SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
Pre-Effective Amendment No.
Post-Effective Amendment No. 2
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 2
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(Check appropriate box or boxes)
THE TUSCARORA INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
3100 Tower Boulevard, Suite 800
Durham, North Carolina 27707
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (919) 419-1900
George W. Brumley III
Oak Value Capital Management, Inc.
3100 Tower Boulevard, Suite 800
Durham, North Carolina 27707
(Name and Address of Agent for Service)
Copies to:
John F. Splain, Esq.
MGF Service Corp.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
It is proposed that this filing will become effective (check appropriate box)
/x / immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on (date) pursuant to paragraph (a) of Rule 485
Registrant registered an indefinite number of securities under Rule 24f-2 by
filing Registrant's initial registration statement effective April 26, 1995.
Pursuant to paragraph (b)(1) of Rule 24f-2, Registrant filed a Rule 24f-2 Notice
for the fiscal year ended June 30, 1996 on August 27, 1996.
TOTAL NUMBER OF PAGES:
INDEX TO EXHIBITS ON PAGE:
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THE TUSCARORA INVESTMENT TRUST
OAK VALUE FUND
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A) UNDER THE SECURITIES ACT OF 1933
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Form N-1A Item No. Prospectus Caption
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PART A
Item 1 Cover Page Cover Page
Item 2 Synopsis Synopsis of Costs and Expenses
Item 3 Condensed Financial Information Financial Highlights; Performance Information, Dividends,
Distributions, Taxes and Other Information
Item 4 General Description of Registrant Prospectus Summary; Investment Objective, Investment
Policies and Risk Considerations
Item 5 Management of the Fund Management of the Fund
Item 6 Capital Stock and Other Securities Dividends, Distributions, Taxes and Other Information
Item 7 Purchase of Securities Being Offered How to Purchase Shares; How Net Asset Value is Determined
Item 8 Redemption or Repurchase How to Redeem Shares
Item 9 Pending Legal Proceedings Not Applicable
Statement of Additional
Information Caption
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PART B
Item 10 Cover Page Cover Page
Item 11 Table of Contents Table of Contents
Item 12 General Information and History Capital Shares and Voting
Item 13 Investment Objectives and Policies Investment Objective and Policies; Investment Limitations;
Description of Bond Ratings
Item 14 Management of the Fund Trustees and Officers; Investment Advisor; Administrator
Item 15 Control Persons and Principal Holders Trustees and Officers;Principal Holders of Voting Securities
of Securities
Item 16 Investment Advisory and Other Investment Advisor; Administrator; Other Services
Services
Item 17 Brokerage Allocation and Other Brokerage
Practices
Item 18 Capital Stock and Other Securities Capital Shares and Voting
Item 19 Purchase, Redemption and Pricing Special Shareholder Services; Purchase of Shares;
of Securities Being Offered Redemption of Shares;
Net Asset Value Determination
Item 20 Tax Status Additional Tax Information
Item 21 Underwriters Not Applicable
Item 22 Calculation of Performance Data Calculation of Performance Data
Item 23 Financial Statements Financial Statements and Reports
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PART C
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C to this Registration Statement.
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PROSPECTUS
November 1, 1996
THE OAK VALUE FUND
A NO-LOAD FUND
The investment objective of the OAK VALUE FUND is to seek capital appreciation
primarily through investments in equity securities, consisting of common and
preferred stocks and securities convertible into common stocks. Current income
will be of secondary importance. While there is no assurance that the Fund will
achieve its investment objective, it endeavors to do so by following the
investment policies described in this Prospectus.
INVESTMENT ADVISOR
Oak Value Capital Management, Inc.
Durham, North Carolina
The Oak Value Fund (the "Fund") is a NO-LOAD, diversified series of The
Tuscarora Investment Trust, a registered open-end management investment company.
The Fund's ticker symbol is OAKVX. This Prospectus provides you with the basic
information you should know before investing in the Fund. You should read it and
keep it for future reference.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
A Statement of Additional Information dated November 1, 1996, containing
additional information about the Fund, has been filed with the Securities and
Exchange Commission and is incorporated by reference in this Prospectus in its
entirety. The Fund's address is P.O. Box 5354, Cincinnati, Ohio 45201-5354, and
its telephone number is 1-800-622-2474. A copy of the Statement of Additional
Information may be obtained at no charge by calling or writing the Fund.
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FOR INFORMATION OR ASSISTANCE IN OPENING AN ACCOUNT, PLEASE CALL:
Nationwide (Toll-Free).......................................800-622-2474
FOR 24-HOUR NET ASSET VALUE AND INVESTMENT INFORMATION, PLEASE CALL:
Nationwide (Toll-Free).......................................800-680-4199
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TABLE OF CONTENTS
PROSPECTUS SUMMARY...........................................................2
SYNOPSIS OF COSTS AND EXPENSES...............................................3
FINANCIAL HIGHLIGHTS.........................................................4
PERFORMANCE INFORMATION......................................................5
INVESTMENT OBJECTIVE, INVESTMENT POLICIES
AND RISK CONSIDERATIONS....................................................6
HOW TO PURCHASE SHARES......................................................13
HOW TO REDEEM SHARES........................................................15
HOW NET ASSET VALUE IS DETERMINED...........................................18
MANAGEMENT OF THE FUND......................................................19
DIVIDENDS, DISTRIBUTIONS, TAXES AND OTHER INFORMATION.......................22
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PROSPECTUS SUMMARY
THE FUND. The Oak Value Fund (the "Fund") is a NO-LOAD, diversified series of
The Tuscarora Investment Trust, a registered open-end management investment
company commonly known as a "mutual fund." The Fund's investment objective is to
seek capital appreciation primarily through investments in equity securities,
consisting of common and preferred stocks and securities convertible into common
stocks. Current income will be of secondary importance. While there is no
assurance that the Fund will achieve its investment objective, it endeavors to
do so by following the investment policies described in this Prospectus.
HISTORY OF THE FUND. Pursuant to an Agreement and Plan of Reorganization, the
Fund, on May 19, 1995, succeeded to the assets and liabilities of another mutual
fund of the same name (the "Predecessor Fund"), which was an investment series
of Albemarle Investment Trust. The investment objective, policies and
restrictions of the Fund and the Predecessor Fund are substantially identical
and the financial data and information in this Prospectus for periods prior to
May 19, 1995 relates to the Predecessor Fund.
INVESTMENT APPROACH. The percentage of the Fund's assets that is invested in
equity securities may vary according to the Advisor's judgment of market and
economic conditions. In most instances, particularly when the Advisor believes
that capital appreciation can be achieved without excessive levels of market
risk, the Fund will be invested predominantly in equity securities. The Fund's
net asset value will be subject to market fluctuation. The Fund may invest a
portion of its assets in fixed-income securities, consisting of corporate debt
obligations and U.S. Government securities. (See "Investment Objective,
Investment Policies and Risk Considerations.")
INVESTMENT ADVISOR. Oak Value Capital Management, Inc. (the "Advisor") serves as
investment advisor to the Fund and was investment advisor to the Predecessor
Fund. For its services, the Advisor receives compensation of 0.90% of the
average daily net assets of the Fund. (See "Management of the Fund.") The
Advisor currently serves as investment advisor to approximately $385 million in
assets, the vast majority of which are managed using an investment style and
approach similar to that of the Fund.
PURCHASE OF SHARES. Shares are offered "No-Load," which means they may be
purchased directly from the Fund without the imposition of any sales or 12b-1
charges. The minimum initial purchase for the Fund is $2,500 ($1,000 for IRA or
Keogh accounts). Subsequent investments must be $100 or more. Shares may be
purchased by individuals, trusts or organizations and may be
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appropriate for use in Tax Sheltered Retirement Plans and Systematic Withdrawal
Plans. (See "How to Purchase Shares.")
REDEMPTION OF SHARES. There is currently no charge for redemptions. Shares may
be redeemed at any time in which the Fund is open for business at the net asset
value next determined after receipt of a redemption request by the Fund.
(See "How to Redeem Shares.")
DIVIDENDS AND DISTRIBUTIONS. Net investment income and net capital gains, if
any, are distributed annually. Shareholders may elect to receive dividends and
distributions in cash or the dividends and distributions may be reinvested in
additional Fund shares. (See "Dividends, Distributions, Taxes and Other
Information.")
MANAGEMENT. The Fund is a series of The Tuscarora Investment Trust (the
"Trust"), the Board of Trustees of which is responsible for overall management
of the Trust and the Fund. The Trust has employed MGF Service Corp. (the
"Administrator") to provide administration, accounting and transfer agent
services. (See "Management of the Fund.")
SYNOPSIS OF COSTS AND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES:......................... None
ANNUAL FUND OPERATING EXPENSES:
(As a percentage of average daily net assets)
Investment Advisory Fees After Waivers................. .65%
Administrator's Fees................................... .20%
Other Expenses......................................... 1.05%
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Total Fund Operating Expenses After Waivers............ 1.90%
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EXAMPLE: You would pay the following expenses on a $1,000
investment, whether or not you redeem at the end of the period,
assuming 5% annual return:
1 year 3 years 5 years 10 years
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$19 $60 $103 $222
The purpose of the foregoing table is to assist investors in the Fund in
understanding the various costs and expenses that they will bear directly or
indirectly. See "Management of the Fund" for more information about the fees and
costs of operating the Fund. The Annual Fund Operating Expenses shown above are
based upon actual operating history for the fiscal year ended June 30, 1996.
Absent fee waivers by the Advisor, the Fund's investment advisory fees would
have been 0.90% of average daily net assets and total fund operating expenses
would have been 2.15% of average daily net assets. THE EXAMPLE SHOWN SHOULD NOT
BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES IN
THE FUTURE MAY BE GREATER OR LESS THAN THOSE SHOWN.
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FINANCIAL HIGHLIGHTS
The following audited financial information for the fiscal periods ended June
30, 1996 and June 30, 1995 has been audited by Arthur Andersen LLP, independent
accountants, whose report covering the fiscal year ended June 30, 1996 is
contained in the Statement of Additional Information. The following audited
financial information for the fiscal periods ended prior to June 30, 1995 was
audited by other independent accountants. This information should be read in
conjunction with the Fund's latest audited annual financial statements and notes
thereto, which are also contained in the Statement of Additional Information, a
copy of which may be obtained at no charge by calling the Fund.
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
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For the Period
Year Ten Months Year January 18,
Ended Ended Ended 1993(a) to
June 30, June 30, August 31, August 31,
1996 1995 1994 1993
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Net asset value at beginning of period....... $12.19 $12.50 $10.96 $10.00
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Income from investment operations:
Net investment loss...................... (0.04) (0.05) (0.02) (0.03)
Net realized and unrealized gains on
investments......................... 3.57 0.55 1.78 0.99
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Total from investment operations............... 3.53 0.50 1.76 0.96
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Less distributions:
From net realized gains................... (0.10) (0.81) (0.22) --
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Net asset value at end of period............... $ 15.62 $12.19 $12.50 $10.96
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Total return................................... 29.04% 5.78%(c) 16.07% 16.11%(c)
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Net assets at end of period (000's)........... $22,066 $10,250 $8,769 $1,890
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Ratio of expenses to average net assets(b)....... 1.90% 1.89%(c) 1.89% 2.19%(c)
Ratio of net investment loss to average
net assets................................ (0.43%) (0.53%)(c) (0.58%) (0.81%)(c)
Portfolio turnover rate (annualized)............. 58% 103%(c) 91% 43%(c)
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(a) Commencement of operations.
(b) Absent fee waivers and/or expense reimbursements by the Advisor, the ratios of expenses to
average net assets would have been 2.15%, 2.38%(c), 2.80%, and 6.29%(c) for the periods ended
June 30, 1996, June 30, 1995, August 31, 1994 and August 31, 1993, respectively.
(c) Annualized.
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Further information about the performance of the Fund is contained in the Annual
Report, a copy of which may be obtained at no charge by calling the Fund.
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PERFORMANCE INFORMATION
A Representation of the graphic material contained herein is set forth below:
Comparison of the Change in Value of a $10,000 Investment in the Oak Value Fund,
Lipper Growth Fund Index and Standard & Poor's 500 Index
S&P 500 INDEX: OAK VALUE FUND:
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
01/18/93 10,000 01/18/93 10,000
03/31/93 3.93% 10,393 03/31/93 3.53% 10,353
06/30/93 0.49% 10,443 06/30/93 0.04% 10,357
09/30/93 2.56% 10,711 09/30/93 10.48% 11,442
12/31/93 2.32% 10,960 12/31/93 6.66% 12,204
03/31/94 -3.79% 10,544 03/31/94 -4.86% 11,611
06/30/94 0.42% 10,588 06/30/94 1.79% 11,818
09/30/94 4.89% 11,106 09/30/94 5.53% 12,472
12/31/94 -0.02% 11,104 12/31/94 -3.66% 12,015
03/31/95 9.74% 12,186 03/31/95 9.50% 13,157
06/30/95 9.55% 13,350 06/30/95 1.34% 13,334
09/30/95 7.95% 14,411 09/30/95 10.34% 14,712
12/31/95 6.02% 15,278 12/31/95 5.27% 15,487
03/31/96 5.37% 16,098 03/31/96 7.40% 16,633
06/30/96 4.49% 16,821 06/30/96 3.44% 17,206
LIPPER GROWTH FUND INDEX:
QTRLY
DATE RETURN BALANCE
01/18/93 10,000
03/31/93 1.27% 10,127
06/30/93 1.47% 10,272
09/30/93 4.80% 10,765
12/31/93 2.26% 11,008
03/31/94 -2.99% 10,679
06/30/94 -2.20% 10,444
09/30/94 4.91% 10,957
12/31/94 -1.12% 10,834
03/31/95 7.23% 11,618
06/30/95 10.70% 12,861
09/30/95 9.08% 14,028
12/31/95 1.54% 14,244
03/31/96 4.51% 14,887
06/30/96 3.33% 15,383
Past performance is not predictive of future performance.
Oak Value Fund
Average Annual Total Returns
As of June 30, 1996
1 Year Since Inception*
29.04% 17.03%
NON-STANDARDIZED TOTAL RETURNS
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1996 SINCE
CALENDAR CALENDAR CALENDAR YEAR TO DATE INCEPTION*
1993* 1994 1995 (AS OF 9/30/96)(AS OF 9/30/96)
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Oak Value Fund.......................... 22.05% -1.51% 28.89% 19.35% 84.83%
Lipper Growth Fund Index................ 10.13% -1.57% 31.48% 11.03% 59.66%
S&P 500 Index........................... 9.70% 1.32% 37.58% 13.50% 73.40%
*Inception date of the Oak Value Fund was January 18, 1993.
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INVESTMENT OBJECTIVE, INVESTMENT POLICIES AND RISK CONSIDERATIONS
The Fund's investment objective is capital appreciation. The Fund will seek to
achieve its objective by investing primarily in equity securities, consisting of
common and preferred stocks and securities convertible into common stocks.
Current income will be of secondary importance. Any investment involves risk,
and there can be no assurance that the Fund will achieve its investment
objective. The Fund's investment objective may not be altered without the prior
approval of a majority (as defined by the Investment Company Act of 1940) of the
Fund's shares.
The Fund is governed by an investment concept commonly known as value investing.
While many investment advisors often cite a "value approach to investing" to
describe a wide array of investment techniques and philosophies, the Advisor
seeks to follow a very specific form of "value investing."
The value philosophy that the Advisor seeks to follow rests on the principle
that the market is not always priced efficiently. Value investing is predicated
on the ability to find undervalued securities. The Advisor views growth and
value as two sides of the same coin. In this context, value investing is simply
buying growth at a discount. The value side of the coin represents the price
that an investor is willing to pay for a particular security. That price should
be at a sufficient discount to provide a margin of safety and thereby have a
high probability of capital preservation. The concept of a margin of safety is
pivotal to the successful implementation of value investing. The entire premise
of value investing rests on the manager's ability to exercise judgment with
discipline regarding the purchase price of a security. A margin of safety refers
to the difference between the investor's calculation of value and the price at
which the security is trading in the market. There is a given margin of safety
at one price level and a diminished margin of safety at a higher price level. In
other words, as the price of a security approaches the investor's calculation of
value, the margin of safety declines. Many managers can identify a good
business, but the successful value manager can analyze the price at which that
security falls into the purchase category. The concept of a margin of safety is
applicable to the purchase of common stocks, preferred stock or fixed-income
instruments. The other side of the coin is the growth aspect of that particular
security. A company that possesses the potential to grow through business
expansion over time represents the ability to buy a future stream of income that
will be reflected in its future stock price. Paying a reasonable price, with a
sufficient margin of safety, in an enterprise that can grow is essential to
long-term value investing.
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Fundamental research is the foundation on which value investing rests. Most
value proponents use a bottom-up approach (focusing on specific companies rather
than the overall market level or industry sectors) to find the companies meeting
their criteria. Integrity of analytical approach is important to the value
investor because it provides demonstrated evidence of the value of a company
relative to its current stock price. No matter how good the story or how great
the management, the value of a company lies solely with the future cash flow
available after capital spending and taxes. An important requirement for most
value investors is that they understand the business they are trying to value.
The preference for simple businesses, without undue complication and
technological change, allows the investor to develop a complete understanding of
the future prospects of the company. Since the value investor begins with the
premise that the current market price is no indication of the true worth of a
business, the value investor analyzes the company's reports and other public
information to develop his own opinion of intrinsic value. The purchase decision
rests on the ability to buy that security with a great enough margin of safety
to ensure safety of principal and an adequate return. The second premise of the
value investor is that the stock prices will fluctuate over time but that, over
the long term, market price will move towards intrinsic value.
The margin of safety should expand as the intrinsic value of the business
increases. If you buy a growth business at a sufficient discount, you should be
rewarded as the intrinsic value increases. In a growing enterprise you are not
forced to wait for a catalyst to unlock the hidden value (takeovers, mergers,
liquidation, etc.). A good business will exhibit strong cash flow generation,
significant barriers to competition, and moderate or low requirements for
capital reinvestment. If one is fortunate enough to identify such a holding at a
reasonable price, the rewards can be significant.
EQUITY SELECTION. The Fund's portfolio will be comprised primarily of common
stocks, convertible preferred stocks and preferred stocks traded on domestic and
foreign securities exchanges or on the over-the-counter markets. Securities
selected are those securities that, in the opinion of the Advisor, are priced at
a discount to intrinsic value.
The Advisor will select securities based upon the Advisor's view of the
intrinsic value of the issuer and its equity securities relative to the market
price. A few of the characteristics that may indicate unrecognized intrinsic
value are that the shares: (1) sell at a relatively low multiple of their free
cash flow (defined as average net income plus non-cash charges such as
depreciation and amortization less those capital expenditures necessary to
maintain the competitiveness of the enterprise); (2) sell at a substantial
discount from a price at which the
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securities of comparable businesses have been sold in arms' length transactions
between parties judged to be competent businesspersons; (3) sell at a
substantial discount to the value of the business determined by cash flow
analysis and qualitative characteristics; or (4) sell at a substantial discount
from asset value, which is based on the sum of the company's parts, including
consideration for its hidden assets, such as overfunded pension plans,
understated value of inventories, appreciated real estate, brand names and
franchises, less the present value of its liabilities.
Other factors considered desirable by the Advisor in selecting potential
investments include: indications of a shareholder- oriented management - The
Advisor believes that if management has a vested ownership interest in the
company's success, it is more likely that the interests of shareholders and
management will coincide, and the company will therefore be managed for the
benefit of all shareholders. Ownership of a substantial equity position could be
evidence of a shareholder-oriented management; evidence of financial strength -
The most attractive companies have solid financial foundations, such as a
consistent generation of free cash flow, a strong balance sheet, and a high
return on capital; cash flow generation - The company should exhibit a
sufficient cash flow to fund its internal needs for capital replacement and
expansion, without excessive need for debt or new equity offerings; pricing
flexibility - The company should have the ability to raise prices independent of
competitive forces; dominant position in the market - The company should exhibit
an ability to control its own destiny; franchise position - The company should
have a strong market share, or significant niche in its market; comparative
barriers to entry - The company should be in an industry which does now allow
easy competition, to ensure against wide swings in earnings as a result of
unexpected competitors; and reinvestment ability - The company has the ability
to reinvest its earnings at a high rate of return.
While portfolio securities are generally acquired for the long term, they may be
sold under some of the following circumstances when the Advisor believes that:
(a) the anticipated price appreciation has been achieved or is no longer
probable; (b) alternate investments offer superior total return prospects; (c)
the risk of decline in market value is increased; or (d) a fundamental change
has occurred in the company or its market.
FACTORS TO CONSIDER. The Fund is not intended to be a complete investment
program and there can be no assurance that the Fund will achieve its
investment objective. The Fund's net asset value will be subject to market
fluctuation. The Fund may borrow using its assets as collateral, but only under
certain limited conditions. Borrowing, if done, would tend to exaggerate the
effects of market fluctuations on the Fund's net asset value until repaid.
(See "Borrowing.")
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OPTIONS. When the Advisor believes that individual portfolio securities are
approaching the Advisor's growth and price expectations, covered call options
(calls) may be written (sold) against such securities in a disciplined approach
to selling portfolio securities.
If the Fund writes a call, it receives a premium and agrees to sell the
underlying security to a purchaser of a corresponding call at a specified price
("strike price") by a future date ("exercise date"). To terminate its obligation
on a call the Fund has written, it may purchase a corresponding call in a
"closing purchase transaction". A profit or loss will be realized, depending
upon whether the price of the closing purchase transaction is more or less than
the premium (net of transaction costs) previously received on the call written.
The Fund may also realize a profit if the call it has written lapses
unexercised, in which case the Fund keeps the premium and retains the underlying
security as well. If a call written by the Fund is exercised, the Fund forgoes
any possible profit from an increase in the market price of the underlying
security over the exercise price plus the premium received. The Fund writes
options only for hedging purposes and not for speculation where the aggregate
value of the underlying obligations will not exceed 25% of the Fund's net
assets. If the Advisor is incorrect in its expectations and the market price of
a stock subject to a call option rises above the exercise price of the option,
the Fund will lose the opportunity for further appreciation of that security.
Profits on closing purchase transactions and premiums on lapsed calls written
are considered capital gains for financial reporting purposes and are short term
gains for federal income tax purposes. When short term gains are distributed to
shareholders, they are taxed as ordinary income. If the Fund desires to enter
into a closing purchase transaction, but there is no market when it desires to
do so, it would have to hold the securities underlying the call until the call
lapses or until the call is exercised.
The Fund will only write options which are issued by the Options Clearing
Corporation and listed on a national securities exchange. Call writing affects
the Fund's portfolio turnover rate and the brokerage commissions paid
Commissions for optons, which are normally higher than for general securities
transactions, are payable when writing calls and when purchasing closing
purchase transactions. The Statement of Additional Information contains
additional information about covered call options.
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FOREIGN SECURITIES. Foreign securities investment presents special
considerations not typically associated with investments in domestic securities.
Foreign taxes may reduce income. Currency exchange rates and regulations may
cause fluctuations in the value of foreign securities. Foreign securities are
subject to different regulatory environments than in the United States and,
compared to the United States, there may be a lack of uniform accounting,
auditing and financial reporting standards, less volume and liquidity and more
volatility, less public information and less regulation of foreign issuers.
Countries have been known to expropriate or nationalize assets, and foreign
investments may be subject to political, financial or social instability or
adverse diplomatic developments. There may be difficulties in obtaining service
of process on foreign issuers and difficulties in enforcing judgments with
respect to claims under the U.S. securities laws against such issuers. Favorable
or unfavorable differences between U.S. and foreign economies could affect
foreign securities values. The U.S. Government has, in the past, discouraged
foreign investments by U.S. investors through taxation or other restrictions and
it is possible that such restrictions could be imposed again.
The Fund may invest in foreign issuers directly or though the purchase of
American Depository Receipts (ADRs). ADRs, which are traded domestically, are
receipts issued by a U.S. bank or trust company evidencing ownership of
securities of a foreign issuer. ADRs may be listed on a national securities
exchange or may trade in the over-the-counter market. The prices of ADRs are
denominated in U.S. dollars while the underlying security may be denominated in
a foreign currency. Direct investments in foreign securities will generally be
limited to foreign securities traded on foreign securities exchanges.
Although the Fund is not limited in the amount of foreign securities it may
acquire, it is presently expected that the Fund will not invest in excess of 10%
of its assets (measured at the time of purchase) in direct investments in
foreign securities traded on foreign securities exchanges.
MONEY MARKET INSTRUMENTS. Money market instruments may be purchased for
temporary defensive purposes, in an amount up to 100% of the Fund's assets, when
the Advisor believes the prospect for capital appreciation in the equity
securities markets is not attractive. Money market instruments will typically
represent a portion of the Fund's portfolio, as funds awaiting investment, to
accumulate cash for anticipated purchases of portfolio securities and to provide
for shareholder redemptions and operational expenses of the Fund. Money market
instruments mature in thirteen months or less from the date of purchase and may
include U.S. Government Securities (defined below) and corporate debt securities
(including those subject to repurchase agreements), bankers' acceptances and
certificates of deposit of domestic
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branches of U.S. banks, and commercial paper (including variable amount demand
master notes). At the time of purchase, money market instruments will have a
short-term rating in the highest category from any nationally recognized
statistical rating organization ("NRSRO") or, if not rated, issued by a
corporation having an outstanding unsecured debt issue rated in the three
highest categories of any NRSRO or, if not so rated, of equivalent quality in
the Advisor's opinion. See the Statement of Additional Information for a further
description of money market instruments.
U.S. GOVERNMENT SECURITIES. The Fund may invest a portion of its assets in U.S.
Government Securities, which include direct obligations of the U.S. Treasury,
securities guaranteed as to interest and principal by the U.S. Government such
as Government National Mortgage Association, as well as securities issued or
guaranteed as to interest and principal by U.S. Government authorities, agencies
and instrumentalities such as Federal National Mortgage Association, Federal
Home Loan Mortgage Corporation, Federal Home Administration, Federal Farm Credit
Bank, Federal Home Loan Bank, Student Loan Marketing Association, Resolution
Funding Corporation, Financing Corporation, and Tennessee Valley Authority. U.S.
Government Securities may be acquired subject to repurchase agreements. While
obligations of some U.S. Government sponsored entities are supported by the full
faith and credit of the U.S. Government, several are supported by the right of
the issuer to borrow from the U.S. Government, and still others are supported
only by the credit of the issuer itself. The guarantee of the U.S. Government
does not extend to the yield or value of the U.S. Government Securities held by
the Fund or to the Fund's shares.
BORROWING. The Fund may borrow, temporarily, up to 5% of its total assets for
extraordinary purposes and may increase this limit to 33.3% of its total assets
to meet redemption requests which might otherwise require untimely disposition
of portfolio holdings. To the extent the Fund borrows for these purposes, the
effects of market price fluctuations on portfolio net asset value will be
exaggerated. If, while such borrowing is in effect, the value of the Fund's
assets declines, the Fund would be forced to liquidate portfolio securities when
it is disadvantageous to do so. The Fund would incur interest and other
transaction costs in connection with such borrowing. The Fund will not make any
additional investments while its borrowings are outstanding.
ILLIQUID INVESTMENTS. The Fund may invest up to 10% of its net assets in
illiquid securities. Illiquid securities are those that may not be sold or
disposed of in the ordinary course of business within seven days at
approximately the price at which they are valued. Under the supervision of the
Board of Trustees, the Advisor determines the liquidity of the Fund's
investments. The absence of a trading market can make it difficult to
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ascertain a market value for illiquid investments. Disposing of illiquid
securities before maturity may be time consuming and expensive, and it may be
difficult or impossible for the Fund to sell illiquid securities promptly at an
acceptable price.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES. The Fund may purchase
when-issued securities and commit to purchase securities for a fixed price at a
future date beyond customary settlement time. The Fund is required to hold and
maintain in a segregated account until the settlement date, cash, U.S.
Government Securities or high-grade debt obligations in an amount sufficient to
meet the purchase price. Purchasing securities on a when- issued or forward
commitment basis involves a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition to
the risk of decline in value of the Fund's other assets. In addition, no income
accrues to the purchaser of when-issued securities during the period prior to
issuance. Although the Fund would generally purchase securities on a when-issued
or forward commitment basis with the intention of acquiring securities for its
portfolio, the Fund may dispose of a when-issued security or forward commitment
prior to settlement if the Advisor deems it appropriate to do so. The Fund may
realize short-term gains or losses upon such sales.
PORTFOLIO TURNOVER. The Fund sells portfolio securities, without regard to the
length of time they have been held, in order to take advantage of new investment
opportunities or changes in business fundamentals, or if price targets have been
met. The degree of portfolio activity affects the brokerage costs of the Fund
and may have an impact on the amount of taxable distributions to shareholders.
REPURCHASE AGREEMENTS. The Fund may acquire U.S. Government Securities or other
high-grade debt securities subject to repurchase agreements. A repurchase
agreement transaction occurs when the Fund acquires a security and
simultaneously resells it to the vendor (normally a member bank of the Federal
Reserve or a registered Government Securities dealer) for delivery on an agreed
upon future date. The repurchase price exceeds the purchase price by an amount
which reflects an agreed upon market interest rate earned by the Fund effective
for the period of time during which the repurchase agreement is in effect.
Delivery pursuant to the resale typically will occur within one to five days of
the purchase. The Fund's risk with respect to repurchase agreements is limited
to the ability of the vendor to pay the agreed upon sum upon the delivery date;
in the event of bankruptcy or other default by the vendor, there may be possible
delays and expenses in liquidating the instrument purchased, decline in its
value and loss of interest. Under guidelines issued by the Trustees, the Advisor
will carefully consider the creditworthiness of a vendor during the term of the
repurchase agreement. For purposes of the Investment Company Act of 1940 (the
"1940 Act"), a repurchase agreement is considered to be a
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loan collateralized by the securities subject to the repurchase agreement. The
Fund will not enter into a repurchase agreement which will cause more than 10%
of its assets to be invested in repurchase agreements which extend beyond seven
days and other illiquid securities.
INVESTMENT LIMITATIONS. For the purpose of limiting the Fund's exposure to risk,
the Fund has adopted certain limitations which, together with its investment
objective, are considered fundamental policies which may not be changed without
shareholder approval. The Fund will not: (1) issue senior securities, borrow
money or pledge its assets, except that it may borrow from banks as a temporary
measure (a) for extraordinary or emergency purposes, in amounts not exceeding 5%
of the Fund's total assets, or (b) in order to meet redemption requests which
might otherwise require untimely disposition of portfolio securities if,
immediately after such borrowing, the value of the Fund's assets, including all
borrowings then outstanding, less its liabilities (excluding all borrowings), is
equal to at least 300% of the aggregate amount of borrowings then outstanding,
and may pledge its assets to secure all such borrowings; (2) make loans of money
or securities, except that the Fund may invest in repurchase agreements (but
repurchase agreements having a maturity of longer than seven days, together with
other securities which are not readily marketable, are limited to 10% of the
Fund's net assets); (3) write, purchase or sell commodities, commodities
contracts, futures contracts or related options; (4) invest in securities of
issuers which have a record of less than three years' continuous operation
(including predecessors and, in the case of bonds, guarantors); or (5) invest
more than 5% of its net assets in warrants. Other fundamental investment
limitations are listed in the Statement of Additional Information.
HOW TO PURCHASE SHARES
There are NO SALES COMMISSIONS CHARGED TO INVESTORS. Assistance in opening
accounts may be obtained from the Administrator by calling 1-800-622-2474, or by
writing to the Fund at the address shown below for regular mail orders.
Assistance is also available through any broker-dealer authorized to sell shares
of the Fund. Such broker-dealer may charge you a fee for its services. Payment
for shares purchased may be made through your account with the broker-dealer
processing your application and order to purchase. Your investment will purchase
shares at the Fund's net asset value next determined after your order is
received by the Fund in proper order as indicated herein. The minimum initial
investment in the Fund, unless stated otherwise herein, is $2,500. The minimum
for an Individual Retirement Account ("IRA") or self-employed retirement plan
("Keogh Plan") is generally $1,000. The Fund may, in the Advisor's sole
discretion, accept certain accounts with less than the stated minimum initial
investment.
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<PAGE>
Payment must be made by check or money order drawn on a U.S. bank and payable in
U.S. dollars. All orders received by the Administrator, whether by mail, bank
wire or facsimile order from a qualified broker-dealer, prior to 4:00 p.m.,
Eastern time, will purchase shares at the net asset value next determined on
that business day. If your order is not received by 4:00 p.m. Eastern time, your
order will purchase shares as of the net asset value determined on the next
business day. (See "How Net Asset Value is Determined.")
Due to Internal Revenue Service ("IRS") regulations, applications without social
security or tax identification numbers will not be accepted. If, however, you
have already applied for a social security or tax identification number at the
time of completing your account application, the application should so indicate.
The Fund is required to, and will, withhold taxes on all distributions and
redemption proceeds if the number is not delivered to the Fund within 60 days.
Investors should be aware that the Fund's Account Application contains
provisions in favor of the Fund, the Administrator and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
the various services made available to investors.
Should an order to purchase shares be cancelled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by the
Fund or the Administrator in the transaction.
REGULAR MAIL ORDERS. Please complete and sign the Account Application form
accompanying this Prospectus and mail it with your check, made payable to the
Oak Value Fund, to:
The Oak Value Fund
c/o Shareholder Services
P.O. Box 5354
Cincinnati, Ohio 45201-5354
BANK WIRE ORDERS. Investments can be made directly by bank wire. To establish a
new account or add to an existing account by wire, please call the Fund, at
1-800-622-2474, before wiring funds, to advise the Fund of the investment, the
dollar amount and the account registration. This will ensure prompt and accurate
handling of your investment. Please have your bank use the following wiring
instructions to purchase by wire:
Star Bank, N.A.
ABA# 042000013 The Tuscarora Investment Trust
For credit to Oak Value Fund #483616975
(Shareholder name and account number
or tax identification number)
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<PAGE>
It is important that the wire contain all the information and that the Fund
receive prior telephone notification to ensure proper credit. Once your wire is
sent you should, as soon as possible thereafter, complete and mail your Account
Application to the Fund as described under "Regular Mail Orders," above.
ADDITIONAL INVESTMENTS. You may add to your account by mail or wire (minimum
additional investment of $100) at any time by purchasing shares at the then
current net asset value as aforementioned. The Fund may, in the Advisor's sole
discretion, accept certain additional investments of less than the stated
minimum amount. Before making additional investments by bank wire, please call
the Fund at 1-800-622-2474 to alert the Fund that your wire is to be sent.
Follow the wire instructions above to send your wire. When calling for any
reason, please have your account number ready, if known. Mail orders should
include, when possible, the "Invest by Mail" stub which is attached to your Fund
confirmation statement. Otherwise, be sure to identify your account in your
letter.
AUTOMATIC INVESTMENT PLAN. The automatic investment plan enables shareholders to
make regular monthly or bimonthly investments in shares through automatic
charges to their checking account. With shareholder authorization and bank
approval, the Administrator will automatically charge the checking account for
the amount specified ($100 minimum) which will be automatically invested in
shares at the net asset value on or about the fifteenth day and/or the last
business day of the month, as indicated on the Account Application. The
shareholder may change the amount of the investment or discontinue the plan at
any time by writing to the Administrator.
EMPLOYEES AND AFFILIATES OF THE FUND. The minimum purchase requirement is not
applicable to accounts of Trustees, officers or employees of the Fund or certain
parties related thereto. See the Statement of Additional Information for further
details.
STOCK CERTIFICATES. Stock certificates will not be issued for your shares.
Evidence of ownership will be given by issuance of periodic account statements
which will show the number of shares owned.
HOW TO REDEEM SHARES
Shares of the Fund may be redeemed on each day that the Fund is open for
business. The Fund is open for business on each day the New York Stock Exchange
(the "Exchange") is open for business. Any redemption may be for more or less
than the purchase price of your shares depending on the market value of the
Fund's portfolio securities. All redemption orders received in proper form, as
indicated herein, by the Administrator prior to 4:00 p.m., Eastern time, will
redeem shares at the net asset value
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<PAGE>
determined as of that business day's close of trading. Otherwise, your order
will redeem shares at the net asset value determined on the next business day.
There is no charge for redemptions from the Fund. You may also redeem your
shares through a broker-dealer which may charge you a fee for its services.
The Board of Trustees reserves the right to involuntarily redeem any account
having an account value of less than $1,000 (due to redemptions or transfers,
and not due to market action) upon 60 days' written notice. If the shareholder
brings his account value up to $1,000 or more during the notice period, the
account will not be redeemed. Redemptions from retirement plans may be subject
to tax withholding.
If you are uncertain of the requirements for redemption, please contact the
Fund, at 1-800-622-2474, or write to the address shown below.
REGULAR MAIL REDEMPTIONS. Your request should be addressed to the Oak Value
Fund, P.O. Box 5354, Cincinnati, Ohio 45201-5354. Your request for redemption
must include:
1) your letter of instruction or a stock assignment specifying
the account number, and the number of shares or dollar
amount to be redeemed. This request must be signed by all
registered shareholders in the exact names in which they are
registered;
2) any required signature guarantees (see "Signature Guarantees"); and
3) other supporting legal documents, if required in the case of
estates, trusts, guardianships, custodianships, corporations,
partnerships, and other organizations.
Your redemption proceeds will be mailed to you within three business days after
receipt of your redemption request. However, the Fund may delay forwarding a
redemption check for recently purchased shares while it determines whether the
purchase payment will be honored. Such delay (which may take up to 15 days) may
be reduced or avoided if the purchase is made by wire transfer. In such cases,
the net asset value next determined after receipt of the request for redemption
will be used in processing the redemption and your redemption proceeds will be
mailed to you upon clearance of your check to purchase shares. The Fund may
suspend redemption privileges or postpone the date of payment (i) during any
period that the Exchange is closed, or trading on the Exchange is restricted as
determined by the Securities and Exchange Commission (the "Commission"), (ii)
during any period when an emergency exists as defined by the rules of the
Commission as a result of which it is not reasonably practicable
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<PAGE>
for the Fund to dispose of securities owned by it, or to fairly determine the
value of its assets, and (iii) for such other periods as the Commission may
permit.
TELEPHONE AND BANK WIRE REDEMPTIONS. The Fund offers shareholders the option of
redeeming shares by telephone under certain limited conditions. You may redeem
shares, subject to the procedures outlined below, by calling the Fund at
1-800-622-2474. The Fund will redeem shares when requested by telephone if, and
only if, the shareholder confirms redemption instructions in writing. The Fund
may rely upon confirmation of redemption requests transmitted via facsimile (FAX
# 513-629- 2901). The confirmation instructions must include:
1) Shareholder name and account number;
2) Number of shares or dollar amount to be redeemed;
3) Instructions for transmittal of redemption funds to the
shareholder;
4) Shareholder signature as it appears on the application
then on file with the Fund; and
5) Any required signature guarantees (see "Signature
Guarantees").
In such cases, the net asset value used in processing the redemption will be the
net asset value next determined after the telephone request is received.
Redemption proceeds will not be remitted until written confirmation of the
redemption request is received. You can choose to have redemption proceeds
mailed to you at your address of record, your bank, or to any other authorized
person, or you can have the proceeds sent by bank wire to your bank ($5,000
minimum). Shares of the Fund may not be redeemed by wire on days in which your
bank is not open for business. Redemption proceeds will only be sent to the bank
account or person named in your Account Application currently on file with the
Fund. You can change your redemption instructions anytime you wish by filing a
letter including your new redemption instructions with the Fund. (See "Signature
Guarantees.")
The Fund reserves the right to restrict or cancel telephone redemption
privileges for any shareholder or all shareholders, without notice, if the
Trustees believe it to be in the best interest of the shareholders to do so.
During drastic economic and market changes, telephone redemption privileges may
be difficult to implement.
Neither the Fund, the Administrator, nor their respective affiliates will be
liable for complying with telephone instructions they reasonably believe to be
genuine or for any loss, damage, cost or expense in acting on such telephone
instructions. The affected investors will bear the risk of any such loss. The
Fund or the Administrator, or both, will employ reasonable procedures to
determine that telephone instructions
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<PAGE>
are genuine. If the Fund and/or the Administrator do not employ such procedures,
they may be liable for losses due to unauthorized or fraudulent instructions.
These procedures may include, among others, requiring forms of personal
identification prior to acting upon telephone instructions, providing written
confirmation of the transactions and/or tape recording telephone instructions.
There is currently no charge by the Administrator for wire redemptions. However,
the Administrator reserves the right, upon thirty days' written notice, to make
reasonable charges for wire redemptions. All charges will be deducted from your
account by redemption of shares in your account. Your bank or brokerage firm may
also impose a charge for processing the wire. In the event that wire transfer of
funds is impossible or impractical, the redemption proceeds will be sent by mail
to the designated account.
SIGNATURE GUARANTEES. To protect your account and the Fund from fraud, signature
guarantees are required to be sure that you are the person who has authorized a
redemption in an amount over $25,000, or a change in registration or standing
instructions for your account. Signature guarantees are required for (1)
requests to redeem shares having a value of greater than $25,000, (2) change of
registration requests, and (3) requests to establish or change redemption
services other than through your initial account application. Signature
guarantees are acceptable from a member bank of the Federal Reserve System, a
savings and loan institution, credit union, registered broker-dealer or a member
firm of a U.S. Stock Exchange, and must appear on the written request for
redemption or change of registration.
SYSTEMATIC WITHDRAWAL PLAN. A shareholder who owns shares of the Fund valued at
$10,000 or more at the current offering price may establish a Systematic
Withdrawal Plan to receive a monthly, quarterly or annual check in a stated
amount not less than $100. Each month, quarter or year, as specified, the Fund
will automatically redeem sufficient shares from your account to meet the
specified withdrawal amount. The shareholder may establish this service whether
dividends and distributions are reinvested or paid in cash. Systematic
withdrawals may be deposited directly to the shareholder's bank account by
completing the applicable section on the Account Application form accompanying
this Prospectus, or by calling or by writing the Fund. See the Statement of
Additional Information for further details.
HOW NET ASSET VALUE IS DETERMINED
The net asset value of the Fund is determined on each business day that the
Exchange is open for trading, as of the close of the Exchange (currently 4:00
p.m., Eastern time). Net asset value per share is determined by dividing the
total value of all Fund securities (valued at market value) and other assets,
less liabilities, by the total number of shares then outstanding. Net
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<PAGE>
asset value includes interest on fixed income securities, which is accrued
daily. Information on the Fund's last reported net asset value is available
through NASDAQ using the ticker symbol OAKVX. See the Statement of Additional
Information for further details.
Securities which are traded over-the-counter are priced at the last sale price,
if available, otherwise, at the last quoted bid price. Securities traded on a
national stock exchange will be valued based upon the closing price on the
valuation date on the principal exchange where the security is traded.
Fixed-income securities will ordinarily be traded in the over-the-counter market
and common stocks will ordinarily be traded on a national securities exchange,
but may also be traded in the over-the-counter market. When market quotations
are not readily available, fixed-income securities may be valued on the basis of
prices provided by an independent pricing service. The prices provided by the
pricing service are determined with consideration given to institutional bid and
last sale prices and take into account securities prices, yields, maturities,
call features, ratings, institutional trading in similar groups of securities
and developments related to specific securities. The Trustees will satisfy
themselves that such pricing services consider all appropriate factors relevant
to the value of such securities in determining their fair value. Calls written
by the Fund are valued at the then current market quotation, using the ask
price, as of the close of each day on the principal exchanges on which they are
traded. Securities and other assets for which no quotations are readily
available will be valued in good faith at fair value using methods determined by
the Board of Trustees.
MANAGEMENT OF THE FUND
The Fund is a diversified series of The Tuscarora Investment Trust (the
"Trust"), an investment company organized as a Massachusetts business trust in
March 1995. The Board of Trustees has overall responsibility for management of
the Fund under the laws of Massachusetts governing the responsibilities of
trustees of business trusts. The Statement of Additional Information identifies
the Trustees and executive officers of the Trust and provides information about
them.
INVESTMENT ADVISOR. Subject to the authority of the Board of Trustees, Oak Value
Capital Management, Inc. (the "Advisor") provides the Fund with a continuous
program of supervision of the Fund's assets, including the composition of its
portfolio, and furnishes advice and recommendations with respect to investments,
investment policies and the purchase and sale of securities, pursuant to an
Investment Advisory Agreement with the Trust. The Advisor is also responsible
for the selection of broker-dealers through which the Fund executes portfolio
transactions, subject to brokerage policies established by the Trustees, and
provides certain executive personnel to the Fund.
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The Advisor, organized as a North Carolina corporation in 1992, is controlled by
George W. Brumley III and David R. Carr, Jr. In addition to acting as Advisor to
the Fund, the Advisor also provides investment advice to accounts with assets of
approximately $355 million, the vast majority of which are managed using an
investment style and approach similar to that of the Fund.
George W. Brumley III and David R. Carr, Jr. are primarily responsible for
managing the portfolio of the Fund and also acted in this capacity for the
Predecessor Fund. Mr. Brumley and Mr. Carr founded the Advisor and its
predecessor firm in May 1986. Mr. Brumley is the chairman and chief executive
officer of the Advisor. He received his Bachelor of Arts degree from Emory
University and his Master of Business Administration from Duke University.
Mr. Carr is the chief investment officer and president of the Advisor. He has
a degree in Business Administration with a concentration in Accounting from the
University of North Carolina in Chapel Hill, as well as a Juris Doctor degree
from the Law School at the University of North Carolina in Chapel Hill. Mr.
Brumley and Mr. Carr have studied and applied value investing techniques for
the past sixteen years and use the same value-oriented philosophy to manage
the Fund as they use to manage the Advisor's other accounts.
Compensation of the Advisor is at the annual rate of 0.90% of the Fund's average
daily net assets. The Advisor currently intends to waive its investment advisory
fees to the extent necessary to limit the total operating expenses of the Fund
to 1.90% per annum of its average daily net assets. However, there is no
assurance that any voluntary fee waivers will continue in the current or future
fiscal years, and expenses of the Fund may therefore exceed 1.90% of its average
daily net assets.
The Advisor's address is 3100 Tower Boulevard, Suite 800, Durham, North Carolina
27707 and its telephone number is 1-800-680-4199.
ADMINISTRATOR. The Fund has retained MGF Service Corp., P.O. Box 5354,
Cincinnati, Ohio 45201, to serve as its transfer agent, dividend paying agent
and shareholder service agent. The Administrator is a subsidiary of Leshner
Financial, Inc., of which Robert H. Leshner is the controlling shareholder.
In addition, the Administrator has been retained to provide administrative
services to the Fund. In this capacity, the Administrator supplies executive,
administrative and regulatory services, supervises the preparation of tax
returns, and coordinates the preparation of reports to shareholders and reports
to and filings with the Securities and Exchange Commission and state securities
authorities. The Fund pays the Administrator a fee for these administrative
services at the annual rate of .20% of the average value of its daily net assets
up to $25 million, .175% of the next $25 million of such assets and .15% of such
assets in excess of $50 million.
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The Administrator also provides accounting and pricing services to the Fund. The
Administrator receives a monthly fee of $2,000 for calculating daily net asset
value per share and maintaining such books and records as are necessary to
enable it to perform its duties. The Administrator also charges the Fund for
certain costs involved with the daily valuation of investment securities and is
reimbursed for out-of-pocket expenses.
CUSTODIAN. The Custodian of the Fund's assets is Star Bank, N.A. (the
"Custodian"). The Custodian's mailing address is 425 Walnut Street, P.O. Box
1118, Cincinnati, Ohio 45201. The Advisor, Administrator or interested persons
thereof may have banking relationships with the Custodian.
OTHER FUND COSTS. The Fund pays all expenses not assumed by the Advisor,
including its fees. Fund expenses include, among others, the fees and expenses,
if any, of the Trustees and officers who are not "affiliated persons" of the
Advisor, fees of the Fund's custodian, interest expense, taxes, brokerage fees
and commissions, fees and expenses of the Fund's shareholder servicing
operations, fees and expenses of qualifying and registering the Fund's shares
under federal and state securities laws, expenses of preparing, printing and
distributing prospectuses and reports to existing shareholders, auditing and
legal expenses, insurance expenses, association dues, and the expense of
shareholders' meetings and proxy solicitations. The Fund is also liable for any
nonrecurring expenses as may arise such as litigation to which the Fund may be a
party. The Fund may be obligated to indemnify the Trustees and officers with
respect to such litigation. All expenses of the Fund are accrued daily on the
books of the Fund at a rate which, to the best of its belief, is equal to the
actual expenses expected to be incurred by the Fund in accordance with generally
accepted accounting practices. For the fiscal year ended June 30, 1996, the
expense ratio of the Fund was 1.90% of its average daily net assets after fee
waivers.
The Advisor has arrangements with certain brokerage firms to provide
recordkeeping, shareholder communications and other services to investors
purchasing shares of the Fund through investment programs serviced by those
brokerage firms. These services may include assisting in establishing and
maintaining customer accounts and records, assisting with purchase and
redemption requests, receiving and answering correspondence, monitoring dividend
payments made by the Fund on behalf of customers, and similar activities related
to furnishing personal services and maintaining shareholder accounts. The
Advisor, not the Fund, may compensate these brokerage firms for their services,
based upon the amount of customer assets maintained in the Fund by such firms.
The payment of such compensation by the Advisor will not affect the expense
ratio of the Fund.
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<PAGE>
BROKERAGE. The Fund has adopted brokerage policies which allow the Advisor to
prefer brokers which provide research or other valuable services to the Advisor
and/or the Fund. In all cases, the primary consideration for selection of
broker-dealers through which to execute brokerage transactions will be to obtain
the most favorable price and execution for the Fund. Research services obtained
through the Fund's brokerage transactions may be used by the Advisor for its
other clients; conversely, the Fund may benefit from research services obtained
through the brokerage transactions of the Advisor's other clients. The Statement
of Additional Information contains more information about the management and
brokerage practices of the Fund.
DIVIDENDS, DISTRIBUTIONS, TAXES AND OTHER INFORMATION
The Statement of Additional Information contains additional information about
the federal income tax implications of an investment in the Fund in general and,
particularly, with respect to dividends and distributions and other matters.
Shareholders should be aware that dividends from the Fund which are derived in
whole or in part from interest on U.S. Government Securities may not be taxable
for state income tax purposes. Other state income tax implications are not
covered, nor is this discussion exhaustive on the subject of federal income
taxation. Consequently, investors should seek qualified tax advice.
The Fund intends to remain qualified as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986 (the "Code") and will
distribute all of its net income and realized capital gains to shareholders.
Shareholders are liable for taxes on distributions of net income and realized
capital gains of the Fund but, of course, shareholders who are not subject to
tax on their income will not be required to pay taxes on amounts distributed to
them. The Fund intends to declare dividends and capital gains distributions
annually, payable in December on a date selected by the Trustees. The Fund may
make a supplemental distribution of capital gains at the end of its fiscal year.
The nature and amount of all dividends and distributions will be identified
separately when tax information is distributed by the Fund at the end of each
year. The Fund intends to withhold 30% on taxable dividends and any other
payments that are subject to such withholding and are made to persons who are
neither citizens nor residents of the U.S.
There is no fixed dividend rate, and there can be no assurance as to the payment
of any dividends or the realization of any gains. All dividends and capital
gains distributions are reinvested in additional shares of the Fund unless the
shareholder requests in writing to receive dividends and/or capital gains
distributions in cash. That request must be received by the Fund prior to the
record date to be effective as to the next dividend. Tax consequences to
shareholders of dividends and distributions are the same if received in cash or
if received in additional shares of the Fund.
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TAX STATUS OF THE FUND. If the Fund is qualified as a "regulated investment
company" under the Code, it will not be liable for federal income taxes on
amounts paid as dividends and distributions. The Code contains a number of
complex requirements which an investment company must meet in order to qualify.
For a more detailed discussion of the tax status of the Fund, see "Additional
Tax Information" in the Statement of Additional Information.
DESCRIPTION OF FUND SHARES AND OTHER MATTERS. The Declaration of Trust of The
Tuscarora Investment Trust currently provides for the issuance of shares of the
Fund as sole series of the Trust. The Trustees are permitted to create
additional series, or funds, at any time.
Shares are freely transferable, have no preemptive or conversion rights and,
when issued, are fully paid and non-assessable. Upon liquidation of the Trust or
a particular Fund of the Trust, holders of the outstanding shares of the Fund
being liquidated shall be entitled to receive, in proportion to the number of
shares of the Fund held by them, the excess of that Fund's assets over its
liabilities. Each outstanding share is entitled to one vote for each full share
and a fractional vote for each fractional share, on all matters which concern
the Trust as a whole. On any matter submitted to a vote of shareholders, all
shares of the Trust then issued and outstanding and entitled to vote,
irrespective of the Fund, shall be voted in the aggregate and not by Fund,
except (i) when required by the 1940 Act, shares shall be voted by individual
Fund; and (ii) when the matter does not affect any interest of a particular
Fund, then only shareholders of the affected Fund or Funds shall be entitled to
vote thereon. Examples of matters which affect only a particular Fund could be a
proposed change in the fundamental investment objectives or policies of that
Fund or a proposed change in the investment advisory agreement for a particular
Fund. The shares of the Fund will have noncumulative voting rights, which means
that the holders of more than 50% of the shares voting for the election of
Trustees can elect all of the Trustees if they so choose.
The Declaration of Trust provides that the Trustees may hold office
indefinitely, except that: (1) any Trustee may resign or retire; and (2) any
Trustee may be removed with or without cause at any time: (a) by a written
instrument, signed by at least two-thirds of the number of Trustees prior to
such removal; (b) by vote of shareholders holding not less than two-thirds of
the outstanding shares of the Trust, cast in person or by proxy at a meeting
called for that purpose; or (c) by a written declaration signed by shareholders
holding not less than two-thirds of the outstanding shares of the Trust and
filed with the Custodian. In case a vacancy or an anticipated vacancy shall for
any reason exist, the vacancy shall be filled by the affirmative vote of a
majority of the remaining Trustees, subject to the provisions of Section 16(a)
of the 1940 Act.
- 23 -
<PAGE>
Any group of shareholders representing 10% or more of the shares then
outstanding may call a meeting for the purpose of removing one or more of the
Trustees. If shareholders desire to call a meeting to consider the removal of
one or more Trustees, they will be assisted in communicating with other
shareholders. See the Statement of Additional Information for more information.
Shareholder inquiries may be made in writing, addressed to the Fund at the
address shown on the cover.
Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
Trust. The Declaration of Trust, therefore, contains provisions which are
intended to mitigate such liability. See the Statement of Additional Information
for further information about the Trust and its shares.
CALCULATION OF PERFORMANCE DATA. From time to time the Fund may advertise its
total return. The Fund may also advertise yield. Both yield and total return
figures are based on historical earnings and are not intended to indicate future
performance.
The "total return" of the Fund refers to the average annual compounded rates of
return over 1, 5 and 10 year periods that would equate an initial amount
invested at the beginning of a stated period to the ending redeemable value of
the investment. The calculation of total return assumes the reinvestment of all
dividends and distributions, includes all recurring fees that are charged to all
shareholder accounts and deducts all nonrecurring charges at the end of each
period. If the Fund has been operating less than 1, 5 or 10 years, the time
period during which the Fund has been operating is substituted.
In addition, the Fund may advertise other total return performance data
("Nonstandardized Return"). Nonstandardized Return shows as a percentage rate of
return encompassing all elements of return (i.e., income and capital
appreciation or depreciation); it assumes reinvestment of all dividends and
capital gain distributions. Nonstandardized Return may be quoted for the same or
different periods as those for which standardized return is quoted.
Nonstandardized Return may consist of a cumulative percentage rate of return,
actual year-by-year rates or any combination thereof.
The "yield" of the Fund is computed by dividing the net investment income per
share earned during a thirty-day (or one month) period stated in the
advertisement by the maximum public offering price per share on the last day of
the period (using the average number of shares entitled to receive dividends).
The yield formula assumes that net investment income is earned and reinvested at
a constant rate and annualized at the end of a six-month period. For the purpose
of determining net investment income, the calculation includes among expenses of
the Fund all recurring fees that are charged to all shareholder accounts and any
nonrecurring charges for the period stated.
- 24 -
<PAGE>
<TABLE>
<S> <C> <C>
OAK VALUE FUND
Account Application ACCOUNT NO. 60-__________________
(For Fund Use Only)
Please mail account application to:
MGF Service Corp.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
- -------------------------------------------------------------------------------------------------------------------
1. ACCOUNT REGISTRATION
[ ] Check or draft enclosed payable to the Oak Value Fund
[ ] Bank Wire From: _________________________________________________________________________________________________
Account Name S.S. #/Tax I.D.#
__________________________________________________________________ ___________________________________
Name of Individual, Corporation, Organization, or Minor, etc. (In case of custodial account
please list minor's S.S.#)
_________________________________________________________________ Citizenship: [ ] U.S.
Name of Joint Tenant, Partner, Custodian [ ] Other _____________________
Address Phone
____________________________________________________________________ ( )_______________________
Street or P.O. Box Business Phone
_____________________________________________________________________ ( ) __________________________
City State Zip Home Phone
Check Appropriate Box: [ ] Individual [ ] Joint Tenant (Right of survivorship presumed) [ ] Partnership
[ ] Corporation [ ] Trust [ ] Custodial [ ] Non-Profit [ ] Other
- -------------------------------------------------------------------------------------------------------------------
2. TAXPAYER IDENTIFICATION NUMBER - Under penalties of perjury I certify that the Taxpayer Identification Number listed above is my
correct number. The Internal Revenue Service does not require your consent to any provision of this document other than the
certifications required to avoid backup withholding. Check box if appropriate:
[ ] I am exempt from backup withholding under the provisions of section 3406(a)(1)(c) of the Internal Revenue Code; or I am not
subject to backup withholding because I have not been notified that I am subject to backup withholding as a result of a failure
to report all interest or dividends; or the Internal Revenue Service has notified me that I am no longer subject to backup
withholding.
[ ] I certify under penalties of perjury that a Taxpayer Identification Number has not been issued to me and I have mailed or
delivered an application to receive a Taxpayer Identification Number to the Internal Revenue Service Center or Social Security
Administration Office. I understand that if I do not provide a Taxpayer Identification Number within 60 days that 31% of all
reportable payments will be withheld until I provide a number.
- -------------------------------------------------------------------------------------------------------------------
3. DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
[ ] Share Option - Income distributions and capital gains distributions automatically reinvested in additional shares.
[ ] Income Option - Income distributions and short term capital gains distributions paid in cash, long term capital
gains distributions reinvested in additional shares.
[ ] Cash Option - Income distributions and capital gains distributions paid in cash.
- -------------------------------------------------------------------------------------------------------------------
4. REDEMPTION OPTIONS
I (we) authorize the Fund or MGF Service Corp. to act upon instructions received by telephone to have amounts withdrawn from my
(our) account in the Fund (see prospectus for limitations on this option) and:
[ ] WIRED ($5,000 minimum OR MAILED to my (our) bank account designated below. I (we) further authorize the used of automated
cash transfers to and from the account designated below.
NOTE: For wire redemptions, the indicated bank should be a commercial bank. Please attach a voided check for the account.
Bank Account Number ____________________________________________Bank Routing Transit Number ________________________________
Name of Account Holder _____________________________________________________________________________________________________
Bank Name ______________________________________________________Bank Address________________________________________________
City State
- -------------------------------------------------------------------------------------------------------------------------------
5. SIGNATURES
By signature below each investor certifies that he has received a copy of the Fund's current Prospectus, that he is of legal
age, and that he has full authority and legal capacity for himself or the organization named below, to make this investment and
to use the options selected above. The investor appoints MGF Service Corp. as his agent to enter orders for shares, to receive
dividends and distributions for automatic reinvestment in additional shares of the Fund for credit to the investor's account and
to surrender for redemption shares held in the investor's account in accordance with any of the procedures elected above or for
payment of service charges incurred by the investor. The investor further agrees that MGF Service Corp. can cease to act as such
agent upon ten days' notice in writing to the investor at the address contained in this Application. The investor hereby ratifies
any instructions given pursuant to this Application and for himself and his successors and assigns does hereby release the Fund,
Oak Value Capital Management, Inc., MGF Service Corp., and their respective officers, employees, agents and affiliates from any
and all liability in the performance of the acts instructed herein. Neither the Fund, MGF Service Corp., nor their respective
affiliates will be liable for complying with telephone instructions they reasonably believe to be genuine or for any loss, damage,
cost or expense in acting on such telephone instructions. The investor(s) will bear the risk of any such loss. The Fund or MGF
Service Corp., or both, will employ reasonable procedures to determine that telephone instructions are genuine. If the Fund and/or
MGF Service Corp. do not employ such procedures, they may be liable for losses due to unauthorized or fraudulent instructions.
These procedures may include, among others, requiring forms of personal identification prior to acting upon telephone instructions,
providing written confirmation of the transactions and/or tape recording telephone instructions.
________________________________________________________________ ________________________________________________________
Signature of Individual Owner, Corporate Officer, Trustee, etc. Signature of Joint Owner, if Any
________________________________________________________________ _________________________________________________________
Title of Corporate Officer, Trustee, etc. Date
NOTE: Corporations, trusts and other organizations must complete the
resolution form on the reverse side. Unless otherwise specified, each
joint owner shall have full authority to act on behalf of the account.
6. AUTOMATIC INVESTMENT PLAN (Complete for Investments into the Fund)
The Automatic Investment Plan is available for all established accounts of the Fund. There is no charge for
this service, and it offers the convenience of automatic investing on a regular basis. The minimum investment is $100.00 per
month. Though a continuous program of 12 monthly investments is recommended, the Plan may be discontinued by the shareholder
at any time.
Please invest $ __________per month in the Fund. ABA Routing Number_______________________
FI Account Number________________________
[ ] Checking Account [ ] Savings Account
_________________________________________________________________________
Name of Financial Institution (FI) Please make my automatic investment on:
[ ] the last business day of each month
_________________________________________________________________________ [ ] the 15th day of each month
City State [ ] both the 15th and last business day
X________________________________________________________________________ X_______________________________________________
(Signature of Depositor EXACTLY as it appears on FI Records) (Signature of Joint Tenant - if any)
(Joint Signatures are required when bank account is in joint names. Please sign exactly as signature appears
on your FI's records.)
Please attach a voided check for the Automatic Investment Plan.
Indemnification to Depositor's Bank
In consideration of your participation in a plan which MGF Service Corp. ("MGF") has put into effect, by which amounts,
determined by your depositor, payable to the Fund, for purchase of shares of the Fund, are collected by MGF, MGF hereby agrees:
MGF will indemnify and hold you harmless from any liability to any person or persons whatsoever arising out of the payment
by you of any amount drawn by the Fund to its own order on the account of your depositor or from any liability to any person
whatsoever arising out of the dishonor by you whether with or without cause or intentionally or inadvertently, of any such
checks. MGF will defend, at its own cost and expense, any action which might be brought against you by any person or persons
whatsoever because of your actions taken pursuant to the foregoing request or in any manner arising by reason of your
participation in this arrangement. MGF will refund to you any amount erroneously paid by you to the Fund on any such check if
the claim for the amount of such erroneous payment is made by you within six (6) months from the date of such erroneous payment;
your participation in this arrangement and that of the Fund may be terminated by thirty (30) days written notice from either
party to the other.
- ----------------------------------------------------------------------------------------------------------------------------
7. AUTOMATIC WITHDRAWAL PLAN (Complete for Withdrawals from the Fund - $100 minimum)
This is an authorization for you to withdraw $_________________ from my mutual fund account beginning the last business day of
the month of _____________________.
Please Indicate Withdrawal Schedule (Check One):
[ ] Monthly - Withdrawals will be made on the last business day of each month.
[ ] Quarterly - Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
[ ] Annually - Please make withdrawals on the last business day of the month of:____________________
Please Select Payment Method (Check One):
[ ] Transfer: Please transfer the withdrawal proceeds into another account number: 60: __ __ __ __ __ __ - __
[ ] Check: Please mail a check for my withdrawal proceeds to the mailing address on this account.
[ ] ACH Transfer: Please send my withdrawal proceeds via ACH transfer to my bank checking or savings account as indicated
below. I understand that the transfer will be completed in two to three business days and that there is no charge.
[ ] Bank Wire: Please send my withdrawal proceeds via bank wire, to the account indicated below. I understand that the wire
will be completed in one business day.
Please attach a voided _______________________________________________________________________________________
check for ACH or bank wire Bank Name Bank Address
_______________________________________________________________________________________
Bank ABA# Account # Account Name
[ ] Send to special payee (other than applicant): Please mail a check for my withdrawal proceeds to the mailing address
below:
Name of payee_____________________________________________________________________________________________________________
Please send to: __________________________________________________________________________________________________________
Street address City State Zip
- ----------------------------------------------------------------------------------------------------------------------------
8. RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of the Oak Value Fund (the Fund) and that
______________________________________________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on behalf of the corporation or organization and to take any
action for it as may be necessary or appropriate with respect to its shareholder account with the Fund, and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to sign any documents necessary or appropriate to appoint
MGF Service Corp. as redemption agent of the corporation or organization for shares of the Fund, to establish or
acknowledge terms and conditions governing the redemption of said shares and to otherwise implement the privileges elected on
the Application.
Certificate
I hereby certify that the foregoing resolutions are in conformity with the Charter and By-Laws or other empowering documents of
the
____________________________________________________________________________________________________________________________
(Name of Organization)
incorporated or formed under the laws of ___________________________________________________________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the organization or corporation duly called and held on
_________________ at which a quorum was present and acting throughout, and that the same are now in full force and effect.
I further certify that the following is (are) duly elected officer(s) of the corporation or organization, authorized to act in
accordance with the foregoing resolutions.
Name Title
_______________________________________________________________ _______________________________________________
________________________________________________________________ ________________________________________________
________________________________________________________________ ________________________________________________
Witness my hand and seal of the corporation or organization this________________day of_____________________________, 19_______
________________________________________________________________ ________________________________________________
*Secretary-Clerk Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the above resolutions, this certificate must also be signed
by another officer.
</TABLE>
<PAGE>
OAK VALUE FUND
INVESTMENT ADVISOR
Oak Value Capital Management, Inc.
University Tower
3100 Tower Boulevard, Suite 800
Durham, North Carolina 27707
1-800-680-4199
ADMINISTRATOR
MGF Service Corp.
312 Walnut Street
P.O. Box 5354
Cincinnati, Ohio 45201-5354
1-800-622-2474
INDEPENDENT AUDITORS
Arthur Andersen LLP
425 Walnut Street
Cincinnati, Ohio 45202
CUSTODIAN
Star Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
BOARD OF TRUSTEES
George W. Brumley III
C. Russell Bryan
David R. Carr, Jr.
John M. Day
Joseph T. Jordan, Jr.
OFFICERS
George W. Brumley III, President
David R. Carr, Jr., Vice President and Treasurer
John F. Splain, Secretary
No person has been authorized to give any information or to make
any representations, other than those contained in this
Prospectus, in connection with the offering contained in this
Prospectus, and if given or made, such information or
representations must not be relied upon as being authorized by
the Fund. This Prospectus does not constitute an offer by the
Fund to sell shares in any State to any person to whom it is
unlawful for the Fund to make such offer in such State.
<PAGE>
PROSPECTUS
NOVEMBER 1, 1996
OAK VALUE FUND
Member of 100% NO-LOADTM
MUTUAL FUND COUNCIL
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
OAK VALUE FUND
November 1, 1996
A series of
THE TUSCARORA INVESTMENT TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Telephone 1-800-622-2474
TABLE OF CONTENTS
INVESTMENT OBJECTIVE AND POLICIES........................................... 2
DESCRIPTION OF BOND RATINGS ................................................ 5
INVESTMENT LIMITATIONS...................................................... 8
TRUSTEES AND OFFICERS.......................................................10
INVESTMENT ADVISOR..........................................................11
ADMINISTRATOR...............................................................12
OTHER SERVICES............................................................. 13
BROKERAGE.................................................................. 13
SPECIAL SHAREHOLDER SERVICES............................................... 14
PURCHASE OF SHARES......................................................... 17
REDEMPTION OF SHARES....................................................... 17
NET ASSET VALUE DETERMINATION.............................................. 18
ADDITIONAL TAX INFORMATION................................................. 18
CAPITAL SHARES AND VOTING.................................................. 19
CALCULATION OF PERFORMANCE DATA............................................ 20
FINANCIAL STATEMENTS AND REPORTS........................................... 22
This Statement of Additional Information is not a prospectus and should only be
read in conjunction with the Prospectus of the Oak Value Fund (the "Fund") dated
November 1, 1996. The Prospectus may be obtained from the Fund, at the address
and phone number shown above, at no charge.
- 1 -
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Fund are described in the
Prospectus. Supplemental information about these policies is set forth below.
Certain capitalized terms used herein are defined in the Prospectus.
WRITING COVERED CALL OPTIONS. The writing of call options by the Fund is subject
to limitations established by each of the exchanges governing the maximum number
of options which may be written or held by a single investor or group of
investors acting in concert, regardless of whether the options were written or
purchased on the same or different exchanges or are held in one or more accounts
or through one or more different exchanges or through one or more brokers.
Therefore the number of calls the Fund may write (or purchase in closing
transactions) may be affected by options written or held by other entities,
including other clients of the Advisor. An exchange may order the liquidation of
positions found to be in violation of these limits and may impose certain other
sanctions.
The Fund intends to qualify as a "regulated investment company" under Subchapter
M of the Internal Revenue Code of 1986. One of the requirements for such
qualification is that gains realized from the sale of securities held by the
Fund less than three months must comprise less than 30% of the Fund's gross
income. Due to this requirement, the Fund will limit the extent to which it
writes call options on investments held less than 3 months.
WARRANTS AND RIGHTS. Warrants are essentially options to purchase equity
securities at specific prices and are valid for a specific period of time.
Prices of warrants do not necessarily move in concert with the prices of the
underlying securities. Rights are similar to warrants but generally have a short
duration and are distributed directly by the issuer to its shareholders. Rights
and warrants have no voting rights, receive no dividends and have no rights with
respect to the assets of the issuer.
FOREIGN SECURITIES. The Fund may invest in foreign securities if the Advisor
believes such investment would be consistent with the Fund's investment
objective. The same factors would be considered in selecting foreign securities
as with domestic securities, as discussed in the Prospectus. Foreign securities
investment presents special considerations not typically associated with
investments in domestic securities. Foreign taxes may reduce income. Currency
exchange rates and regulations may cause fluctuation in the value of foreign
securities. Foreign securities are subject to different regulatory environments
than in the United States and, compared to the United States, there may be a
lack of uniform accounting, auditing and financial reporting standards, less
volume and liquidity and more volatility, less public information, and less
regulation of foreign issuers. Countries have been known to
- 2 -
<PAGE>
expropriate or nationalize assets, and foreign investments may be subject to
political, financial or social instability or adverse diplomatic developments.
There may be difficulties in obtaining service of process on foreign issuers and
difficulties in enforcing judgments with respect to claims under the U.S.
securities laws against such issuers. Favorable or unfavorable differences
between U.S. and foreign economies could affect foreign securities values. The
U.S. Government has, in the past, discouraged certain foreign investments by
U.S. investors through taxation or other restrictions and it is possible that
such restrictions could be imposed again.
REPURCHASE AGREEMENTS. The Fund may acquire U.S. Government Securities subject
to repurchase agreements. A repurchase transaction occurs when, at the time the
Fund purchases a security (normally a U.S. Treasury obligation), it also resells
it to the vendor (normally a member bank of the Federal Reserve System or a
registered Government Securities dealer) and must deliver the security (and/or
securities substituted for them under the repurchase agreement) to the vendor on
an agreed upon date in the future. Such securities, including any securities so
substituted, are referred to as the "Repurchase Securities." The repurchase
price exceeds the purchase price by an amount which reflects an agreed upon
market interest rate effective for the period of time during which the
repurchase agreement is in effect.
The majority of these transactions run day to day, and the delivery pursuant to
the resale typically will occur within one to five days of the purchase. The
Fund's risk is limited to the ability of the vendor to pay the agreed upon sum
upon the delivery date; in the event of bankruptcy or other default by the
vendor, there may be possible delays and expenses in liquidating the instrument
purchased, decline in its value and loss of interest. These risks are minimized
when the Fund holds a perfected security interest in the Repurchase Securities
and can therefore sell the instrument promptly. Under guidelines issued by the
Trustees, the Advisor will carefully consider the creditworthiness of a vendor
during the term of the repurchase agreement. Repurchase agreements are
considered as loans collateralized by the Repurchase Securities, such agreements
being defined as "loans" under the Investment Company Act of 1940 (the "1940
Act"). The return on such "collateral" may be more or less than that from the
repurchase agreement. The market value of the resold securities will be
monitored so that the value of the "collateral" is at all times as least equal
to the value of the loan, including the accrued interest earned thereon. All
Repurchase Securities will be held by the Fund's custodian either directly or
through a securities depository.
DESCRIPTION OF MONEY MARKET INSTRUMENTS. Money market instruments may include
U.S. Government Securities or corporate debt obligations (including those
subject to repurchase agreements) as described herein, provided that they mature
in
- 3 -
<PAGE>
thirteen months or less from the date of acquisition and are otherwise eligible
for purchase by the Fund. Money market instruments also may include Bankers'
Acceptances and Certificates of Deposit of domestic branches of U.S. banks,
Commercial Paper and Variable Amount Demand Master Notes ("Master Notes").
BANKERS' ACCEPTANCES are time drafts drawn on and "accepted" by a bank, are the
customary means of effecting payment for merchandise sold in import-export
transactions and are a source of financing used extensively in international
trade. When a bank "accepts" such a time draft, it assumes liability for its
payment. When the Fund acquires a Bankers' Acceptance, the bank which "accepted"
the time draft is liable for payment of interest and principal when due. The
Bankers' Acceptance, therefore, carries the full faith and credit of such bank.
A CERTIFICATE OF DEPOSIT ("CD") is an unsecured interest-bearing debt obligation
of a bank. CDs acquired by the Fund would generally be in amounts of $100,000 or
more. COMMERCIAL PAPER is an unsecured, short term debt obligation of a bank,
corporation or other borrower. Commercial Paper maturity generally ranges from
two to 270 days and is usually sold on a discounted basis rather than as an
interest-bearing instrument. The Fund will invest in Commercial Paper only if it
is rated in the highest rating category by any nationally recognized statistical
rating organization ("NRSRO") or, if not rated, the issuer must have an
outstanding unsecured debt issue rated in the three highest categories by any
NRSRO or, if not so rated, be of equivalent quality in the Advisor's assessment.
Commercial Paper may include Master Notes of the same quality. MASTER NOTES are
unsecured obligations which are redeemable upon demand of the holder and which
permit the investment of fluctuating amounts at varying rates of interest.
Master Notes are acquired by the Fund only through the Master Note program of
the Fund's custodian, acting as administrator thereof. The Advisor will monitor,
on a continuous basis, the earnings power, cash flow and other liquidity ratios
of the issuer of a Master Note held by the Fund.
FORWARD COMMITMENT AND WHEN-ISSUED SECURITIES. The Fund may purchase securities
on a when-issued basis or for settlement at a future date if the Fund holds
sufficient assets to meet the purchase price. In such purchase transactions the
Fund will not accrue interest on the purchased security until the actual
settlement. Similarly, if a security is sold for a forward date, the Fund will
accrue the interest until the settlement of the sale. When-issued security
purchases and forward commitments have a higher degree of risk of price movement
before settlement due to the extended time period between the execution and
settlement of the purchase or sale. As a result, the exposure to the
counterparty of the purchase or sale is increased. Although the Fund would
generally purchase securities on a forward commitment or when-issued basis with
the intention of taking delivery, the Fund may sell such a security prior to the
settlement date if the Advisor felt such action was appropriate. In such a case
the Fund could incur a short-term gain or loss.
- 4 -
<PAGE>
DESCRIPTION OF BOND RATINGS
The Fund will normally be invested in equities, although the percentage of its
assets fully invested in equities may vary based on market and economic
conditions. The Fund may invest a portion of its assets in fixed-income
securities, including corporate debt securities and U.S. Government Securities.
As a temporary defensive position, however, the Fund may invest up to 100% of
its assets in money market instruments. When the Fund invests in money market
instruments, it is not pursuing its investment objective. Under normal
circumstances, however, the Fund may invest in money market instruments or
repurchase agreements as described in the Prospectus. When the Fund invests in
fixed-income securities or money market instruments, it will limit itself to
debt securities within the rating categories described below or, if unrated, of
equivalent quality.
The various ratings used by the NRSROs are described below. A rating by an NRSRO
represents the organization's opinion as to the credit quality of the security
being traded. However, the ratings are general and are not absolute standards of
quality or guarantees as to the creditworthiness of an issuer. Consequently, the
Advisor believes that the quality of fixed-income securities in which the Fund
may invest should be continuously reviewed and that individual analysts give
different weightings to the various factors involved in credit analysis. A
rating is not a recommendation to purchase, sell or hold a security because it
does not take into account market value or suitability for a particular
investor. When a security has received a rating from more than one NRSRO, each
rating is evaluated independently. Ratings are based on current information
furnished by the issuer or obtained by the NRSROs from other sources that they
consider reliable. Ratings may be changed, suspended or withdrawn as a result of
changes in or unavailability of such information, or for other reasons.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S RATINGS:
The following summarizes the highest three ratings used by Moody's Investors
Service, Inc. ("Moody's") for bonds:
AAA: Bonds rated Aaa are judged to be of the best quality. These bonds
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
AA: Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large
- 5 -
<PAGE>
in Aa securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements that make the long term risks appear
somewhat larger than in Aaa securities.
A: Bonds rated A possess many favorable investment attributes and are to
be considered upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present that
suggest a susceptibility to impairment sometime in the future.
Moody's applies numerical modifiers (1, 2 and 3) with respect to bonds rated Aa
and A. The modifier 1 indicates that the bond being rated ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the bond ranks in the lower end of
its generic rating category.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of short-term promissory obligations.
MIG-1 and V-MIG-1 are the highest ratings used by Moody's for short-term notes
and variable rate demand obligations. Obligations bearing these designations are
of the best quality, enjoying strong protection by established cash flows,
superior liquidity support or demonstrated broad-based access to the market for
refinancing.
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP'S RATINGS:
The following summarizes the highest three ratings used by Standard & Poor's
Ratings Group ("S&P") for bonds:
AAA: This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA: Bonds rated AA also qualify as high quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degree.
A: Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
To provide more detailed indications of credit quality, the AA and A ratings may
be modified by the addition of a plus or minus sign to show relative standing
within these major rating categories.
- 6 -
<PAGE>
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. The rating SP-1 is the highest rating
assigned by S&P to short-term notes and indicates very strong or strong capacity
to pay principal and interest. Those issues determined to possess overwhelming
safety characteristics are given a plus (+) designation.
DESCRIPTION OF FITCH INVESTORS SERVICE INC.'S RATINGS:
The following summarizes the highest three ratings used by Fitch Investors
Service, Inc. ("Fitch") for bonds:
AAA: Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA: Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA.
A: Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
To provide more detailed indications of credit quality, the AA and A ratings may
be modified by the addition of a plus or minus sign to show relating standing
within a rating category.
The following summarizes the highest ratings used by Fitch for short-term notes,
variable rate demand instruments and commercial paper:
F-1+: Instruments assigned this rating are regarded as having the
strongest degree of assurance for timely payment.
F-1: Instruments assigned this rating reflect an assurance of
timely payment only slightly less in degree than issues rated
F-1+.
DESCRIPTION OF DUFF & PHELPS CREDIT RATING CO.'S RATINGS:
The following summarizes the highest three ratings used by Duff & Phelps Credit
Rating Co. ("D&P") for bonds:
AAA: This is the highest rating credit quality. The risk factors are
negligible, being only slightly more than for risk-free U.S. Treasury debt.
- 7 -
<PAGE>
AA: Bonds rated AA are considered to be of high credit quality.
Protection factors are strong. Risk is modest but may vary slightly from time
to time because of economic conditions.
A: Bonds rated A have average protection factors. However risk factors
are more variable and greater in periods of economic stress.
The rating Duff 1 is the highest rating assigned by D&P for short-term debt,
including commercial paper. D&P employs three designations, Duff 1+, Duff 1 and
Duff 1- within the highest rating category. Duff 1+ indicates highest certainty
of timely payment. Short-term liquidity, including internal operating factors
and/or access to alternative sources of funds, is judged to be "outstanding, and
safety is just below risk-free U.S. Treasury short-term obligations." Duff 1
indicates very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
considered to be minor. Duff 1- indicates high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.
INVESTMENT LIMITATIONS
The Fund has adopted the following investment limitations, in addition to those
described in the Prospectus, which cannot be changed without approval by holders
of a majority of the outstanding voting shares of the Fund. A "majority" for
this purpose, means the lesser of (i) 67% of the Fund's outstanding shares
represented in person or by proxy at a meeting at which more than 50% of its
outstanding shares are represented, or (ii) more than 50% of its outstanding
shares.
Under these limitations, the Fund MAY NOT:
(1) Purchase more than 10% of the outstanding voting
securities or of any class of securities of any one
issuer;
(2) Invest 25% or more of the value of its total assets in any
one industry or group of industries (except that
securities of the U.S. Government, its agencies and
instrumentalities are not subject to these limitations);
(3) Issue senior securities, borrow money or pledge its
assets, except that it may borrow from banks as a
temporary measure (a) for extraordinary or emergency
purposes, in amounts not exceeding 5% of the Fund's total
assets, or (b) in order to meet redemption requests that
might otherwise require untimely disposition of portfolio
securities if, immediately after such borrowing, the value
of the Fund's assets, including all borrowings then
outstanding, less its liabilities (excluding all
- 8 -
<PAGE>
borrowings), is equal to at least 300% of the aggregate amount of
borrowings then outstanding, and may pledge its assets to secure all
such borrowings.
(4) Invest for the purpose of exercising control or management
of another issuer;
(5) Invest in interests in real estate, real estate mortgage loans, oil,
gas or other mineral exploration or development programs, except
that the Fund may invest in the securities of companies (other than
those which are not readily marketable) which own or deal in such
things.
(6) Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter under the federal securities laws
in connection with the disposition of portfolio securities;
(7) Purchase securities on margin (but the Fund may obtain such short-
term credits as may be necessary for the
clearance of transactions);
(8) Make short sales of securities or maintain a short position, except
short sales "against the box." (A short sale is made by selling a
security the Fund does not own. A short sale is "against the box" to
the extent that the Fund contemporaneously owns or has the right to
obtain at no added cost securities identical to those sold short.);
(9) Participate on a joint or joint and several basis in any
trading account in securities;
(10) Make loans of money or securities, except that the Fund may
invest in repurchase agreements;
(11) Invest in securities of issuers which have a record of less than
three years' continuous operation (including predecessors and, in
the case of bonds, guarantors);
(12) Write, purchase or sell commodities, commodities contracts, futures
contracts or related options; or
(13) Invest more than 5% of the value of its net assets in warrants,
valued at the lower of cost or market; included within that
amount, but not to exceed 2% of the value of the Fund's net assets,
may be warrants which are not listed on the New York or American
Stock Exchange; warrants acquired by the Fund in units or attached
to securities may be deemed to be without value.
Percentage restrictions stated as an investment policy or investment limitation
apply at the time of investment; if a later increase or decrease in percentage
beyond the specified limits results from a change in securities values or total
assets, it
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<PAGE>
will not be considered a violation. However, in the case of the borrowing
limitation (limitation number 3, above), the Fund will, to the extent necessary,
reduce its existing borrowings to comply with the limitation.
While the Fund has reserved the right to make short sales "against the box"
(limitation number 8, above), the Advisor has no present intention of engaging
in such transactions at this time or during the coming year.
TRUSTEES AND OFFICERS
Following are the Trustees and executive officers of The Tuscarora Investment
Trust (the "Trust"), their present position with the Trust, age, principal
occupation during the past 5 years and their aggregate compensation from the
Trust for the fiscal year ended June 30, 1996:
<TABLE>
<C> <C> <C>
Name, Address Principal Occupation Compensation
and Age Position During Past 5 Years From the Trust
- ----------------- -------- -------------------- --------------
*George W. Brumley III (age 36) Trustee and Chairman and CEO of None
3100 Tower Blvd., Suite 800 President Oak Value Capital
Durham, North Carolina 27707 Management, Inc.
C. Russell Bryan (age 36) Trustee Vice President, Mergers and $4,000
3916 Severn Avenue Acquisitions Group of NationsBanc
Charlotte, North Carolina 28210 Capital Markets, Inc.
*David R. Carr, Jr. (age 36) Trustee, President of Oak Value None
3100 Tower Blvd., Suite 800 Vice President Capital Management, Inc.
Durham, North Carolina 27707 and Treasurer
John M. Day (age 42) Trustee Vice President of $3,500
5151 Glenwood Avenue Investors Management Corporation
Raleigh, North Carolina 27612 with responsibility for Acquisitions
and Investments
Joseph T. Jordan, Jr. (age 50) Trustee President of Practice $4,000
120 Carver Street Management Services, Inc.
Durham, North Carolina 27704
John F. Splain (age 40) Secretary Secretary and General Counsel None
312 Walnut Street, 21st Floor of MGF Service Corp. and Midwest
Cincinnati, Ohio 45202 Group Financial Services, Inc.,
(a registered broker-dealer and
investment adviser). Secretary,
General Counsel and a Director of
Leshner Financial, Inc. (parent
company of MGF Service Corp. and
Midwest Group Financial Services, Inc.)
</TABLE>
* Indicates that Trustee is an Interested Person for purposes of the 1940 Act.
- 10 -
<PAGE>
Each Board member who is not an Interested Person of the Trust receives an
annual retainer of $2,000 and a fee of $500 for attending each Board Meeting.
Messrs. Bryan, Day and Jordan constitute the Trust's Audit Committee. The Audit
Committee reviews annually the nature and cost of the professional services
rendered by the Trust's independent accountants, the results of their year-end
audit and their findings and recommendations as to accounting and financial
matters, including the adequacy of internal controls. On the basis of this
review the Audit Committee makes recommendations to the Trustees as to the
appointment of independent accountants for the following year. The Trustees have
not appointed a compensation committee or a nominating committee.
PRINCIPAL HOLDERS OF VOTING SECURITIES. As of October 4, 1996, the Trustees and
Officers of the Trust as a group owned beneficially (i.e., had voting and/or
investment power) 2.61% of the then outstanding shares of the Fund. On the same
date, National Financial Services Corp., 200 Liberty Street, One World Financial
Center, New York, New York 10281 owned of record 17.06% of the then outstanding
shares of the Fund; and The Trust Company of the South, P.O. Box 1898,
Burlington, North Carolina 27216, owned of record 8.40% of the then outstanding
shares of the Fund;
INVESTMENT ADVISOR
Oak Value Capital Management, Inc. (the "Advisor") supervises the Fund's
investments pursuant to an Investment Advisory Agreement (the "Advisory
Agreement") described in the Prospectus. The Advisory Agreement is effective
until May 23, 1997 and will be renewed thereafter for one year periods only so
long as such renewal and continuance is specifically approved at least annually
by the Board of Trustees or by vote of a majority of the Fund's outstanding
voting securities, provided the continuance is also approved by a majority of
the Trustees who are not "interested persons" of the Trust or the Advisor by
vote cast in person at a meeting called for the purpose of voting on such
approval. The Advisory Agreement is terminable without penalty on sixty days
notice by the Board of Trustees of the Trust or by the Advisor. The Advisory
Agreement provides that it will terminate automatically in the event of its
assignment.
Compensation of the Advisor is at the annual rate of 0.90% of the Fund's average
daily net assets. For the fiscal year ended June 30, 1996, the Fund paid the
Advisor advisory fees of $90,910 (which was net of voluntary fee waivers of
$34,872). For the fiscal period ended June 30, 1995, the Fund and the
Predecessor Fund paid the Advisor aggregate advisory fees of $30,539 (which was
net of voluntary fee waivers of $35,968). For the fiscal year ended August 31,
1994, the Predecessor Fund paid the Advisor advisory fees of $586 (which was net
of voluntary fee waivers of $47,889).
- 11 -
<PAGE>
The Advisor, organized as a North Carolina corporation in 1992, is controlled by
its controlling shareholders, George W. Brumley III and David R. Carr, Jr. In
addition to acting as Advisor to the Fund, the Advisor also provides investment
advice to corporations, trusts, pension and profit sharing plans, other business
and institutional accounts and individuals.
The Advisor provides a continuous investment program for the Fund, including
investment research and management with respect to all securities, investments,
cash and cash equivalents of the Fund. The Advisor determines what securities
and other investments will be purchased, retained or sold by the Fund, and does
so in accordance with the investment objective and policies of the Fund as
described herein and in the Prospectus. The Advisor places all securities orders
for the Fund, determining with which broker, dealer, or issuer to place the
orders.
The Advisor must adhere to the brokerage policies of the Fund in placing all
orders, the substance of which policies are that the Advisor must seek at all
times the most favorable price and execution for all securities brokerage
transactions.
The Advisor also provides, at its own expense, certain Executive Officers to the
Trust, and pays the entire cost of distributing Fund shares.
ADMINISTRATOR
MGF Service Corp. (the "Administrator") maintains the records of each
shareholder's account, answers shareholders' inquiries concerning their
accounts, processes purchases and redemptions of the Fund's shares, acts as
dividend and distribution disbursing agent and performs other shareholder
service functions. The Administrator receives for such services a fee payable
monthly at an annual rate of $17 per account, provided, however, that the
minimum fee is $1,000 per month. In addition, the Fund pays out-of-pocket
expenses, including but not limited to, postage, envelopes, checks, drafts,
forms, reports, record storage and communication lines.
In addition, the Administrator has been retained to provide administrative
services to the Fund. In this capacity, the Administrator supplies
non-investment related statistical and research data, internal regulatory
compliance services and executive and administrative services. The Administrator
supervises the preparation of tax returns, reports to shareholders of the Fund,
reports to and filings with the Securities and Exchange Commission and state
securities commissions, and materials for meetings of the Board of Trustees. For
the performance of these administrative services, the Fund pays MGF a fee at the
annual rate of 0.20% of the average value
- 12 -
<PAGE>
of its daily net assets up to $25,000,000, 0.175% of such assets from
$25,000,000 to $50,000,000 and 0.15% of such assets in excess of $50,000,000.
For the fiscal year ended June 30, 1996, the Administrator received
administrative services fees of $28,013.
The Administrator also provides accounting and pricing services to the Fund. The
Administrator receives $2,000 per month from the Fund for calculating daily net
asset value per share and maintaining such books and records as are necessary to
enable the Administrator to perform its duties.
OTHER SERVICES
The firm of Arthur Andersen LLP, 425 Walnut Street, Cincinnati, Ohio 45202, has
been retained by the Board of Trustees to perform an independent audit of the
books and records of the Trust, to review the Fund's federal and state tax
returns and to consult with the Trust as to matters of accounting and federal
and state income taxation.
The Custodian of the Fund's assets is Star Bank, N.A., 425 Walnut Street,
Cincinnati, Ohio 45202. The Custodian holds all cash and securities of the Fund
(either in its possession or in its favor through "book entry systems"
authorized by the Trustees in accordance with the 1940 Act), collects all income
and effects all securities transactions on behalf of the Fund.
BROKERAGE
It is the Fund's practice to seek the best price and execution for all portfolio
securities transactions. The Advisor (subject to the general supervision of the
Board of Trustees) directs the execution of the Fund's portfolio transactions.
The Trust has adopted a policy which prohibits the Advisor from effecting Fund
portfolio transactions with broker-dealers which may be interested persons of
the Trust, any Trustee, officer or director of the Trust or the Advisor or any
interested person of such persons.
The Fund's fixed-income portfolio transactions will normally be principal
transactions executed in over-the-counter markets and will be executed on a
"net" basis, which may include a dealer markup. The Fund's common stock
portfolio transactions will normally be exchange traded and will be effected
through broker-dealers who will charge brokerage commissions. Options would also
normally be exchange traded involving the payment of commissions. With respect
to securities traded only in the over-the-counter market, orders will be
executed on a principal basis with primary market makers in such securities
except where better prices or executions may be obtained on an agency basis or
by dealing with other than a primary market maker.
- 13 -
<PAGE>
During the fiscal year ended June 30, 1996, the total amount of brokerage
commissions paid by the Fund was $25,218. During the fiscal period ended June
30, 1995, the total amount of brokerage commissions paid by the Fund and the
Predecessor Fund was $29,082. During the fiscal year ended August 31, 1994, the
total amount of brokerage commissions paid by the Predecessor Fund was $42,462.
While there is no formula, agreement or undertaking to do so, the Advisor may
allocate a portion of the Fund's brokerage commissions to persons or firms
providing the Advisor with research services, which may typically include, but
are not limited to, investment recommendations, financial, economic, political,
fundamental and technical market and interest rate data, and other statistical
or research services. Much of the information so obtained may also be used by
the Advisor for the benefit of the other clients it may have. Conversely, the
Fund may benefit from such transactions effected for the benefit of other
clients. In all cases, the Advisor is obligated to effect transactions for the
Fund based upon obtaining the most favorable price and execution. Factors
considered by the Advisor in determining whether the Fund will receive the most
favorable price and execution include, among other things: the size of the
order, the broker's ability to effect and settle the transaction promptly and
efficiently and the Advisor's perception of the broker's reliability, integrity
and financial condition. During the fiscal year ended June 30, 1996, the amount
of brokerage transactions and related commissions directed to brokers because of
research services provided was $2,162,106 and $3,319, respectively.
SPECIAL SHAREHOLDER SERVICES
As noted in the Prospectus, the Fund offers the following shareholder services:
REGULAR ACCOUNT. The regular account allows for voluntary investments to be made
at any time. Available to individuals, custodians, corporations, trusts,
estates, corporate retirement plans and others, shareholders are free to make
additions and withdrawals to or from their account as often as they wish. When a
shareholder makes an initial investment in the Fund, a shareholder account is
opened in accordance with the shareholder's registration instructions. Each time
there is a transaction in a shareholder account, such as an additional
investment or the reinvestment of a dividend or distribution, the shareholder
will receive a statement showing the current transaction and all prior
transactions in the shareholder account during the calendar year to date.
- 14 -
<PAGE>
AUTOMATIC INVESTMENT PLAN. The automatic investment plan enables shareholders to
make regular monthly or bimonthly investments in shares through automatic
charges to their checking account. With shareholder authorization and bank
approval, the Administrator will automatically charge the checking account for
the amount specified ($100 minimum) which will be automatically invested in
shares at the public offering price on or about the fifteenth and/or the last
business day of the month as indicated on the Account Application. The
shareholder may change the amount of the investment or discontinue the plan at
any time by writing to the Administrator.
SYSTEMATIC WITHDRAWAL PLAN. Shareholders owning shares with a value of $10,000
or more may establish a Systematic Withdrawal Plan. A shareholder may receive
monthly, quarterly or annual payments, in amounts of not less than $100 per
payment, by authorizing the Fund to redeem the necessary number of shares
periodically (each month, quarterly in the months of March, June, September and
December or annually as specified on the Account Application). Payments may be
made directly to an investor's account with a commercial bank or other
depository institution via an Automated Clearing House ("ACH") transaction.
Instructions for establishing this service are included in the Application
contained in the Prospectus or are available by calling the Fund. Payment may
also be made by check made payable to the designated recipient and mailed within
three business days of the valuation date. If the designated recipient is other
than the registered shareholder, the signature of each shareholder must be
guaranteed on the application (see "Signature Guarantees" in the Prospectus). A
corporation (or partnership) must also submit a "Corporate Resolution" (or
"Certification of Partnership") indicating the names, titles and required number
of signatures authorized to act on its behalf. The application must be signed by
a duly authorized officer(s) and the corporate seal affixed. No redemption fees
are charged to shareholders under this plan. Costs in conjunction with the
administration of the plan are borne by the Fund. Shareholders should be aware
that such systematic withdrawals may deplete or use up entirely their initial
investment and may result in realized long-term or short-term capital gains or
losses. The Systematic Withdrawal Plan may be terminated at any time by the Fund
upon sixty days' written notice or by a shareholder upon written notice to the
Fund. Applications and further details may be obtained by calling the Fund at
1-800-622-2474, or by writing to:
The Oak Value Fund
Shareholder Services
P.O. Box 5354
Cincinnati, Ohio 45201-5354
- 15 -
<PAGE>
PURCHASES IN KIND. The Fund may accept securities in lieu of cash in payment for
the purchase of shares of the Fund. The acceptance of such securities is at the
sole discretion of the Advisor based upon the suitability of the securities
accepted for inclusion as a long term investment of the Fund, the marketability
of such securities, and other factors which the Advisor may deem appropriate. If
accepted, the securities will be valued using the same criteria and methods as
described in "How Net Asset Value is Determined" in the Prospectus.
REDEMPTIONS IN KIND. The Fund does not intend, under normal circumstances, to
redeem its securities by payment in kind. It is possible, however, that
conditions may arise in the future which would, in the opinion of the Trustees,
make it undesirable for the Fund to pay for all redemptions in cash. In such
case, the Board of Trustees may authorize payment to be made in portfolio
securities or other property of the Fund. Securities delivered in payment of
redemptions would be valued at the same value assigned to them in computing the
net asset value per share. Shareholders receiving them would incur brokerage
costs when these securities are sold. An irrevocable election may be filed under
Rule 18f-1 of the 1940 Act, wherein the Fund commits itself to pay redemptions
in cash, rather than in kind, to any shareholder of record of the Fund who
redeems during any ninety day period, the lesser of (a) $250,000 or (b) one
percent (1%) of the Fund's net assets at the beginning of such period.
TRANSFER OF REGISTRATION. To transfer shares to another owner, send a written
request to the Fund's Administrator at the address shown herein. Your request
should include the following: (1) the existing account registration; (2)
signature(s) of the registered owner(s) exactly as the signature(s) appear(s) on
the account registration; (3) the new account registration, address, social
security or taxpayer identification number and how dividends and capital gains
are to be distributed; (4) signature guarantees (see the Prospectus under the
heading "Signature Guarantees"); and (5) any additional documents which are
required for transfer by corporations, administrators, executors, trustees,
guardians, etc. If you have any questions about transferring shares, call or
write the Administrator.
PURCHASE OF SHARES
The purchase price of shares of the Fund is the net asset value next determined
after the order is received. An order received prior to 4:00 p.m., Eastern time
will be executed at the price computed on the date of receipt; and an order
received after that time will be executed at the price computed on the next
Business Day. An order to purchase shares is not binding on the Fund until
confirmed in writing (or unless other arrangements have been made with the Fund,
for example in the case of orders utilizing wire transfer of funds) and payment
has been received.
- 16 -
<PAGE>
The Fund reserves the right in its sole discretion (i) to suspend the offering
of its shares, (ii) to reject purchase orders when in the judgment of management
such rejection is in the best interest of the Fund and its shareholders, and
(iii) to reduce or waive the minimum for initial and subsequent investments
under some circumstances, including circumstances where certain economies can be
achieved in sales of Fund shares.
EMPLOYEES AND AFFILIATES OF THE FUND. The Fund has adopted initial investment
minimums for the purpose of reducing the cost to the Fund (and consequently to
the shareholders) of communicating with and servicing its shareholders. However,
the minimum initial investment requirement does not apply to Trustees, officers
and employees of the Fund, the Advisor and certain parties related thereto,
including clients of the Advisor or any sponsor, officer, committee member
thereof, or the immediate family of any of them. In addition, accounts having
the same mailing address may be aggregated for purposes of the minimum
investment if they consent in writing to share a single mailing of shareholder
reports, proxy statements (but each such shareholder would receive his/her own
proxy) and other Fund literature.
REDEMPTION OF SHARES
The Fund may suspend redemption privileges or postpone the date of payment (i)
during any period that the New York Stock Exchange (the "Exchange") is closed,
or trading on the Exchange is restricted as determined by the Securities and
Exchange Commission (the "Commission"), (ii) during any period when an emergency
exists as defined by the rules of the Commission as a result of which it is not
reasonably practicable for the Fund to dispose of securities owned by it, or to
fairly determine the value of its assets, and (iii) for such other periods as
the Commission may permit.
No charge is made by the Fund for redemptions, although the Trustees could
impose a redemption charge in the future. Any redemption may be more or less
than the shareholder's cost depending on the market value of the securities held
by the Fund.
NET ASSET VALUE DETERMINATION
Under the 1940 Act, the Trustees are responsible for determining in good faith
the fair value of the securities and other assets of the Fund, and they have
adopted procedures to do so, as follows. The net asset value of the Fund is
determined as of the close of trading of the Exchange (currently 4:00 p.m.,
Eastern time) on each "Business Day." A Business Day means any day, Monday
through Friday, except for the following holidays: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Fourth of
- 17 -
<PAGE>
July, Labor Day, Thanksgiving Day and Christmas. Net asset value per share is
determined by dividing the total value of all Fund securities and other assets,
less liabilities, by the total number of shares then outstanding. Net asset
value includes interest on fixed income securities, which is accrued daily.
ADDITIONAL TAX INFORMATION
TAXATION OF THE FUND. The Fund intends to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"). Among the requirements to qualify under Subchapter M, the Fund
must distribute annually at least 90% of its net investment income. In addition
to this distribution requirement, the Fund must derive at least 90% of its gross
income each taxable year from dividends, interest, payments with respect to
securities' loans, gains from the disposition of stock or securities, and
certain other income. The Fund will also be required to derive less than 30% of
its gross income from the sale or other disposition of securities held for less
than 90 days.
While the above requirements are aimed at qualification of the Fund as a
regulated investment company under Subchapter M of the Code, the Fund also
intends to comply with certain requirements of the Code to avoid liability for
federal income and excise tax. If the Fund remains qualified under Subchapter M,
it will not be subject to federal income tax to the extent it distributes its
taxable net investment income and net realized capital gains. A nondeductible 4%
federal excise tax will be imposed on the Fund to the extent it does not
distribute at least 98% of its ordinary taxable income for a calendar year, plus
98% of its capital gain net taxable income for the one year period ending each
October 31, plus certain undistributed amounts from prior years. While the Fund
intends to distribute its taxable income and capital gains in a manner so as to
avoid imposition of the federal excise and income taxes, there can be no
assurance that the Fund indeed will make sufficient distributions to avoid
entirely imposition of federal excise or income taxes.
Should additional series, or funds, be created by the Trustees, each fund would
be treated as a separate tax entity for federal income tax purposes.
TAX STATUS OF THE FUND'S DIVIDENDS AND DISTRIBUTIONS. Dividends paid by the Fund
derived from net investment income or net short-term capital gains are taxable
to shareholders as ordinary income, whether received in cash or reinvested in
additional shares. Distributions, if any, of long-term capital gains are taxable
to shareholders as long-term capital gains, whether received in cash or
reinvested in additional shares, regardless of how long Fund shares have been
held. For information on "backup" withholding, see "How to Purchase Shares" in
the Prospectus.
- 18 -
<PAGE>
For corporate shareholders, the dividends received deduction, if applicable,
should apply to dividends from the Fund. The Fund will send shareholders
information each year on the tax status of dividends and disbursements. A
dividend or capital gains distribution paid shortly after shares have been
purchased, although in effect a return of investment, is subject to federal
income taxation. Dividends from net investment income, along with capital gains,
will be taxable to shareholders, whether received in cash or shares and no
matter how long you have held Fund shares, even if they reduce the net asset
value of shares below your cost and thus in effect result in a return of a part
of your investment.
CAPITAL SHARES AND VOTING
Shares of the Fund, when issued, are fully paid and non-assessable and have no
preemptive or conversion rights. Shareholders are entitled to one vote for each
full share and a fractional vote for each fractional share held. Shares have
noncumulative voting rights, which means that the holders of more than 50% of
the shares voting for the election of Trustees can elect 100% of the Trustees
and, in this event, the holders of the remaining shares voting will not be able
to elect any Trustees. The Trustees will hold office indefinitely, except that:
(1) any Trustee may resign or retire and (2) any Trustee may be removed with or
without cause at any time (a) by a written instrument, signed by at least
two-thirds of the number of Trustees prior to such removal; or (b) by vote of
shareholders holding not less than two-thirds of the outstanding shares of the
Trust, cast in person or by proxy at a meeting called for that purpose; or (c)
by a written declaration signed by shareholders holding not less than two-thirds
of the outstanding shares of the Trust and filed with the Trust's Custodian.
Shareholders have certain rights, as set forth in the Declaration of Trust,
including the right to call a meeting of the shareholders for the purpose of
voting on the removal of one or more Trustees. Shareholders holding not less
than ten percent (10%) of the shares then outstanding may require the Trustees
to call such a meeting and the Trustees are obligated to provide certain
assistance to shareholders desiring to communicate with other shareholders in
such regard (e.g., providing access to shareholder lists, etc.). In case a
vacancy or an anticipated vacancy shall for any reason exist, the vacancy shall
be filled by the affirmative vote of a majority of the remaining Trustees,
subject to the provisions of Section 16(a) of the 1940 Act. The Trust does not
expect to have an annual meeting of shareholders.
Prior to May 19, 1995, the Predecessor Fund was a series of Albemarle Investment
Trust.
- 19 -
<PAGE>
CALCULATION OF PERFORMANCE DATA
As indicated in the Prospectus, the Fund may, from time to time, advertise
certain total return and yield information. The average annual total return of
the Fund for a period is computed by subtracting the net asset value per share
at the beginning of the period from the net asset value per share at the end of
the period (after adjusting for the reinvestment of any income dividends and
capital gain distributions), and dividing the result by the net asset value per
share at the beginning of the period. In particular, the average annual total
return of the Fund ("T") is computed by using the redeemable value at the end of
a specified period of time ("ERV") of a hypothetical initial investment of
$1,000 ("P") over a period of time ("n") according to the formula P(l+T)n=ERV.
The average annual total return quotations for the Fund for the one year period
ended June 30, 1996 and for the period since inception (January 18, 1993) to
June 30, 1996 are 29.04% and 17.03%, respectively.
In addition, the Fund may advertise other total return performance data
("Nonstandardized Return"). Nonstandardized Return shows as a percentage rate of
return encompassing all elements of return (i.e., income and capital
appreciation or depreciation); it assumes reinvestment of all dividends and
capital gain distributions. Nonstandardized Return may consist of a cumulative
percentage of return, actual year-by-year rates or any combination thereof.
From time to time, the Fund may advertise its yield. A yield quotation is based
on a 30-day (or one month) period and is computed by dividing the net investment
income per share earned during the period by the maximum offering price per
share on the last day of the period, according to the following formula:
Yield = 2[a-b/cd + 1)6 - 1]
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period
Solely for the purpose of computing yield, dividend income is recognized by
accruing 1/360 of the stated dividend rate of the security each day that the
Fund owns the security. Generally, interest earned (for the purpose of "a"
above) on debt obligations is computed by reference to the yield to maturity of
each obligation held based on the market value of the obligation (including
actual accrued interest) at the close of business on the last business day prior
to the start of the 30-day (or one
- 20 -
<PAGE>
month) period for which yield is being calculated, or, with respect to
obligations purchased during the month, the purchase price (plus actual accrued
interest).
The Fund's performance may be compared in advertisements, sales literature and
other communications to the performance of other mutual funds having similar
objectives or to standardized indices or other measures of investment
performance. In particular, the Fund may compare its performance to the S&P 500
Index, which is generally considered to be representative of the performance of
unmanaged common stocks that are publicly traded in the United States securities
markets. Comparative performance may also be expressed by reference to a ranking
prepared by a mutual fund monitoring service, such as Lipper Analytical
Services, Inc. or Morningstar, Inc., or by one or more newspapers, newsletters
or financial periodicals. Performance comparisons may be useful to investors who
wish to compare the Fund's past performance to that of other mutual funds and
investment products. Of course, past performance is not a guarantee of future
results.
o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes
the reinvestment of all capital gains distributions and income dividends
and takes into account any change in net asset value over a specific period
of time.
o MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
Investors may use such indices in addition to the Fund's Prospectus to obtain a
more complete view of the Fund's performance before investing. Of course, when
comparing the Fund's performance to any index, factors such as composition of
the index and prevailing market conditions should be considered in assessing the
significance of such comparisons. When comparing funds using reporting services,
or total return, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and compute offering price. Advertisements and
other sales literature for the Fund may quote total returns that are calculated
on non-standardized base periods. The total returns represent the historic
change in the value of an investment in the Fund based on monthly reinvestment
of dividends over a specified period of time.
From time to time the Fund may include in advertisements and other
communications information, charts, and illustrations
- 21 -
<PAGE>
relating to inflation and the effects of inflation on the dollar, including the
purchasing power of the dollar at various rates of inflation. The Fund may also
disclose from time to time information about its portfolio allocation and
holdings at a particular date (including ratings of securities assigned by
independent rating services such as S&P and Moody's). The Fund may also depict
the historical performance of the securities in which the Fund may invest over
periods reflecting a variety of market or economic conditions either alone or in
comparison with alternative investments, performance indices of those
investments, or economic indicators. The Fund may also include in advertisements
and in materials furnished to present and prospective shareholders statements or
illustrations relating to the appropriateness of types of securities and/or
mutual funds that may be employed to meet specific financial goals, such as
saving for retirement, children's education, or other future needs.
The Fund may also disclose from time to time information about IRAs and the
benefits of IRAs, including the potential tax deduction and tax-deferred growth.
The Fund may also provide examples of the accumulated amounts that would be
available in an IRA with specified contributions over a specified amount of time
with a specified annual return. For example, a $2,000 IRA contribution each year
for 30 years earning a 10% average annual return would be worth approximately
$360,000 at the end of 30 years. Such examples will be used for illustration
purposes only and will not be indicative of past or future performance of the
Fund.
FINANCIAL STATEMENTS AND REPORTS
The books of the Fund will be audited at least once each year by independent
public accountants. Shareholders will receive annual audited and semiannual
(unaudited) reports when published, and will receive written confirmation of all
confirmable transactions in their account. A copy of the Annual Report will
accompany the Statement of Additional Information ("SAI") whenever the SAI is
requested by a shareholder or prospective investor. The Financial Statements of
the Fund as of June 30, 1996, together with the report of the independent
accountants thereon, are included on the following pages.
- 22 -
<PAGE>
ANNUAL REPORT
JUNE 30, 1996
OAK VALUE FUND
<PAGE>
LETTER TO SHAREHOLDERS August 14, 1996
==============================================================================
The Oak Value Fund has, by all measures, had another banner year. The Fund
achieved several major milestones during the past year. These milestones
include:
o OUTPERFORMANCE - The Fund outperformed both the broad market as measured
by the S&P 500 and its peer group as measured by the Lipper Growth Index
for the six months and one year ended June 30, 1996. The Fund has also
outperformed these benchmarks for the three year period ending June 30,
1996 and since the Fund's inception
o MORNINGSTAR RATING - The Fund received an initial star rating of four
stars from Morningstar in March. In early August, this rating was
increased to five stars. The five star rating is awarded to the top ten
percent of all mutual funds tracked by Morningstar. We are pleased to have
been honored with Morningstar's highest rating.
o CONTINUED ASSET GROWTH - The total assets of the Fund have increased from
$10.3 million on June 30, 1995 to $22.1 million on June 30, 1996.
Total shareholders in the Fund have increased from 426 to 720 in that
same period of time.
o FIDELITY RELATIONSHIP - In May, the Trustees of the Fund approved a plan
to establish a distribution relationship with the Fidelity Investment
Advisors Group. This relationship will allow nearly four hundred financial
planners and investment advisors who use this service the ability to
invest in the Oak Value Fund.
Listed below is a comparison of the Fund's performance versus the S&P 500
Index and the Lipper Growth Fund Index:
Six One Three Since
MONTHS YEAR YEARS INCEPTION
Oak Value Fund 11.10% 29.04% 18.42% 17.03%
S&P 500 w/ div 10.10 26.00 17.22 16.31
Lipper Growth Index 7.99 20.68 14.75 13.61
<PAGE>
The market's recent volatility continues to confirm our long-standing belief
that few people, if any, can consistently predict the future. As long term
investors, volatility creates opportunity. Such volatility gives us the
opportunity to deploy additional capital into businesses of which we are
knowledgeable. The Oak Value Fund ended its fiscal year with approximately
eighteen percent of total assets in cash equivalent investments. This cash
position was not by design. It is our goal to be fully invested at all times,
though we will allocate capital only when we find opportunities which provide
the requisite margin of safety. The recent volatility since the end of June
has provided us with such opportunities. Many of our purchases were of
companies we know well that afforded us a brief opportunity to buy at very
attractive prices. Purchases made during the few panic days in July have
already experienced significant appreciation.
Our search for good businesses is driven by the requirements that the
underlying economics of those businesses in which we invest must be both
attractive and predictable. We have long been attracted to the economics of
the newspaper publishing and television broadcasting businesses, though we
have until recently had little, if any, exposure to these industries in the
Fund. We have long considered these industries to be great businesses.
Historically, they have been characterized as having very attractive
economics, very high barriers to entry and very high returns on capital.
We have met with the management of twenty-nine companies in these two
industries over the past eighteen months. This intensive research effort has
led us to several companies which we believe represent "good businesses with
good management at attractive prices." Our exposure to these industries is
represented through our holdings in such companies as LIN Television, Pulitzer
Publishing, E.W. Scripps Co., Washington Post Co., New York Times Co. and
Torstar Inc. (Collectively, these companies represented approximately nineteen
percent of the Fund's assets at the end of the fiscal year.) They all possess
defined, defensible franchises which produce predictable, excess cash flow.
They are operated by management teams which have demonstrated their abilities
and loyalties to their shareholders. Finally, the share prices of the
companies that we have purchased represent, in our opinion, significant
discounts to the true intrinsic values of the underlying businesses. We have
been able to buy public equity positions in superior companies at significant
discounts to the value these franchises would sell for in the private market.
<PAGE>
Our decision to increase our exposure to these industries was related to
several factors. In broadcasting, a major telecommunications bill was passed
in January 1996. We believed as early as late last Fall that regulatory
changes would presage a long term positive for the broadcasting industry. The
ultimate passage of this legislation has resulted in an increase in the
maximum U.S. market coverage that one company may control from twenty-five
percent to thirty-five percent. This legislation also addresses the
grandfathering of LMAs (Local Marketing Agreements-operation of a second
station in an existing market). Our decision to invest in this industry was
also influenced by the fact that both the Olympics and a national election
campaign will likely have a very positive impact on the near term earnings
prospects for these companies, providing us with increased near term
predictability. Though we believe that further consolidation in this industry
is likely, our decision to invest in this industry is not predicated on such
consolidation. All but one of the above mentioned companies operates network
affiliated television broadcasting stations. Collectively, these companies own
thirty-eight network affiliated television stations. Over ninety percent of
these properties operate within the top one hundred markets in the country.
Over eighty percent of these properties are ranked one or two in their
respective markets. A key success factor for many of these companies has been
their dominance of local news. Superior local news production is a key factor
in attaining high market share ratings and building the value of the local
franchise. Profit margins on local news can be in excess of seventy percent.
Local news provides a demonstrated ability to win viewers and maintain the
value of the franchise. Additionally, successful local news production often
reduces the need for expanded syndicated programming. We believe that we have
identified and invested in truly great franchises at prices which provide a
significant margin of safety. If further consolidation does take place, we
will gladly participate in the positive surprise. The past ten years have
presented a very unique set of challenges which have resulted in mediocre
returns for most newspaper companies. Major shifts in advertising from local,
main street retailers has occurred as the category killers continued their
rampant onslaught with less advertising and more preprint messages.
Advertising revenue growth has not been spectacular during the last decade.
One reason for the less than robust growth in advertising has been the shift
in identity and methodology of the local advertiser. We believe the shift is
for the most part nearing its completion and these franchises have new base
positions. Accelerating newsprint prices have created an opportunity for us.
We believe the majority of the advertising shift has run its course and that
newsprint prices have now finally reversed their cyclical climb. The
management teams of these companies have responded to these and other
challenges by rationalizing plants, increasing advertising and circulation
prices, reducing employee headcount, reducing newsprint consumption,
leveraging existing marketing and distribution channels, increasing use of new
and innovative technologies, and diversifying investments. The results are
stronger, more efficient businesses with attractive long term economics.
Competition from alternate providers of news and information content will
certainly continue to represent risks as well. Though growth challenges will
continue, we believe these franchises will yield predictable, growing excess
cash flow from this base. Additionally, we believe this cash flow will be less
subject to the risk of lost advertisers than has been the case in recent
years. We have allocated a significant amount of time and effort to visiting
and analyzing many companies within this industry. It is our belief that the
management of the companies we own are aware of these risks and are responding
to them just as they have responded to other challenges in recent years.
<PAGE>
Based in Cincinnati, Ohio, E. W. Scripps Co. owns and operates daily and
Sunday newspapers in Cincinnati, Denver, Memphis and Knoxville with combined
circulation of over 500,000, as well as twelve regional daily newspapers. It
is also the largest independently owned operator of ABC affiliated television
stations in the country. This combination of good newspaper and broadcasting
properties is further enhanced by the truly superior management team at E. W.
Scripps. In 1995, Scripps launched Home & Garden Television (HGTV), a cable
television station which focuses on programming for the home, garden and home
improvement markets. This launch was considered the most successful launch of
1995 and now reaches over 160 markets across the country, including fifteen of
the twenty largest markets. Growing rapidly, HGTV's subscriber base is now in
excess of 17 million subscribers. HGTV has a great future as superior audience
demographics and fantastic advertiser support provide a very valuable cable
franchise. The company also announced earlier this year that it had signed an
agreement to sell its cable television operations (exclusive of HGTV) to
Comcast. Though recent pressures on the cable industry have drawn this
transaction into question, we are confident that the underlying valuation of
Scripps and its component pieces is far in excess of the stock's recent
trading range.
Scripps' management team is extremely impressive as one analyzes the many
brilliant moves they have made-from starting HGTV to successfully executing
affiliation switches at three stations from FOX to ABC, to combining a group
of small newspapers into a local California stronghold. This management team
is either unbelievably lucky or extremely bright. We choose to believe the
latter. They are fair to their shareholders and are dedicated to creating long
term value. We are glad to be associated with this fine enterprise.
As our firm approaches a ten year anniversary, we are pleased to say that we
have owned shares of Berkshire Hathaway for our clients for most of that time
period. We have diligently monitored the company, its holdings in publicly
traded securities and its wholly-owned businesses for this entire period. This
long-term experience has provided Oak Value a unique ability to analyze and
value the shares of this often misunderstood and frequently mispriced company.
We find it very interesting that this highly publicized company provides so
many people with the opportunity to have an opinion on a company about which
they know so little. Berkshire Hathaway is a collection of businesses and as
such can be analyzed (if diligence is applied) just as any other company.
Recent prophecies suggest that Mr. Buffett has recently fallen off the turnip
truck and that the future is dim for Berkshire shareholders. We do not share
this opinion. While we do not believe that Berkshire can continue to compound
at its historically high rates of return, we do believe that Mr. Buffett's
long term, stated goal of increasing intrinsic value fifteen percent per year
is quite achievable.
<PAGE>
We have owned Berkshire in the Oak Value Fund since the Fund's inception in
1993. Our decision to increase the Fund's allocation to this long term holding
in recent months has been driven by several factors:
o We believe the underlying businesses, whether partially or wholly owned,
will continue to compound at above average rates for the foreseeable
future. Additionally, Berkshire's recent acquisition of GEICO will
significantly increase the "float" available for long term investment at
Berkshire. Earlier investors in the Fund will recall that the Fund was a
shareholder of GEICO when it was acquired by Berkshire earlier this year.
We had purchased shares of GEICO in early 1995 based on the belief that
GEICO's already efficient delivery system coupled with the further use of
additional technology would allow it to take advantage of major changes in
the automobile insurance industry.
o The management structure and compensation employed by Mr. Buffett are the
most efficient of any major U.S. corporation. Total corporate office
staff was recently a total of twelve employees including Chairman Buffett
and Vice Chairman Munger. They each receive annual compensation of
$100,000 per year. There are no stock option plans. We compare this
structure to the hundreds of companies where management is paid seven or
eight figure salaries in addition to their egregious stock option plans
which in effect give them a "call" on the future growth of shareholder
value. Stock options are often viewed as a way for managers to "help
themselves" to the corporate coffers over the long term. Many companies
have granted significant portions of the company's ownership to
management over a period of years. Of course, the accounting confession
(we mean profession) says this has no costs to us as shareholders. The
compensation and overhead structure employed at Berkshire provide nearly
frictionless participation in the underlying businesses which the company
owns and/or operates.
o Recent share price volatility has given us the opportunity to purchase
Berkshire shares at very attractive valuations. The publicity surrounding
the recent issuance of the Class B shares has created increased trading
activity in the shares of this otherwise inactively traded company. The
primary reason for the issuance of the Class B shares was to forestall
potential issuers of unit investment trusts from plying their trade with
Berkshire's good name. Berkshire's holdings in Coke and Gillette have
together added over two billion dollars ($1,800 per share) to the value
of Berkshire as their share prices have increased significantly since the
offering was announced. Meanwhile, Berkshire's Class A share price has
declined by more than $2,000 over the same period of time. Though Mr.
Buffett did comment that he did not believe the shares were undervalued
at the time he announced the offering, we believe the recent share prices
near $30,000 represent significant value and we have acted accordingly.
<PAGE>
Many of the companies which we have owned for some time continue to give us
opportunities to invest in good enterprises at valuations which represent
discounts to their true intrinsic value. For many of these companies, these
discounts may remain intact as investors' misunderstanding of these franchises
continues (particularly in the insurance industry where some participants
consistently trade at a price below that of their intrinsic value). Meanwhile,
we should continue to compound at the rate of growth of the underlying
businesses even if the valuation gap does not close.
Oakwood Homes continues to demonstrate its management expertise as our thesis
develops at this emerging finance powerhouse. Deutsche Bank ( the largest
floor plan financing provider for the manufactured housing industry in the
country) recently established a joint venture with Oakwood to pursue the
financing of retail sales through the many dealers with which it already has
relationships. This joint venture provides Oakwood the opportunity to further
leverage its existing base of underwriting and servicing systems while
Deutsche Bank provides the capital and the business development. This combined
effort of two major players in an otherwise fragmented industry should have
significant impact on the industry.
R. P. Scherer's management continues to be forthright with its shareholders,
focused on the long term and diligent about capital allocation. We believe the
fruits of their efforts and investments to transition this business are coming
to bear. Meanwhile, management continues to make the best of a very difficult
market in the vitamin soft gel business while building a base of alternative
drug delivery systems that should yield superior financial results over the
long term.
We are extremely pleased with the portfolio of companies we own. We are
confident that the underlying businesses they represent will produce above
average returns for our shareholders.
Thank you for your vote of confidence.
Sincerely,
/s/ David R. Carr, Jr.
David R. Carr, Jr.
Co-Manager
/s/ George W. Brumley, III
George W. Brumley, III
Co-Manager
<PAGE>
<TABLE>
<CAPTION>
OAK VALUE FUND
PERFORMANCE INFORMATION
===================================================================================================================
A Representation of the graphic material contained in the Oak Value Fund
Annual Report is set forth below:
Comparison of the Change in Value of a $10,000 Investment in the Oak Value Fund,
Lipper Growth Fund Index and Standard & Poor's 500 Index
S&P 500 INDEX: OAK VALUE FUND:
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
01/18/93 10,000 01/18/93 10,000
03/31/93 3.93% 10,393 03/31/93 3.53% 10,353
06/30/93 0.49% 10,443 06/30/93 0.04% 10,357
09/30/93 2.56% 10,711 09/30/93 10.48% 11,442
12/31/93 2.32% 10,960 12/31/93 6.66% 12,204
03/31/94 -3.79% 10,544 03/31/94 -4.86% 11,611
06/30/94 0.42% 10,588 06/30/94 1.79% 11,818
09/30/94 4.89% 11,106 09/30/94 5.53% 12,472
12/31/94 -0.02% 11,104 12/31/94 -3.66% 12,015
03/31/95 9.74% 12,186 03/31/95 9.50% 13,157
06/30/95 9.55% 13,350 06/30/95 1.34% 13,334
09/30/95 7.95% 14,411 09/30/95 10.34% 14,712
12/31/95 6.02% 15,278 12/31/95 5.27% 15,487
03/31/96 5.37% 16,098 03/31/96 7.40% 16,633
06/30/96 4.49% 16,821 06/30/96 3.44% 17,206
LIPPER GROWTH FUND INDEX:
QTRLY
DATE RETURN BALANCE
01/18/93 10,000
03/31/93 1.27% 10,127
06/30/93 1.47% 10,272
09/30/93 4.80% 10,765
12/31/93 2.26% 11,008
03/31/94 -2.99% 10,679
06/30/94 -2.20% 10,444
09/30/94 4.91% 10,957
12/31/94 -1.12% 10,834
03/31/95 7.23% 11,618
06/30/95 10.70% 12,861
09/30/95 9.08% 14,028
12/31/95 1.54% 14,244
03/31/96 4.51% 14,887
06/30/96 3.33% 15,383
Past performance is not predictive of future performance.
Oak Value Fund
Average Annual Total Returns
As of June 30, 1996
1 Year Since Inception*
29.04% 17.03%
*Inception date of the Oak Value Fund was January 18, 1993.
NON-STANDARDIZED TOTAL RETURNS
1996 SINCE
CALENDAR CALENDAR CALENDAR YEAR TO DATE INCEPTION*
1993* 1994 1995 (AS OF 6/30/96)(AS OF 6/30/96)
<S> <C> <C> <C> <C> <C>
Oak Value Fund.......................... 22.05% -1.51% 28.84% 11.10% 72.06%
Lipper Growth Fund Index................ 10.13% -1.57% 31.48% 7.99% 53.83%
S&P 500 Index........................... 9.70% 1.32% 37.58% 10.10% 68.21%
*Inception date of the Oak Value Fund was January 18, 1993.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OAK VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996
===================================================================================================================
ASSETS
Investments in securities:
<S> <C>
At acquisition cost...................................................................... $ 15,462,506
===============
At value (Note 1)........................................................................ $ 18,727,571
Investments in repurchase agreements (Note 1)............................................... 3,990,000
Cash ....................................................................................... 65
Receivable for capital shares sold.......................................................... 49,431
Dividends receivable........................................................................ 15,233
Interest receivable......................................................................... 1,663
Organization expenses, net (Note 1)......................................................... 7,749
Other assets................................................................................ 25,320
---------------
TOTAL ASSETS............................................................................. 22,817,032
---------------
LIABILITIES
Payable for securities purchased............................................................ 507,441
Payable for capital shares redeemed......................................................... 205,205
Payable to affiliates (Note 3).............................................................. 31,525
Other accrued expenses...................................................................... 7,324
---------------
TOTAL LIABILITIES........................................................................ 751,495
---------------
NET ASSETS ................................................................................. $ 22,065,537
===============
Net assets consist of:
Capital shares.............................................................................. $ 18,023,351
Accumulated net realized gains from security transactions................................... 777,121
Net unrealized appreciation on investments.................................................. 3,265,065
---------------
Net assets.................................................................................. $ 22,065,537
===============
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value)................................................................ 1,413,047
===============
Net asset value, offering price and redemption price per share (Note 1)..................... $ 15.62
===============
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OAK VALUE FUND
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1996
===================================================================================================================
INVESTMENT INCOME
<S> <C>
Dividends................................................................................ $ 138,408
Interest................................................................................. 66,726
---------------
TOTAL INVESTMENT INCOME................................................................ 205,134
---------------
EXPENSES
Investment advisory fees (Note 3)........................................................ 125,782
Administrative services fees (Note 3).................................................... 28,013
Professional fees........................................................................ 27,507
Accounting services fees (Note 3)........................................................ 24,000
Registration fees........................................................................ 23,304
Postage and supplies..................................................................... 15,514
Trustees' fees and expenses.............................................................. 14,097
Shareholder services and transfer agent fees (Note 3).................................... 12,000
Insurance expense........................................................................ 10,875
Custodian fees........................................................................... 6,692
Printing of shareholder reports.......................................................... 4,093
Amortization of organization expenses (Note 1)........................................... 4,000
Other expenses........................................................................... 4,534
---------------
TOTAL EXPENSES......................................................................... 300,411
Fees waived by the Adviser (Note 3)...................................................... ( 34,872)
---------------
NET EXPENSES........................................................................... 265,539
---------------
NET INVESTMENT LOSS ........................................................................ ( 60,405)
---------------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions............................................ 926,281
Net change in unrealized appreciation/depreciation on investments........................ 2,549,944
---------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS ........................................... 3,476,225
---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ................................................. $ 3,415,820
===============
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OAK VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIODS ENDED JUNE 30, 1996 AND JUNE 30, 1995
===================================================================================================================
YEAR TEN MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1996 1995
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment loss.................................................... $ ( 60,405) $ ( 39,220)
Net realized gains from security transactions.......................... 926,281 247,324
Net change in unrealized appreciation/depreciation on investments...... 2,549,944 272,160
--------------- ---------------
Net increase in net assets from operations................................ 3,415,820 480,264
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net realized gains from security transactions..................... ( 92,392) ( 515,382)
--------------- ---------------
FROM CAPITAL SHARE TRANSACTIONS(A):
Proceeds from shares sold.............................................. 10,044,743 3,131,449
Net asset value of shares issued in reinvestment
of distributions to shareholders..................................... 89,729 503,235
Payments for shares redeemed........................................... ( 1,642,431) ( 2,118,927)
--------------- ---------------
Net increase in net assets from capital share transactions................ 8,492,041 1,515,757
--------------- ---------------
TOTAL INCREASE IN NET ASSETS ............................................. 11,815,469 1,480,639
NET ASSETS:
Beginning of period.................................................... 10,250,068 8,769,429
--------------- ---------------
End of period.......................................................... $ 22,065,537 $ 10,250,068
=============== ===============
(a)Summary of capital share activity:
Shares sold............................................................ 681,397 270,560
Shares issued in reinvestment of distributions to shareholders......... 6,382 46,309
Shares redeemed........................................................ ( 115,378) ( 177,823)
--------------- ---------------
Net increase in shares outstanding..................................... 572,401 139,046
Shares outstanding, beginning of period................................ 840,646 701,600
--------------- ---------------
Shares outstanding, end of period...................................... 1,413,047 840,646
=============== ===============
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
OAK VALUE FUND
FINANCIAL HIGHLIGHTS
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
===================================================================================================================
FOR THE PERIOD
YEAR TEN MONTHS YEAR JANUARY 18,
ENDED ENDED ENDED 1993(A) TO
JUNE 30, JUNE 30, AUGUST 31, AUGUST 31,
1996 1995 1994 1993
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period......... $ 12.19 $ 12.50 $ 10.96 $ 10.00
------------ ------------- ------------- ------------
Income from investment operations:
Net investment loss......................... ( 0.04) ( 0.05) ( 0.02) ( 0.03)
Net realized and unrealized gains
on investments........................... 3.57 0.55 1.78 0.99
------------ ------------- ------------- ------------
Total from investment operations............... 3.53 0.50 1.76 0.96
------------ ------------- ------------- ------------
Less distributions:
From net realized gains..................... ( 0.10) ( 0.81) ( 0.22) --
------------ ------------- ------------- ------------
Net asset value at end of period............... $ 15.62 $ 12.19 $ 12.50 $ 10.96
============ ============= ============= ============
Total return................................... 29.04% 5.78%(c) 16.07% 16.11%(c)
============ ============= ============= ============
Net assets at end of period (000's)............ $ 22,066 $ 10,250 $ 8,769 $ 1,890
============ ============= ============= ============
Ratio of expenses to average net assets(b) .... 1.90% 1.89%(c) 1.89% 2.19%(c)
Ratio of net investment loss to average
net assets................................ (0.43%) (0.53%)(c) (0.58%) (0.81%)(c)
Portfolio turnover rate (annualized)........... 58% 103%(c) 91% 43%(c)
<FN>
(a)Commencement of operations.
(b)Absent fee waivers and/or expense reimbursements by the Adviser, the ratios
of expenses to average net assets would have been 2.15%, 2.38%(c), 2.80%,
and 6.29%(c) for the periods ended June 30, 1996, June 30, 1995, August 31,
1994 and August 31, 1993, respectively (Note 3).
(c)Annualized.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
OAK VALUE FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
===================================================================================================================
MARKET
SHARES COMMON STOCKS -- 84.9% VALUE
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ADVERTISING -- 3.7%
17,350 Interpublic Group Companies, Inc............................................. $ 813,281
--------------
BEVERAGES -- 4.2%
19,200 Coca-Cola Company............................................................ 938,400
--------------
BROADCASTING -- 4.2%
25,550 LIN Television Corporation(a) ............................................... 919,800
--------------
CONGLOMERATE -- 7.8%
56 Berkshire Hathaway, Inc., Class A(a) ........................................ 1,719,200
--------------
CONSUMER PRODUCTS -- 5.7%
35,925 Armor All Product Corporation................................................ 534,384
16,200 Avon Products, Inc........................................................... 731,025
--------------
1,265,409
--------------
ENTERTAINMENT -- 5.0%
17,526 The Walt Disney Company...................................................... 1,101,947
--------------
FINANCIAL INSTITUTIONS -- 5.0%
22,850 American Express Company..................................................... 1,019,681
2,500 Associates First Capital Corporation(a) ..................................... 94,063
--------------
1,113,744
--------------
HEALTHCARE/PHARMACEUTICAL -- 6.4%
30,950 R. P. Scherer Corporation(a) ................................................ 1,404,356
--------------
HOUSEHOLD PRODUCTS -- 4.1%
10,625 Colgate-Palmolive Company ................................................... 900,469
--------------
INSURANCE - ACCIDENT & HEALTH -- 4.0%
29,925 AFLAC, Inc................................................................... 894,009
--------------
INSURANCE - PROPERTY & CASUALTY -- 9.8%
65,525 Acceptance Insurance Companies, Inc.(a) ..................................... 1,122,116
11,100 Markel Corporation(a) ....................................................... 1,032,300
--------------
2,154,416
--------------
MANUFACTURED HOUSING -- 3.6%
38,400 Oakwood Homes Corporation.................................................... 792,000
--------------
<PAGE>
<CAPTION>
OAK VALUE FUND (CONTINUED)
===================================================================================================================
MARKET
SHARES COMMON STOCKS -- 84.9% VALUE
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MEDIA -- 11.3%
18,775 Pulitzer Publishing Company.................................................. $ 1,112,419
22,650 Scripps (E.W.) Company....................................................... 1,056,056
1,000 Washington Post Company, Class B............................................. 324,000
--------------
2,492,475
--------------
MORTGAGE BANKING -- 4.0%
10,300 Federal Home Loan Mortgage Corporation....................................... 880,650
--------------
PERSONAL CARE/COSMETICS -- 1.9%
6,700 Gillette Company............................................................. 417,913
--------------
PUBLISHING -- 4.2%
12,000 New York Times Company, Class A.............................................. 391,500
28,500 Torstar Corporation.......................................................... 528,002
--------------
919,502
--------------
TOTAL COMMON STOCKS (COST $15,462,506) ...................................... $ 18,727,571
--------------
<PAGE>
<CAPTION>
===================================================================================================================
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS(B) -- 18.1% VALUE
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
$ 3,990,000 Star Bank, N.A., 5.00%, dated 06/28/96, due 07/01/96,
repurchase proceeds $3,991,663 (Cost $3,990,000)......................... $ 3,990,000
--------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS AT VALUE-- 103.0% ............... $ 22,717,571
LIABILITIES IN EXCESS OF OTHER ASSETS-- (3.0%) .............................. ( 652,034)
--------------
NET ASSETS-- 100.0% ......................................................... $ 22,065,537
==============
<FN>
(a)Non-income producing security.
(b)Repurchase agreement is fully collateralized by U.S. Government obligations.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
OAK VALUE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
==============================================================================
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Oak Value Fund (the Fund) is a diversified series of shares of The
Tuscarora Investment Trust (the Trust). The Trust, registered as an open-end
management investment company under the Investment Company Act of 1940, as
amended, was organized as a Massachusetts business trust on March 3, 1995. The
Fund itself began operations on January 18, 1993 as a series of the Albemarle
Investment Trust (Note 4).
The Investment objective of the Fund is to seek capital appreciation primarily
through investments in equity securities, consisting of common and preferred
stocks and securities convertible into common stocks. Current income will be
of secondary importance.
The following is a summary of the Fund's significant accounting policies:
Securities valuation -- The Fund's portfolio securities are valued as of the
close of business of the regular session of the New York Stock Exchange
(currently 4:00 p.m., Eastern time). Securities which are traded
over-the-counter are valued at the last sales price, if available, otherwise,
at the last quoted bid price. Securities traded on a national stock exchange
are valued based upon the closing price on the principal exchange where the
security is traded.
Repurchase agreements -- Repurchase agreements, which are collateralized by
U.S. Government obligations, are valued at cost which, together with accrued
interest, approximates market. At the time the Fund enters into a repurchase
agreement, the seller agrees that the value of the underlying securities,
including accrued interest, will at all times be equal to or exceed the face
amount of the repurchase agreement. In addition, the Fund actively monitors
and seeks additional collateral, as needed.
Share valuation -- The net asset value per share of the Fund is calculated
daily by dividing the total value of the Fund's assets, less liabilities, by
the number of shares outstanding. The offering price and redemption price per
share are equal to the net asset value per share.
<PAGE>
Investment income and distributions to shareholders -- Interest income is
accrued as earned. Dividend income is recorded on the ex-dividend date.
Dividends arising from net investment income, if any, are declared and paid
annually. Net realized short-term capital gains, if any, may be distributed
throughout the year and net realized long-term capital gains, if any, are
distributed at least once each year. Income distributions and capital gain
distributions are determined in accordance with income tax regulations, which
may differ from generally accepted accounting principles.
Organization expenses -- Expenses of organization, net of certain expenses
paid by the Adviser, have been capitalized and are being amortized on a
straight-line basis over five years.
Security transactions -- Security transactions are accounted for on trade
date. Securities sold are valued on a specific identification basis.
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 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.
Federal income tax -- It is the Fund's policy to comply with the special
provisions of the Internal Revenue Code applicable to regulated investment
companies. As provided therein, in any fiscal year in which a Fund so
qualifies and distributes at least 90% of its taxable net income, the Fund
(but not the shareholders) will be relieved of federal income tax on the
income distributed. Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare as dividends
in each calendar year at least 98% of its net investment income (earned during
the calendar year) and 98% of its net realized capital gains (earned during
the twelve months ended October 31) plus undistributed amounts from prior
years.
The following information is based upon the federal income tax cost of
portfolio investments of the Fund as of June 30, 1996:
Gross unrealized appreciation............................ $ 3,370,071
Gross unrealized depreciation............................ ( 107,980)
---------------
Net unrealized appreciation.............................. $ 3,262,091
===============
<PAGE>
The tax basis of investments for the Fund as of June 30, 1996 was $15,465,480.
The difference between financial reporting and federal income tax cost amounts
is due to certain timing differences in recognizing capital losses under
generally accepted accounting principles and tax regulations. The Fund's net
investment loss of $60,405 for 1996 was used to offset net short-term realized
capital gains and, as such, has been reclassified to accumulated net realized
gains from security transactions on the Statement of Assets and Liabilities.
2. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of investment securities,
other than short-term investments, amounted to $12,658,766 and $7,416,625,
respectively, for the year ended June 30, 1996.
3. TRANSACTIONS WITH AFFILIATES
Certain trustees and officers of the Trust are also officers of Oak Value
Capital Management, Inc. (the Adviser) or MGF Service Corp. (MGF), the
administrator, transfer agent and accounting services agent for the Trust
INVESTMENT ADVISORY AGREEMENT
The Fund's investments are managed by the Adviser under the terms of an
Investment Advisory Agreement. Under the Investment Advisory Agreement, the
Fund pays the Adviser a fee, which is computed and accrued daily and paid
monthly, at an annual rate of .90% of the Fund's average daily net assets.
The Adviser currently intends to waive its investment advisory fees to the
extent necessary to limit the total operating expenses of the Fund to 1.90% of
the Fund's average daily net assets. In accordance with the above limitation,
the Adviser voluntarily waived $34,872 of its investment advisory fees for the
year ended June 30, 1996.
<PAGE>
ADMINISTRATION AGREEMENT
Under the terms of the Administration Agreement with the Trust, MGF supplies
non-investment related statistical and research data, internal regulatory
compliance services and executive and administrative services for the Fund.
MGF supervises the preparation of tax returns, reports to shareholders of the
Fund, reports to and filings with the Securities and Exchange Commission and
state securities commissions, and materials for meetings of the Board of
Trustees. For the performance of these administrative services, MGF receives a
monthly fee based on the Fund's average daily net assets.
TRANSFER AGENT AND SHAREHOLDER SERVICE AGREEMENT
Under the terms of the Transfer, Dividend Disbursing, Shareholder Service and
Plan Agency Agreement with the Trust, MGF maintains the records of each
shareholder's account, answers shareholders' inquiries concerning their
accounts, processes purchases and redemptions of the Fund's shares, acts as
dividend and distribution disbursing agent and performs other shareholder
service functions. For these services, MGF receives a monthly fee based on the
number of shareholder accounts in the Fund. In addition, the Fund pays
out-of-pocket expenses including, but not limited to, postage and supplies.
ACCOUNTING SERVICES AGREEMENT
Under the terms of the Accounting Services Agreement with the Trust, MGF
calculates the daily net asset value per share and maintains the financial
books and records of the Fund. For these services, MGF receives a monthly fee
from the Fund. In addition, the Fund pays certain out-of-pocket expenses
incurred by MGF in obtaining valuations for the Fund's portfolio securities.
4. REORGANIZATION OF THE OAK VALUE FUND
The Oak Value Fund was originally organized as a series of the Albemarle
Investment Trust, a Massachusetts business trust. On May 19, 1995, pursuant to
an Agreement and Plan of Reorganization, all assets and liabilities of this
series (the Predecessor Fund), which had substantially identical investment
objectives and policies as the Fund, were transferred in exchange for all
capital shares of the Fund. The Predecessor Fund then distributed to its
shareholders as a liquidating dividend all capital shares of the Fund in
exchange for and in cancellation of its capital shares.
For federal income tax purposes, the reorganization qualified as a tax-free
reorganization with no tax consequences to the Predecessor Fund, the Fund or
the shareholders.
In connection with the reorganization, the Fund changed its fiscal year-end
from August 31 to June 30.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
==============================================================================
To the Shareholders and Board of Trustees
of Tuscarora Investment Trust:
We have audited the accompanying statement of assets and liabilities of Oak
Value Fund of the Tuscarora Investment Trust (a Massachusetts business trust),
including the portfolio of investments, as of June 30, 1996, the related
statement of operations for the year then ended, and the statements of changes
in net assets and financial highlights for the year ended June 30, 1996 and
the period from September 1, 1994 to June 30, 1995. These financial statements
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. The financial highlights for the year ended August 31,
1994 and for the period from January 18, 1993 to August 31, 1993 were audited
by other auditors whose reports thereon dated October 20, 1994, and September
24, 1993, respectively, expressed unqualified opinions on those financial
highlights.
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 June 30, 1996, by correspondence with the custodian and brokers.
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 Oak
Value Fund of the Tuscarora Investment Trust as of June 30, 1996, the results
of its operations for the year then ended, and the changes in its net assets
and the financial highlights for the year ended June 30, 1996 and the period
from September 1, 1994 to June 30, 1995, in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Cincinnati, Ohio
July 19, 1996
<PAGE>
THE TUSCARORA INVESTMENT TRUST
PART C. OTHER INFORMATION
- --------------------------
Item 24. Financial Statements and Exhibits
- -------
(a) (i) Financial Statements included in Part A:
Financial Highlights
(ii) Financial Statements included in Part B:
Statement of Assets and Liabilities, June 30,
1996
Statement of Operations for year ended June 30,
1996
Statement of Changes in Net Assets for the
periods ended June 30, 1996 and June 30, 1995
Financial Highlights
Notes to Financial Statements
Portfolio of Investments, June 30, 1996
(b) Exhibits
(1) Registrant's Agreement and Declaration of
Trust is filed herewith.
(2) Registrant's Bylaws is filed herewith.
(3) Inapplicable
(4) Inapplicable
(5) Investment Advisory Agreement with Oak Value
Capital Management, Inc. is filed herewith.
(6) Inapplicable
(7) Inapplicable
(8) Custody Agreement with Star Bank N.A. is
filed herewith.
<PAGE>
(9)(i) Administration Agreement with MGF Service
Corp. is filed herewith.
(ii) Transfer, Dividend Disbursing, Shareholder
Service and Plan Agency Agreement with MGF
Service Corp. is filed herewith.
(iii) Accounting Services Agreement with MGF
Service Corp. is filed herewith.
(iv) License Agreement with Oak Value Capital
Management, Inc. is filed herewith.
(10) Opinion and Consent of Morgan, Lewis &
Bockius, which was filed as an Exhibit to
Registrant's Registration Statement on Form
N-1A, is hereby incorporated by reference.
(11)(i) Consent of Arthur Andersen LLP is filed
herewith.
(ii) Consent of KPMG Peat Marwick LLP, which was
filed as an Exhibit to Registrant's
Registration Statement on Form N-1A, is
hereby incorporated by reference.
(iii) Consent of Tait, Weller & Baker, which was filed as
an Exhibit to Registrant's Registration Statement
on Form N-1A, is hereby incorporated by reference.
(12) Inapplicable
(13) Inapplicable
(14) Individual Retirement Plan is filed herewith.
(15) Inapplicable
(16) Computation of Performance Quotations is filed
herewith.
(17) Financial Data Schedule is filed herewith.
(18) Inapplicable.
Item 25. Persons Controlled by or Under Common Control with
- ------- Registrant.
None
- 2 -
<PAGE>
Item 26. Number of Holders of Securities.
- -------
As of September 4, 1996, there were 760 holders of
shares of beneficial interest of the Oak Value Fund series of
Registrant.
Item 27. Indemnification
- --------
Article VIII of the Registrant's Agreement and Declaration of Trust provides for
indemnification of Officers and Trustees as follows:
"Section 8.4 INDEMNIFICATION OF TRUSTEES AND OFFICERS. Subject
to the limitations set forth in this Section 8.4, the Trust
shall indemnify (from the assets of the Fund or Funds to which
the conduct in question relates) each of its Trustees and
officers, including persons who serve at the Trust's request
as directors, officers or trustees of another organization in
which the Trust has any interest as a shareholder, creditor or
otherwise (referred to hereinafter, together with such
Person's heirs, executors, administrators or other legal
representatives, as a "Covered Person") against all
liabilities, including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines and
penalties, and expenses, including reasonable accountants' and
counsel fees, incurred by any Covered Person in connection
with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered
Person may be or may have been involved as a party or
otherwise or with which such Covered Person may be or may have
been threatened, while in office or thereafter, by reason of
being or having been such a Trustee or officer, except with
respect to any matter as to which it has been determined that
such Covered Person (i) did not act in good faith in the
reasonable belief that his action was in or not opposed to the
best interests of the Trust or (ii) had acted with willful
misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office (either
and both of the conduct described in clauses (i) and (ii)
above being referred to hereinafter as "Disabling Conduct"). A
determination that the Covered Person is entitled to
indemnification may be made by (i) a final decision on the
merits by a court or other body before whom the proceeding was
brought that such Covered Person was not liable by reason of
Disabling Conduct, (ii) dismissal of a court action or an
administrative action against such Covered Person for
insufficiency of evidence of Disabling Conduct, or (iii) a
reasonable determination,
- 3 -
<PAGE>
based upon a review of the facts, that such Covered Person was
not liable by reason of Disabling Conduct by (a) vote of a
majority of a quorum of Trustees who are neither "interested
persons" of the Trust as the quoted phrase is defined in
Section 2(a)(19) of the 1940 Act nor parties to the action,
suit or other proceeding on the same or similar grounds is
then or has been pending or threatened (such quorum of such
Trustees being referred to hereinafter as the "Disinterested
Trustees"), or (b) an independent legal counsel in a written
opinion. Expenses, including accountants' and counsel fees so
incurred by any such Covered Person (but excluding amounts
paid in satisfaction of judgments, in compromise or as fines
or penalties), may be paid from time to time by the Fund or
Funds to which the conduct in question related in advance of
the final disposition of any such action, suit or proceeding;
provided, that the Covered Person shall have undertaken to
repay the amounts so paid if it is ultimately determined that
indemnification of such expenses is not authorized under this
Article VIII and if (i) the Covered Person shall have provided
security for such undertaking, (ii) the Trust shall be insured
against losses arising by reason of any lawful advances, or
(iii) a majority of the Disinterested Trustees, or an
independent legal counsel in a written opinion, shall have
determined, based on a review of readily available facts (as
opposed to a full inquiry), that there is reason to believe
that the Covered Person ultimately will be entitled to
indemnification hereunder.
"Section 8.5 COMPROMISE PAYMENT. As to any matter disposed of
by a compromise payment by any Covered Person referred to in
Section 8.4 hereof, pursuant to a consent decree or otherwise,
no such indemnification either for said payment or for any
other expenses shall be provided unless such indemnification
shall be approved (i) by a majority of the Disinterested
Trustees or (ii) by an independent legal counsel in a written
opinion. Approval by the Disinterested Trustees pursuant to
clause (i) shall not prevent the recovery from any Covered
Person of any amount paid to such Covered Person in accordance
with either of such clauses as indemnification if such Covered
Person is subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in the reasonable
belief that such Covered Person's action was in or not opposed
to the best interests of the Trust or to have been liable to
the Trust or its Shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such Covered Person's
office.
- 4 -
<PAGE>
"Section 8.6 INDEMNIFICATION NOT EXCLUSIVE. The right of
indemnification provided by this Article VIII shall not be
exclusive of or affect any of the rights to which any Covered
Person may be entitled. Nothing contained in this Article VIII
shall affect any rights to indemnification to which personnel
of the Trust, other than Trustees and officers, and other
Persons may be entitled by contract or otherwise under law,
nor the power of the Trust to purchase and maintain liability
insurance on behalf of any such person."
The Registrant maintains a standard mutual fund and investment advisory
professional and directors and officers liability policy. The policy provides
coverage to the Registrant, its Trustees and officers, and its Advisor. Coverage
under the policy will include losses by reason of any act, error, omission,
misstatement, misleading statement, neglect or breach of duty.
The Advisory Agreement with Oak Value Capital Management, Inc. (the "Advisor")
provides for indemnification of the Advisor as follows:
"Subject to the limitations set forth in this Section 8(b),
the Trust shall indemnify, defend and hold harmless (from the
assets of the Fund) the Advisor against all loss, damage and
liability, including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines and
penalties, and expenses, including reasonable accountants' and
counsel fees, incurred by the Advisor in connection with the
defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or
administrative or legislative body, related to or resulting
from this Agreement or the performance of services hereunder,
except with respect to any matter as to which it has been
determined that the loss, damage or liability is a direct
result of (i) a breach of fiduciary duty with respect to the
receipt of compensation for services; or (ii) willful
misfeasance, bad faith or gross negligence on the part of the
Advisor in the performance of its duties or from reckless
disregard by it of its duties under this Agreement (either and
both of the conduct described in clauses (i) and (ii) above
being referred to hereinafter as "Disabling Conduct"). A
determination that the Advisor is entitled to indemnification
may be made by (i) a final decision on the merits by a court
or other body before whom the proceeding was brought that the
Advisor was not liable by reason of Disabling Conduct, (ii)
dismissal of a court action or an administrative proceeding
against the Advisor for
- 5 -
<PAGE>
insufficiency of evidence of Disabling Conduct, or (iii) a
reasonable determination, based upon a review of the facts,
that the Advisor was not liable by reason of Disabling Conduct
by (a) vote of a majority of a quorum of Trustees who are
neither "interested persons" of the Trust as the quoted phrase
is defined in Section 2(a)(19) of the 1940 Act nor parties to
the action, suit or other proceeding on the same or similar
grounds that is then or has been pending or threatened (such
quorum of such Trustees being referred to hereinafter as the
"Independent Trustees"), or (b) an independent legal counsel
in a written opinion. Expenses, including accountants' and
counsel fees so incurred by the Advisor (but excluding amounts
paid in satisfaction of judgments, in compromise or as fines
or penalties), may be paid from time to time by the Fund in
advance of the final disposition of any such action, suit or
proceeding; provided, that the Advisor shall have undertaken
to repay the amounts so paid if it is ultimately determined
that indemnification of such expenses is not authorized under
this Section 8(b) and if (i) the Advisor shall have provided
security for such undertaking, (ii) the Trust shall be insured
against losses arising by reason of any lawful advances, or
(iii) a majority of the Independent Trustees, or an
independent legal counsel in a written opinion, shall have
determined, based on a review of readily available facts (as
opposed to a full trial- type inquiry), that there is reason
to believe that the Advisor ultimately will be entitled to
indemnification hereunder.
"As to any matter disposed of by a compromise payment by the
Advisor referred to in this Section 8(b), pursuant to a
consent decree or otherwise, no such indemnification either
for said payment or for any other expenses shall be provided
unless such indemnification shall be approved (i) by a
majority of the Independent Trustees or (ii) by an independent
legal counsel in a written opinion. Approval by the
Independent Trustees pursuant to clause (i) shall not prevent
the recovery from the Advisor of any amount paid to the
Advisor in accordance with either of such clauses as
indemnification if the Advisor is subsequently adjudicated by
a court of competent jurisdiction not to have acted in good
faith in the reasonable belief that the Advisor's action was
in or not opposed to the best interests of the Fund or to have
been liable to the Fund or its Shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in its conduct under the
Agreement.
- 6 -
<PAGE>
"The right of indemnification provided by this Section 8(b)
shall not be exclusive of or affect any of the rights to which
the Advisor may be entitled. Nothing contained in this Section
8(b) shall affect any rights to indemnification to which
Trustees, officers or other personnel of the Trust, and other
persons may be entitled by contract or otherwise under law,
nor the power of the Trust to purchase and maintain liability
insurance on behalf of any such person.
"The Board of Trustees of the Trust shall take all such action
as may be necessary and appropriate to authorize the Fund
hereunder to pay the indemnification required by the Section
8(b) including, without limitation, to the extent needed, to
determine whether the Advisor is entitled to indemnification
hereunder and the reasonable amount of any indemnity due it
hereunder, or employ independent legal counsel for that
purpose."
Item 28. Business and Other Connections of the Investment Advisor
- -------
(a) The Advisor was organized in 1992 and has assets
under management in excess of $385 million. In
addition to providing investment advisory services to
the Registrant, the Advisor provides investment
advisory services to individual and institutional
accounts.
(b) The directors and officers of the Advisor have not
engaged in any other business, profession, vocation
or employment of a substantial nature at any time
during the past two years.
Item 29. Principal Underwriters
- --------
Inapplicable
Item 30. Location of Accounts and Records
- -------
Accounts, books and other documents required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated
thereunder will be maintained by the Registrant at its offices located at 3100
Tower Boulevard, Suite 800, Durham, North Carolina 27707, as well as at the
office of the Registrant's administrator located at 312 Walnut Street,
Cincinnati, Ohio 45202.
Item 31. Management Services Not Discussed in Parts A or B
- --------
Inapplicable
- 7 -
<PAGE>
Item 32. Undertakings
- -------
(a) Inapplicable
(b) Inapplicable
(c) The Registrant undertakes to furnish each person to
whom a Prospectus is delivered with a copy of the
latest annual report to shareholders of Registrant
upon request and without charge.
- 8 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed below on its behalf by the undersigned, thereunto duly
authorized, in the City of Cincinnati and State of Ohio on the 31st day of
October, 1996.
THE TUSCARORA INVESTMENT TRUST
By: /s/ John F. Splain
---------------------
John F. Splain
Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
/s/ George W. Brumley III President October 31, 1996
- -------------------------- and Trustee
George W. Brumley III
/s/ David R. Carr, Jr. Vice President, October 31, 1996
- -------------------------- Treasurer and
David R. Carr, Jr. Trustee
*C. RUSSELL BRYAN Trustee
*JOHN M. DAY Trustee
*JOSEPH T. JORDAN, JR. Trustee
By: /s/ John F. Splain
------------------
John F. Splain
Attorney-in-Fact*
October 31, 1996
INDEX TO EXHIBITS
(1) Agreement and Declaration of Trust
(2) Bylaws
(3) Investment Advisory Agreement with Oak
Value Capital Management, Inc.
(4) Custody Agreement with Star Bank N.A.
(5) Administration Agreement with MGF Service Corp.
(6) Transfer, Dividend Disbursing, Shareholder Service and Plan
Agency Agreement with MGF Service Corp.
(7) Accounting Services Agreement with MGF Service Corp.
(8) License Agreement with Oak Value Capital Management, Inc.
(9) Consent of Arthur Andersen LLP
(10) Individual Retirement Plan
(11) Computation of Performance Quotations
(12) Financial Data Schedule
THE TUSCARORA INVESTMENT TRUST
AGREEMENT AND DECLARATION OF TRUST
THE TUSCARORA INVESTMENT TRUST
AGREEMENT AND DECLARATION OF TRUST
Table of Contents
Page
RECITALS......................................................................1
ARTICLE I THE TRUST..................................................2
Section 1.1 Name...............................................2
Section 1.2 Principal Place of Business and Resident Agent.... 2
Section 1.3 Nature of Trust................................... 2
Section 1.4 Definitions....................................... 2
ARTICLE II PURPOSE OF THE TRUST................................... ..7
ARTICLE III POWERS OF THE TRUSTEES...................................7
Section 3.1 Powers in General..................................7
Section 3.2 Borrowings; Financings; Issuance of Securities....12
Section 3.3 Deposits..........................................13
Section 3.4 Allocations.......................................13
Section 3.5 Further Powers and Limitations....................13
ARTICLE IV TRUSTEES AND OFFICERS....................................14
Section 4.1 Number; Election; Term............................14
Section 4.2 Trustees' Meetings................................16
Section 4.3 Committees........................................16
Section 4.4 Officers..........................................16
Section 4.5 Compensation of Trustees and Officers.............17
Section 4.6 Ownership of Shares and Securities of the Trust...17
Section 4.7 Right of Trustees and Officers to Own Property or to
Engage in Business............................... 17
Section 4.8 Reliance on Experts.............................. 18
Section 4.9 Surety Bonds..................................... 18
Section 4.10 Apparent Authority of Trustees and Officers...... 18
Section 4.11 Other Relationships Not Prohibited............... 19
Section 4.12 Payment of Trust Expenses........................ 19
Section 4.13 Ownership of the Trust Property.................. 20
ARTICLE V DELEGATION OF MANAGERIAL RESPONSIBILITIES................ 20
Section 5.1 Appointment; Action by Less than All Trustees.... 20
Section 5.2 Certain Contracts................................ 21
<PAGE>
ARTICLE VI FUNDS AND SHARES........................................ 23
Section 6.1 Description of Funds and Shares.................. 23
Section 6.2 Establishment and Designation of Certain Funds;
General Provisions for All Funds................. 24
Section 6.3 Ownership of Shares.............................. 28
Section 6.4 Investments in the Trust......................... 29
Section 6.5 No Preemptive or Appraisal Rights................ 29
Section 6.6 Status of Shares................................. 29
ARTICLE VII SHAREHOLDERS' VOTING POWERS AND MEETINGS............... 29
Section 7.1 Voting Powers.....................................29
Section 7.2 Number of Votes and Manner of Voting; Proxies.....30
Section 7.3 Meetings..........................................30
Section 7.4 Record Dates......................................31
Section 7.5 Quorum and Required Vote..........................32
Section 7.6 Action by Written Consent.........................32
Section 7.7 Inspection of Records.............................32
Section 7.8 Additional Provisions.............................32
ARTICLE VIII LIMITATION OF LIABILITY; INDEMNIFICATION..............32
Section 8.1 Trustees and Shareholders Not Personally Liable...32
Section 8.2 Trustees' Good Faith Action.......................33
Section 8.3 Indemnification of Shareholders...................33
Section 8.4 Indemnification of Trustees and Officers......... 34
Section 8.5 Compromise Payment............................... 35
Section 8.6 Indemnification Not Exclusive.................... 35
Section 8.7 Liability of Third Persons Dealing with Trustees. 36
ARTICLE IX DURATION; REORGANIZATION; AMENDMENTS................. 36
Section 9.1 Duration and Termination of Trust................ 36
Section 9.2 Reorganization................................... 36
Section 9.3 Amendments....................................... 37
Section 9.4 Filing of Copies of Declaration and Amendments... 38
ARTICLE X MISCELLANEOUS........................................ 39
Section 10.1 Governing Law.................................... 39
Section 10.2 Counterparts..................................... 39
Section 10.3 Reliance by Third Parties........................ 39
Section 10.4 References; Headings............................. 39
SIGNATURES AND ACKNOWLEDGEMENTS. . . . . . . . . . . . . . . . . . . . . . ..40
<PAGE>
AGREEMENT AND DECLARATION OF TRUST OF
THE TUSCARORA INVESTMENT TRUST
This AGREEMENT AND DECLARATION OF TRUST, made at Boston, Massachusetts, this 3rd
day of March, 1995, by the Trustee whose signature is set forth below (the
"Initial Trustee"),
WITNESSETH THAT:
WHEREAS, it is intended that the trust established hereby (the "Trust") will
carry on the business of an investment company, and as such of buying, selling,
investing in or otherwise dealing in and with stocks, bonds, debentures,
warrants and other securities, and interests therein, or calls or puts with
respect to any of the same, or financial futures contracts, or such other and
further investment media and other property as the Trustees may deem advisable,
which are not prohibited by law or the terms of this Declaration; and
WHEREAS, the Initial Trustee has accepted such sum, together with any and all
additions thereto and the income or increments thereof, upon the terms,
conditions and trusts hereinafter set forth; and
WHEREAS, the assets held by the Trustees may be divided into separate Funds,
each with its own separate investment portfolio and investment objectives,
policies and purposes, and the beneficial interest in each such Fund shall be
divided into transferable Shares, there being a separate Series of Shares for
each Fund, all in accordance with the provisions hereinafter set forth; and
WHEREAS, it is desired that the Trust be managed and operated as a trust with
transferrable shares under the laws of Massachusetts, of the type commonly known
and referred to as a Massachusetts business trust, in accordance with the
provisions hereinafter set forth; and
NOW, THEREFORE, the Initial Trustee, for himself and his successors as Trustees,
hereby declares, and agrees with the Settlor, for himself and for all persons
who shall hereafter become holders of Shares of Beneficial Interest of the
Trust, of any Series, that the Trustees will hold the sum delivered to them upon
the execution hereof, and thereafter from time to time, and all other and
further cash, Securities and other property of every type and description which
they may in any way acquire in their capacity as such Trustees, together with
the income there from and the proceeds thereof, IN TRUST, to manage and dispose
of the same for the benefit of the holders from time to time of the
1
<PAGE>
Shares of the several Series being issued and to be issued hereunder and in the
manner and subject to the provisions hereof, to wit:
ARTICLE I THE TRUST
Section 1.1 Name. The name of the Trust shall be "The Tuscarora Investment
Trust," and so far as may be practicable the Trustees shall conduct the Trust's
activities, execute all documents and enter into legal action, if any, under
that name, which name (and the word "Trust" wherever used in this Agreement and
Declaration of Trust, except where the context otherwise requires) shall refer
to the Trustees in their capacity as Trustees, and not individually or
personally, and shall not refer to the officers, agents or employees of the
Trust or of such Trustees, or to the holders of the shares of Beneficial
Interest of the Trust, of any Series. If the Trustees determine that the use of
such name is not practicable, legal or convenient at any time or in any
jurisdiction, or if the Trust is required to discontinue the use of such name
pursuant to Section 10.5 hereof, then subject to that Section, the Trustees may
use such other designation, or they may adopt such other name for the Trust as
they deem proper, and the Trust may hold property and conduct its activities
under such designation or name.
Section 1.2 Principal Place of Business and Resident Agent. The principal
place of business of the Trust shall be 3100 Tower Boulevard, Suite 800, Durham,
North Carolina 27707, unless changed by the Trustees to another location in
another jurisdiction within the United States, but such office need not be the
sole or principal office of the Trust. The Trust may have such other offices or
places of business as the Trustees may from time to time determine to be
necessary or expedient. The Trust's resident agent in Massachusetts is CT
Corporation System, 2 Oliver Street, Boston, Massachusetts 02109.
Section 1.3 Nature of Trust. The Trust shall be a trust with transferrable
shares under the laws of The Commonwealth of Massachusetts, of the type referred
to in Section 1 of Chapter 182 of the Massachusetts General Laws and commonly
known as a Massachusetts business trust. The Trust is not intended to be, shall
not be deemed to be, and shall not be treated as, a general partnership, limited
partnership, limited liability company, joint venture, corporation or joint
stock company. The Shareholders shall be beneficiaries and their relationship to
the Trustees shall be solely in that capacity in accordance with the rights
conferred upon them hereunder.
Section 1.4 Definitions. As used in this Agreement and Declaration of Trust,
the following terms shall have the meanings set forth below unless the context
thereof otherwise requires:
<PAGE>
"Accounting Agent" shall have the meaning designated in Section 5.2(g) hereof.
"Administrator" shall have the meaning designated in Section 5.2(b) hereof.
"Affiliated Person" shall have the meaning designated in the 1940 Act.
"Bylaws" shall mean the Bylaws of the Trust, as amended from time to time.
"Certificate of Designation" shall have the meaning designated in Section 6.1
hereof.
"Certificate of Termination" shall have the meaning designated in Section 6.1
hereof.
"Commission" shall have the meaning designated in the 1940 Act.
"Contracting Party" shall have the meaning designated in the preamble to Section
5.2 hereof.
"Covered Person" shall have the meaning designated in Section 8.4 hereof.
"Custodian" shall have the meaning designated in Section 5.2(d) hereof.
"Declaration" and "Declaration of Trust" shall mean this Agreement and
Declaration of Trust, as amended and restated, and all amendments or
modifications thereof as from time to time in effect. References in this
Agreement and Declaration of Trust to "hereof," "herein" and "hereunder" shall
be deemed to refer to the Declaration of Trust generally, and shall not be
limited to the particular text, Article or Section in which such words appear.
"Disabling Conduct" shall have the meaning designated in Section 8.4 hereof.
"Distributor" shall have the meaning designated in Section 5.2(c) hereof.
"Dividend Disbursing Agent" shall have the meaning designated in Section 5.2(e)
hereof.
"Fund" or "Funds" shall mean one or more of the separate components of the
assets of the Trust which are now or hereafter established and designated under
or in accordance with the provisions of Article VI hereof.
<PAGE>
"Fund Assets" shall have the meaning designated in Section 6.2(a) hereof.
"General Items" shall have the meaning designated in Section 6.2(a) hereof.
"Initial Trustee" shall have the meaning designated in the Preamble hereto.
"Investment Adviser" shall have the meaning designated in Section 5.2(a) hereof.
"Majority of the Trustees" shall mean a majority of the Trustees in office at
the time in question. At any time at which there shall be only one (1) Trustee
in office, such phrase shall mean such Trustee.
"Majority Shareholder Vote," as used with respect to the election of any Trustee
at a meeting of Shareholders, shall mean the vote for the election of such
Trustee of a plurality of all outstanding Shares, without regard to Series,
represented in person or by proxy and entitled to vote thereon, provided that a
quorum (as determined in accordance with Section 7.5 hereof) is present, and as
used with respect to any other action required or permitted to be taken by
Shareholders, shall mean the vote for such action of the holders of that
majority of outstanding Shares (or where a separate vote of Shares of any
particular Series is to be taken the affirmative vote of that majority of the
outstanding Shares of that Series) which consists of: (i) a majority of all
Shares (or of all Shares of the particular Series) represented in person or by
proxy and entitled to vote on such action at the meeting of Shareholders at
which such action is to be taken, provided that a quorum (as determined in
accordance with Section 7.5 hereof) is present; or (ii) if such action is to be
taken by written consent of Shareholders, a majority of all outstanding Shares
(or of all outstanding Shares of the particular Series) entitled to vote on such
action; provided, further, that (iii) as used with respect to any action
requiring the affirmative vote of "a majority of the outstanding voting
securities," as the quoted phrase is defined in the 1940 Act, of the Trust or of
any Fund, "Majority Shareholder Vote" shall mean the vote for such action at a
meeting of Shareholders of the smallest majority of all outstanding Shares of
the Trust (or the particular Series) entitled to vote on such action which
satisfies such 1940 Act voting requirement.
"1940 Act" shall mean the provisions of the Investment Company Act of 1940 and
the rules and regulations thereunder, both as amended from time to time, and any
order or orders thereunder which may from time to time be applicable to the
Trust.
<PAGE>
"Person" shall mean and include individuals as well as corporations, limited
partnerships, limited liability companies, general partnerships, joint stock
companies, joint ventures, associations, banks, trust companies, business trusts
or any other organizations or entities whatsoever established under the laws of
any jurisdiction, whether or not considered to be legal entities, and
governments and agencies and political subdivisions thereof.
"Principal Underwriter" shall have the meaning designated in Section 5.2(c)
hereof.
"Prospectus," as used with respect to any Fund or Series of Shares, shall mean
the prospectus relating to such Fund or Series which constitutes part of the
currently effective Registration Statement of the Trust under the Securities Act
of 1933, as such prospectus may be amended or supplemented from time to time.
"Securities" shall mean any and all bills, notes, bonds, debentures or other
obligations or evidences of indebtedness, certificates of deposit, bankers'
acceptances, commercial paper, repurchase agreements or other money market
instruments, stocks, shares or other equity ownership interests, and warrants,
options, futures, "when issued" or "delayed delivery" contracts, or other
instruments representing rights to subscribe for, purchase, receive or otherwise
acquire or to sell, transfer, assign or otherwise dispose of any scrip,
certificates, receipts or other instruments evidencing any ownership rights or
interests in, any of the foregoing, issued, guaranteed or sponsored by any
governments, political subdivisions or governmental authorities, municipalities
or instrumentalities, by any individuals, firms, companies, corporations,
syndicates, associations or trusts, or by any other organizations or entities
whatsoever, irrespective of their forms or the names by which they may be
described, whether or not they be organized and operated for profit, and whether
they be domestic or foreign with respect to The Commonwealth of Massachusetts or
the United States of America.
"Securities of the Trust" shall mean any Securities issued by the Trust.
"Series" shall mean one or more of the series of Shares authorized by the
Trustees to represent the beneficial interest in one or more of the Funds.
"Shareholder" shall mean as of any particular time any Person shown of record at
such time on the books of the Trust as a holder of outstanding Shares of any
Series.
"Shareholder Servicing Agent" shall have the meaning designated in Section
5.2(f) hereof.
<PAGE>
"Shares" shall mean the transferable units into which the beneficial interest in
the Trust and each Fund of the Trust (as the context may require) shall be
divided from time to time, and includes fractions of Shares as well as whole
Shares. All references herein to "Shares" which are not accompanied by a
reference to any particular Series or Fund shall be deemed to apply to
outstanding Shares without regard to Series.
"Single Class Voting," as used with respect to any matter to be acted upon at a
meeting or by written consent of Shareholders, shall mean a style of voting in
which each holder of one or more Shares shall be entitled to one vote on the
matter in question for each Share standing in his name on the records of the
Trust, irrespective of Series, and all outstanding Shares of all Series shall
vote as a single class.
"Statement of Additional Information," as used with respect to any Fund or
Series of Shares, shall mean the statement of additional information relating to
such Fund or Series which constitutes part of the currently effective
Registration Statement of the Trust under the Securities Act of 1933, as
amended, as such statement of additional information may be amended or
supplemented from time to time.
"Transfer Agent" shall have the meaning designated in Section 5.2(e) hereof.
"Trust" shall have the meaning designated in the first "Whereas" clause set
forth above.
"Trust Property" shall mean, as of any particular time, any and all property
which shall have been transferred, conveyed or paid to the Trust or the
Trustees, and all interest, dividends, income, earnings, profits and gains
therefrom, and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation thereof, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, and which at
such time is owned or held by, or for the account of, the Trust or the Trustees,
without regard to the Fund to which such property is allocated.
"Trustees" shall mean, collectively, the Initial Trustee, so long as he shall
continue in office, and all other individuals who at the time in question have
been duly elected or appointed as Trustees of the Trust in accordance with the
provisions hereof and who have qualified and are then in office. At any time at
which there shall be only one (1) Trustee in office, such term shall mean such
single Trustee.
<PAGE>
ARTICLE II PURPOSE OF THE TRUST
The purpose of the Trust shall be to engage in the business of being an
investment company, and as such of subscribing for, purchasing or otherwise
acquiring, holding for investment or trading in, borrowing, lending and selling
short, selling, assigning, negotiating or exchanging and otherwise disposing of,
and turning to account, realizing upon and generally dealing in and with, in any
manner, (i) Securities of all kinds, and (ii) precious metals and other
minerals, contracts to purchase and sell, and other interests of every nature
and kind, in such metals and minerals, and all investments as the Trustees in
their discretion shall determine to be necessary, desirable or appropriate, and
to exercise and perform any and every act, thing or power necessary, suitable or
desirable for the accomplishment of such purpose, the attainment of any of the
objects or the furtherance of any of the powers of a trust with transferrable
shares of the type commonly known as a Massachusetts business trust; and to do
every other act or acts or thing or things incidental or appurtenant to or
growing out of or in connection with the aforesaid objects, purposes or powers,
or any of them, which a trust of the type commonly known as a Massachusetts
business trust is not now or hereafter prohibited from doing, exercising or
performing.
ARTICLE III POWERS OF THE TRUSTEES
Section 3.1 Powers in General. The Trustees shall have, without other or further
authorization, full, entire, exclusive and absolute power, control and authority
over, and the management of, the business of the Trust and over the Trust
Property, to the same extent as if the Trustees were the sole owners of the
business and property of the Trust in their own right, and with such powers of
delegation as may be permitted by this Declaration, subject only to such
limitations as may be expressly imposed by this Declaration of Trust or by
applicable law. The enumeration of any specific power or authority herein shall
not be construed as limiting the aforesaid power or authority or any specific
power or authority. Without limiting the foregoing, the Trustees may adopt
By-Laws not inconsistent with this Declaration of Trust providing for the
conduct of the business and affairs of the Trust and may amend and repeal them
to the extent that such By-Laws do not reserve that right to the Shareholders;
they may select, and from time to time change, the fiscal year of the Trust;
they may adopt and use a seal for the Trust, provided, that unless otherwise
required by the Trustees, it shall not be necessary to place the seal upon, and
its absence shall not impair the validity of any document, instrument or other
paper executed and delivered by or on behalf of the Trust.
The Trustees may from time to time in accordance with the provisions of Section
6.1 hereof establish one or more Funds to
<PAGE>
which they may allocate such of the Trust Property, subject to such liabilities,
as they shall deem appropriate, each such Fund to be operated by the Trustees as
a separate and distinct investment portfolio and with separately defined
investment objectives and policies and distinct investment purposes, all as
established by the Trustees, or from time to time changed by them.
The Trustees may, as they consider appropriate, elect and remove officers and
appoint and terminate agents and consultants and hire and terminate employees,
any one or more of the foregoing of whom may be a Trustee; they may appoint from
their own number, and terminate any one or more committees consisting of one or
more Trustees, including without implied limitation an Executive Committee,
which may, when the Trustees are not in session and subject to the 1940 Act,
exercise some or all of the power and authority of the Trustees as the Trustees
may determine; in accordance with Section 5.2 hereof they may employ one or more
Investment Advisers, Administrators and Custodians and may authorize any
Custodian to employ subcustodians or agents and to deposit all or any part of
the securities held by the Trust in a system or systems for the central handling
of securities, retain Transfer, Dividend Disbursing, Accounting or Shareholder
Servicing Agents or any of the foregoing, provide for the distribution of shares
through one or more Distributors or Principal Underwriters, or otherwise.
The Trustees may set record dates or times for the determination of Shareholders
entitled to participate in, benefit from or act with respect to various matters.
In general the Trustees, consistent with their ultimate responsibility to
supervise the affairs of the Trust, may delegate to any officer of the Trust, to
any committee of the Trustees and to any employee, Investment Adviser,
Administrator, Distributor, Custodian, Transfer Agent, Dividend Disbursing,
Accounting or Shareholder Servicing Agents, or any other agent or consultant of
the Trust, such authority, powers, functions and duties as they consider
desirable or appropriate for the conduct of the business and affairs of the
Trust, including without implied limitation and power an authority to act in the
name of the Trust and of the Trustees, to sign documents and to act as
attorney-in-fact for the Trustees.
Any determination as to what is in the interests of the Trust made by the
Trustees in good faith shall be conclusive.
Without limiting the foregoing and to the extent not inconsistent with the 1940
Act or other applicable law, the Trustees shall have power and authority:
<PAGE>
(a) Investments. To invest and reinvest cash and other property
forming part of the Trust Property; to buy, for cash or on margin, and
otherwise acquire and hold, securities created or issued by any
Persons, including securities maturing after the possible termination
of the Trust; to make payment therefor in any lawful manner in exchange
for any of the Trust Property; and to hold cash or other property
uninvested without in any event being bound or limited by any present
or future law or custom in regard to investments by trustees;
(b) Disposition of Assets. To lend, sell, exchange, mortgage, pledge,
hypothecate, grant security interests in, encumber, negotiate, convey,
transfer or otherwise dispose of and to trade in, any and all of the
Trust Property, free and clear of all trusts, for cash or on terms,
with or without advertisement, and on such terms as to payment,
security or otherwise, all as they shall deem necessary or expedient;
(c) Ownership Powers. To vote or give assent, or exercise any and all
other rights, powers and privileges of ownership with respect to, and
to perform any and all duties and obligations as owners of, any
securities or other property forming part of the Trust Property, the
same as any individual might do; to exercise powers and rights of
subscription or otherwise which in any manner arise out of ownership of
Securities, and to receive powers of attorney from, and to execute and
deliver proxies or powers of attorney to, such person or persons as the
Trustees shall deem to be giving from or granting to such person or
persons such power and discretion with relation to Securities or other
property forming part of the Trust Property, all as they shall deem
proper;
(d) Form of Holding. To hold any Security or other property, whether
in bearer, unregistered or other negotiable form, or in the name of the
Trustees or of the Trust or of the Fund to which such Securities or
other property have been assigned, or in the name of a Custodian or
other nominee or nominees, or otherwise, upon such terms, in such
manner or with such powers as the Trustees may determine and with or
without indicating any trust or the interest of the Trustees therein;
(e) Reorganization. To consent to or participate in any plan for the
reorganization, consolidation or merger of any issuer, any Security of
which is or was held in the Trust or any Fund; to consent to any
contract, lease, mortgage, purchase or sale of property by any such
issuer; and to pay calls or subscriptions with respect to any Security
forming part of the Trust Property;
<PAGE>
(f) Voting Trusts. To join with other holders of any securities in
acting through a committee, depository, voting trustee or otherwise,
and in that connection to deposit any Security with, or transfer any
Security to, any such committee, depository or trustee, and to delegate
to them such power and authority with relation to any Security (whether
or not so deposited or transferred) as the Trustees shall deem proper,
and to agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depository or trustee as the Trustees
shall deem proper;
(g) Contracts. To enter into, make and perform all such obligations,
contracts, agreements and undertakings of every kind and description,
with any person or persons, as the Trustees shall in their discretion
deem expedient in the conduct of the business of the Trust, for such
terms as they shall see fit, whether or not extending beyond the term
of office of the Trustees, or beyond the possible expiration of the
Trust; to amend, extend, release or cancel any such obligations,
contracts, agreements or understandings; and to execute, acknowledge,
deliver and record all written instruments which they may deem
necessary or expedient in the exercise of their powers;
(h) Guarantees. To endorse or guarantee the payment of any notes or
other obligations of any person; to make contracts of guaranty or
suretyship, or otherwise assume liability for payment thereof, and to
mortgage or pledge the Trust Property or any part thereof to secure any
part of or all such obligations;
(i) Compromise. To compromise, arbitrate or otherwise adjust claims
in favor of or against the Trust or any matter in controversy;
(j) Partnership. To enter into joint ventures, general or limited
partnerships, and any other combinations or associations;
(k) Insurance. To purchase and pay for entirely out of the Trust
Property such insurance as they may deem appropriate for the conduct of
the business of the Trust, including, without limitation, insurance
policies insuring the Trust Property and payment of distributions and
principal on Securities included in the Trust Property, and insurance
policies insuring the Shareholders, Trustees, officers, employees,
consultants, Investment Advisers, Administrators, Distributors,
Principal Underwriters, or other agents or independent contractors, or
any thereof (or any Person connected therewith), of the Trust,
individually, against all claims and liabilities of every nature
arising by reason of holding, being or having held any such office or
<PAGE>
position, or by reason of any action alleged to have been taken or
omitted by any such Person in any such capacity, including any action
taken or omitted that may be determined to constitute negligence,
whether or not the Trust would have the power to indemnity any such
Person against such liability;
(l) Pensions. To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry out
pension, profit sharing, share bonus, share purchase, savings, thrift
and other retirement, incentive and benefit plans, trusts and
provisions, including the purchasing of life insurance and annuity
contracts as a means of providing such retirement and other benefits,
for any or all of the Trustees, officers, employees and agents of the
Trust;
(m) Power of Collection and Litigation. To collect, sue for and
receive all sums of money coming due to the Trust, to employ counsel,
and to commence, engage in, prosecute, intervene in, join, defend,
compound, advise, adjust or abandon, in the name of the Trust, any and
all actions, suits, proceedings, disputes, claims, controversies,
demands or other litigation or legal proceedings relating to the Trust,
the business of the Trust, the Trust Property, or the Trustees,
officers, employees, agents and independent contractors of the Trust,
in their capacity as such, at law or in equity, or before any other
bodies or tribunals, and to compromise, arbitrate or otherwise adjust
any dispute to which the Trust may be a party, whether or not any suit
is commenced or any claim shall have been made or asserted;
(n) Issuance and Repurchase of Shares. To issue, sell, repurchase,
redeem, retire, cancel, acquire, hold, resell, reissue, dispose of,
transfer, and otherwise deal in Shares of any Series, and subject to
Article VI hereof, to apply to any such repurchase, redemption,
retirement, cancellation or acquisition of Shares of any Series any of
the Fund Assets belonging to the Fund to which such Series relates,
whether constituting capital or surplus or otherwise, to the full
extent now or hereafter permitted by applicable law; provided that any
Shares belonging to the Trust shall not be voted, directly or
indirectly;
(o) Offices. To have one or more offices, and to carry on all or any
of the operations and business of the Trust, in any of the States,
Districts or Territories of the United States of America, and in any
and all foreign countries, subject to the laws of such State, District,
Territory or country;
<PAGE>
(p) Expenses. To incur and pay any and all such expenses and charges as
they may deem advisable (including without limitation appropriate fees
to themselves as Trustees), and to pay all such sums of money for which
they may be held liable by way of damages, penalty, fine or otherwise;
(q) Agents. To retain and employ any and all such servants, agents,
employees, attorneys, brokers, investment advisers, accountants,
engineers, escrow agents, depositories, consultants, ancillary
trustees, custodians, agents for collection, insurers, banks and
officers, as they think best for the business of the Trust or any Fund,
to supervise and direct the acts of any of the same, and to fix and pay
their compensation and define their duties;
(r) Accounts. To determine, and from time to time change,
the method or form in which the accounts of the Trust shall
be kept;
(s) Valuation. Subject to the requirements of the 1940 Act, to
determine from time to time the value of all or any part of the Trust
Property and of any services, Securities, property or other
consideration to be furnished to or acquired by the Trust, and from
time to time to revalue all or any part of the Trust Property in
accordance with such appraisals or other information as is, in the
Trustees' sole judgment, necessary and satisfactory;
(t) Indemnification. In addition to the mandatory indemnification
provided for in Article VIII hereof and to the extent permitted by law,
to indemnity or enter into agreements with respect to indemnification
with any person with whom the Trust has dealings, including, without
limitation, any independent contractor, to such extent as the Trustees
shall determine; and
(u) General. To do all such other acts and things and to conduct,
operate, carry on and engage in such other lawful businesses or
business activities as they shall in their sole and absolute discretion
consider to be incidental to the business of the Trust or any Fund, and
to exercise all powers which they shall in their discretion consider
necessary, useful or appropriate to carry on the business of the Trust
or any Fund, to promote any of the purposes for which the Trust is
formed, whether or not such things are specifically mentioned herein,
in order to protect or promote the interests of the Trust or any Fund,
or otherwise to carry out the provisions of this Declaration.
Section 3.2 Borrowings; Financings; Issuance of Securities.
Subject to the requirements of the 1940 Act, the Trustees shall have power
to borrow or in any other manner raise such sum or
<PAGE>
sums of money, and to incur such other indebtedness for goods or services, or
for or in connection with the purchase or other acquisition of property, as they
shall deem advisable for the purposes of the Trust, in any manner and on any
terms, and to evidence the same by negotiable or non-negotiable securities which
may mature at any time or times, even beyond the possible date of termination of
the Trust; to mortgage and pledge the assets of the Trust or any portion thereof
to secure obligations arising in connection with such indebtedness; to issue
securities of any type for such cash, property, services or other consideration,
and at such time or times and upon such terms, as they may deem advisable; and
to reacquire any such securities. Any such securities of the Trust may, at the
discretion of the Trustees, be made convertible into Shares of any Series, or
may evidence the right to purchase, subscribe for or otherwise acquire Shares of
any Series, at such times and on such terms as the Trustees may prescribe.
Section 3.3 Deposits. Subject to the requirements of the 1940 Act, the Trustees
shall have power to deposit any moneys or securities included in the Trust
Property with any one or more banks, trust companies or other banking
institutions, whether or not such deposits will draw interest. Such deposits are
to be subject to withdrawal in such manner as the Trustees may determine, and
the Trustees shall have no responsibility for any loss which may occur by reason
of the failure of the bank, trust company or other banking institution with
which any such moneys or securities have been deposited, other than liability
based on their gross negligence or willful fault.
Section 3.4 Allocations. The Trustees shall have power to determine whether
moneys or other assets received by the Trust shall be charged or credited to
income or capital, or allocated between income and capital, including the power
to amortize or fail to amortize any part or all specifically mentioned.
Section 3.5 Further Powers and Limitations. In construing the provisions of this
Declaration of Trust, the presumption shall be in favor of a grant of power to
the Trustees. The Trustees shall not be required to obtain any court order to
deal with the Trust Property. The Trustees may limit their right to exercise any
of their powers through express restrictive provisions in the instruments
evidencing or providing the terms for any Securities
13
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of the Trust or in other contractual instruments adopted on
behalf of the Trust.
ARTICLE IV TRUSTEES AND OFFICERS
Section 4.1 Number; Election; Term.
(a) Initial Trustee. Upon his execution of this Declaration of this
Trust, the individual whose signature was affixed thereto as Initial Trustee
became the Initial Trustee hereof.
(b) Number. A Majority of the Trustees may increase or decrease the
number of Trustees to a number other than the number theretofore determined. No
decrease in the number of Trustees shall have the effect of removing any Trustee
from office prior to the expiration of his term, but the number of Trustees may
be decreased in conjunction with the removal of a Trustee pursuant to subsection
(e) of this Section 4.1.
(c) Term. Subject to the 1940 Act, the Trustees shall have the power to
set and alter the terms of office of the Trustees, and at any time to lengthen
or shorten their own terms or make their terms of unlimited duration, to elect
their own successors and, pursuant to subsection (f) of this Section 4.1, to
appoint Trustees to fill vacancies; provided, that if at any time less than a
majority of the Trustees then holding office were elected by a Majority
Shareholder Vote, the Trustees shall forthwith cause to be held as promptly as
possible, and in any event within 60 days, a meeting of Shareholders for the
purpose of electing Trustees to fill any existing vacancies.
(d) Resignation and Retirement. Any Trustee may resign or retire as a
Trustee, by a written instrument signed by him and delivered to the other
Trustees or to any officer of the Trust, and such resignation or retirement
shall take effect upon such delivery or upon such later date as is specified in
such instrument.
(e) Removal. Any Trustee may be removed with or without cause at any
time: (i) by written instrument, signed by at least two-thirds (2/3) of the
number of Trustees prior to such removal shall become effective; or (ii) by vote
of Shareholders holding not less than two-thirds (2/3) of all outstanding Shares
of the Trust without regard to Series, cast in person or by proxy at any meeting
called for the purpose; or (iii) by a written declaration signed by Shareholders
holding not less than two-thirds (2/3) of all outstanding Shares of the Trust
without regard to Series and filed with the Trust's Custodian.
(f) Vacancies. Any vacancy or anticipated vacancy resulting from any
reason, including an increase in the number of
14
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Trustees, may (but unless required by the 1940 Act need not) be filled by a
Majority of the Trustees, subject to the provisions of the 1940 Act, through the
appointment of such other individual as such remaining Trustees in their
discretion shall determine; provided, that if there shall be no Trustees in
office, such vacancy or vacancies shall be filled by Majority Shareholder Vote.
Any such appointment or election shall take effect immediately, except that any
such appointment or election in anticipation of a vacancy to occur by reason of
retirement, resignation or increase in the number of Trustees to be effective at
a later date shall become effective only at or after the effective date of said
retirement, resignation or increase in the number of Trustees.
(g) Acceptance of Trust. Whenever any conditions to the appointment or
election of any individual as a Trustee hereunder who was not, immediately prior
to such election, acting as a Trustee shall have been satisfied, such individual
shall become a Trustee and the Trust Property shall vest in the new Trustee,
together with the continuing Trustees, without any further act or conveyance.
Such new Trustee shall accept such appointment or election in writing and agree
in such writing to be bound by the provisions hereof, but the execution of such
writing shall not be requisite to the effectiveness of the appointment or
election of a new Trustee.
(h) Effect of Death, Resignation, etc. No vacancy, whether resulting
from the death, resignation, retirement, removal or incapacity of any Trustee,
an increase in the number of Trustees or otherwise, shall operate to annul or
terminate the Trust hereunder or to revoke or terminate any existing agency or
contract created or entered into pursuant to the terms of this Declaration of
Trust. Until such vacancy is filled as provided in this Section 4.1, the
Trustees in office (if any), regardless of their number, shall have all the
powers granted to the Trustees and shall discharge all the duties imposed upon
the Trustees by this Declaration.
(i) Conveyance. In the event of the resignation or removal of a Trustee
or his otherwise ceasing to be a Trustee, such former Trustee or his legal
representative shall, upon request of the continuing Trustees, execute and
deliver such documents as may be required for the purpose of consummating or
evidencing the conveyance to the Trust or the remaining Trustees of any Trust
Property held in such former Trustee's name, but the execution and delivery of
such documents shall not be requisite to the vesting of title to the Trust
property in the remaining Trustees, as provided in subsection (g) of this
Section 4.1 and in Section 4.13 hereof.
(j) Accounting by Former Trustee. Except to the extent required by the
1940 Act or under circumstances that would
15
<PAGE>
justify his removal for cause, no person ceasing to be a Trustee (nor the estate
of any such person) shall be required to make an accounting to the Shareholders
or remaining Trustees upon such cessation.
(k) Filings. Whenever there shall be a change in the composition of the
Trustees, the Trust shall cause to be filed in the office of the Secretary of
The Commonwealth of Massachusetts, and in each other place where the Trust is
required to file amendments to this Declaration, a certificate executed by a
Trustee or officer of the Trust as to the fact of the appointment or election of
an individual who was not theretofore a Trustee or as to the resignation,
removal or death of a Trustee, but the filing of such certificate shall not be
requisite to the effectiveness of any such appointment, election, resignation or
removal of a Trustee.
Section 4.2 Trustees' Meetings. An annual meeting of Trustees shall be held
not later than the last day of the fourth month after the end of each fiscal
year of the Trust, and special meetings may be held from time to time, in each
case, upon the call of such officers as may be thereunto authorized by the
By-Laws or vote of the Trustees, or by any two (2) Trustees, or pursuant to a
vote of the Trustees adopted at a duly constituted meeting of the Trustees, and
upon such notice as shall be provided in the Bylaws. The Trustees may act with
or without a meeting, and a written consent to any matter, signed by a Majority
of the Trustees, shall be equivalent to action duly taken at a meeting of the
Trustees, duly carried and held. Except as otherwise provided by the 1940 Act
or other applicable law, or by this Declaration of Trust or the Bylaws, any
action to be taken by the Trustees may be taken by a majority of the Trustees
present at a meeting of Trustees (a quorum, consisting of at least a Majority
of the Trustees, being present), within or without Massachusetts. If authorized
by the Bylaws, all or any one or more Trustees may participate in a meeting of
the Trustees or any committee thereof by means of conference telephone or
similar means of communication by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to such
means of communication shall constitute presence in person at such meeting. The
minutes of any meeting thus held shall be prepared in the same manner as a
meeting at which all participants were present in person.
Section 4.3 Committees. The Trustees shall have power, consistent with their
ultimate responsibility to supervise the affairs of the Trust, to delegate from
time to time to an executive committee, and to one or more other committees, or
to any single Trustee, or to any other person, the doing of such things and the
execution of such deeds or other instruments, either in the name of the Trust or
the names of the Trustees or
<PAGE>
as their attorney or attorneys-in-fact, or otherwise as the Trustees may from
time to time deem expedient, and any agreement, deed, mortgage, lease or other
instrument or writing executed by the Trustee or Trustees or other person to
whom such delegation was made shall be valid and binding upon the Trustees and
upon the Trust.
Section 4.4 Officers. The Trustees shall annually elect such officers or
agents, who shall have such powers, duties and responsibilities as the Trustees
may deem to be advisable, and as they shall specify by resolution or in the
Bylaws. Except as may be provided in the Bylaws, any officer elected by the
Trustees may be removed at any time with or without cause. Any two (2) or more
offices may be held by the same individual.
Section 4.5 Compensation of Trustees and Officers. The Trustees shall fix
the compensation of all officers and Trustees. Without limiting the generality
of any of the provisions hereof, the Trustees shall be entitled to receive
reasonable compensation for their general services as such, and to fix the
amount of such compensation, and to pay themselves or any one or more of
themselves such compensation for special services, including legal, accounting,
or other professional services, as they in good faith may deem reasonable.
No Trustee or officer resigning and (except where a right to receive
compensation for a definite future period shall be expressly provided in a
written agreement with the Trust, duly approved by the Trustees) no Trustee or
officer removed shall have any right to any compensation as such Trustee or
officer for any period following his resignation or removal, or any right to
damages on account of his removal, whether his compensation be by the month,
by the year or otherwise.
Section 4.6 Ownership of Shares and Securities of the Trust. Any Trustee, and
any officer, employee or agent of the Trust, and any organization in which any
such Person is interested, may acquire, own, hold and dispose of Shares of any
Series and other Securities of the Trust for his or its individual account, and
may exercise all rights of a holder of such Shares or Securities to the same
extent and in the same manner as if such Person were not such a Trustee,
officer, employee or agent of the Trust; and the Trust may issue and sell or
cause to be issued and sold, and may purchase any such Shares or other
Securities from any such Person or any such organization, subject only to the
general limitations, restrictions or other provisions applicable to the sale or
purchase of shares of such Series or other Securities of the Trust generally.
Section 4.7 Right of Trustees and Officers to Own Property or to Engage in
Business; Authority of Trustees to Permit Others to do Likewise. The Trustees,
in their capacity as Trustees, and (unless otherwise specifically directed by
vote of the Trustees)
<PAGE>
the officers of the Trust in their capacity as such, shall not be required to
devote their entire time to the business and affairs of the Trust. Except as
otherwise specifically provided by vote of the Trustees, or by agreement in any
particular case, any Trustee or officer of the Trust may acquire, own, hold,
carry on and dispose of, for his own individual account, any business entity or
business activity, whether similar or dissimilar to any property or business
entity or business activity invested in or carried on by the Trust, and without
first offering the same as an investment opportunity to the Trust, and may
exercise all rights in respect thereof as if he were not a Trustee or officer of
the Trust. The Trustees shall also have power, generally or in specific cases,
to permit employees or agents of the Trust to have the same rights (or lesser
rights) to acquire, hold, own and dispose of property and businesses, to carry
on businesses, and to accept investment opportunities without offering them to
the Trust, as the Trustees have by virtue of this Section 4.7.
Section 4.8 Reliance on Experts. The Trustees and officers may consult with
counsel, brokers, appraisers, accountants, investment bankers, securities
analysts or other Persons (any of which may be a firm in which one or more of
the Trustees or officers is or are members or otherwise interested) whose
profession gives authority to a statement made by them on the subject in
question, and who are reasonably deemed by the Trustees or officers in question
to be competent, and the advice or opinion of such Persons shall be full and
complete personal protection to all of the Trustees and officers in respect of
any action taken or suffered by them in good faith and in reliance on or in
accordance with such advice or opinion. In discharging their duties, Trustees
and officers, when acting in good faith, may rely upon financial statements of
the Trust represented to them to be correct by any officer of the Trust having
charge of its books of account, or stated in a written report by an independent
certified public accountant fairly to present the financial position of the
Trust. The Trustees and officers may rely, and shall be personally protected in
taking action, upon any instrument or other document believed by them to be
genuine.
Section 4.9 Surety Bonds. No Trustee, officer, employee or agent of the Trust
shall, as such, be obligated to give any bond or surety or other security for
the performance of any of his duties, unless required by applicable law or
regulation, or unless the Trustees shall otherwise determine in any particular
case.
Section 4.10 Apparent Authority of Trustees and Officers. No purchaser,
lender, transfer agent or other Person dealing with the Trustees or any officer
of the Trust shall be bound to make any inquiry concerning the validity of any
transaction purporting to be made by the Trustees or by such officer, or to make
inquiry concerning or be liable for the application of money or property
<PAGE>
paid, loaned or delivered to or on the order of the Trustees or of such officer.
Section 4.11 Other Relationships Not Prohibited. The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, manager, member, partner, trustee,
employee, investment adviser, principal underwriter or distributor, or
agent of or for any Contracting Party or of or for any parent or
affiliate of any Contracting Party, or that any Contracting Party or
any parent or affiliate thereof is a shareholder or has an interest in
the Trust or any Fund, or that
(ii) any Contracting Party may have a contract providing for the
rendering of any similar services to one or more other corporations,
trusts, associations, limited liability companies, partnerships,
limited partnerships or other organizations, or have other businesses
or interests,
shall not affect the validity of any contract for the performance and assumption
of services, duties and responsibilities to, for or of the Trust and/or the
Trustees or disqualify any Shareholder, Trustee or officer of the Trust from
voting upon or executing the same or create any liability or accountability to
the Trust or to the Shareholders; provided, that in the case of any such
relationship or interest on the part of any Trustee or officer of the Trust,
either (x) the material facts as to such relationship or interest have been
disclosed to or are known by the Trustees not having any such relationship or
interest and the contract involved is approved in good faith by a majority of
such Trustees not having any such relationship or interest (even though such
unrelated or disinterested Trustees are less than a quorum of all the Trustees),
(y) the material facts as to such relationship or interest and as to the
contract have been disclosed to or are known by the Shareholders entitled to
vote thereon and the contract involved is specifically approved in good faith by
vote of the Shareholders, or (z) the specific contract involved is fair to the
Trust as of the time it is authorized, approved or ratified by the Trustees or
by the Shareholders.
Section 4.12 Payment of Trust Expenses. The Trustees are authorized to pay or
to cause to be paid out of the principal or income of the Trust, or partly out
of principal and partly out of income, and according to any allocation to
particular Funds made by them pursuant to Section 6.2(b) hereof, all expenses,
fees, charges, taxes and liabilities incurred or arising in connection with the
business and affairs of the Trust or in connection with the management thereof,
including, but not limited to, the Trustees' compensation and such expenses and
charges for the
<PAGE>
services of the Trust's officers, employees, Investment Adviser, Administrator,
Distributor or Principal Underwriter, auditor, counsel, Custodian, Transfer
Agent, Dividend Disbursing Agent, Accounting Agent, Shareholder Servicing Agent,
and such other agents, consultants, and independent contracts and such other
expenses and charges as the Trustees may deem necessary or proper to incur.
Section 4.13 Ownership of the Trust Property. Legal title to all the Trust
Property shall be vested in the Trustees as joint tenants, except that the
Trustees shall have power to cause legal title to any Trust Property to be held
by or in the name of one or more of the Trustees, or in the name of the Trust,
or of any particular Fund, or in the name of any other Person as nominee, on
such terms as the Trustees may determine; provided, that the interest of the
Trust and of the respective Fund therein is appropriately protected. The right,
title and interest of the Trustees in the Trust Property shall vest
automatically in each person who may hereafter become a Trustee. Upon the
termination of the term of office of a Trustee as provided in Section 4.1(c),
(d) or (e) hereof, such Trustee shall automatically cease to have any right,
title or interest in any of the Trust Property, and the right, title and
interest of such Trustee in the Trust Property shall vest automatically in the
remaining Trustees. Such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered pursuant
to Section 4.1(i) hereof.
ARTICLE V DELEGATION OF MANAGERIAL RESPONSIBILITIES
Section 5.1 Appointment; Action by Less than All Trustees. The Trustees
shall be responsible for the general operating policy of the Trust and for the
general supervision of the business of the Trust conducted by officers, agents
or employees of the Trust or by independent contractors, but the Trustees shall
not be required personally to conduct all the business of the Trust and,
consistent with their ultimate responsibility as stated herein, the Trustees
may appoint employ or contract with one or more officers, employees or agents
to conduct, manage or supervise the operations of the Trust, and may grant or
delegate such authority to such officers, employees or agents as the Trustees
may, in their discretion, deem to be necessary or desirable, without regard to
whether such authority is normally granted or delegated by trustees. With
respect to those matters of the operation and business of the Trust that they
shall elect to conduct themselves, except as otherwise provided by this
Declaration or the Bylaws, if any, the Trustees may authorize a single Trustee
or defined group of Trustees or any committee consisting of a number of Trustees
less than the whole number of Trustees then in office without specification of
the particular Trustees required to be included therein, to act for and to bind
the Trust, to the same extent as the whole number of Trustees
<PAGE>
could do, either with respect to one or more particular matters or classes of
matters.
Section 5.2 Certain Contracts. Subject to compliance with the provisions of
the 1940 Act, but notwithstanding any limitations of present and future law or
custom in regard to delegation of powers by trustees generally, the Trustees
may, at any time and from time to time in their discretion and without limiting
the generality of their powers and authority otherwise set forth herein, enter
into one or more contracts with any one or more corporations, trusts,
associations, limited liability companies, partnerships, limited partnerships,
or other organizations or individuals (any such person being herein referred to
as a "Contracting Party"), to provide for the performance and assumption of some
or all of the following services, duties and responsibilities to, for or on
behalf of the Trust or any Fund, or the Trustees, and to provide for the
performance and assumption of such other services, duties and responsibilities
in addition to those set forth below, as the Trustees may deem appropriate:
(a) Advisory. An agreement whereby an investment adviser registered
under the Investment Advisers Act of 1940, as amended, shall undertake to
furnish the Trust or any Fund such management, investment advisory or
statistical and research facilities and services, and such other facilities and
services, if any, as the Trustees shall from time to time consider desirable,
all upon such terms and conditions as the Trustees may in their discretion
determine to be not inconsistent with this Declaration, the applicable
provisions of the 1940 Act or any applicable provisions of the Bylaws (any such
investment adviser being herein referred to as an "Investment Adviser"). Any
such advisory or management agreement and any amendment thereto shall be subject
to approval by a Majority Shareholder Vote at a meeting of the Shareholders of
the Trust. Notwithstanding any provisions of this Declaration, the Trustees may
authorize an Investment Adviser (subject to such general or specific
instructions as the Trustees may from time to time adopt) to effect purchases,
sales, loans or exchanges pursuant to recommendations of an Investment Adviser
(and all without further action by the Trustees). Any such purchases, sales,
loans and exchanges shall be deemed to have been authorized by all the Trustees.
The Trustees may, in their sole discretion, call a meeting of Shareholders in
order to submit to a vote of Shareholders at such meeting the approval of
continuance of any such investment advisory or management agreement. If the
Shareholders of any Fund should fail to approve any such investment advisory or
management agreement, the Investment Adviser may nonetheless serve as Investment
Adviser with respect to any other Fund whose Shareholders shall have approved
such contract.
<PAGE>
(b) Administration. An agreement whereby an agent, subject to the
general supervision of the Trustees and in conformity with any policies of the
Trustees with respect to the operations of the Trust and each Fund, will
supervise all or any part of the operations of the Trust and each Fund, and will
provide all or any part of the administrative and clerical personnel, office
space and office equipment and services appropriate for the efficient
administration and operations of the Trust and each Fund (any such agent being
herein referred to as an "Administrator").
(c) Distribution. An agreement providing for the sale of shares of any
one or more Series to net the Trust not less than the net asset value per Share
(as described in Section 6.2(h) hereof) and pursuant to which the Trust may
appoint the other party to such agreement as its principal underwriter or sales
agent for the distribution of such Shares. The agreement shall contain such
terms and conditions as the Trustees may in their discretion determine to be not
inconsistent with this Declaration, the applicable provisions of the 1940 Act
and any applicable provisions of the Bylaws (any such agent being herein
referred to as a "Distributor" or a "Principal Underwriter," as the case may
be).
(d) Custodian. An agreement appointing a bank or trust company having
an aggregate capital surplus and undivided profits (as shown in its last
published report) of at least two million dollars ($2,000,000), and meeting the
requirements of Section 17(f) of the 1940 Act as custodian of the Securities and
similar investments of the Trust or of any Fund and of the accounting records in
connection therewith (any such custodian being herein referred to as a
"Custodian").
(e) Transfer and Dividend Disbursing Agent. An agreement with an agent
to maintain records of the ownership of outstanding shares, the issuance and
redemption and the transfer thereof (any such agent being herein referred to as
a "Transfer Agent"), and to disburse any dividends declared by the Trustees and
in accordance with the policies of the Trustees or the instructions of any
particular Shareholder to reinvest any such dividends (any such agent being
herein referred to as a "Dividend Disbursing Agent").
(f) Shareholder Servicing. An agreement with an agent to provide
service with respect to the relationship of the Trust and its Shareholders,
records with respect to Shareholders and their Shares, and similar matters (any
such agent being herein referred to as a "Shareholder Servicing Agent").
(g) Accounting. An agreement with an agent to handle all or any
part of the accounting responsibilities, whether with
<PAGE>
respect to the Trust Property, Shareholders or otherwise (any such agent being
herein referred to as an "Accounting Agent").
The same person may be a Contracting Party for some or all of the services,
duties and responsibilities to, for and of the Trust or the Trustees, and the
contracts with respect thereto may contain such terms interpretive of or in
addition to the delineation of the services, duties and responsibilities
provided for, including provisions that are not inconsistent with the 1940 Act
relating to the standard of duty of and the rights to indemnification of the
Contracting Party from entering into subcontractual arrangements relative to any
of the matters referred to in subsections (a) through (g) of this Section 5.2.
ARTICLE VI FUNDS AND SHARES
Section 6.1 Description of Funds and Shares.
(a) Shares; Funds; Series of Shares. The beneficial interest in the
Trust shall be divided into Shares having no par value, and all of one class
(except as provided in Section 6.2(c) for the separate payment of dividends by
each Fund), of which an unlimited number may be issued. The Trustees shall have
the authority from time to time to establish and designate one or more separate,
distinct and independent Funds into which the assets of the Trust shall be
divided, and to authorize a separate Series of Shares for each such Fund (each
of which Series, including without limitation the Series authorized in Section
6.2 hereof, shall represent interests only in the Fund with respect to which
such Series was authorized), as they deem necessary or desirable. Except as
otherwise provided as to a particular Fund herein, or in the Certificate of
Designation therefor, the Trustees shall have all the rights and powers, and be
subject to all the duties and obligations, with respect to each such Fund and
the assets and affairs as they have under this Declaration with respect to the
Trust and the Trust Property in general.
(b) Establishment of Funds; Authorization of Shares. The
establishment and designation of any Fund in addition to the Fund established
and designated in Section 6.2 hereof and the authorization of the Shares
thereof shall be effective upon the execution by a Majority of the Trustees (or
by an officer of the Trust pursuant to the vote of a Majority of the Trustees)
of an instrument setting forth such establishment and designation and the
relative rights and preferences of the Shares of such Fund and the manner in
which the same may be amended (a "Certificate of Designation"). A Certificate
of Designation may provide that the number of Shares of any such Series which
may be issued is unlimited, or may limit the number issuable. At any time that
there are no Shares outstanding of any particular Fund previously established
and designated, including any Fund established and designated in Section 6.2
hereof, the Trustees may by an instrument (a "Certificate of Termination")
executed by a
<PAGE>
Majority of the Trustees (or by an officer of the Trust pursuant to the vote of
a Majority of the Trustees) terminate such Fund and the establishment and
designation thereof and the authorization of its Shares.
(c) Character of Separate Funds and Shares Thereof. Each Fund
established hereunder shall be a separate component of the assets of the Trust,
and the holders of Shares of the Series representing the beneficial interest in
the assets of that Fund shall be considered Shareholders of such Fund, but such
Shareholders shall also be considered Shareholders of the Trust for purposes of
receiving reports and notices and, except as otherwise provided herein or in
the Certificate of Designation of a particular Fund as to such Fund, or as
required by the 1940 Act or other applicable law, the right to vote, all without
distinction by Series. The Trustees shall have exclusive power without the
requirement of Shareholder approval to establish and designate such separate and
distinct Funds, and to fix and determine the relative rights and preferences as
between the Shares of the respective Funds as to rights of redemption and the
price, terms and manner of redemption, special and relative rights as to
dividends and other distributions and on liquidation, sinking or purchase fund
provisions, conversion rights, and conditions under which the Shareholders of
the several Funds shall have separate voting rights or no voting rights.
(d) Consideration for Shares. The Trustees may issue Shares of any
Series for such consideration (which may include property subject to, or
acquired in connection with the assumption of, liabilities) and on such terms as
they may determine (or for no consideration if pursuant to a Share dividend or
split), all without action or approval of the Shareholders. All Shares when so
issued on the terms determined by the Trustees shall be fully paid and
non-assessable (but may be subject to mandatory contribution back to the Trust
as provided in Section 6.2(h) hereof). The Trustees may classify or reclassify
any unissued Shares, or any Shares of any Series previously issued and
reacquired by the Trust, into Shares of one or more other Funds that may be
established and designated from time to time.
Section 6.2 Establishment and Designation of Certain Funds; General Provisions
for All Funds. Without limiting the authority of the Trustees set forth in
Section 6.1(a) hereof to establish and designate further Funds, it is hereby
established and designated the following Fund: Oak Value Fund. The Shares of
such Fund, and the Shares of any further Funds that may from time to time be
established and designated by the Trustees shall (unless the Trustees otherwise
determine with respect to some further Fund at the time of establishing and
designating the same) have the following relative rights and preferences:
<PAGE>
(a) Assets Belonging to Funds. Any portion of the Trust Property
allocated to a particular Fund, and all consideration received by the Trust for
the issue or sale of Shares of such Fund, together with all assets in which such
consideration is invested or reinvested, all interest, dividends, income,
earnings, profits and gains therefrom, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such proceeds in whatever
form the same may be, shall be held by the Trustees in trust for the benefit of
the holders of Shares of that Fund and shall irrevocably belong to that Fund for
all purposes, and shall be so recorded upon the books of account of the Trust,
and the Shareholders of such Fund shall not have, and shall be conclusively
deemed to have waived, any claims to the assets of any Fund of which they are
not Shareholders. Such consideration, assets, interest, dividends, income,
earnings, profits, gains and proceeds, together with any General Items allocated
to that Fund as provided in the following sentence, are herein referred to
collectively as "Fund Assets" of such Fund, and as assets "belonging to" that
Fund. If there are any assets, interest, dividends, income, earnings, profits,
gains and proceeds which are not readily identifiable as belonging to any
particular Fund (collectively "General Items"), the Trustees shall allocate such
General Items to and among any one or more of the Funds established and
designated from time to time in such manner and on such basis as they, in their
sole discretion, deem fair and equitable; and any General Items so allocated to
a particular Fund shall belong to and be part of the Fund Assets of that Fund.
Each such allocation by the Trustees shall be conclusive and binding upon the
Shareholders of all Funds for all purposes.
(b) Liabilities of Funds. The assets belonging to each particular
Fund shall be charged with the liabilities in respect of that Fund and all
expenses, costs, charges and reserves attributable to that Fund, and any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as pertaining to any particular Fund shall be allocated and
charged by the Trustees to and among any one or more of the Funds established
and designated from time to time in such manner and on such basis as the
Trustees in their sole discretion deem fair and equitable. The indebtedness,
expenses, costs, charges and reserves allocated and so charged to a particular
Fund are herein referred to as "liabilities" of that Fund. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the Shareholders of all Funds for all purposes. Any
creditor of any Fund may look only to the assets belonging to that Fund to
satisfy such creditor's debt.
(c) Dividends. Dividends and distributions on Shares of a
particular Fund may be paid with such frequency as the Trustees
<PAGE>
may determine, which may be daily or otherwise pursuant to a standing resolution
or resolutions adopted only once or with such frequency as the Trustees may
determine, to the Shareholders of that Fund, from such of the income, accrued or
realized, and capital gains, realized or unrealized, and out of the assets
belonging to that Fund, as the Trustees may determine, after providing for
actual and accrued liabilities of that Fund. All dividends and distributions on
Shares of a particular Fund shall be distributed pro rata to the Shareholders of
that Fund in proportion to the number of such Shares held by such holders at the
date and time of record established for the payment of such dividends or
distributions. Such dividends and distributions may be made in cash, property or
Shares of that Fund, or a combination thereof, as determined by the Trustees, or
pursuant to any program that the Trustees may have in effect at the time for the
election by each Shareholder of the mode of the making of such dividend or
distribution to that Shareholder. Any such dividend or distribution paid in
Shares shall be paid at the net asset value thereof as determined in accordance
with subsection (h) of this Section 6.2.
(d) Liquidation. In the event of the liquidation or dissolution of
the Trust, the Shareholders of each Fund of which Shares are outstanding shall
be entitled to receive, when, and as declared by the Trustees, the excess of the
Fund Assets over the liabilities of such Fund. The assets so distributable to
the Shareholders of any particular Fund shall be distributed among such
Shareholders in proportion to the number of Shares of that Fund held by them and
recorded on the books of the Trust. The liquidation of any particular Fund of
which Shares are outstanding may be authorized by a Majority of the Trustees.
(e) Voting. The Shareholders shall have the voting rights
set forth in or determined under Article VII hereof.
(f) Redemption by Shareholder. Each holder of Shares of a particular
Fund shall have the right at such times as may be permitted by the Trust, but no
less frequently than once each week, to require the Trust to redeem all or any
part of his Shares of that Fund at a redemption price equal to the net asset
value per Share of that Fund next determined in accordance with subsection (h)
of this Section 6.2 after such Shares are properly tendered for redemption;
provided, that the Trustees may from time to time, in their discretion,
determine and impose a fee for such redemption. Payment of the redemption price
shall be in cash; provided, however, that if the Trustees determine, which
determination shall be conclusive, that conditions exist which make payment
wholly in cash unwise or undesirable, the Trust may make payment wholly or
partly in Securities or other assets belonging to such Fund at the value of such
Securities or assets used in such determination of net asset value.
Notwithstanding the foregoing, the Trust may postpone payment of the redemption
<PAGE>
price and may suspend the right of the holders of Shares of any Fund to require
the Trust to redeem Shares of that Fund during any period or at any time when
and to the extent permissible under the 1940 Act.
(g) Redemption at the Option of the Trust. Each Share of any Fund
shall be subject to redemption at any time at the option of the Trust at the
redemption price which would be applicable if such Share were then being
redeemed by a Shareholder pursuant to subsection (f) of this Section 6.2: (i) if
the Trustees determine in their sole discretion that failure to so redeem may
have materially adverse consequences to the holders of Shares of the Trust or of
any Fund, or (ii) upon such other conditions with respect to maintenance of
Shareholder accounts of a minimum amount as may from time to time be determined
by the Trustees and set forth in the then current Prospectus or Statement of
Additional Information of such Fund. Upon such redemption the holders of the
Shares so redeemed shall have no further right with respect thereto other than
to receive payment of such redemption price.
(h) Net Asset Value. The net asset value per Share of any Fund will
be calculated on each business day of the Trust as of the close of business, and
shall be the quotient obtained by dividing the value of the net assets of such
Fund at such time (being the current value of the assets belonging to such Fund,
less the then existing liabilities of such Fund) by the total number of Shares
of that Fund then outstanding, all determined in accordance with the methods and
procedures, including without limitation those with respect to pricing,
established by the Trustees from time to time. The Trustees may determine to
maintain the net asset value per share of any Fund at a designated constant
dollar amount and in connection therewith may adopt procedures not inconsistent
with the 1940 Act for the continuing declaration of income attributable to that
Fund as dividends payable in additional Shares of that Fund at the designated
constant dollar amount and for the handling of any losses attributable to that
Fund. Such procedures may provide that in the event of any loss each Shareholder
shall be deemed to have contributed to the shares of beneficial interest account
of that Fund his pro rata portion of the total number of Shares required to be
canceled in order to permit the net asset value per Share of that Fund to be
maintained, after reflecting such loss, at the designated constant dollar
amount. Each Shareholder of the Trust shall be deemed to have expressly agreed,
by his investment in any Fund with respect to which the Trustees shall have
adopted any such procedure, to make the contribution referred to in the
preceding sentence in the event of any such loss.
(i) Transfer. All Shares of each particular Fund shall be
transferable, but transfers of Shares of a particular Fund shall
<PAGE>
be recorded on the share transfer records of the Trust applicable to that Fund
only at such times as Shareholders have the right to require the Trust to redeem
Shares of that Fund and at such other times as may be permitted by the Trustees.
(j) Equality of Share Valuation. All Shares of each particular Fund
shall represent an equal proportionate interest in the assets belonging to that
Fund (subject to the liabilities of that Fund), and each Share thereof; but the
provisions of this sentence shall not restrict any distinctions permissible
under subsection (c) of this Section 6.2 that may exist with respect to
dividends and distributions on Shares of the same Fund. The Trustees may from
time to time divide or combine the Shares of any particular Fund into a greater
or lesser number of Shares of that Fund without thereby changing the
proportionate beneficial interest in the assets belonging to that Fund or in any
way affecting the rights of the holders of Shares of any other Fund.
(k) Rights of Fractional Shares. Any fractional Share of any Series
shall carry proportionately all the rights and obligations of a whole Share of
that Series, including rights and obligations with respect to voting, receipt of
dividends and distributions, redemption and liquidation.
(l) Conversion Rights. Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to provide that holders
of Shares of any Fund shall have the right to convert said Shares into Shares of
one or more other Funds in accordance with such requirements and procedures as
the Trustees may establish.
Section 6.3 Ownership of Shares. The ownership of Shares shall be recorded on
the books of the Trust or of a Transfer Agent or similar agent for the Trust,
which books shall be maintained separately for the Shares of each Series that
has been authorized. Certificates evidencing the ownership of Shares need not be
issued except as the Trustees may otherwise determine from time to time, and the
Trustees shall have power to call outstanding Share certificates and to replace
them with book entries. The Trustees may make such rules as they consider
appropriate for the issuance of share certificates, the use of facsimile
signatures, the transfer of Shares and similar matters. The record books of the
Trust as kept by the Trust or any Transfer Agent or similar agent, as the case
may be, shall be conclusive as to who are the Shareholders and as to the number
of Shares of each Fund held from time to time by each such Shareholder.
The holders of Shares of each Fund shall upon demand disclose to the Trustees in
writing such information with respect to their direct and indirect ownership of
Shares of such Fund as the Trustees deem necessary to comply with the provisions
of the
<PAGE>
Internal Revenue Code of 1986, as amended, or to comply with the requirements of
any other authority.
Section 6.4 Investments in the Trust. The Trustees may accept investments in
any Fund of the Trust from such Persons and on such terms and for such
consideration, not inconsistent with the provisions of the 1940 Act, as they
from time to time authorize. The Trustees may authorize any Distributor or
Principal Underwriter, Custodian, Transfer Agent or other Person to accept
orders for the purchase of Shares that conform to such authorized terms and to
reject any such orders, whether or not conforming to such authorized terms.
Section 6.5 No Preemptive or Appraisal Rights. No Shareholder, by virtue of
holding Shares of any Fund, shall have any appraisal, conversion or exchange
rights, nor any preemptive or other right to subscribe to any additional Shares
of that Fund, or to any Shares of any other Fund or any other Securities of the
Trust.
Section 6.6 Status of Shares. Every Shareholder, by virtue of having become a
Shareholder, shall be held to have expressly assented and agreed to the terms
hereof and to have become a party hereto. Shares shall be deemed to be personal
property, giving only the rights provided herein. Ownership of Shares shall not
entitle the Shareholder to any title in or to the whole or any part of the Trust
Property or any right to call for a partition or division of the same or for an
accounting, nor shall the ownership of Shares constitute the Shareholders
partners. The death of a Shareholder during the continuance of the Trust shall
not operate to terminate the Trust or any Fund, nor to entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but only to the
rights of said decedent under this Declaration of Trust.
ARTICLE VII SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 7.1 Voting Powers. Shareholders shall have power to vote only (i)
for the election or removal of Trustees as provided in Sections 4.1(c) and (e)
hereof, (ii) with respect to the approval or termination of any contract as to
which Shareholder action is required by the 1940 Act, (iii) with respect to any
termination or reorganization of the Trust or any Fund to the extent and as
provided in Sections 9.1 and 9.2 hereof, (iv) with respect to any amendment of
this Declaration of Trust to the extent and as provided in Section 9.3 hereof,
(v) to the same extent as the stockholders of a Massachusetts business
corporation as to whether or not a court action, proceeding or claim should or
should not be brought or maintained derivatively or as a class action on behalf
of the Trust or any Fund, or the Shareholders of any of them (except that a
Shareholder of a
<PAGE>
particular Fund shall not in any event be entitled to maintain a derivative or
class action on behalf of any other Fund or the Shareholders thereof), and (vi)
with respect to such additional matters as may be required by the 1940 Act, this
Declaration of Trust, the Bylaws, or any registration with the Commission or any
State, or as the Trustees may consider necessary or desirable. Each matter
required or permitted to be voted upon at a meeting or by written consent of
Shareholders shall be submitted to a separate vote of the outstanding Shares of
each Fund entitled to vote thereon; provided, that (i) when required by this
Declaration or by the 1940 Act, actions of Shareholders shall be taken by Single
Class Voting and (ii) when the Trustees determine that any matter to be
submitted to a vote of Shareholders affects only the rights or interests of
Shareholders of one or more but not all Funds, then only the Shareholders of the
Funds so affected shall be entitled to vote thereon.
Section 7.2 Number of Votes and Manner of Voting; Proxies. On each matter
submitted to a vote of the Shareholders, each holder of Shares of any Series
shall be entitled to a number of votes equal to the number of Shares of such
Series standing in his name on the books of the Trust. There shall be no
cumulative voting in the election of Trustees. Shares may be voted in person
or by proxy. A proxy with respect to Shares held in the name of two (2) or more
Persons shall be valid if executed by any one of them unless at or prior to
exercise of the proxy the Trust receives a specific written notice to the
contrary from any one of them. A proxy purporting to be executed by or on
behalf of a Shareholder shall be deemed valid unless challenged at or prior to
its exercise, and the burden of proving invalidity shall rest on the challenger.
Until Shares are issued, the Trustees may exercise all rights of Shareholders
and may take any action required by law, this Declaration of Trust or the Bylaws
to be taken by Shareholders.
Section 7.3 Meetings. Meetings of Shareholders may be called by the Trustees
from time to time for the purpose of taking action upon any matter requiring the
vote or authority of Shareholders as herein provided, or upon any other matter
deemed by the Trustees to be necessary or desirable. Written notice of any
meeting of Shareholders shall be given or caused to be given by the Trustees by
mailing such notice at least seven (7) days before such meeting, postage
prepaid, stating the time, place and purpose of the meeting, to each Shareholder
entitled to vote or act at any such meeting at the Shareholder's address as it
appears on the records of the Trust. The Trustees shall promptly call and give
notice of a meeting of Shareholders when requested to do so in writing by
Shareholders holding not less than ten percent (10%) of the Shares then
outstanding and entitled to vote at any such meeting. If the Trustees shall fail
to call or give notice of any meeting of Shareholders for a period of thirty
(30) days after written application by such Shareholders, then
<PAGE>
Shareholders holding at least ten percent (10%) of the Shares then outstanding
and entitled to vote at any such meeting may call and give notice of such
meeting, and thereupon the meeting shall be held in the manner provided for
herein in case of call thereof by the Trustees.
Whenever ten or more Shareholders of record who have been such for at least six
months preceding the date of application, and who hold in the aggregate either
Shares having a net asset value of at least $25,000 or at least one percent (1%)
of the outstanding Shares, whichever is less, shall apply to the Trustees in
writing, stating that they wish to communicate with other Shareholders with a
view to obtaining signatures to a request for a meeting pursuant to this section
7.3 and accompanied by a form of communication and request which they wish to
transmit, the Trustees shall, within five days after receipt of such application
either (i) afford to such applicants access to a list of the names and addresses
of all Shareholders as recorded on the books of the Trust or (ii) inform such
applicants as to the approximate number of Shareholders of record and the
approximate cost of mailing to them the proposed communication and form of
request. If the Trustees elect to follow the course of (ii), above, the
Trustees, upon the written request of such applicants, accompanied by a tender
of the material to be mailed and the reasonable expenses of mailing, shall, with
reasonable promptness, mail such material to all Shareholders of record at their
addresses as recorded on the books. If in the opinion of the Trustees, the
material to be mailed contains untrue statements of fact or omits to state facts
necessary to make the statements contained therein not misleading, or would be
in violation of applicable law, the Trustees may, within five business days and
in lieu of mailing the tendered material to Shareholders, request a hearing by
the Securities and Exchange Commission (the "Commission"), in accordance with
Section 16(c) of the 1940 Act, to decide the matter.
Section 7.4 Record Dates. For the purpose of determining the Shareholders who
are entitled to vote or act at any meeting or any adjournment thereat or who are
entitled to participate in any dividend or distribution, or for the purpose of
any other action, the Trustees may from time to time close the transfer books
for such period, not exceeding thirty (30) days (except at or in connection with
the termination of the Trust), as the Trustees may determine; or without closing
the transfer books the Trustees may fix a date and time not more than ninety
(90) days prior to the date and time of record for the determination of
Shareholders entitled to vote at such meeting or any adjournment thereof or to
be treated as Shareholders of record for purposes of such other action, and any
Shareholder who was a Shareholder at the date and time so fixed shall be
entitled to vote at such meeting or any adjournment thereof or to be treated as
a Shareholder of record
<PAGE>
for purposes of such other action, even though he has since that date and time
disposed of his shares (other than through redemption or repurchase by the
Trust), and no Shareholder becoming such after that date and time shall be so
entitled to vote at such meeting or any adjournment thereof or to be treated as
a Shareholder of record for purposes of such other action.
Section 7.5 Quorum and Required Vote. Fifty percent (50%) of the Shares
entitled to vote shall be a quorum for the transaction of business at a
Shareholders' meeting, but any lesser number shall be sufficient for
adjournments. Any adjourned session or sessions may be held within a reasonable
time after the date set for the original meeting without the necessity of
further notice. A Majority Shareholder Vote shall decide any question, except
when a different vote is required or permitted by the 1940 Act or other
applicable law or by this Declaration of Trust or the Bylaws, or when the
Trustees shall in their discretion require a larger vote or the vote of a
majority or larger fraction of the Shares of one or more particular Series.
Section 7.6 Action by Written Consent. Subject to the provisions of the 1940
Act and other applicable law, any action taken by Shareholders may be taken
without a meeting if a majority of Shareholders entitled to vote on the matter
(or such larger proportion thereof or of the Shares of any particular Series as
shall be required by the 1940 Act or by any provision of this Declaration of
Trust or the Bylaws or as shall be permitted by the Trustees) consent to the
action in writing and if the writings in which such consent is given are filed
with the records of the meetings of Shareholders, to the same extent and for the
same period as proxies given in connection with a Shareholders' meeting. Such
consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
Section 7.7 Inspection of Records. The records of the Trust shall be open for
inspection by Shareholders to the same extent as is permitted stockholders of a
Massachusetts business corporation under the Massachusetts Business Corporation
Law.
Section 7.8 Additional Provisions. The Bylaws may include further provisions
for Shareholders' votes and meetings and related matters not inconsistent with
the provisions hereof.
ARTICLE VIII LIMITATION OF LIABILITY; INDEMNIFICATION
Section 8.1 Trustees and Shareholders Not Personally Liable. The Trustees and
officers of the Trust, in incurring any debts, liabilities, or obligations, or
in limiting or omitting any other actions for or in connection with the Trust,
are or shall be deemed to be acting as Trustees or officers of the Trust and not
in their own capacities. No Shareholder shall be subject to any personal
liability whatsoever in tort, contract or otherwise to
<PAGE>
any other Person in connection with the assets or affairs of the Trust or of any
Fund; and subject to Section 8.4 hereof, no Trustee, officer, employee or agent
of the Trust shall be subject to any personal liability whatsoever in tort,
contract or otherwise to any other Person in connection with the assets or
affairs of the Trust or of any Fund, unless only that arising from his own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office or the discharge of his functions.
The Trust (or if the matter relates only to a particular Fund, that Fund) shall
be solely liable for any and all debts, claims, demands, judgments, decrees,
liabilities or obligations of any and every kind, against or with respect to the
Trust or such Fund in tort, contract or otherwise in connection with the assets
or affairs of the Trust or of such Fund, and all persons dealing with the Trust
or any Fund shall be deemed to have agreed that resort shall be had solely to
the Trust Property or the Fund Assets of such Fund, as the case may be, for the
payment or performance thereof.
The Trustees shall use their best efforts to ensure that every note, bond,
contract, instrument, certificate or undertaking made or issued by the Trustees
or by any officer shall reiterate the provisions of this Section 8.1.
Section 8.2 Trustees' Good Faith Action. The exercise by the Trustees of
their powers and discretion hereunder shall be binding upon everyone interested.
Subject to Section 8.4 hereof, a Trustee shall be liable for his willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee, and for nothing else, and
shall not be liable for errors of judgment or mistakes of fact or law. Subject
to the foregoing, (i) the Trustees shall not be responsible or liable in any
event for any neglect or wrongdoing of any officer, agent, employee, consultant
or contracting party, nor shall any Trustee be responsible for the act or
omission of any other Trustee; (ii) the Trustees may take advice of counsel or
other experts with respect to the meaning and operation of this Declaration of
Trust and their duties as Trustees, and shall be under no liability for any act
or omission in accordance with such advice or for failing to follow such advice;
and (iii) in discharging their duties, the Trustees, when acting in good faith,
shall be entitled to rely upon the books of account of the Trust and upon
written reports made to the Trustees by any officer appointed by them, any
independent public accountant, and (with respect to the subject matter of the
contract involved) any officer, partner or responsible employee of a contracting
party. The Trustees as such shall not be required to give any bond or surety or
any other security for the performance of their duties.
Section 8.3 Indemnification of Shareholders. If any Shareholder (or former
Shareholder) of the Trust shall be charged or held to be personally liable for
any obligation or liability
<PAGE>
of the Trust solely by reason of being or having been a Shareholder and not
because of such Shareholder's acts or omissions or for some other reason, the
Trust (upon proper and timely request by the Shareholder) shall assume the
defense against such charge and satisfy any judgment thereon, and the
Shareholder or former Shareholder (or his heirs, executors, administrators or
other legal representative, or in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled (but solely out of the
assets of the Fund of which such Shareholder or former Shareholder is or was the
holder of Shares) to be held harmless from and indemnified against all loss and
expense arising from such liability.
Section 8.4 Indemnification of Trustees and Officers. Subject to the
limitations set forth in this Section 8.4, the Trust shall indemnify (from the
assets of the Fund or Funds to which the conduct in question relates) each of
its Trustees and officers, including persons who serve at the Trust's request
as directors, officers or trustees of another organization in which the Trust
has any interest as a shareholder, creditor or otherwise (referred to
hereinafter, together with such Person's heirs, executors, administrators or
other legal representatives, as a "Covered Person") against all liabilities,
including but not limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and expenses, including reasonable
accountants' and counsel fees, incurred by any Covered Person in connection
with the defense or disposition of any action, suit or other proceeding, whether
civil or criminal, before any court or administrative or legislative body, in
which such Covered Person may be or may have been involved as a party
or otherwise or with which such Covered Person may be or may have been
threatened, while in office or thereafter, by reason of being or having been
such a Trustee or officer, except with respect to any matter as to which it has
been determined that such Covered Person (i) did not act in good faith in the
reasonable belief that his action was in or not opposed to the best interests
of the Trust or (ii) had acted with willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office (either and both of the conduct described in clauses (i) and (ii)
above being referred to hereinafter as "Disabling Conduct"). A determination
that the Covered Person is entitled to indemnification may be made by (i)
a final decision on the merits by a court or other body before whom the
proceeding was brought that such Covered Person was not liable by reason of
Disabling Conduct, (ii) dismissal of a court action or an administrative action
against such Covered Person for insufficiency of evidence of Disabling
Conduct, or (iii) a reasonable determination, based upon a review of the facts,
that such Covered Person was not liable by reason of Disabling Conduct by (a)
vote of a majority of a quorum of Trustees who are neither "interested persons"
of the Trust as the quoted phrase is defined in Section 2(a)(19) of the 1940 Act
nor
<PAGE>
parties to the action, suit or other proceeding on the same or similar grounds
is then or has been pending or threatened (such quorum of such Trustees being
referred to hereinafter as the "Disinterested Trustees"), or (b) an independent
legal counsel in a written opinion. Expenses, including accountants' and counsel
fees so incurred by any such Covered Person (but excluding amounts paid in
satisfaction of judgments, in compromise or as fines or penalties), may be paid
from time to time by the Fund or Funds to which the conduct in question related
in advance of the final disposition of any such action, suit or proceeding;
provided, that the Covered Person shall have undertaken to repay the amounts so
paid if it is ultimately determined that indemnification of such expenses is not
authorized under this Article VIII and if (i) the Covered Person shall have
provided security for such undertaking, (ii) the Trust shall be insured against
losses arising by reason of any lawful advances, or (iii) a majority of the
Disinterested Trustees, or an independent legal counsel in a written opinion,
shall have determined, based on a review of readily available facts (as opposed
to a full inquiry), that there is reason to believe that the Covered Person
ultimately will be entitled to indemnification hereunder.
Section 8.5 Compromise Payment. As to any matter disposed of by a compromise
payment by any Covered Person referred to in Section 8.4 hereof, pursuant to a
consent decree or otherwise, no such indemnification either for said payment or
for any other expenses shall be provided unless such indemnification shall be
approved (i) by a majority of the Disinterested Trustees or (ii) by an
independent legal counsel in a written opinion. Approval by the Disinterested
Trustees pursuant to clause (i) shall not prevent the recovery from any Covered
Person of any amount paid to such Covered Person in accordance with either of
such clauses as indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction not to have acted in good faith
in the reasonable belief that such Covered Person's action was in or not opposed
to the best interests of the Trust or to have been liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such Covered
Person's office.
Section 8.6 Indemnification Not Exclusive. The right of indemnification
provided by this Article VIII shall not be exclusive of or affect any of the
rights to which any Covered Person may be entitled. Nothing contained in this
Article VIII shall affect any rights to indemnification to which personnel of
the Trust, other than Trustees and officers, and other Persons may be entitled
by contract or otherwise under law, nor the power of the Trust to purchase and
maintain liability insurance on behalf of any such person.
<PAGE>
Section 8.7 Liability of Third Persons Dealing with Trustees. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
ARTICLE IX DURATION; REORGANIZATION; AMENDMENTS
Section 9.1 Duration and Termination of Trust. Unless terminated as provided
herein, the Trust shall continue without limitation of time and, without
limiting the generality of the foregoing, no change, alteration or modification
with respect to the Trust or any Fund or Series of Shares shall operate to
terminate the Trust. The Trust may be terminated at any time by a Majority of
the Trustees, subject to the favorable vote of the holders of not less than a
majority of the Shares outstanding and entitled to vote of each Fund of the
Trust, or by an instrument or instruments in writing without a meeting,
consented to by the holders of not less than a majority of such Shares, or by a
greater or different vote of shareholders of any Series as may be established by
the Certificate of Designation by which such Series was unauthorized. Upon
termination, after paying or otherwise providing for all charges, taxes,
expenses and liabilities, whether due or accrued or anticipated as may be
determined by the Trustees, the Trust shall, in accordance with such procedures
as the Trustees consider appropriate, reduce the remaining assets to
distributable form in cash, securities or other property, or any combination
thereof, and distribute the proceeds to the Shareholders, in conformity with the
provisions of Section 6.2(d) hereof.
Section 9.2 Reorganization. The Trustees may sell, convey and transfer all or
substantially all of the Trust Property, or the assets belonging to any one or
more Funds, to another trust, partnership, association, corporation or other
entity, or may transfer such assets to another Fund of the Trust in exchange for
cash, Shares or other Securities (including, in the case of a transfer to
another Fund of the Trust, Shares of such other Fund), or to the extent
permitted by law then in effect, may merge or consolidate the Trust or any Fund
with any other trust, partnership, association, corporation or other entity, all
upon such terms and conditions and for such consideration when and as authorized
by a Majority of the Trustees, subject to the favorable vote of the holders of
not less than a majority of the Shares outstanding and entitled to vote of each
Fund whose assets are affected by such transaction, or by an instrument or
instruments in writing without a meeting, consented to by the holders of not
less than a majority of such Shares, or by such greater or different vote of
Shareholders of any Series as may be established by the Certificate of
Designation by which such Series was authorized. Following such transfer, the
Trustees shall distribute the cash, Shares or other Securities or other
<PAGE>
consideration received in such transaction (giving due effect to the assets
belonging to and the liabilities of, and any other differences among, the
various Funds of which the assets have so been transferred) among the
Shareholders of the Fund of which the assets have been so transferred; and if
all of the assets of the Trust have been so transferred, the Trust shall be
terminated. Nothing in this Section 9.2 shall be construed as requiring approval
of Shareholders for the Trustees to organize or assist in organizing one or more
corporations, trusts, partnerships, associations or other organizations, and to
sell, convey or transfer less than substantially all of the Trust Property or
the assets belonging to any Fund to such organizations or entities.
Section 9.3 Amendments. All rights granted to the Shareholders under this
Declaration of Trust are granted subject to the reservation of the right to
amend this Declaration of Trust as herein provided, except that no amendment
shall adversely affect the limitations on personal liability of any Shareholder
or Trustee or the prohibition of assessment upon the Shareholders (otherwise
than as permitted under Section 6.2(h)) without the express consent of each
Shareholder or Trustee involved. Subject to the foregoing, the provisions of
this Declaration of Trust (whether or not related to the rights of Shareholders)
may be amended at any time, so long as such amendment does not adversely affect
the rights of any Shareholder with respect to matters to which such amendment is
or purports to be applicable and so long as such amendment is not in
contravention of applicable law, including the 1940 Act, by an instrument in
writing signed by a Majority of the Trustees (or by an officer of the Trust
pursuant to the vote of a Majority of the Trustees). Any amendment to this
Declaration of Trust that adversely affects the rights of all Shareholders may
be adopted at any time by an instrument in writing signed by a Majority of the
Trustees (or by an officer of the Trust pursuant to a vote of a Majority of the
Trustees) when authorized to do so by the vote in accordance with Section 7.1
hereof of Shareholders holding a majority of all the Shares outstanding and
entitled to vote, without regard to Series, or if said amendment adversely
affects the rights of the Shareholders of less than all of the Funds, by the
vote of the holders of a majority of all the Shares entitled to vote of each
Fund so affected. A Certificate of Designation establishing and designating any
Fund in addition to the Fund established and designated in Section 6.2 hereof
and authorizing of the Shares thereof shall not constitute an amendment to this
Declaration which adversely affects the rights of any Shareholder. Subject to
the foregoing, any amendment shall be effective when an instrument containing
the terms thereof and a certificate (which may be a part of such instrument) to
the effect that such amendment has been duly adopted, and setting forth the
circumstances thereof, shall have been executed by a Trustee or officer of the
Trust.
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Section 9.4 Filing of Copies of Declaration and Amendments. The original or
a copy of this Declaration and of each amendment hereto (including each
Certificate of Designation and Certificate of Termination) shall be kept at the
principal office of the Trust where it may be inspected by any Shareholder, and
one copy of each such instrument shall be filed with the Secretary of The
Commonwealth of Massachusetts, as well as with any other governmental office
where such filing may from time to time be required by the laws of
Massachusetts. A restated Declaration, integrating into a single instrument all
of the provisions of this Declaration which are then in effect and operative,
may be executed from time to time by a Majority of the Trustees (or by an
officer of the Trust pursuant to the vote of a Majority of the Trustees) and
shall, upon filing with the Secretary of The Commonwealth of Massachusetts, be
conclusive evidence of all amendments contained therein and may thereafter be
referred to in lieu of the original Declaration and the various amendments
thereto.
<PAGE>
ARTICLE X MISCELLANEOUS
Section 10.1 Governing Law. This Declaration of Trust is executed and
delivered in The Commonwealth of Massachusetts and with reference to the laws
thereof, and the rights of all parties and the construction and effect of every
provision hereof shall be subject to and construed according to the laws of said
Commonwealth.
Section 10.2 Counterparts. This Declaration of Trust and any amendment
hereto may be simultaneously executed in several counterparts, each of which so
executed shall be deemed to be an original, and such counterparts, together
shall constitute but one and the same instrument, which shall be sufficiently
evidenced by any such original counterpart.
Section 10.3 Reliance by Third Parties. Any certificate executed by an
individual who, according to the records in the office of the Secretary of The
Commonwealth of Massachusetts appears to be a Trustee hereunder or an officer of
the Trust certifying to: (i) the number or identity of Trustees or Shareholders,
(ii) the due authorization of the execution of any instrument or writing, (iii)
the form of any vote passed at a meeting of Trustees or Shareholders, (iv) the
fact that the number of Trustees or Shareholders present at any meeting or
executing any written instrument satisfies the requirements of this Declaration
of Trust, (v) the form of any Bylaw adopted, or the identity of any officers
elected, by the Trustees, or (vi) the existence or nonexistence of any fact or
facts which in any manner relate to the affairs of the Trust, shall be
conclusive evidence as to the matters so certified in favor of any person
dealing with the Trustees, or any of them, and the successors of such person.
Section 10.4 References; Headings. The masculine gender shall include the
feminine and neuter genders. Headings are placed herein for convenience of
reference only and shall not be taken as a part of this Declaration or control
or affect the meaning, construction or effect hereof.
<PAGE>
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, and has thereby
accepted the Trusteeship as the Initial Trustee of The Tuscarora Investment
Trust hereby granted and agreed to the provisions hereof, all as of the day and
year first above written.
/s/ George W. Brumley III
_______________________________
George W. Brumley III
3100 Tower Boulevard, Suite 800
Durham, North Carolina 27707
ACKNOWLEDGEMENT
State of North Carolina
County of Durham March 3, 1995
Then personally appeared the above named George W. Brumley III and
acknowledged the foregoing instrument to be his free act and
deed.
Before me, /s/ Lynne D. McMannen
----------------------
THE TUSCARORA INVESTMENT TRUST
BYLAWS
THE TUSCARORA INVESTMENT TRUST
BYLAWS
Table of Contents
Page
RECITALS................................................................... 1
ARTICLE I SHAREHOLDERS AND SHAREHOLDERS' MEETINGS......................... 1
Section 1.1 Meetings ...................................................... 1
Section 1.2 Presiding Officer; Secretary................................... 1
Section 1.3 Authority of Chairman to Interpret Declaration and Bylaws...... 2
Section 1.4 Voting; Quorum................................................. 2
Section 1.5 Inspectors..................................................... 2
Section 1.6 Shareholders' Action in Writing................................ 2
ARTICLE II TRUSTEES AND TRUSTEES' MEETINGS................................. 2
Section 2.1 Number of Trustees............................................ 2
Section 2.2 Regular Meetings of Trustees.................................. 3
Section 2.3 Special Meetings of Trustees.................................. 3
Section 2.4 Notice of Meetings............................................ 3
Section 2.5 Quorum; Presiding Officer..................................... 3
Section 2.6 Participation by Telephone.................................... 3
Section 2.7 Location of Meetings.......................................... 4
Section 2.8 Votes......................................................... 4
Section 2.9 Rulings of Chairman........................................... 4
Section 2.10 Trustees' Action in Writing................................... 4
Section 2.11 Resignations.................................................. 4
Section 2.12 Indemnity Insurance........................................... 4
ARTICLE III OFFICERS ...................................................... 4
Section 3.1 Officers of the Trust......................................... 4
Section 3.2 Time and Terms of Election.................................... 4
Section 3.3 Resignation and Removal....................................... 5
Section 3.4 Fidelity Bond................................................. 5
Section 3.5 Chairman of the Board......................................... 5
Section 3.6 Vice Chairman................................................. 5
Section 3.7 President..................................................... 5
Section 3.8 Vice Presidents............................................... 5
Section 3.9 Treasurer and Assistant Treasurers............................ 5
Section 3.10 Controller and Assistant Controller........................... 6
Section 3.11 Secretary and Assistant Secretaries........................... 6
Section 3.12 Substitutions................................................. 7
Section 3.13 Execution of Deeds, etc....................................... 7
Section 3.14 Power to Vote Securities...................................... 7
<PAGE>
ARTICLE IV COMMITTEES...................................................... 7
Section 4.1 Power of Trustees to Designate Committees..................... 7
Section 4.2 Rules for Conduct of Committee Affairs........................ 8
Section 4.3 Trustees May Alter, Abolish, etc., Committees................. 8
Section 4.4 Minutes; Review by Trustees.................................. 8
ARTICLE V SEAL ............................................................ 8
ARTICLE VI SHARES ......................................................... 8
Section 6.1 Issuance of Shares............................................ 8
Section 6.2 Uncertificated Shares......................................... 9
Section 6.3 Share Certificates............................................ 9
Section 6.4 Lost, Stolen, etc., Certificates.............................. 9
Section 6.5 Record Transfer of Pledged Shares............................. 9
ARTICLE VII AMENDMENTS ....................................................10
Section 7.1 Bylaws Subject to Amendment...................................10
Section 7.2 Notice of Proposal to Amend Bylaws Required...................10
3
<PAGE>
BYLAWS
OF
THE TUSCARORA INVESTMENT TRUST
These ARTICLES are the BYLAWS of The Tuscarora Investment Trust,
a trust with transferable shares established under the laws of
the Commonwealth of Massachusetts (the "Trust"), pursuant to an
Agreement and Declaration of Trust of the Trust (the
"Declaration") made the third day of March, 1995. These Bylaws
have been adopted by the Trustees pursuant to the authority
granted by Section 3.1 of the Declaration.
All words and terms capitalized in these Bylaws, unless otherwise
defined herein, shall have the same meanings as they have in the
Declaration.
ARTICLE I
SHAREHOLDERS AND SHAREHOLDERS' MEETINGS
SECTION 1.1 Meetings. A meeting of the Shareholders of the Trust
shall be held whenever called by the Trustees and whenever
election of a Trustee or Trustees by Shareholders is required by
the provisions of the 1940 Act. Meetings of Shareholders shall
also be called by the Trustees when requested in writing by the
Shareholders holding at least ten percent (10%) of the Shares
then outstanding for the purpose of voting upon removal of
Trustee, or if the Trustees shall fail to call or give notice of
any such meeting of Shareholders for period of thirty (30) days
after such application, then Shareholders holding at least ten
percent (10%) of the Shares then outstanding may call and give
notice of such meeting. Notice of Shareholders' meetings shall
be given as provided in the Declaration.
SECTION 1.2 Presiding Officer; Secretary. The President shall
preside at each Shareholders' meeting as chairman of the meeting,
or in the absence of the President, the Trustees present at the
meeting shall elect one of their number as chairman of the
meeting. Unless otherwise provided for by the Trustees, the
Secretary of the Trust shall be the secretary of all meetings of
Shareholders and shall record the minutes thereof.
SECTION 1.3 Authority of Chairman of Meeting to Interpret
Declaration and Bylaws. At any Shareholders' meeting the
chairman of the meeting shall be empowered to determine the
construction or interpretation of the Declaration or these
Bylaws, or and part thereof or hereof, and his ruling shall be
final.
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SECTION 1.4 Voting; Quorum. At each meeting of Shareholders,
except as otherwise provided by the Declaration, every holder of
record of Shares entitled to vote shall be standing in his name
on the Share register of the Trust. Shareholders may vote by
proxy and the form of any such proxy may be prescribed from time
to time by the Trustees. As provided in the Declaration, a
quorum shall exist for voting on any matter if the holders of
fifty percent (50%) of the outstanding Shares of the Trust
entitled to vote on that matter are present in person or by
proxy, but any lesser number shall be sufficient for
adjournments. At all meetings of the Shareholders, votes shall
be taken by ballot for all matters which may be binding upon the
Trustees pursuant to Section 7.1 of the Declaration. On other
matters, votes of Shareholders need not be taken by ballot unless
otherwise provided for by the Declaration or by vote of the
Trustees, or as required by the 1940 Act, but the chairman of the
meeting may in his discretion authorize any matter to be voted
upon by ballot.
SECTION 1.5 Inspectors. At any meeting of Shareholders, the
chairman of the meeting may appoint one or more Inspectors of
Election or Balloting to supervise the voting at such meeting or
any adjournment thereof. If Inspectors are not so appointed, the
chairman of the meeting may, and on the request of any
Shareholders present or represented and entitled to vote shall,
appoint one or more Inspectors for such purpose. If appointed
Inspectors shall take charge of the polls and, when the vote is
completed, shall make a certificate of the result of the vote
taken and of such other facts as may be required by law.
SECTION 1.6 Shareholders' Action in Writing. Nothing in this
Article I shall limit the power of the Shareholders to take any
action without a meeting by means of written instruments as
permitted by Section 7.6 of the Declaration.
ARTICLE II
TRUSTEES AND TRUSTEES' MEETINGS
SECTION 2.1 Number of Trustees. There shall initially be one
(1) Trustee, and the number of Trustees shall thereafter be such
number as shall be fixed from time to time by a vote adopted by a
Majority of the Trustees.
SECTION 2.2 Regular Meetings of Trustees. Regular meetings of
the Trustees may be held without call or notice at such places
and at such times as the Trustees may form time to time
determine; provided, that notice of such determination, and of
the time, place and purpose of the first regular meeting
thereafter, shall be given to each absent Trustee in accordance
with Section 2.4 hereof.
2
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SECTION 2.3 Special Meetings of Trustees. Special meetings of
the trustees may be held at any time and at any place when called
by the President or the Treasurer or by two (2) or more Trustees,
or if there shall be fewer than three (3) Trustees, by any
Trustee; provided, that notice of the time, place and purpose
thereof is given to each Trustee in accordance with Section 2.4
hereof by the Secretary or an Assistant Secretary or by the
officer or the Trustee calling the meeting.
SECTION 2.4 Notice of Meeting. Notice of any regular or special
meeting of the Trustee shall be sufficient if given orally or in
writing to each Trustee, and if sent by mail at least five (5)
days, or by telegram at least twenty-four (24) hours, before the
meeting. Notice of a special meeting need not be given to any
Trustee who was present at an earlier meeting, not more than
thirty-one (31) days prior to the subsequent meeting, at which
the subsequent meeting was called. Notice of a meeting may be
waived by any Trustee by written waiver of notice, executed by
him before or after the meeting, and such waiver shall be filled
with the records of the meeting. Attendance by a Trustee at a
meeting shall constitute a waiver of notice, except where a
Trustee attends a meeting for the purpose of protesting prior
thereto or at its commencement the lack of notice.
SECTION 2.5 Quorum; Presiding Officer. At any meeting of the
Trustees, a Majority of the Trustees shall constitute a quorum.
Any meeting may be adjourned from time to time by a majority of
the vote cast upon the question, whether or not a quorum is
present, and the meeting may be held as adjourned without further
notice. Unless the Trustees shall otherwise elect, generally or
in a particular case, the President shall preside at each meeting
of the Trustees as chairman of the meeting.
SECTION 2.6 Participation by Telephone. One or more of the
Trustees may participate in a meeting thereof or of any Committee
of the Trustees by means of a conference telephone or similar
communications equipment allowing all persons participating in
the meeting to hear each other at the same time. Participating
by such means shall constitute presence in person at a meeting.
SECTION 2.7 Location of Meetings. Trustees' meetings may be
held at any place, within or without Massachusetts.
SECTION 2.8 Votes. Voting at Trustees' meetings may be
conducted orally, by show of hands, or, if requested by any
Trustee, by written ballot. The results of all voting shall be
recorded by the Secretary in the minute book.
SECTION 2.9 Rulings of Chairman. All other rules of conduct
adopted and used at any Trustees' meeting shall be determined by
the chairman of such meeting, whose ruling on all procedural
matters shall be final.
3
<PAGE>
SECTION 2.10 Trustees' Action in Writing. Nothing in this
Article II shall limit the power of the Trustees to take action
without a meeting by means of a written instrument, as provided
in Section 4.2 of the Declaration.
SECTION 2.11 Resignations. Any Trustee may resign at any time
by written instrument signed by him and delivered to the
President or the Secretary or to a meeting of the Trustees. Such
resignation shall be effective upon receipt unless specified to
be effective at some other time.
SECTION 2.12 Indemnity Insurance. The Trustees may purchase
professional indemnity insurance coverage for its officers and
Trustees, the terms and conditions of which must conform
generally to the standard coverage available to the investment
company industry, provided, however, that no such insurance will
be purchased which protects or purports to protect, any officer
or Trustee for actions constituting willful misfeasance, bad
faith, gross negligence or reckless disregard of duties.
ARTICLE III
OFFICERS
SECTION 3.1 Officers of the Trust. The officers of the Trust
shall consist of a President, a Treasurer and a Secretary, and
may include one or more Vice Presidents, Assistant Treasurers and
Assistant Secretaries, and such other officers as the Trustees
may designate. Any person may hold more than one office. Except
for the President, no officer need be a Trustee.
SECTION 3.2 Time and Terms of Election. The President, the
Treasurer and the Secretary shall be elected by the Trustees at
their first meeting. All other officers of the Trust may be
elected or appointed at any meeting of the Trustees. Officers of
the Trust shall hold office for any term, or indefinitely, as
determined by the Trustees, and shall be subject to removal, with
or without cause, at any time by the Trustees.
SECTION 3.3 Resignation and Removal. Any officer may resign at
any time by giving written notice to the Trustees. Such
resignation shall take effect at the time specified therein, and,
unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective. If the
office of any officer or agent becomes vacant by reason of death,
resignation, retirement, disqualification, removal from office or
otherwise, the Trustees may choose a successor, who shall hold
office for the unexpired term in respect of which such vacancy
occurred. Except to the extent expressly provided in a written
agreement with the Trust, no officer resigning or removed shall
have any right to any compensation for any period following such
resignation or removal, or any right to damage on account of such
removal.
4
<PAGE>
SECTION 3.4 Fidelity Bond. The Trustees may, in their
discretion, direct any officer appointed by them to furnish at
the expense of the Trust a fidelity bond approved by the
Trustees, in such amount as the Trustees may prescribe.
SECTION 3.5 President. The President shall be the chief
executive officer of the Trust and shall have general charge and
supervision of the business, property and affairs of the Trust
and such other powers and duties as the Trustees shall prescribe.
SECTION 3.6 Vice Presidents. In the absence or disability of
the President or a Vice President, if there shall be more than
one, the Vice Presidents in the order of their seniority or as
otherwise designated by the Trustees, shall exercise all of the
powers and duties of the President. The Vice Presidents shall do
and perform such other duties as the Trustees or the President of
the Trust shall direct.
SECTION 3.7 Treasurer and Assistant Treasurers. The Treasurer
shall be the chief financial officer of the Trust, and shall have
the custody of the Trust Property, and shall keep full and
accurate accounts of receipts and disbursements in books
belonging to the Trust and shall deposit all moneys and other
valuable effects in the name and to the credit of the Trust in
such depositories as may be designated by the Trustees, taking
proper vouchers for such disbursements, and shall have such other
duties and powers as may be prescribed from time to time by the
Trustees, and shall render to the Trustees, whenever they may
require it, an account of all his transactions as Treasurer and
the financial condition of the Trust. If no Controller is
elected, the Treasurer shall also have the duties and powers of
the Controller, as provided in these Bylaws. Any Assistant
Treasurer shall have such duties and powers as shall be
prescribed from time to time by the Trustees or the Treasurer,
and shall be responsible to and shall report to the Treasurer.
In the absence or disability of the Treasurer, the Assistant
Treasurer or, if there shall be more than one, the Assistant
Treasurers in the order of seniority or as otherwise designated
by the Trustees, shall have the powers and duties of the
Treasurer.
SECTION 3.8 Controller and Assistant Controller. If a
Controller is elected, he shall be the chief accounting officer
of the Trust, and shall be in charge of its books of account and
accounting records and of its accounting procedures, and shall
have such duties and powers as are commonly incident to the
office of a controller and such other duties and powers as may be
prescribed from time to time by the Trustees. The Controller
shall be responsible to and shall report to the Trustees, but in
the ordinary conduct of the Trust's business, shall be under the
supervision of the Treasurer. Any Assistant Controller shall
have the duties and powers as shall be prescribed from time to
5
<PAGE>
time by the Trustees or the Controller, and shall be responsible
to and shall report to the Controller. In the absence or
disability of the Controller, the Assistant Controller or, if
there shall be more than one, the Assistant Controllers in the
order of their seniority or as otherwise designated by the
Trustees, shall have the powers and duties of the Controller.
SECTION 3.9 Secretary and Assistant Secretaries. The Secretary
shall, if and to the extent requested by the Trustees, attend all
meetings of the Trustees, any Committee of the Trustees and /or
Shareholders and record all votes and the minutes of proceedings
in a book to be kept for that purpose, and shall give or cause to
be given notice of all meetings of the Trustees, any Committee of
the Trustees, and of the Shareholders, and shall perform such
other duties as may be prescribed by the Trustees. The
Secretary, or in his absence any Assistant Secretary, shall affix
the Trust's seal to any instrument requiring it, and when so
affixed, it shall be attested by the signature of the Secretary
or an Assistant Secretary. The Secretary shall be the custodian
of the Share records and all other books, records and papers of
the Trust (other than financial) and shall see that all books,
reports, statements, certificates and other documents and records
required by law are properly kept and filed. Any Assistant
Secretary shall have such duties and powers as shall be
prescribed from time to time by the Trustees or the Secretary,
and shall be responsible to and report to the Secretary. In the
absence or disability of the Secretary, the Assistant Secretary
or, if there shall be more than one, the Assistant Secretaries in
the order of their seniority or as otherwise designated by the
Trustees, shall have the powers and duties of the Secretary.
SECTION 3.10 Substitutions. In case of the absence or
disability of any officer of the Trust, or for any other reason
that the Trustees may deem sufficient, the Trustees may delegate,
for the time being, the powers or duties, or any of them, of such
officer to any other officer, or to any Trustee.
SECTION 3.11 Execution of Deeds, etc. Except as the Trustees
may generally or in particular cases otherwise authorize or
direct, all deeds, leases, transfers, contracts, proposals,
bonds, notes, checks, drafts and other obligations made, accepted
or endorsed by the Trust shall be signed or endorsed on behalf of
the Trust by the Chairman or the Treasurer.
SECTION 3.12 Power to Vote Securities. Unless otherwise ordered
by the Trustees, the President, Vice Presidents, if any, or the
Treasurer shall have full power and authority on behalf of the
Trust to give proxies for, and/or to attend and to act and to
vote at, any meeting of stockholders of any corporation in which
the Trust may hold stock, and at any such meeting any such
officer or his proxy shall possess and may exercise any and all
rights and powers incident to the ownership of such stock which,
6
<PAGE>
as the owner thereof, the Trust might have possessed and
exercised if present. The Trustees, by resolution from time to
time, or, in the absence thereof, the President, Vice Presidents,
if any, or the Treasurer, may confer like powers upon any other
person or persons as attorneys and proxies of the Trust.
ARTICLE IV
COMMITTEES
SECTION 4.1 Power of Trustees to Designate Committees. The
Trustees, by vote of a majority of the Trustees, may elect from
their number an executive committee and any other committees and
may delegate thereto some or all of their power except those
which by law, by the Declaration or by these Bylaws may not be
delegated; provided, that no committee shall be empowered to
elect the President, the Treasurer or the Secretary, to amend the
Bylaws, to exercise the powers of the Trustees under this Section
4.1 or under Section 4.3 hereof, or to perform any act for which
the action of a Majority of the Trustees is required by law, by
the Declaration or by these Bylaws. The members of any such
Committee shall serve at the pleasure of the Trustees.
SECTION 4.2 Rules for Conduct of Committee Affairs. Except as
otherwise provided by the Trustees, each Committee elected or
appointed pursuant to this Article IV may adopt such standing
rules and regulations for the conduct of its affairs as it may
deem desirable, subject to review and approval of such rules and
regulations by the Trustees at the next succeeding meeting of the
Trustees, but in the absence of any such action or any contrary
provisions by the Trustees, the business of each Committee shall
be conducted, so far as practicable, in the same manner as
provided herein and in the Declaration.
SECTION 4.3 Trustees May Alter, Abolish, etc., Committees. The
Trustees may at any time alter or abolish any Committee, change
the membership of any Committee, or revoke, rescind or modify any
action of any Committee or the authority of any Committee with
respect to any matter or class of matters; provided, that no
such action shall impair the rights of any third parties.
SECTION 4.4 Minutes; Review by Trustees. Any Committees to
which the Trustees delegate any of their powers or duties shall
keep records of its meetings and shall report its action to the
Trustees.
7
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ARTICLE V
SEAL
The seal of the Trust shall consist of a flat-faced circular die
with the word "Massachusetts," together with the name of the
Trust, the words "Trust Seal," and the year of its organization
cut or engraved thereon, but, unless otherwise required by the
Trustees, the seal shall not be necessary to be placed on, and
its absence shall not impair the validity of, any document,
instrument or other paper executed and delivered by or on behalf
of the Trust.
ARTICLE VI
SHARES
SECTION 6.1 Issuance of Shares. The Trustees may issue Shares
of any or all Series either in certificated or uncertificated
form, they may issue certificates to the holders of Shares of a
Series which was originally issued in uncertificated form, they
may at any time discontinue the issuance of Share certificates
for such Series and may, by written notice to such Shareholders
of such Series, require the surrender of their Share certificates
to the Trust for cancellation, which surrender and cancellation
shall not affect the ownership of Shares for such Series.
SECTION 6.2 Uncertificated Shares. For any Series of Shares for
which the Trustees issue Shares without certificates, the Trust
or the Transfer Agent may either issue receipts therefor or may
keep account upon the books of the Trust for the record holders
of such Shares, who shall in either case be deemed, for all
purposes hereunder, to be the holders of such Shares as if they
had received certificates therefor and shall be held to have
expressly assented and agreed to the terms hereof and of the
Declaration.
SECTION 6.3 Share Certificates. For any Series of Shares for
which the Trustees shall issue Share certificates, each
Shareholder of such Series shall be entitled to a certificate
stating the number of Shares owned by him in such form as shall
be prescribed from time to time by the Trustees. Such
certificates shall be signed by the President or a Vice
President, and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary, of the Trust. Such
signatures may be facsimiles if the certificate is countersigned
by the Transfer Agent, or by a registrar, other than a Trustee,
officer or employee of the Trust. In case any officer who has
signed or whose facsimile signature has been placed on such
certificate is issued, it may be issued by the Trust with the
same effect as if he were such officer at the time of its issue.
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SECTION 6.4 Lost, Stolen, etc., Certificates. If any
certificate for certificated Shares shall be lost, stolen,
destroyed or mutilated, the Trustees may authorize the issuance
of a new certificate of the same tenor and for the same number of
Shares in lieu thereof. The Trustees shall require the surrender
of any mutilated certificate in respect of which a new
certificate is issued, and may, in their discretion, before the
issuance of new certificate, require the owner of a lost, stolen
or destroyed certificate, or the owner's legal representative, to
make an affidavit or affirmation setting forth such facts as to
the loss, theft or destruction as they deem necessary, and to
give the Trust a bond, in such reasonable sum as the Trustees
direct, in order to indemnify the Trust.
SECTION 6.5 Record Transfer of Pledged Shares. A pledge of
Shares pledged as collateral security shall be entitled to a new
certificate in his name as pledgee, in the case of certificated
Shares, or to be registered as the holder in pledge of such
Shares in the case of uncertificated Shares; provided, that the
instrument of pledge substantially describes the debt or duty
that is intended to be secured thereby. Any such new certificate
shall express on its face that it is held as collateral security,
and the name of the pledgor shall be stated thereon, and any such
registration of uncertificated Shares shall be in a form which
indicates that the registered holder holds such Shares in pledge.
After such issue or registration, and unless and until such
pledge is released, such pledgee and his successors and assigns
shall alone be entitled to the rights of Shareholder, and
entitled to vote such Shares.
ARTICLE VII
AMENDMENTS
SECTION 7.1 Bylaws Subject to Amendment. These Bylaws may be
altered, amended or repealed, in whole or in part, at any time by
vote of the holders of a majority of the Shares (or whenever
there shall be more than one Series of Shares, of the holders of
majority of the Shares of each Series) issued, outstanding and
entitled to vote. The Trustees, by vote of a Majority of
Trustees, may alter, amend or repeal these Bylaws adopted by the
Shareholders, except with respect to any provisions hereof which
by law, the Declaration or these Bylaws requires action by the
Shareholders. Bylaws adopted by the Trustees may be altered,
amended or repealed by the Shareholders.
SECTION 7.2 Notice of Proposal to Amend Bylaws Required. No
proposal to amend or repeal these Bylaws or to adopt new Bylaws
shall be acted upon at a meeting unless either (i) such proposal
is stated in the notice or in waiver of notice, as the case may
be, of the meeting or in the Trustees or Shareholders at which
such action is taken, or (ii) all of the Trustees or
Shareholders, as the case may be, are present at such meeting and
all agree to consider such proposal without protesting the lack
of notice.
9
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, entered into as of the 23rd day of May, 1995, by and between THE
TUSCARORA INVESTMENT TRUST, a Massachusetts business trust, on behalf of its OAK
VALUE FUND series (the "Fund"), and OAK VALUE CAPITAL MANAGEMENT, INC. (the
"Advisor"), a North Carolina corporation registered as an investment advisor
under the Investment Advisers Act of 1940, as amended.
WHEREAS, the Trust is registered as a diversified, open-end management
investment company of the series type under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, the Trust desires to retain the Advisor to furnish investment advisory
and administrative services to the Fund, and the Advisor is willing to so
furnish such services;
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Trust hereby appoints the Advisor to act
as investment advisor to the Fund for the period and on the
terms set forth in this Agreement. The Advisor accepts such
appointment and agrees to furnish the services herein set
forth, for the compensation herein provided.
2. DELIVERY OF DOCUMENTS. The Trust has furnished the Advisor
with copies properly certified or authenticated of each of
the following:
(a) The Trust's Declaration of Trust, as filed with The
Commonwealth of Massachusetts (such Declaration, as presently
in effect and as it shall from time to time be amended, is
herein called the "Declaration");
(b) The Trust's Bylaws (such Bylaws, as presently in effect
and as they shall from time to time be amended, are
herein called the "Bylaws");
(c) Resolutions of the Trust's Board of Trustees
authorizing the appointment of the Advisor and
approving this Agreement;
(d) The Trust's Registration Statement on Form N-1A under the 1940
Act and under the Securities Act of 1933, as amended, relating
to shares of beneficial interest of the Fund (herein called
the "Shares") as filed with the Securities and Exchange
Commission ("SEC") and all amendments thereto; and
<PAGE>
(e) The Fund's Prospectus and Statement of Additional Information
(such Prospectus and Statement of Additional Information, as
presently in effect and all amendments and supplements thereto
are herein called the "Prospectus").
The Trust will furnish the Advisor from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the foregoing
at the same time as such documents are required to be filed with the SEC.
3. MANAGEMENT. Subject to the supervision of the Trust's Board
of Trustees, the Advisor will provide a continuous
investment program for the Fund, including investment
research and management with respect to all securities,
investments, cash and cash equivalents of the Fund. The
Advisor will determine from time to time what securities and
other investments will be purchased, retained or sold by the
Fund. The Advisor will provide the services under this
Agreement in accordance with the Fund's investment
objectives, policies and restrictions as stated in its
Prospectus. The Advisor further agrees that it:
(a) Will conform its activities to all applicable rules and
regulations of the SEC and will, in addition, conduct its
activities under this Agreement in accordance with regulations
of any other federal and state agencies which may now or in
the future have jurisdiction over its activities under this
Agreement;
(b) Will place orders pursuant to its investment
determinations for the Fund either directly with the
issuer or with any broker or dealer. In placing orders
with brokers or dealers, the Advisor will attempt to
obtain the best net price and the most favorable
execution of its orders. Consistent with this
obligation, the Advisor may consider the financial
responsibility, research and investment information and
other services provided by brokers. It is understood
that research and investment information provided by
such brokers may be useful to the Advisor in connection
with its services to other clients;
(c) Will provide certain executive personnel for the Trust as may
be mutually agreed upon from time to time with the Board of
Trustees, the salaries and expenses of such personnel to be
borne by the Advisor unless otherwise mutually agreed upon;
and
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<PAGE>
(d) Will provide, at its own cost, all office space, facilities
and equipment necessary for the conduct of its advisory
activities on behalf of the Fund.
4. SERVICES NOT EXCLUSIVE. The advisory services furnished by
the Advisor hereunder are not to be deemed exclusive, and
the Advisor shall be free to furnish similar services to
others so long as its services under this Agreement are not
impaired thereby provided, however, that without the written
consent of the Trustees, the Advisor will not serve as
investment advisor to any other investment company having a
similar investment objective to that of the Fund.
5. BOOKS AND RECORDS. In compliance with the requirements of
Rule 31a-3 under the 1940 Act, the Advisor hereby agrees
that all records which it maintains for the benefit of the
Fund are the property of the Trust and further agrees to
surrender promptly to the Trust any of such records upon the
Trust's request. The Advisor further agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by it pursuant to Rule
31a-1 under the 1940 Act that are not maintained by others
on behalf of the Fund.
6. EXPENSES. During the term of this Agreement, the Advisor will pay all
expenses incurred by it in connection with its investment advisory
services pertaining to the Fund. In the event that there is no
distribution plan under Rule 12b-1 of the 1940 Act in effect for the
Fund, the Advisor will pay the entire cost of the promotion and sale of
Fund shares.
Notwithstanding the foregoing, the Fund shall pay the expenses and
costs of the following:
(a) Taxes, interest charges and extraordinary expenses;
(b) Brokerage fees and commissions with regard to portfolio
transactions of the Fund;
(c) Fees and expenses of the custodian of the Fund's
portfolio securities;
(d) Fees and expenses of the Fund's administrator, transfer and
dividend disbursing agent and the Fund's fund accounting agent
or, if the Trust performs any such services without an agent,
the costs of the same;
(e) Auditing and legal expenses;
(f) Cost of maintenance of the Trust's existence as a legal
entity;
(g) Compensation of Trustees who are not interested persons
of the Advisor as that term is defined by law;
(h) Costs of Trustees' and shareholders' meetings;
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<PAGE>
(i) Federal and state registration or qualification fees
and expenses;
(j) Costs of setting in type, printing and mailing
Prospectuses, reports and notices to existing
shareholders;
(k) The investment advisory fee payable to the Advisor, as
provided in paragraph 7 herein; and
(l) Distribution expenses, but only in accordance with a Plan of
Distribution as approved by the shareholders of the Fund in
accordance with Rule 12b-1 under the 1940 Act.
It is understood that the Trust may desire to register the Fund's
shares for sale in certain states which impose expense limitations on
mutual funds. The Trust agrees that it will register the Fund's shares
in such states only with the prior written consent of the Advisor.
7. COMPENSATION. The Trust will pay the Advisor and the Advisor will
accept as full compensation an investment advisory fee, based upon the
average daily net assets of the Fund, computed at the end of each month
and payable within five (5) business days thereafter, at the annual
rate of nine tenths of one percent (0.9%) of such assets.
8. (a) LIMITATION OF LIABILITY. The Advisor shall not be
liable for any error of judgment, mistake of law or for
any other loss whatsoever suffered by the Fund in
connection with the performance of this Agreement,
except a loss resulting from a breach of fiduciary duty
with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance,
bad faith or gross negligence on the part of the
Advisor in the performance of its duties or from
reckless disregard by it of its obligations and duties
under this Agreement.
(b) INDEMNIFICATION OF ADVISOR. Subject to the limitations
set forth in this Subsection 8(b), the Trust shall
indemnify, defend and hold harmless (from the assets of
the Fund) the Advisor against all loss, damage and
liability, including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines
and penalties, and expenses, including reasonable
accountants' and counsel fees, incurred by the Advisor
in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or
criminal, before any court or administrative or
legislative body, related to or resulting from this
Agreement or the performance of services hereunder,
except with respect to any matter as to which it has
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<PAGE>
been determined that the loss, damage or liability is a direct
result of (i) a breach of fiduciary duty with respect to the
receipt of compensation for services; or (ii) willful
misfeasance, bad faith or gross negligence on the part of the
Advisor in the performance of its duties or from reckless
disregard by it of its duties under this Agreement (either and
both of the conduct described in clauses (i) and (ii) above
being referred to hereinafter as "Disabling Conduct"). A
determination that the Advisor is entitled to indemnification
may be made by (i) a final decision on the merits by a court
or other body before whom the proceeding was brought that the
Advisor was not liable by reason of Disabling Conduct, (ii)
dismissal of a court action or an administrative proceeding
against the Advisor for insufficiency of evidence of Disabling
Conduct, or (iii) a reasonable determination, based upon a
review of the facts, that the Advisor was not liable by reason
of Disabling Conduct by (a) vote of a majority of a quorum of
Trustees who are neither "interested persons" of the Trust as
the quoted phrase is defined in Section 2(a)(19) of the 1940
Act nor parties to the action, suit or other proceeding on the
same or similar grounds that is then or has been pending or
threatened (such quorum of such Trustees being referred to
hereinafter as the "Independent Trustees"), or (b) an
independent legal counsel in a written opinion. Expenses,
including accountants' and counsel fees so incurred by the
Advisor (but excluding amounts paid in satisfaction of
judgments, in compromise or as fines or penalties), may be
paid from time to time by the Fund in advance of the final
disposition of any such action, suit or proceeding; provided,
that the Advisor shall have undertaken to repay the amounts so
paid if it is ultimately determined that indemnification of
such expenses is not authorized under this Subsection 8(b) and
if (i) the Advisor shall have provided security for such
undertaking, (ii) the Trust shall be insured against losses
arising by reason of any lawful advances, or (iii) a majority
of the Independent Trustees, or an independent legal counsel
in a written opinion, shall have determined, based on a review
of readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the Advisor
ultimately will be entitled to indemnification hereunder.
As to any matter disposed of by a compromise payment by the
Advisor referred to in this Subsection 8(b), pursuant to a
consent decree or otherwise, no such indemnification either
for said payment or for any
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<PAGE>
other expenses shall be provided unless such indemnification
shall be approved (i) by a majority of the Independent
Trustees or (ii) by an independent legal counsel in a written
opinion. Approval by the Independent Trustees pursuant to
clause (i) shall not prevent the recovery from the Advisor of
any amount paid to the Advisor in accordance with either of
such clauses as indemnification if the Advisor is subsequently
adjudicated by a court of competent jurisdiction not to have
acted in good faith in the reasonable belief that the
Advisor's action was in or not opposed to the best interests
of the Fund or to have been liable to the Fund or its
Shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved
in its conduct under this Agreement.
The right of indemnification provided by this Subsection 8(b)
shall not be exclusive of or affect any of the rights to which
the Advisor may be entitled. Nothing contained in this
Subsection 8(b) shall affect any rights to indemnification to
which Trustees, officers or other personnel of the Trust, and
other persons may be entitled by contract or otherwise under
law, nor the power of the Trust to purchase and maintain
liability insurance on behalf of any such person.
The Board of Trustees of the Trust shall take all such action
as may be necessary and appropriate to authorize the Fund
hereunder to pay the indemnification required by this
Subsection 8(b) including, without limitation, to the extent
needed, to determine whether the Advisor is entitled to
indemnification hereunder and the reasonable amount of any
indemnity due it hereunder, or employ independent legal
counsel for that purpose.
8. (c) The provisions contained in Section 8 shall survive the
expiration or other termination of this Agreement, shall be
deemed to include and protect the Advisor and its directors,
officers, employees and agents and shall inure to the benefit
of its/their respective successors, assigns and personal
representatives.
9. DURATION AND TERMINATION. This Agreement shall become effective on the
date hereof and, unless sooner terminated as provided herein, shall
continue in effect for two years. Thereafter, this Agreement shall be
renewable for successive periods of one year each, provided such
continuance is specifically approved annually:
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<PAGE>
(a) By the vote of a majority of those members of the
Board of Trustees who are not parties to this
Agreement or interested persons of any such party (as
that term is defined in the 1940 Act), cast in person
at a meeting called for the purpose of voting on such
approval; and
(b) By vote of either the Board of Trustees or a majority
(as that term is defined in the 1940 Act) of the
outstanding voting securities of the Fund.
Notwithstanding the foregoing, this Agreement may be terminated by the
Trust or by the Advisor at any time on sixty (60) days' written notice,
without the payment of any penalty, provided that termination of the
Trust must be authorized either by vote of the Board of Trustees or by
vote of a majority of the outstanding voting securities of the Fund.
This Agreement will automatically terminate in the event of its
assignment (as that term is defined in the 1940 Act).
10. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement
may be changed, waived, discharged or terminated orally, but
only by a written instrument signed by the party against
which enforcement of the change, waiver, discharge or
termination is sought. No material amendment of this
Agreement shall be effective until approved by vote of the
holders of a majority of the Fund's outstanding voting
securities (as defined in the 1940 Act).
11. MISCELLANEOUS. The captions in this Agreement are included
for convenience of reference only and in no way define or
limit any of the provisions hereof or otherwise affect their
construction or effect. If any provision of this Agreement
shall be held or made invalid by a court decision, statute,
rule or otherwise, the remainder of the Agreement shall not
be affected thereby. This Agreement shall be binding and
shall insure to the benefit of the parties hereto and their
respective successors.
12. APPLICABLE LAW. This Agreement shall be construed in
accordance with, and governed by, the laws of the State of
North Carolina.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
ATTEST: THE TUSCARORA INVESTMENT TRUST
By: /s/ Margaret Landis By: /s/ George W. Brumley
---------------------- ----------------------
Title: Assistant Secretary Title: Chairman & CEO
------------------- --------------------
ATTEST: OAK VALUE CAPITAL MANAGEMENT, INC.
By: /s/ Margaret Landis By: George W. Brumley
----------------------- -----------------------
Title: Vice President Title: Chairman & CEO
-------------------- ---------------------
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CUSTODY AGREEMENT
This AGREEMENT, dated as of May 22, 1995, by and between THE TUSCARORA
INVESTMENT TRUST (the "Trust"), a business trust organized under the laws of the
Commonwealth of Massachusetts, acting with respect to the OAK VALUE FUND (the
"Fund"), a series of the Trust operated and administered by the Trust, and STAR
BANK, N.A., a national banking association (the "Custodian").
W I T N E S S E T H:
WHEREAS, the Trust desires that the Fund's Securities and cash be held
and administered by the Custodian pursuant to this Agreement; and
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Trust and the Custodian hereby agree as follows:
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<PAGE>
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
1.1 "Authorized Person" means any Officer or other person duly
authorized by resolution of the Board of Trustees to give Oral Instructions and
Written Instructions on behalf of the Fund and named in Exhibit A hereto or in
such resolutions of the Board of Trustees, certified by an Officer, as may be
received by the Custodian from time to time.
1.2 "Board of Trustees" shall mean the Trustees from time to time
serving under the Trust's Agreement and Declaration of Trust, as from time to
time amended.
1.3 "Book-Entry System" shall mean a federal book-entry system as
provided in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of
31 CFR Part 350, or in such book-entry regulations of federal agencies as are
substantially in the form of such Subpart O.
1.4 "Business Day" shall mean any day recognized as a
settlement day by The New York Stock Exchange, Inc. and any other
day for which the Trust computes the net asset value of Shares of
the Fund.
1.5 "NASD" shall mean The National Association of
Securities Dealers, Inc.
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<PAGE>
1.6 "Officer" shall mean the President, any Vice President,
the Secretary, any Assistant Secretary, the Treasurer, or any
Assistant Treasurer of the Trust.
1.7 "Oral Instructions" shall mean instructions orally transmitted to
and accepted by the Custodian because such instructions are: (i) reasonably
believed by the Custodian to have been given by an Authorized Person, (ii)
recorded and kept among the records of the Custodian made in the ordinary course
of business and (iii) orally confirmed by the Custodian. The Trust shall cause
all Oral Instructions to be confirmed by Written Instructions prior to the end
of the next Business Day. If such Written Instructions confirming Oral
Instructions are not received by the Custodian prior to a transaction, it shall
in no way affect the validity of the transaction or the authorization thereof by
the Trust. If Oral Instructions vary from the Written Instructions which purport
to confirm them, the Custodian shall notify the Trust of such variance but such
Oral Instructions will govern unless the Custodian has not yet acted.
1.8 "Fund Custody Account" shall mean the account in the name of the
Trust, which is provided for in Section 3.2 below.
1.9 "Proper Instructions" shall mean Oral Instructions or
Written Instructions. Proper Instructions may be continuing Written
Instructions when deemed appropriate by both parties.
1.10 "Securities Depository" shall mean The Depository Trust Company
and (provided that Custodian shall have received a copy
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<PAGE>
of a resolution of the Board of Trustees, certified by an Officer, specifically
approving the use of such clearing agency as a depository for the Fund) any
other clearing agency registered with the Securities and Exchange Commission
under Section 17A of the Securities and Exchange Act of 1934 as amended (the
"1934 Act"), which acts as a system for the central handling of Securities where
all Securities of any particular class or series of an issuer deposited within
the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of the Securities.
1.11 "Securities" shall include, without limitation, common and
preferred stocks, bonds, call options, put options, debentures, notes, bank
certificates of deposit, bankers' acceptances, mortgage-backed securities or
other obligations, and any certificates, receipts, warrants or other instruments
or documents representing rights to receive, purchase or subscribe for the same,
or evidencing or representing any other rights or interests therein, or any
similar property or assets that the Custodian has the facilities to clear and to
service.
1.12 "Shares" shall mean the units of beneficial interest issued by the
Trust on account of the Fund.
1.13 "Sub-Custodian" shall mean and include (i) any branch of a
"qualified U.S. bank," as that term is defined in Rule 17f-5 under the 1940 Act,
(ii) any "eligible foreign custodian," as that term is defined in Rule 17f-5
under the 1940 Act, approved by the Board of Trustees and having a contract with
the Custodian which contract has been approved by the Board of Trustees, and
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<PAGE>
(iii) any securities depository or clearing agency, incorporated or organized
under the laws of a country other than the United States, which operates the
central system for handling of securities or equivalent book-entries in that
country or a transnational system for the central handling of securities or
equivalent book-entries, which securities depository or clearing agency has been
approved by the Board of Trustees; provided, that the Custodian, or a
Sub-Custodian has entered into an agreement with such securities depository or
clearing agency.
1.14 "Written Instructions" shall mean (i) written communications
actually received by the Custodian and signed by an Authorized Person, or (ii)
communications by telex or any other such system from one or more persons
reasonably believed by the Custodian to be Authorized Persons, or (iii)
communications between electro-mechanical or electronic devices provided that
the use of such devices and the procedures for the use thereof shall have been
approved by resolutions of the Board of Trustees, a copy of which, certified by
an Officer, shall have been delivered to the Custodian.
ARTICLE II
APPOINTMENT OF CUSTODIAN
2.1 Appointment. The Trust hereby constitutes and appoints
the Custodian as custodian of all Securities and cash owned by or in the
possession of the Fund at any time during the period of this Agreement.
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<PAGE>
2.2 Acceptance. The Custodian hereby accepts appointment
as such custodian and agrees to perform the duties thereof as
hereinafter set forth.
2.3 Documents to be Furnished. The following documents, including any
amendments thereto, will be provided contemporaneously with the execution of the
Agreement to the Custodian by the Trust:
a. A copy of the Declaration of Trust of the Trust
certified by the Secretary;
b. A copy of the Bylaws of the Trust certified by the
Secretary;
c. A copy of the resolution of the Board of Trustees
of the Trust appointing the Custodian, certified
by the Secretary;
d. A copy of the then current Prospectus of the Fund;
and
e. A certification of the President and Secretary of
the Trust setting forth the names and signatures
of the current Officers of the Trust and other
Authorized Persons.
2.4 Notice of Appointment of Dividend and Transfer Agent.
The Trust agrees to notify the Custodian in writing of the
appointment, termination or change in appointment of any Dividend
and Transfer Agent of the Fund.
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<PAGE>
ARTICLE III
CUSTODY OF CASH AND SECURITIES
3.1 Segregation. All Securities and non-cash property held by the
Custodian for the account of the Fund (other than Securities maintained in a
Securities Depository or Book-Entry System) shall be physically segregated from
other Securities and non-cash property in the possession of the Custodian and
shall be identified as subject to this Agreement.
3.2 Fund Custody Account. The Custodian shall open and maintain in its
trust department a custody account in the name of the Trust coupled with the
name of the Fund, subject only to draft or order of the Custodian, in which the
Custodian shall enter and carry all Securities, cash and other assets of the
Fund which are delivered to it.
3.3 Appointment of Agents. (a) In its discretion, the Custodian may
appoint one or more Sub-Custodians to act as Securities Depositories or as
sub-custodians to hold Securities and cash of the Fund and to carry out such
other provisions of this Agreement as it may determine, provided, however, that
the appointment of any such agents and maintenance of any Securities and cash of
the Fund shall be at the Custodian's expense and shall not relieve the Custodian
of any of its obligations or liabilities under this Agreement.
(b) If, after the initial approval of Sub-Custodians by the Board of
Trustees in connection with this Agreement, the Custodian wishes to appoint
other Sub-Custodians to hold property of the Fund, it will so notify the Trust
and provide it with
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<PAGE>
information reasonably necessary to determine any such new Sub- Custodian's
eligibility under Rule 17f-5 under the 1940 Act, including a copy of the
proposed agreement with such Sub- Custodian. The Trust shall at the meeting of
the Board of Trustees next following receipt of such notice and information give
a written approval or disapproval of the proposed action.
(c) The Agreement between the Custodian and each Sub- Custodian acting
hereunder shall contain the required provisions set forth in Rule
17f-5(a)(1)(iii).
(d) If the Custodian intends to remove any Sub-Custodian previously
approved by the Board of Trustees, it shall so notify the Trust and move the
Securities and cash of the Fund deposited with such Sub-Custodian to another
Sub-Custodian previously approved by the Board of Trustees. The Custodian shall
promptly take such steps as may be required to remove any Sub-Custodian that has
ceased to meet the requirements of Rule 17f-5 under the 1940 Act.
(e) The Custodian hereby warrants to the Trust that in its opinion,
after due inquiry, the established procedures to be followed by each
Sub-Custodian in connection with the safekeeping of property of the Fund
pursuant to this Agreement afford protection for such property not materially
different from that afforded by the Custodian's established safekeeping
procedures with respect to similar property held by it (and its securities
depositories) in Cincinnati, Ohio.
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<PAGE>
(f) The Custodian shall oversee the maintenance of any Securities held
for the Fund by any Sub-Custodian. Any Securities held by a Sub-Custodian will
be subject only to the instructions of the Custodian or its agents; and any
Securities held in an eligible foreign securities depository for the account of
a Sub-Custodian will be subject only to the instructions of such Sub-Custodian.
In the event that a Sub-Custodian permits any of the Securities placed in its
care to be held in an eligible foreign securities depository, such Sub-Custodian
will be required by its agreement with the Custodian to identify on its books
such Securities as being held for the account of the Custodian as a custodian
for its customers.
3.4 Delivery of Assets to Custodian. The Trust shall deliver, or cause
to be delivered, to the Custodian all of the Fund's Securities, cash and other
assets, including (a) all payments of income, payments of principal and capital
distributions received by the Fund with respect to such Securities, cash or
other assets owned by the Fund at any time during the period of this Agreement,
and (b) all cash received by the Fund for the issuance, at any time during such
period, of Shares. The Custodian shall not be responsible for such Securities,
cash or other assets until actually received by it.
3.5 Securities Depositories and Book-Entry Systems. The
Custodian may deposit and/or maintain Securities of the Fund in a
Securities Depository or in a Book-Entry System, subject to the
following provisions:
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<PAGE>
(a) Prior to a deposit of Securities of the Fund in any
Securities Depository or Book-Entry System, the Trust
shall deliver to the Custodian a resolution of the
Board of Trustees, certified by an Officer, authorizing
and instructing the Custodian on an on-going basis to
deposit in such Securities Depository or Book-Entry
System all Securities eligible for deposit therein and
to make use of such Securities Depository or Book-Entry
System to the extent possible and practical in
connection with its performance hereunder, including,
without limitation, in connection with settlements of
purchases and sales of Securities, loans of Securities,
and deliveries and returns of collateral consisting of
Securities.
(b) Securities of the Fund kept in a Book-Entry System or
Securities Depository shall be kept in an account ("Depository
Account") of the Custodian in such Book- Entry System or
Securities Depository which includes only assets held by the
Custodian as a fiduciary, custodian or otherwise for
customers.
(c) The records of the Custodian with respect to Securities of the
Fund maintained in a Book-Entry System or Securities
Depository shall, by book-entry, identify such Securities as
belonging to the Fund.
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<PAGE>
(d) If Securities purchased by the Fund are to be held in a
Book-Entry System or Securities Depository, the
Custodian shall pay for such Securities upon (i)
receipt of advice from the Book-Entry System or
Securities Depository that such Securities have been
transferred to the Depository Account, and (ii) the
making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of
the Fund. If Securities sold by the Fund are held in a
Book-Entry System or Securities Depository, the
Custodian shall transfer such Securities upon (i)
receipt of advice from the Book-Entry System or
Securities Depository that payment for such Securities
has been transferred to the Depository Account, and
(ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the
account of the Fund.
(e) The Custodian shall provide the Trust with copies of any
report (obtained by the Custodian from a Book-Entry System or
Securities Depository in which Securities of the Fund are
kept) on the internal accounting controls and procedures for
safeguarding Securities deposited in such Book-Entry System or
Securities Depository.
(f) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the
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Trust for any loss or damage to the Fund resulting (i) from
the use of a Book-Entry System or Securities Depository by
reason of any negligence or willful misconduct on the part of
Custodian or any Sub- Custodian appointed pursuant to Section
3.3 above or any of its or their employees, or (ii) from
failure of Custodian or any such Sub-Custodian to enforce
effectively such rights as it may have against a Book- Entry
System or Securities Depository. At its election, the Trust
shall be subrogated to the rights of the Custodian with
respect to any claim against a Book-Entry System or Securities
Depository or any other person from any loss or damage to the
Fund arising from the use of such Book-Entry System or
Securities Depository, if and to the extent that the Fund has
not been made whole for any such loss or damage.
3.6 Disbursement of Moneys from Fund Custody Account. Upon
receipt of Proper Instructions, the Custodian shall disburse moneys from the
Fund Custody Account but only in the following cases:
(a) For the purchase of Securities for the Fund but only in
accordance with Section 4.1 of this Agreement and only (i) in
the case of Securities (other than options on Securities,
futures contracts and options on futures contracts), against
the delivery to the Custodian (or
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any Sub-Custodian appointed pursuant to Section 3.3 above) of
such Securities registered as provided in Section 3.9 below or
in proper form for transfer, or if the purchase of such
Securities is effected through a Book-Entry System or
Securities Depository, in accordance with the conditions set
forth in Section 3.5 above; (ii) in the case of options on
Securities, against delivery to the Custodian (or such Sub-
Custodian) of such receipts as are required by the customs
prevailing among dealers in such options; (iii) in the case of
futures contracts and options on futures contracts, against
delivery to the Custodian (or such Sub-Custodian) of evidence
of title thereto in favor of the Fund or any nominee referred
to in Section 3.9 below; and (iv) in the case of repurchase or
reverse repurchase agreements entered into between the Trust
and a bank which is a member of the Federal Reserve System or
between the Trust and a primary dealer in U.S. Government
securities, against delivery of the purchased Securities
either in certificate form or through an entry crediting the
Custodian's account at a Book-Entry System or Securities
Depository with such Securities;
(b) In connection with the conversion, exchange or surrender,
as set forth in Section 3.7(f) below, of Securities owned by
the Fund;
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(c) For the payment of any dividends or capital gain
distributions declared by the Fund;
(d) In payment of the redemption price of Shares as
provided in Section 5.1 below;
(e) For the payment of any expense or liability incurred by
the Fund, including but not limited to the following
payments for the account of the Fund: interest; taxes;
administration, investment advisory, accounting,
auditing, transfer agent, custodian, trustee and legal
fees; and other operating expenses of the Fund; in all
cases, whether or not such expenses are to be in whole
or in part capitalized or treated as deferred expenses;
(f) For transfer in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-
dealer registered under the 1934 Act and a member of
the NASD, relating to compliance with rules of The
Options Clearing Corporation and of any registered
national securities exchange (or of any similar
organization or organizations) regarding escrow or
other arrangements in connection with transactions by
the Fund;
(g) For transfer in accordance with the provision of any agreement
among the Trust, the Custodian, and a futures commission
merchant registered under the Commodity Exchange Act, relating
to compliance with the rules of
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the Commodity Futures Trading Commission and/or any contract
market (or any similar organization or organizations)
regarding account deposits in connection with transactions by
the Fund;
(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution
(including the Custodian), which deposit or account has a term
of one year or less; and
(i) For any other proper purpose, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of
the Board of Trustees, certified by an Officer, specifying the
amount and purpose of such payment, declaring such purpose to
be a proper corporate purpose, and naming the person or
persons to whom such payment is to be made.
3.7 Delivery of Securities from Fund Custody Account. Upon
receipt of Proper Instructions, the Custodian shall release and deliver
Securities from the Fund Custody Account but only in the following cases:
(a) Upon the sale of Securities for the account of the Fund
but only against receipt of payment therefor in cash,
by certified or cashiers check or bank credit;
(b) In the case of a sale effected through a Book-Entry
System or Securities Depository, in accordance with the
provisions of Section 3.5 above;
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(c) To an offeror's depository agent in connection with tender or
other similar offers for Securities of the Fund; provided
that, in any such case, the cash or other consideration is to
be delivered to the Custodian;
(d) To the issuer thereof or its agent (i) for transfer
into the name of the Fund, the Custodian or any Sub-
Custodian appointed pursuant to Section 3.3 above, or
of any nominee or nominees of any of the foregoing, or
(ii) for exchange for a different number of
certificates or other evidence representing the same
aggregate face amount or number of units; provided
that, in any such case, the new Securities are to be
delivered to the Custodian;
(e) To the broker selling Securities, for examination in
accordance with the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan or
merger, consolidation, recapitalization, reorganization
or readjustment of the issuer of such Securities, or
pursuant to provisions for conversion contained in such
Securities, or pursuant to any deposit agreement,
including surrender or receipt of underlying Securities
in connection with the issuance or cancellation of
depository receipts; provided that, in any such case,
the new Securities and cash, if any, are to be
delivered to the Custodian;
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(g) Upon receipt of payment therefor pursuant to any
repurchase or reverse repurchase agreement entered into
by the Fund;
(h) In the case of warrants, rights or similar Securities, upon
the exercise thereof, provided that, in any such case, the new
Securities and cash, if any, are to be delivered to the
Custodian;
(i) For delivery in connection with any loans of Securities of the
Fund, but only against receipt of such collateral as the Trust
shall have specified to the Custodian in Proper Instructions;
(j) For delivery as security in connection with any borrowings by
the Fund requiring a pledge of assets by the Trust, but only
against receipt by the Custodian of the amounts borrowed;
(k) Pursuant to any authorized plan of liquidation,
reorganization, merger, consolidation or
recapitalization of the Trust;
(l) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-dealer
registered under the 1934 Act and a member of the NASD,
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange
(or of any similar organization or organizations) regarding
escrow or
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other arrangements in connection with transactions by
the Fund;
(m) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian, and a futures
commission merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of
the Commodity Futures Trading Commission and/or any
contract market (or any similar organization or
organizations) regarding account deposits in connection
with transactions by the Fund; or
(n) For any other proper corporate purpose, but only upon
receipt, in addition to Proper Instructions, of a copy
of a resolution of the Board of Trustees, certified by
an Officer, specifying the Securities to be delivered,
setting forth the purpose for which such delivery is to
be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to
whom delivery of such Securities shall be made.
3.8 Actions Not Requiring Proper Instructions. Unless otherwise
instructed by the Trust, the Custodian shall with respect to all Securities
held for the Fund:
(a) Subject to Section 7.4 below, collect on a timely basis all
income and other payments to which the Fund is entitled either
by law or pursuant to custom in the securities business;
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(b) Present for payment and, subject to Section 7.4 below, collect
on a timely basis the amount payable upon all Securities which
may mature or be called, redeemed, or retired, or otherwise
become payable;
(c) Endorse for collection, in the name of the Fund,
checks, drafts and other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary
form for Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or
certificates of ownership under the federal income tax
laws or the laws or regulations of any other taxing
authority now or hereafter in effect, and prepare and
submit reports to the Internal Revenue Service ("IRS")
and to the Trust at such time, in such manner and
containing such information as is prescribed by the
IRS;
(f) Hold for the Fund, either directly or, with respect to
Securities held therein, through a Book-Entry System or
Securities Depository, all rights and similar securities
issued with respect to Securities of the Fund; and
(g) In general, and except as otherwise directed in Proper
Instructions, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with Securities and assets of the
Fund.
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3.9 Registration and Transfer of Securities. All Securities held for
the Fund that are issued or issuable only in bearer form shall be held by the
Custodian in that form, provided that any such Securities shall be held in a
Book-Entry System if eligible therefor. All other Securities held for the Fund
may be registered in the name of the Fund, the Custodian, or any Sub- Custodian
appointed pursuant to Section 3.3 above, or in the name of any nominee of any of
them, or in the name of a Book-Entry System, Securities Depository or any
nominee of either thereof. The Trust shall furnish to the Custodian appropriate
instruments to enable the Custodian to hold or deliver in proper form for
transfer, or to register in the name of any of the nominees hereinabove referred
to or in the name of a Book-Entry System or Securities Depository, any
Securities registered in the name of the Fund.
3.10 Records. (a) The Custodian shall maintain, by Fund, complete and
accurate records with respect to Securities, cash or other property held for the
Fund, including (i) journals or other records of original entry containing an
itemized daily record in detail of all receipts and deliveries of Securities and
all receipts and disbursements of cash; (ii) ledgers (or other records)
reflecting (A) Securities in transfer, (B) Securities in physical possession,
(C) monies and Securities borrowed and monies and Securities loaned (together
with a record of the collateral therefor and substitutions of such collateral),
(D)
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dividends and interest received, and (E) dividends receivable and interest
receivable; and (iii) canceled checks and bank records related thereto. The
Custodian shall keep such other books and records of the Fund as the Trust shall
reasonably request, or as may be required by the 1940 Act, including, but not
limited to, Section 31 of the 1940 Act and Rule 31a-2 promulgated thereunder.
(b) All such books and records maintained by the Custodian shall (i) be
maintained in a form acceptable to the Trust and in compliance with rules and
regulations of the Securities and Exchange Commission, (ii) be the property of
the Trust and at all times during the regular business hours of the Custodian be
made available upon request for inspection by duly authorized officers,
employees or agents of the Trust and employees or agents of the Securities and
Exchange Commission, and (iii) if required to be maintained by Rule 31a-1 under
the 1940 Act, be preserved for the periods prescribed in Rule 31a-2 under the
1940 Act.
3.11 Fund Reports by Custodian. The Custodian shall furnish the Trust
with a daily activity statement and a summary of all transfers to or from the
Fund Custody Account on the day following such transfers. At least monthly and
from time to time, the Custodian shall furnish the Trust with a detailed
statement of the Securities and moneys held by the Custodian and the
Sub-Custodians for the Fund under this Agreement.
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3.12 Other Reports by Custodian. The Custodian shall provide the Trust
with such reports, as the Trust may reasonably request from time to time, on the
internal accounting controls and procedures for safeguarding Securities, which
are employed by the Custodian or any Sub-Custodian appointed pursuant to Section
3.3 above.
3.13 Proxies and Other Materials. The Custodian shall cause all proxies
relating to Securities which are not registered in the name of the Fund, to be
promptly executed by the registered holder of such Securities, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Trust such proxies, all proxy soliciting materials and
all notices relating to such Securities.
3.14 Information on Corporate Actions. The Custodian shall promptly
deliver to the Trust all information received by the Custodian and pertaining to
Securities being held by the Fund with respect to optional tender or exchange
offers, calls for redemption or purchase, or expiration of rights as described
in the Standards of Service Guide attached as Exhibit B. If the Trust desires to
take action with respect to any tender offer, exchange offer or other similar
transaction, the Trust shall notify the Custodian at least five Business Days
prior to the date on which the Custodian is to take such action. The Trust will
provide or cause to be provided to the Custodian all relevant information for
any Security which has unique put/option
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provisions at least five Business Days prior to the beginning date of the tender
period.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
4.1 Purchase of Securities. Promptly upon each purchase of Securities
for the Fund, Written Instructions shall be delivered to the Custodian,
specifying (a) the name of the issuer or writer of such Securities, and the
title or other description thereof, (b) the number of shares, principal amount
(and accrued interest, if any) or other units purchased, (c) the date of
purchase and settlement, (d) the purchase price per unit, (e) the total amount
payable upon such purchase, and (f) the name of the person to whom such amount
is payable. The Custodian shall upon receipt of such Securities purchased by the
Fund pay out of the moneys held for the account of the Fund the total amount
specified in such Written Instructions to the person named therein. The
Custodian shall not be under any obligation to pay out moneys to cover the cost
of a purchase of Securities for the Fund, if in the Fund Custody Account there
is insufficient cash available to the Fund for which such purchase was made.
4.2 Liability for Payment in Advance of Receipt of
Securities Purchased. In any and every case where payment for the purchase of
Securities for the Fund is made by the Custodian in advance of receipt of the
Securities purchased but in the
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absence of specified Written Instructions to so pay in advance, the Custodian
shall be liable to the Fund for such Securities to the same extent as if the
Securities had been received by the Custodian.
4.3 Sale of Securities. Promptly upon each sale of Securities by the
Fund, Written Instructions shall be delivered to the Custodian, specifying (a)
the name of the issuer or writer of such Securities, and the title or other
description thereof, (b) the number of shares, principal amount (and accrued
interest, if any), or other units sold, (c) the date of sale and settlement, (d)
the sale price per unit, (e) the total amount payable upon such sale, and (f)
the person to whom such Securities are to be delivered. Upon receipt of the
total amount payable to the Fund as specified in such Written Instructions, the
Custodian shall deliver such Securities to the person specified in such Written
Instructions. Subject to the foregoing, the Custodian may accept payment in such
form as shall be satisfactory to it, and may deliver Securities and arrange for
payment in accordance with the customs prevailing among dealers in Securities.
4.4 Delivery of Securities Sold. Notwithstanding Section 4.3 above or
any other provision of this Agreement, the Custodian, when instructed to deliver
Securities against payment, shall be entitled, if in accordance with generally
accepted market practice, to deliver such Securities prior to actual
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receipt of final payment therefor. In any such case, the Fund shall bear the
risk that final payment for such Securities may not be made or that such
Securities may be returned or otherwise held or disposed of by or through the
person to whom they were delivered, and the Custodian shall have no liability
for any for the foregoing.
4.5 Payment for Securities Sold, etc. In its sole discretion and from
time to time, the Custodian may credit the Fund Custody Account, prior to actual
receipt of final payment thereof, with (i) proceeds from the sale of Securities
which it has been instructed to deliver against payment, (ii) proceeds from the
redemption of Securities or other assets of the Fund, and (iii) income from
cash, Securities or other assets of the Fund. Any such credit shall be
conditional upon actual receipt by Custodian of final payment and may be
reversed if final payment is not actually received in full. The Custodian may,
in its sole discretion and from time to time, permit the Fund to use funds so
credited to the Fund Custody Account in anticipation of actual receipt of final
payment. Any such funds shall be repayable immediately upon demand made by the
Custodian at any time prior to the actual receipt of all final payments in
anticipation of which funds were credited to the Fund Custody Account.
4.6 Advances by Custodian for Settlement. The Custodian
may, in its sole discretion and from time to time, advance funds
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to the Trust to facilitate the settlement of the Fund's transactions in the Fund
Custody Account. Any such advance shall be repayable immediately upon demand
made by Custodian.
ARTICLE V
REDEMPTION OF FUND SHARES
5.1 Transfer of Funds. From such funds as may be available for the
purpose in the Fund Custody Account, and upon receipt of Proper Instructions
specifying that the funds are required to redeem Shares of the Fund, the
Custodian shall wire each amount specified in such Proper Instructions to or
through such bank as the Trust may designate with respect to such amount in such
Proper Instructions.
5.2 No Duty Regarding Paying Banks. The Custodian shall not be under
any obligation to effect payment or distribution by any bank designated in
Proper Instructions given pursuant to Section 5.1 above of any amount paid by
the Custodian to such bank in accordance with such Proper Instructions.
ARTICLE VI
SEGREGATED ACCOUNTS
Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of the Fund, into
which account or accounts may be transferred cash and/or Securities, including
Securities maintained in a Depository Account,
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(a) in accordance with the provisions of any agreement
among the Trust, the Custodian and a broker-dealer
registered under the 1934 Act and a member of the NASD
(or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance
with the rules of The Options Clearing Corporation and
of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or
organizations, regarding escrow or other arrangements
in connection with transactions by the Fund,
(b) for purposes of segregating cash or Securities in connection
with securities options purchased or written by the Fund or in
connection with financial futures contracts (or options
thereon) purchased or sold by the Fund,
(c) which constitute collateral for loans of Securities
made by the Fund,
(d) for purposes of compliance by the Fund with requirements under
the 1940 Act for the maintenance of segregated accounts by
registered investment companies in connection with reverse
repurchase agreements and when-issued, delayed delivery and
firm commitment transactions, and
(e) for other proper corporate purposes, but only upon
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receipt of, in addition to Proper Instructions, a certified
copy of a resolution of the Board of Trustees, certified by an
Officer, setting forth the purpose or purposes of such
segregated account and declaring such purposes to be proper
corporate purposes.
ARTICLE VII
CONCERNING THE CUSTODIAN
7.1 Standard of Care. The Custodian shall be held to the exercise of
reasonable care in carrying out its obligations under this Agreement, and shall
be without liability to the Trust or the Fund for any loss, damage, cost,
expense (including attorneys' fees and disbursements), liability or claim unless
such loss, damage, cost, expense, liability or claim arises from negligence, bad
faith or willful misconduct on its part or on the part of any Sub-Custodian
appointed pursuant to Section 3.3 above. The Custodian shall be entitled to rely
on and may act upon advice of counsel on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such advice.
The Custodian shall promptly notify the Trust of any action taken or omitted by
the Custodian pursuant to advice of counsel. The Custodian shall not be under
any obligation at any time to ascertain whether the Trust or the Fund is in
compliance with the 1940 Act, the regulations thereunder, the provisions of the
Trust's charter documents or by-laws, or its investment objectives and policies
as then in effect.
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7.2 Actual Collection Required. The Custodian shall not be liable for,
or considered to be the custodian of, any cash belonging to the Fund or any
money represented by a check, draft or other instrument for the payment of
money, until the Custodian or its agents actually receive such cash or collect
on such instrument.
7.3 No Responsibility for Title, etc. So long as and to the extent that
it is in the exercise of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or evidence of title
thereto received or delivered by it pursuant to this Agreement.
7.4 Limitation on Duty to Collect. Custodian shall not be required to
enforce collection, by legal means or otherwise, of any money or property due
and payable with respect to Securities held for the Fund if such Securities are
in default or payment is not made after due demand or presentation.
7.5 Reliance Upon Documents and Instructions. The Custodian shall be
entitled to rely upon any certificate, notice or other instrument in writing
received by it and reasonably believed by it to be genuine. The Custodian shall
be entitled to rely upon any Oral Instructions and any Written Instructions
actually received by it pursuant to this Agreement.
7.6 Express Duties Only. The Custodian shall have no duties or
obligations whatsoever except such duties and obligations as are specifically
set forth in this Agreement, and
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no covenant or obligation shall be implied in this Agreement against
the Custodian.
7.7 Co-operation. The Custodian shall cooperate with and supply
necessary information to the entity or entities appointed by the Trust to keep
the books of account of the Fund and/or compute the value of the assets of the
Fund. The Custodian shall take all such reasonable actions as the Trust may from
time to time request to enable the Trust to obtain, from year to year, favorable
opinions from the Trust's independent accountants with respect to the
Custodian's activities hereunder in connection with (a) the preparation of the
Trust's reports on Form N-1A and Form N-SAR and any other reports required by
the Securities and Exchange Commission, and (b) the fulfillment by the Trust of
any other requirements of the Securities and Exchange Commission.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Trust. The Trust shall indemnify and hold
harmless the Custodian and any Sub-Custodian appointed pursuant to Section 3.3
above, and any nominee of the Custodian or of such Sub-Custodian, from and
against any loss, damage, cost, expense (including attorneys' fees and
disbursements), liability (including, without limitation, liability arising
under the Securities Act of 1933, the 1934 Act, the 1940 Act, and any state or
foreign securities and/or banking laws) or claim arising
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directly or indirectly (a) from the fact that Securities are registered in the
name of any such nominee, or (b) from any action or inaction by the Custodian or
such Sub-Custodian (i) at the request or direction of or in reliance on the
advice of the Trust, or (ii) upon Proper Instructions, or (c) generally, from
the performance of its obligations under this Agreement or any sub-custody
agreement with a Sub-Custodian appointed pursuant to Section 3.3 above, provided
that neither the Custodian nor any such Sub-Custodian shall be indemnified and
held harmless from and against any such loss, damage, cost, expense, liability
or claim arising from the Custodian's or such Sub-Custodian's negligence, bad
faith or willful misconduct.
8.2 Indemnification by Custodian. The Custodian shall indemnify and
hold harmless the Trust from and against any loss, damage, cost, expense
(including attorneys' fees and disbursements), liability (including without
limitation, liability arising under the Securities Act of 1933, the 1934 Act,
the 1940 Act, and any state or foreign securities and/or banking laws) or claim
arising from the negligence, bad faith or willful misconduct of the Custodian or
any Sub-Custodian appointed pursuant to Section 3.3 above, or any nominee of the
Custodian or of such Sub-Custodian.
8.3 Indemnity to be Provided. If the Trust requests the
Custodian to take any action with respect to Securities, which may, in the
opinion of the Custodian, result in the Custodian or
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its nominee becoming liable for the payment of money or incurring liability of
some other form, the Custodian shall not be required to take such action until
the Trust shall have provided indemnity therefor to the Custodian in an amount
and form satisfactory to the Custodian.
8.4 Security. If the Custodian advances cash or Securities to the Fund
for any purpose, either at the Trust's request or as otherwise contemplated in
this Agreement, or in the event that the Custodian or its nominee incurs, in
connection with its performance under this Agreement, any loss, damage, cost,
expense (including attorneys' fees and disbursements), liability or claim
(except such as may arise from its or its nominee's negligence, bad faith or
willful misconduct), then, in any such event, any property at any time held for
the account of the Fund shall be security therefor, and should the Fund fail
promptly to repay or indemnify the Custodian, the Custodian shall be entitled to
utilize available cash of such Fund and to dispose of other assets of such Fund
to the extent necessary to obtain reimbursement or indemnification.
ARTICLE IX
FORCE MAJEURE
Neither the Custodian nor the Trust shall be liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by
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circumstances beyond its reasonable control, including, without limitation, acts
of God; earthquakes; fires; floods; wars; civil or military disturbances;
sabotage; strikes; epidemics; riots; power failures; computer failure and any
such circumstances beyond its reasonable control as may cause interruption, loss
or malfunction of utility, transportation, computer (hardware or software) or
telephone communication service; accidents; labor disputes; acts of civil or
military authority; governmental actions; or inability to obtain labor,
material, equipment or transportation; provided, however, that the Custodian in
the event of a failure or delay (i) shall not discriminate against the Fund in
favor of any other customer of the Custodian in making computer time and
personnel available to input or process the transactions contemplated by this
Agreement and (ii) shall use its best efforts to ameliorate the effects of any
such failure or delay.
ARTICLE X
EFFECTIVE PERIOD; TERMINATION
10.1 Effective Period. This Agreement shall become effective as of
its execution and shall continue in full force and effect until terminated as
hereinafter provided.
10.2 Termination. Either party hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than sixty (60) days after the date of the
giving of such notice. If a successor custodian shall have been appointed by the
Board
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of Trustees, the Custodian shall, upon receipt of a notice of acceptance by the
successor custodian, on such specified date of termination (a) deliver directly
to the successor custodian all Securities (other than Securities held in a
Book-Entry System or Securities Depository) and cash then owned by the Fund and
held by the Custodian as custodian, and (b) transfer any Securities held in a
Book-Entry System or Securities Depository to an account of or for the benefit
of the Fund at the successor custodian, provided that the Trust shall have paid
to the Custodian all fees, expenses and other amounts to the payment or
reimbursement of which it shall then be entitled. Upon such delivery and
transfer, the Custodian shall be relieved of all obligations under this
Agreement. The Trust may at any time immediately terminate this Agreement in the
event of the appointment of a conservator or receiver for the Custodian by
regulatory authorities or upon the happening of a like event at the direction of
an appropriate regulatory agency or court of competent jurisdiction.
10.3 Failure to Appoint Successor Custodian. If a successor custodian
is not designated by the Trust on or before the date of termination specified
pursuant to Section 10.1 above, then the Custodian shall have the right to
deliver to a bank or trust company of its own selection, which (a) is a "bank"
as defined in the 1940 Act and (b) has aggregate capital, surplus and undivided
profits as shown on its then most recent published
- 34 -
<PAGE>
report of not less than $25 million, all Securities, cash and other property
held by Custodian under this Agreement and to transfer to an account of or for
the Fund at such bank or trust company all Securities of the Fund held in a
Book-Entry System or Securities Depository. Upon such delivery and transfer,
such bank or trust company shall be the successor custodian under this Agreement
and the Custodian shall be relieved of all obligations under this Agreement.
ARTICLE XI
COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to compensation as agreed upon from
time to time by the Trust and the Custodian. The fees and other charges in
effect on the date hereof and applicable to the Fund are set forth in Exhibit C
attached hereto.
ARTICLE XII
LIMITATION OF LIABILITY
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust personally, but shall bind only the trust
property of the Trust as provided in the Trust's Agreement and Declaration of
Trust, as from time to time amended. The execution and delivery
- 35 -
<PAGE>
of this Agreement have been authorized by the Trustees, and this Agreement has
been signed and delivered by an authorized officer of the Trust, acting as such,
and neither such authorization by the Trustees nor such execution and delivery
by such officer shall be deemed to have been made by any of them individually or
to impose any liability on any of them personally, but shall bind only the trust
property of the Trust as provided in the above-mentioned Agreement and
Declaration of Trust.
ARTICLE XIII
NOTICES
Unless otherwise specified herein, all demands, notices, instructions,
and other communications to be given hereunder shall be in writing and shall be
sent or delivered to the recipient at the address set forth after its name
hereinbelow:
To the Trust:
The Tuscarora Investment Trust
Oak Value Fund
312 Walnut Street, 21st Floor
Cincinnati, OH 45202
Telephone: (513) 629-2000
Facsimile: (513) 629-2041
To Custodian:
Star Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
Attention: Mutual Fund-Operations
Telephone: (513) 632-5536
Facsimile: (513) 632-4448
or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XIII. Writing shall include
transmissions by or through teletype,
- 36 -
<PAGE>
facsimile, central processing unit connection, on-line terminal
and magnetic tape.
ARTICLE XIV
MISCELLANEOUS
14.1 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Ohio.
14.2 References to Custodian. The Trust shall not circulate any printed
matter which contains any reference to Custodian without the prior written
approval of Custodian, excepting printed matter contained in the prospectus or
statement of additional information for the Fund and such other printed matter
as merely identifies Custodian as custodian for the Fund. The Trust shall submit
printed matter requiring approval to Custodian in draft form, allowing
sufficient time for review by Custodian and its counsel prior to any deadline
for printing.
14.3 No Waiver. No failure by either party hereto to exercise, and no
delay by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or in equity.
14.4 Amendments. This Agreement cannot be changed orally
and no amendment to this Agreement shall be effective unless
- 37 -
<PAGE>
videnced by an instrument in writing executed by the parties hereto.
14.5 Counterparts. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
14.6 Severability. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.
14.7 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that this Agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.
14.8 Headings. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
- 38 -
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered in its name and on its behalf by its
representatives thereunto duly authorized, all as of the day and year first
above written.
ATTEST: THE TUSCARORA INVESTMENT TRUST
/s/ John F. Splain By: /s/ George W. Brumley III
- --------------------------- ----------------------------
Secretary President
ATTEST: STAR BANK, N.A.
______________________________ By: /s/ Marsha A. Croxton, VP
-------------------------------
- 39 -
<PAGE>
EXHIBIT A
AUTHORIZED PERSONS
Set forth below are the names and specimen signatures of the persons
authorized by the Trust to administer the Fund Custody Account.
Name Signature
George W. Brumley III /s/ George W. Brumley III
______________________________
/s/ David R. Carr, Jr.
David R. Carr, Jr. ______________________________
/s/ John F. Splain
John F. Splain ______________________________
/s/ Robert G. Dorsey
Robert G. Dorsey _____________________________
/s/ Mark J. Seger
Mark J. Seger ______________________________
/s/ M. Kathleen Leugers
M. Kathleen Leugers ______________________________
- 40 -
<PAGE>
EXHIBIT B
STAR BANK, N.A.
STANDARDS OF SERVICE GUIDE
Star Bank, N.A. is committed to providing superior quality service to
all customers and their agents at all times. We have compiled this guide as a
tool for our clients to determine our standards for the processing of security
settlements, payment collection, and capital change transactions. Deadlines
recited in this guide represent the times required for Star Bank to guarantee
processing. Failure to meet these deadlines will result in settlement at our
client's risk. In all cases, Star Bank will make every effort to complete all
processing on a timely basis.
Star Bank is a direct participant of the Depository Trust Company, a
direct member of the Federal Reserve Bank of Cleveland, and utilizes the Bankers
Trust Company as its agent for ineligible and foreign securities.
For corporate reorganizations, Star Bank utilizes SEI's Reorg Source,
Financial Information, Inc., XCITEK, DTC Important Notices, and the Wall Street
Journal.
For bond calls and mandatory puts, Star Bank utilizes SEI's Bond
Source, Kenny Information Systems, Standard & Poor's Corporation, and DTC
Important Notices. Star Bank will not notify clients of optional put
opportunities.
Any securities delivered free to Star Bank or its agents must be
received three (3) business days prior to any payment or settlement in order for
the Star Bank standards of service to apply.
Should you have any questions regarding the information contained in
this guide, please feel free to contact your account representative.
The information contained in this Standards of Service Guide
is subject to change. Should any changes be made Star Bank
will provide you with an updated copy of its Standards of
Service Guide.
<PAGE>
STAR BANK SECURITY SETTLEMENT STANDARDS
<TABLE>
<C> <C> <C>
TRANSACTION TYPE INSTRUCTIONS DEADLINES* DELIVERY INSTRUCTIONS
DTC - Clearing House Funds 11:00 A.M. on Settlement Date DTC Participant #2219
For Account #________
DTC - Same Day Funds Settlement 12:30 P.M. on Settlement Date DTC Participant #2219
For Account # _______
Federal Reserve Book Entry 1:00 P.M. on Settlement Date Federal Reserve Bank of
Cinti/Trust for Star Bank, N.A.
ABA# 042000013
For Account # ________
Federal Reserve Book Entry 1:00 P.M. on Settlement Date Federal Reserve Bank of
(Repurchase Agreement Cinti/Spec for Star Bank, N.A.
Collateral Only) ABA #04200013
For Account #_________
PTC Securities 12:00 P.M. on Settlement Date PTC For Account BTRST/CUST
(GNMA Book Entry) (for Deliveries by 5:00 P.M. Sub Account: Star Bank, N.A. #090334
on Settlement Date minus 1)
Physical Securities 10:00 A.M. EST on Settlement Date Bankers Trust Company
(for Deliveries, by 4:00 P.M. on 16 Wall Street 4th Floor, Window 43
Settlement Date minus 1) for Star Bank Account #090334
CEDEL/EURO-CLEAR 4:00 P.M. on Settlement Date minus 3 Eurclear Via Cedel Bridge
In favor of Bankers Trust Comp
Cedel 53355
For Star Bank Account #501526354
Cash Wire Transfer 3:00 P.M. Star Bank, N.A. Cinti/Trust ABA#042000013
Credit Account #9901877
Further Credit to ______________
Account # ________________
</TABLE>
*All times listed are Cincinnati time.
<PAGE>
STAR BANK PAYMENT STANDARDS
<TABLE>
<C> <C> <C>
SECURITY TYPE INCOME PRINCIPAL
Equities Payable Date + 1
Municipal Bonds* Payable Date Payable Date
Corporate Bonds* Payable Date + 1 Payable Date
Federal Reserve Bank
Book Entry* Payable Date Payable Date
CMOs*
DTC Payable Date + 1 Payable Date + 1
Bankers Trust Payable Date + 2 Payable Date + 2
SBA Loan Certificates When Received When Received
Unit Investment Trust Payable Date + 1 Payable Date + 1
Certificates*
Certificates of Deposit* Payable Date + 1 Payable Date + 1
Limited Partnerships When Received When Received
Foreign Securities When Received When Received
*Variable Rate Securities
Federal Reserve Bank
Book Entry Payable Date Payable Date
DTC Payable Date + 1 Payable Date + 1
Bankers Trust Payable Date + 2 Payable Date + 2
</TABLE>
NOTE: If a payable date falls on a weekend or bank holiday, payment will be
made on the immediately following business day.
<PAGE>
STAR BANK CORPORATE REORGANIZATION STANDARDS
<TABLE>
<C> <C> <C> <C>
TYPE OF ACTION NOTIFICATION TO CLIENT DEADLINE FOR CLIENT INSTRUCTIONS TRANSACTION
TO STAR BANK POSTING
Rights, Warrants, Later of 10 business days prior 5 business days prior to expiration Upon receipt
and Optional Mergers to expiration or receipt of notice
Mandatory Puts with Later of 10 business days prior 5 business days prior to expiration Upon receipt
Option to Retain to expiration or receipt of notice
Class Actions 10 business days prior to 5 business days prior to expiration Upon receipt
expiration date
Voluntary Tenders, Later of 10 business days prior 5 business days prior to expiration Upon receipt
Exchanges, to expiration or receipt of notice
and Conversions
Mandatory Puts, At posting of funds or securities None Upon receipt
Defaults, Liquidations, received
Bankruptcies, Stock Splits,
Mandatory Exchanges
Full and Partial Calls Later of 10 business days prior None Upon receipt
to expiration or receipt of notice
</TABLE>
NOTE: Fractional shares/par amounts resulting from any of the above will be
sold.
<PAGE>
APPENDIX C
STAR BANK, N.A.
DOMESTIC CUSTODY FEE SCHEDULE
Star Bank, N.A., as Custodian, will receive monthly compensation for services
according to the terms of the following Schedule:
I. PORTFOLIO TRANSACTION FEES:
(a) For each repurchase agreement transaction $7.00
(b) For each portfolio transaction processed
through DTC or Federal Reserve $9.00
(c) For each portfolio transaction processed
through our New York custodian $25.00
(d) For each GNMA/Amortized Security Purchase $16.00
(e) For each GNMA Prin/Int Paydown, GNMA Sales $ 6.00
(f) For each option/future contract written,
exercised or expired $25.00
(g) For each Disbursement (Fund expenses only) $ 5.00
A transaction is a purchase/sale of a security, free receipt/free delivery
(excludes initial conversion), maturity, tender or exchange:
II. MARKET VALUE FEE
Based upon an annual rate of: Million
.0001 (1.0 Basis Points) on First $20
.00005 (.5 Basis Points) on Next $50
.000075 (.75 Basis Points) on Balance
III. MONTHLY MINIMUM FEE-PER FUND $200.00
IV. OUT-OF-POCKET EXPENSES
The only out-of-pocket expenses charged to your account will be
shipping fees or transfer fees.
V. IRA PROCESSING
Per Shareholder/year $12.00
If Trust Financial Services provides a cash management administrative service to
keep your income and principal cash balances fully invested, for which we can
charge up to .0036 of the average daily cash balance. The yield for your cash
management fund shown on your statement is net of this fee.
<PAGE>
STAR BANK, N.A.
GLOBAL CUSTODY
FEE SCHEDULE
1. ANNUAL CHARGE ON ASSETS
-Canada 7 Basis Points
-Mexico 12 Basis Points
2. TRADES - PURCHASE/SALE TRANSACTIONS $60.00 each
NOTES:
1. Fees are billed monthly.
2. Fees for the receipt of positions relating to the initial asset
transition will be waived.
3. Cash movements relating to third party FX trades will be assessed
at $15 per U.S. wire movement and $50.00 per non U.S. wire
movement. For FX trades concluded with BTCo., this charge will be
waived.
4. Fees for investment in countries not listed will be negotiated
separately.
5. Fees for stamp duty and registration, charged by local authorities,
not included as part of trade cost will be billed separately.
Effective 4/95
<PAGE>
STAR BANK, N.A.
CASH MANAGEMENT FEE SCHEDULE
SERVICES UNIT COST MONTHLY COST
BUSINESS CHECKING FEES
D.D.A. Account Maintenance $12.00
Deposits .37
Deposited Items .10
Checks Paid .155
Deposited Items Returned 5.00
International Returned Items 10.00
NSF Returned Check 20.00
Stop Payments 20.00
CASH MANAGEMENT FEES
Account Reconcilement:
DEBIT RECONCILEMENT SERVICES:
Set-up Fee: $100.00 for Full Reconciliation
$25.00 all other services
Fine Sort .025 per debit ($25.00 Minimum)
Paid .040 per debit ($40.00 Minimum)
Full .050 per debit ($50.00 Minimum)
CREDIT RECONCILEMENT SERVICES:
------------------------------
Deposit .040 per credit ($50.00 Minimum)
Balance Reporting - P.C. Access 50.00 1st Acct
35.00 each add
ACH Transaction .08
ACH Maintenance 40.00
ACH Additions, Deletions,
Changes 3.50
Controlled Disbursement 110.00 1st Acct
25.00 each add
Data Transmission per application 110.00
Data Capture (varies depending upon what
information needs to be
captured)
Drafts Cleared .179
Lockbox Maintenance 55.00
Lockbox items Processed
(with copy of check) .30
(without copy of check) .24
<PAGE>
STAR BANK, N.A.
CASH MANAGEMENT FEE SCHEDULE CONTINUED
SERVICES UNIT COST MONTHLY COST
-------- --------- ------------
Wires Incoming
Domestic: 10.00
International: 10.00
Wires Outgoing
Domestic:
Repetitive 10.00
Non Repetitive 10.00
International:
Repetitive 35.00
Non Repetitive 40.00
PC - Initiated Wires:
Domestic:
Repetitive 9.00
Non Repetitive 9.00
International:
Repetitive 25.00
Non Repetitive 25.00
EARNINGS CREDITS
On a monthly basis any earnings credits generated from univested custody
balances will be applied against any cash management service fees generated.
Earnings credits are based on the average yield on the 91 day U.S. Treasury Bill
for the preceding thirteen weeks less the 10% reserve.
UNCOLLECTED CHARGE
Star Bank assesses a penalty of prime rate plus 4% on any combined relationship
with average uncollected balances for the month.
ADMINISTRATION AGREEMENT
AGREEMENT dated as of May 23, 1995 between The Tuscarora Investment
Trust (the "Trust"), a Massachusetts business trust, and MGF Service Corp.
("MGF"), an Ohio corporation.
WHEREAS, the Trust is an investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust wishes to employ the services of MGF to
serve as its administrative agent; and
WHEREAS, MGF wishes to provide such services under the
conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust and MGF agree as follows:
1. APPOINTMENT.
-----------
The Trust hereby appoints and employs MGF as agent to perform
those services described in this Agreement for the Trust. MGF shall act under
such appointment and perform the obligations thereof upon the terms and
conditions hereinafter set forth.
2. DOCUMENTATION.
-------------
The Trust will furnish from time to time the following
documents:
A. Each resolution of the Board of Trustees of the Trust
authorizing the original issue of its shares;
B. Each Registration Statement filed with the Securities
and Exchange Commission (the "SEC") and amendments
thereof;
C. A certified copy of each amendment to the Agreement and
Declaration of Trust and the By-Laws of the Trust;
D. Certified copies of each resolution of the Board of
Trustees authorizing officers to give instructions to
MGF;
E. Specimens of all new forms of share certificates
accompanied by Board of Trustees' resolutions approving
such forms;
- 1 -
<PAGE>
F. Such other certificates, documents or opinions which
MGF may, in its discretion, deem necessary or
appropriate in the proper performance of its duties;
G. Copies of all Underwriting and Dealer Agreements in
effect;
H. Copies of all Investment Advisory Agreements in effect;
and
I. Copies of all documents relating to special investment
or withdrawal plans which are offered or may be offered
in the future by the Trust and for which MGF is to act
as plan agent.
3. TRUST ADMINISTRATION.
--------------------
Subject to the direction and control of the Trustees of the
Trust, MGF shall supervise the Trust's business affairs not otherwise supervised
by other agents of the Trust. To the extent not otherwise the primary
responsibility of, or provided by, other agents of the Trust, MGF shall supply
(i) office facilities, (ii) internal auditing and regulatory services, and (iii)
executive and administrative services. MGF shall coordinate the preparation of
(i) reports to shareholders of the Trust, (ii) reports to and filings with the
SEC and state securities authorities including preliminary and definitive proxy
materials, post-effective amendments to the Trust's registration statement, and
the Trust's Form N-SAR, and (iii) necessary materials for Board of Trustees'
meetings unless prepared by other parties under agreement with the Trust. MGF
shall also supervise the preparation of all federal, state and local tax returns
and reports of the Trust required by applicable law. MGF shall provide personnel
to serve as officers of the Trust if so elected by the Board of Trustees;
provided, however, that the Trust shall reimburse MGF for the reasonable
out-of-pocket expenses incurred by such personnel in attending Board of
Trustees' meetings and shareholders' meetings of the Trust.
4. RECORDKEEPING AND OTHER INFORMATION.
-----------------------------------
MGF shall create and maintain all records required by
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act and the rules thereunder, as the same
may be amended from time to time, pertaining to the various functions performed
by it and not otherwise created and maintained by another party pursuant to
contract with the Trust. All such records shall be the property of the Trust at
all times and shall be available for inspection and use by the Trust. Where
applicable, such records shall be maintained by MGF for the periods and in the
places required by Rule 31a-2 under the 1940 Act. The retention of such records
shall be at the expense of the Trust. MGF shall make available during regular
business hours all records and other data created
- 2 -
<PAGE>
and maintained pursuant to this Agreement for reasonable audit and inspection by
the Trust, any person retained by the Trust, or any regulatory agency having
authority over the Trust.
5. FURTHER ACTIONS.
---------------
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof.
6. COMPENSATION.
-------------
For the performance of MGF's obligations under this Agreement,
each series of the Trust shall pay MGF, on the first business day following the
end of each month, a monthly fee at the annual rate of .2% of such series'
average daily net assets up to $25 million; .175% of such assets from $25 to $50
million; and .15% of such assets in excess of $50 million. MGF shall not be
required to reimburse the Trust or the Trust's investment adviser for (or have
deducted from its fees) any expenses in excess of expense limitations imposed by
certain state securities commissions having jurisdiction over the Trust.
7. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
--------------------------------------------------
The parties hereto acknowledge and agree that nothing
contained herein shall be construed to require MGF to perform any services for
the Trust which services could cause MGF to be deemed an "investment adviser" of
the Trust within the meaning of Section 2(a)(20) of the 1940 Act or to supersede
or contravene the Trust's prospectus or statement of additional information or
any provisions of the 1940 Act and the rules thereunder. Except as otherwise
provided in this Agreement and except for the accuracy of information furnished
to it by MGF, the Trust assumes full responsibility for complying with all
applicable requirements of the 1940 Act, the Securities Act of 1933, as amended,
and any other laws, rules and regulations of governmental authorities having
jurisdiction.
8. INDEMNIFICATION OF MGF.
-----------------------
A. MGF may rely on information reasonably believed by it to be
accurate and reliable. Except as may otherwise be required by the 1940 Act and
the rules thereunder, neither MGF nor its officers, directors, employees,
agents, control persons or affiliates of any thereof shall be subject to any
liability for, or any damages, expenses or losses incurred by the Trust in
connection with, any error of judgment, mistake of law, any act or omission
connected with or arising out of any services rendered under or payments made
pursuant to this Agreement or any other matter to which this Agreement relates,
except by reason of willful misfeasance, bad faith or negligence on the part of
any
- 3 -
<PAGE>
such persons in the performance of the duties of MGF under this Agreement or by
reason of reckless disregard by any of such persons of the obligations and
duties of MGF under this Agreement.
B. Any person, even though also a director, officer, employee,
shareholder or agent of MGF, or any of its affiliates, who may be or become an
officer, trustee, employee or agent of the Trust, shall be deemed, when
rendering services to the Trust or acting on any business of the Trust, to be
rendering such services to or acting solely as an officer, trustee, employee or
agent of the Trust and not as a director, officer, employee, or agent of or one
under the control or direction of MGF or any of its affiliates, even though paid
by one of these entities.
C. The Trust shall indemnify and hold harmless MGF, its directors,
officers, employees, agents, control persons and affiliates from and against any
and all claims, demands, expenses and liabilities of any and every nature which
MGF may sustain or incur by reason of, or as a result of: (i) any action taken
or omitted to be taken by MGF in good faith in reliance upon any certificate,
instrument, order or share certificate reasonably believed by it to be genuine
and to be signed, countersigned or executed by any duly authorized person, upon
the oral instructions or written instructions of an authorized person of the
Trust or upon the opinion of legal counsel for the Trust or its own counsel; or
(ii) any action taken or omitted to be taken by MGF in connection with its
appointment in good faith in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have been
altered, changed, amended or repealed. However, indemnification under this
subparagraph shall not apply to actions or omissions of MGF or its directors,
officers, employees, or agents in cases of its or their own negligence, willful
misconduct, bad faith, or reckless disregard of its or their own duties
hereunder.
9. INDEMNIFICATION OF TRUST.
------------------------
MGF shall indemnify and hold harmless the Trust, its trustees,
officers and employees from and against any and all claims, demands, expenses
and liabilities of any and every nature which the Trust or such persons may
sustain or incur by reason of, or as a result of MGF's negligence, willful
misconduct, bad faith, or reckless disregard of its duties hereunder.
10. TERMINATION
-----------
A. The provisions of this Agreement shall be effective on the
date first above written, shall continue in effect for two years from that date
and shall continue in force from year to year thereafter, but only so long as
such continuance is approved (1) by MGF, (2) by vote, cast in person
- 4 -
<PAGE>
at a meeting called for the purpose, of a majority of the Trust's trustees who
are not parties to this Agreement or interested persons (as defined in the 1940
Act) of any such party, and (3) by vote of a majority of the Trust's Board of
Trustees or a majority of the Trust's outstanding voting securities.
B. Either party may terminate this Agreement on any date by
giving the other party at least sixty (60) days' prior written notice of such
termination specifying the date fixed therefore. Upon termination of this
Agreement, the Trust shall pay to MGF such compensation as may be due as of the
date of such termination, and shall likewise reimburse MGF for any out-of-pocket
expenses and disbursements reasonably incurred by MGF to such date.
C. In the event that in connection with the termination of
this Agreement a successor to any of MGF's duties or responsibilities under this
Agreement is designated by the Trust by written notice to MGF, MGF shall,
promptly upon such termination and at the expense of the Trust, transfer all
records maintained by MGF under this Agreement and shall cooperate in the
transfer of such duties and responsibilities, including provision for assistance
from MGF's cognizant personnel in the establishment of books, records and other
data by such successor.
11. SERVICES FOR OTHERS.
-------------------
Nothing in this Agreement shall prevent MGF or any affiliated
person (as defined in the 1940 Act) of MGF from providing services for any other
person, firm or corporation (including other investment companies); provided,
however, that MGF expressly represents that it will undertake no activities
which, in its judgment, will adversely affect the performance of its obligations
to the Trust under this Agreement.
12. LIMITATION OF LIABILITY.
-----------------------
It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the Trust, personally, but bind only the trust
property of the Trust. The execution and delivery of this Agreement have been
authorized by the Trustees of the Trust and signed by an officer of the Trust,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Trust.
- 5 -
<PAGE>
13. SEVERABILITY.
-------------
In the event any provision of this Agreement is determined to
be void or unenforceable, such determination shall not affect the remainder of
this Agreement, which shall continue to be in force.
14. QUESTIONS OF INTERPRETATION.
---------------------------
This Agreement shall be governed by the laws of the State of
Ohio. Any question of interpretation of any term or provision of this Agreement
having a counterpart in or otherwise derived from a term or provision of the
1940 Act shall be resolved by reference to such term or provision of the 1940
Act and to interpretations thereof, if any, by the United States Courts or in
the absence of any controlling decision of any such court, by rules, regulations
or orders of the SEC issued pursuant to said 1940 Act. In addition, where the
effect of a requirement of the 1940 Act, reflected in any provision of this
Agreement, is revised by rule, regulation or order of the SEC, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
15. NOTICES.
--------
All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing (including telex
and telegraphic communication) and shall be (as elected by the person giving
such notice) hand delivered by messenger or courier service, telecommunicated,
or mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
To the Trust: The Tuscarora Investment Trust
3100 Tower Boulevard, Suite 800
Durham, North Carolina 27707
Attention: George W. Brumley
To MGF: MGF Service Corp.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert H. Leshner
or to such other address as any party may designate by notice complying with the
terms of this Section 15. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery; (b) on the date telecommunicated if by
telegraph; (c) on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method; and (d) on the date upon which the
return receipt is signed or delivery is refused or the notice is designated by
the postal authorities as not deliverable, as the case may be, if mailed.
- 6 -
<PAGE>
16. AMENDMENT.
----------
This Agreement may not be amended or modified except by a
written agreement executed by both parties.
17. BINDING EFFECT.
---------------
Each of the undersigned expressly warrants and represents that
he has the full power and authority to sign this Agreement on behalf of the
party indicated, and that his signature will operate to bind the party indicated
to the foregoing terms.
18. COUNTERPARTS.
-------------
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
19. FORCE MAJEURE.
--------------
If MGF shall be delayed in its performance of services or
prevented entirely or in part from performing services due to causes or events
beyond its control, including and without limitation, acts of God, interruption
of power or other utility, transportation or communication services, acts of
civil or military authority, sabotages, national emergencies, explosion, flood,
accident, earthquake or other catastrophe, fire, strike or other labor problems,
legal action, present or future law, governmental order, rule or regulation, or
shortages of suitable parts, materials, labor or transportation, such delay or
non-performance shall be excused and a reasonable time for performance in
connection with this Agreement shall be extended to include the period of such
delay or non-performance.
20. MISCELLANEOUS.
--------------
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
- 7 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
THE TUSCARORA INVESTMENT TRUST
By: /s/ George W. Brumley
---------------------------
Its: President
MGF SERVICE CORP.
By: /s/ Robert H. Leshner
----------------------------
Its: Chairman of the Board
- 8 -
TRANSFER, DIVIDEND DISBURSING, SHAREHOLDER SERVICE
AND PLAN AGENCY AGREEMENT
--------------------------------------------------
AGREEMENT dated as of May 23, 1995 between The Tuscarora Investment
Trust (the "Trust"), a Massachusetts business trust, and MGF Service Corp.
("MGF"), an Ohio corporation.
WHEREAS, the Trust is an investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust wishes to employ the services of MGF to serve as its
transfer, dividend disbursing, shareholder service and plan agent; and
WHEREAS, MGF wishes to provide such services under the conditions
set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust and MGF agree as follows:
1. APPOINTMENT.
-----------
The Trust hereby appoints and employs MGF as agent to perform
those services described in this Agreement for the Trust. MGF shall act under
such appointment and perform the obligations thereof upon the terms and
conditions hereinafter set forth.
2. DOCUMENTATION.
--------------
The Trust will furnish from time to time the following
documents:
A. Each resolution of the Board of Trustees of the Trust
authorizing the original issue of its shares;
B. Each Registration Statement filed with the Securities
and Exchange Commission (the "SEC") and amendments
thereof;
C. A certified copy of each amendment to the Agreement and
Declaration of Trust and the By-Laws of the Trust;
D. Certified copies of each resolution of the Board of
Trustees authorizing officers to give instructions to
MGF;
E. Specimens of all new forms of share certificates
accompanied by Board of Trustees' resolutions approving
such forms;
- 1 -
<PAGE>
F. Such other certificates, documents or opinions which
MGF may, in its discretion, deem necessary or
appropriate in the proper performance of its duties;
G. Copies of all Underwriting and Dealer Agreements in
effect;
H. Copies of all Investment Advisory Agreements in effect;
and
I. Copies of all documents relating to special investment
or withdrawal plans which are offered or may be offered
in the future by the Trust and for which MGF is to act
as plan agent.
3. MGF TO RECORD SHARES.
---------------------
MGF shall record the issuance of shares of the Trust and
maintain pursuant to applicable rules of the SEC a record of the total number of
shares of the Trust which are authorized, issued and outstanding, based upon
data provided to it by the Trust. MGF shall also provide the Trust on a regular
basis or upon reasonable request the total number of shares which are
authorized, issued and outstanding, but shall have no obligation when recording
the issuance of the Trust's shares, except as otherwise set forth herein, to
monitor the issuance of such shares or to take cognizance of any laws relating
to the issue or sale of such shares, which functions shall be the sole
responsibility of the Trust.
4. MGF TO VALIDATE TRANSFERS.
--------------------------
Upon receipt of a proper request for transfer and upon
surrender to MGF of certificates, if any, in proper form for transfer, MGF shall
approve such transfer and shall take all necessary steps to effectuate the
transfer as indicated in the transfer request. Upon approval of the transfer,
MGF shall notify the Trust in writing of each such transaction and shall make
appropriate entries on the shareholder records maintained by MGF.
5. SHARE CERTIFICATES.
-------------------
If the Trust authorizes the issuance of share certificates and
an investor requests a share certificate, MGF will countersign and mail, by
insured first class mail, a share certificate to the investor at his address as
set forth on the transfer books of the Trust, subject to any other instructions
for delivery of certificates representing newly purchased shares and subject to
the limitation that no certificates representing newly purchased shares shall be
mailed to the investor until the cash purchase price of such shares has been
collected and
- 2 -
<PAGE>
credited to the account of the Trust maintained by the Custodian. The Trust
shall supply MGF with a sufficient supply of blank share certificates and from
time to time shall renew such supply upon request of MGF. Such blank share
certificates shall be properly signed, manually or, if authorized by the Trust,
by facsimile; and notwithstanding the death, resignation or removal of any
officers of the Trust authorized to sign share certificates, MGF may continue to
countersign certificates which bear the manual or facsimile signature of such
officer until otherwise directed by the Trust. In case of the alleged loss or
destruction of any share certificate, no new certificates shall be issued in
lieu thereof, unless there shall first be furnished an appropriate bond
satisfactory to MGF and the Trust, and issued by a surety company satisfactory
to MGF and the Trust.
6. RECEIPT OF FUNDS.
-----------------
Upon receipt of any check or other instrument drawn or
endorsed to it as agent for, or identified as being for the account of, the
Trust, MGF shall stamp the check or instrument with the date of receipt,
determine the amount thereof due the Trust and shall forthwith process the same
for collection. Upon receipt of notification of receipt of funds eligible for
share purchases in accordance with the Trust's then current prospectus and
statement of additional information, MGF shall notify the Trust, at the close of
each business day, in writing of the amount of said funds credited to the Trust
and deposited in its account with the Custodian.
7. PURCHASE ORDERS.
----------------
Upon receipt of an order for the purchase of shares of the
Trust, accompanied by sufficient information to enable MGF to establish a
shareholder account, MGF shall, as of the next determination of net asset value
after receipt of such order in accordance with the Trust's then current
prospectus and statement of additional information, compute the number of shares
due to the shareholder, credit the share account of the shareholder, subject to
collection of the funds, with the number of shares so purchased, shall notify
the Trust in writing or by computer report at the close of each business day of
such transactions and shall mail to the shareholder and/or dealer of record a
notice of such credit when requested to do so by the Trust.
8. RETURNED CHECKS.
----------------
In the event that MGF is notified by the Trust's Custodian
that any check or other order for the payment of money is returned unpaid for
any reason, MGF will:
A. Give prompt notification to the Trust of the non-
payment of said check;
- 3 -
<PAGE>
B. In the absence of other instructions from the Trust, take
such steps as may be necessary to redeem any shares purchased on the basis of
such returned check and cause the proceeds of such redemption plus any dividends
declared with respect to such shares to be credited to the account of the Trust
and to request the Trust's Custodian to forward such returned check to the
person who originally submitted the check; and
C. Notify the Trust of such actions and correct the
Trust's records maintained by MGF pursuant to this Agreement.
9. DIVIDENDS AND DISTRIBUTIONS.
---------------------------
The Trust shall furnish MGF with appropriate evidence of
trustee action authorizing the declaration of dividends and other distributions.
MGF shall establish procedures in accordance with the Trust's then current
prospectus and statement of additional information and with other authorized
actions of the Trust's Board of Trustees under which it will have available from
the Custodian or the Trust any required information for each dividend and other
distribution. After deducting any amount required to be withheld by any
applicable laws, MGF shall, as agent for each shareholder who so requests,
invest the dividends and other distributions in full and fractional shares in
accordance with the Trust's then current prospectus and statement of additional
information. If a shareholder has elected to receive dividends or other
distributions in cash, then MGF shall disburse dividends to shareholders of
record in accordance with the Trust's then current prospectus and statement of
additional information. MGF shall, on or before the mailing date of such checks,
notify the Trust and the Custodian of the estimated amount of cash required to
pay such dividend or distribution, and the Trust shall instruct the Custodian to
make available sufficient funds therefor in the appropriate account of the
Trust. MGF shall mail to the shareholders periodic statements, as requested by
the Trust, showing the number of full and fractional shares and the net asset
value per share of shares so credited. When requested by the Trust, MGF shall
prepare and file with the Internal Revenue Service, and when required, shall
address and mail to shareholders, such returns and information relating to
dividends and distributions paid by the Trust as are required to be so prepared,
filed and mailed by applicable laws, rules and regulations.
10. UNCLAIMED DIVIDENDS AND UNCLAIMED REDEMPTION PROCEEDS.
------------------------------------------------------
MGF shall, at least annually, furnish in writing to the Trust
the names and addresses, as shown in the shareholder accounts maintained by MGF,
of all shareholders for which there are, as of the end of the calendar year,
dividends, distributions or redemption proceeds for which checks or share
certificates mailed in payment of distributions have been returned. MGF shall
use its best efforts to contact the shareholders affected and to
- 4 -
<PAGE>
follow any other written instructions received from the Trust concerning the
disposition of any such unclaimed dividends, distributions or redemption
proceeds.
11. REDEMPTIONS AND EXCHANGES.
--------------------------
A. MGF shall process, in accordance with the Trust's then
current prospectus and statement of additional information, each order for the
redemption of shares accepted by MGF. Upon its approval of such redemption
transactions, MGF, if requested by the Trust, shall mail to the shareholder
and/or dealer of record a confirmation showing trade date, number of full and
fractional shares redeemed, the price per share and the total redemption
proceeds. For each such redemption, MGF shall either: (a) prepare checks in the
appropriate amounts for approval and verification by the Trust and signature by
an authorized officer of MGF and mail the checks to the appropriate person, or
(b) in the event redemption proceeds are to be wired through the Federal Reserve
Wire System or by bank wire, cause such proceeds to be wired in federal funds to
the bank account designated by the shareholder, or (c) effectuate such other
redemption procedures which are authorized by the Trust's Board of Trustees or
its then current prospectus and statement of additional information. The
requirements as to instruments of transfer and other documentation, the
applicable redemption price and the time of payment shall be as provided in the
then current prospectus and statement of additional information, subject to such
supplemental instructions as may be furnished by the Trust and accepted by MGF.
If MGF or the Trust determines that a request for redemption does not comply
with the requirements for redemptions, MGF shall promptly notify the shareholder
indicating the reason therefor.
B. If shares of the Trust are eligible for exchange with
shares of any other investment company, MGF, in accordance with the then current
prospectus and statement of additional information and exchange rules of the
Trust and such other investment company, or such other investment company's
transfer agent, shall review and approve all exchange requests and shall, on
behalf of the Trust's shareholders, process such approved exchange requests.
C. MGF shall notify the Trust and the Custodian on each
business day of the amount of cash required to meet payments made pursuant to
the provisions of this Paragraph, and, on the basis of such notice, the Trust
shall instruct the Custodian to make available from time to time sufficient
funds therefor in the appropriate account of the Trust. Procedures for effecting
redemption orders accepted from shareholders or dealers of record by telephone
or other methods shall be established by mutual agreement between MGF and the
Trust consistent with the Trust's then current prospectus and statement of
additional information.
- 5 -
<PAGE>
D. The authority of MGF to perform its responsibilities
under Paragraph 7, Paragraph 9, and this Paragraph 11 shall be suspended with
respect to any series of the Trust upon receipt of notification by it of the
suspension of the determination of such series' net asset value.
12. AUTOMATIC WITHDRAWAL PLANS.
---------------------------
MGF will process automatic withdrawal orders pursuant to the
provisions of the withdrawal plans duly executed by shareholders and the current
prospectus and statement of additional information of the Trust. Payments upon
such withdrawal order shall be made by MGF from the appropriate account
maintained by the Trust with the Custodian on approximately the last business
day of each month in which a payment has been requested, and MGF, on or after
the seventh day prior to the payment date, will withdraw from a shareholder's
account and present for repurchase or redemption as many shares as shall be
sufficient to make such withdrawal payment pursuant to the provisions of the
shareholder's withdrawal plan and the current prospectus and statement of
additional information of the Trust. From time to time on new automatic
withdrawal plans a check for payment date already past may be issued upon
request by the shareholder.
13. WIRE-ORDER PURCHASES.
---------------------
MGF will send written confirmations to the dealers of record
containing all details of the wire-order purchases placed by each such dealer by
the close of business on the business day following receipt of such orders by
MGF. Upon receipt of any check drawn or endorsed to the Trust (or MGF, as agent)
or otherwise identified as being payment of an outstanding wire- order, MGF will
stamp said check with the date of its receipt and deposit the amount represented
by such check to MGF's deposit accounts maintained with the Custodian. MGF will
cause the Custodian to transfer federal funds in an amount equal to the net
asset value of the shares so purchased to the Trust's account with the
Custodian, and will notify the Trust before noon of each business day of the
total amount deposited in the Trust's deposit accounts, and in the event that
payment for a purchase order is not received by MGF or the Custodian on the
tenth business day following receipt of the order, prepare an NASD "notice of
failure of dealer to make payment."
14. OTHER PLANS.
------------
MGF will process such group programs and other plans or
programs for investing in shares of the Trust as are now provided for in the
Trust's current prospectus and statement of additional
- 6 -
<PAGE>
information and will act as plan agent for shareholders pursuant to the terms of
such plans and programs duly executed by such shareholders.
15. RECORDKEEPING AND OTHER INFORMATION.
------------------------------------
MGF shall create and maintain all records required by
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act and the rules thereunder, as the same
may be amended from time to time, pertaining to the various functions performed
by it and not otherwise created and maintained by another party pursuant to
contract with the Trust. All such records shall be the property of the Trust at
all times and shall be available for inspection and use by the Trust. Where
applicable, such records shall be maintained by MGF for the periods and in the
places required by Rule 31a-2 under the 1940 Act. The retention of such records
shall be at the expense of the Trust. MGF shall make available during regular
business hours all records and other data created and maintained pursuant to
this Agreement for reasonable audit and inspection by the Trust, any person
retained by the Trust, or any regulatory agency having authority over the Trust.
16. SHAREHOLDER RECORDS.
--------------------
MGF shall maintain records for each shareholder account
showing the following:
A. Names, addresses and tax identifying numbers;
B. Name of the dealer of record, if any;
C. Number of shares held of each series;
D. Historical information regarding the account of each
shareholder, including dividends and distributions in
cash or invested in shares;
E. Information with respect to the source of all dividends
and distributions allocated among income, realized
short-term gains and realized long-term gains;
F. Any instructions from a shareholder including all forms
furnished by the Trust and executed by a shareholder
with respect to (i) dividend or distribution elections
and (ii) elections with respect to payment options in
connection with the redemption of shares;
G. Any correspondence relating to the current maintenance
of a shareholder's account;
- 7 -
<PAGE>
H. Certificate numbers and denominations for any
shareholder holding certificates;
I. Any stop or restraining order placed against a
shareholder's account;
J. Information with respect to withholding in the case of
a foreign account or any other account for which
withholding is required by the Internal Revenue Code of
1986, as amended; and
K. Any information required in order for MGF to perform
the calculations contemplated under this Agreement.
17. TAX RETURNS AND REPORTS.
------------------------
MGF will prepare in the appropriate form, file with the
Internal Revenue Service and appropriate state agencies and, if required, mail
to shareholders of the Trust such returns for reporting dividends and
distributions paid by the Trust as are required to be so prepared, filed and
mailed and shall withhold such sums as are required to be withheld under
applicable federal and state income tax laws, rules and regulations.
18. OTHER INFORMATION TO THE TRUST.
-------------------------------
Subject to such instructions, verification and approval of the
Custodian and the Trust as shall be required by any agreement or applicable law,
MGF will also maintain such records as shall be necessary to furnish to the
Trust the following: annual shareholder meeting lists, proxy lists and mailing
materials, shareholder reports and confirmations and checks for disbursing
redemption proceeds, dividends and other distributions or expense disbursements.
19. ACCESS TO SHAREHOLDER INFORMATION.
----------------------------------
Upon request, MGF shall arrange for the Trust's investment
adviser to have direct access to shareholder information contained in MGF's
computer system, including account balances, performance information and such
other information which is available to MGF with respect to shareholder
accounts.
20. COOPERATION WITH ACCOUNTANTS.
----------------------------
MGF shall cooperate with the Trust's independent public
accountants and shall take all reasonable action in the performance of its
obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion where required for any document for the Trust.
- 8 -
<PAGE>
21. SHAREHOLDER SERVICE AND CORRESPONDENCE.
---------------------------------------
MGF will provide and maintain adequate personnel, records and
equipment to receive and answer all shareholder and dealer inquiries relating to
account status, share purchases, redemptions and exchanges and other investment
plans available to Trust shareholders. MGF will answer written correspondence
from shareholders relating to their share accounts and such other written or
oral inquiries as may from time to time be mutually agreed upon, and MGF will
notify the Trust of any correspondence or inquiries which may require an answer
from the Trust.
22. PROXIES.
--------
MGF shall assist the Trust in the mailing of proxy cards and
other material in connection with shareholder meetings of the Trust, shall
receive, examine and tabulate returned proxies and shall, if requested by the
Trust, provide at least one inspector of election to attend and participate as
required by law in shareholder meetings of the Trust.
23. FURTHER ACTIONS.
----------------
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof.
24. COMPENSATION.
-------------
For the performance of MGF's obligations under this Agreement,
each series of the Trust shall pay MGF, on the first business day following the
end of each month, a monthly fee in accordance with the schedule attached hereto
as Schedule A. MGF shall not be required to reimburse the Trust or the Trust's
investment adviser for (or have deducted from its fees) any expenses in excess
of expense limitations imposed by certain state securities commissions having
jurisdiction over the Trust. The Trust shall promptly reimburse MGF for any
out-of-pocket expenses and advances which are to be paid by the Trust in
accordance with Paragraph 25.
25. EXPENSES.
---------
MGF shall furnish, at its expense and without cost to the
Trust (i) the services of its personnel to the extent that such services are
required to carry out its obligations under this Agreement and (ii) use of data
processing equipment. All costs and expenses not expressly assumed by MGF under
this Paragraph 25 shall be paid by the Trust, including, but not limited to,
costs and expenses of officers and employees of MGF in attending meetings of the
Board of Trustees and shareholders of the Trust, as well as costs and expenses
for postage,
- 9 -
<PAGE>
envelopes, checks, drafts, continuous forms, reports, communications, statements
and other materials, telephone, telegraph and remote transmission lines, use of
outside pricing services, use of outside mailing firms, necessary outside record
storage, media for storage of records (e.g., microfilm, microfiche, computer
tapes), printing, confirmations and any other shareholder correspondence and any
and all assessments, taxes or levies assessed on MGF for services provided under
this Agreement. Postage for mailings of dividends, proxies, reports and other
mailings to all shareholders shall be advanced to MGF three business days prior
to the mailing date of such materials.
26. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
---------------------------------------------------
The parties hereto acknowledge and agree that nothing
contained herein shall be construed to require MGF to perform any services for
the Trust which services could cause MGF to be deemed an "investment adviser" of
the Trust within the meaning of Section 2(a)(20) of the 1940 Act or to supersede
or contravene the Trust's prospectus or statement of additional information or
any provisions of the 1940 Act and the rules thereunder. Except as otherwise
provided in this Agreement and except for the accuracy of information furnished
to it by MGF, the Trust assumes full responsibility for complying with all
applicable requirements of the 1940 Act, the Securities Act of 1933, as amended,
and any other laws, rules and regulations of governmental authorities having
jurisdiction.
27. EQUIPMENT FAILURES.
-------------------
MGF shall take all steps necessary to minimize or avoid
service interruptions, and has entered into one or more agreements making
provision for emergency use of electronic data processing equipment. MGF shall
have no liability with respect to equipment failures beyond its control.
28. INDEMNIFICATION OF MGF.
-----------------------
A. MGF may rely on information reasonably believed by it to be
accurate and reliable. Except as may otherwise be required by the 1940 Act and
the rules thereunder, neither MGF nor its officers, directors, employees,
agents, control persons or affiliates of any thereof shall be subject to any
liability for, or any damages, expenses or losses incurred by the Trust in
connection with, any error of judgment, mistake of law, any act or omission
connected with or arising out of any services rendered under or payments made
pursuant to this Agreement or any other matter to which this Agreement relates,
except by reason of willful misfeasance, bad faith or negligence on the part of
any such persons in the performance of the duties of MGF under this Agreement or
by reason of reckless disregard by any of such persons of the obligations and
duties of MGF under this Agreement.
- 10 -
<PAGE>
B. Any person, even though also a director, officer, employee,
shareholder or agent of MGF, or any of its affiliates, who may be or become an
officer, trustee, employee or agent of the Trust, shall be deemed, when
rendering services to the Trust or acting on any business of the Trust, to be
rendering such services to or acting solely as an officer, trustee, employee or
agent of the Trust and not as a director, officer, employee, or agent of or one
under the control or direction of MGF or any of its affiliates, even though paid
by one of these entities.
C. The Trust shall indemnify and hold harmless MGF, its directors,
officers, employees, agents, control persons and affiliates from and against any
and all claims, demands, expenses and liabilities of any and every nature which
MGF may sustain or incur by reason of, or as a result of: (i) any action taken
or omitted to be taken by MGF in good faith in reliance upon any certificate,
instrument, order or share certificate reasonably believed by it to be genuine
and to be signed, countersigned or executed by any duly authorized person, upon
the oral instructions or written instructions of an authorized person of the
Trust or upon the opinion of legal counsel for the Trust or its own counsel; or
(ii) any action taken or omitted to be taken by MGF in connection with its
appointment in good faith in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have been
altered, changed, amended or repealed. However, indemnification under this
subparagraph shall not apply to actions or omissions of MGF or its directors,
officers, employees, or agents in cases of its or their own negligence, willful
misconduct, bad faith, or reckless disregard of its or their own duties
hereunder.
29. INDEMNIFICATION OF TRUST.
-------------------------
MGF shall indemnify and hold harmless the Trust, its trustees,
officers and employees from and against any and all claims, demands, expenses
and liabilities of any and every nature which the Trust or such persons may
sustain or incur by reason of, or as a result of MGF's negligence, willful
misconduct, bad faith, or reckless disregard of its duties hereunder.
30. TERMINATION
-----------
A. The provisions of this Agreement shall be effective on the
date first above written, shall continue in effect for two years from that date
and shall continue in force from year to year thereafter, but only so long as
such continuance is approved (1) by MGF, (2) by vote, cast in person at a
meeting called for the purpose, of a majority of the Trust's trustees who are
not parties to this Agreement or interested persons (as defined in the 1940 Act)
of any such party, and (3) by vote of a majority of the Trust's Board of
Trustees or a majority of the Trust's outstanding voting securities.
- 11 -
<PAGE>
B. Either party may terminate this Agreement on any date by
giving the other party at least sixty (60) days' prior written notice of such
termination specifying the date fixed therefore. Upon termination of this
Agreement, the Trust shall pay to MGF such compensation as may be due as of the
date of such termination, and shall likewise reimburse MGF for any out-of-pocket
expenses and disbursements reasonably incurred by MGF to such date.
C. In the event that in connection with the termination of
this Agreement a successor to any of MGF's duties or responsibilities under this
Agreement is designated by the Trust by written notice to MGF, MGF shall,
promptly upon such termination and at the expense of the Trust, transfer all
records maintained by MGF under this Agreement and shall cooperate in the
transfer of such duties and responsibilities, including provision for assistance
from MGF's cognizant personnel in the establishment of books, records and other
data by such successor.
31. SERVICES FOR OTHERS.
-------------------
Nothing in this Agreement shall prevent MGF or any affiliated
person (as defined in the 1940 Act) of MGF from providing services for any other
person, firm or corporation (including other investment companies); provided,
however, that MGF expressly represents that it will undertake no activities
which, in its judgment, will adversely affect the performance of its obligations
to the Trust under this Agreement.
32. LIMITATION OF LIABILITY.
------------------------
It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the Trust, personally, but bind only the trust
property of the Trust. The execution and delivery of this Agreement have been
authorized by the Trustees of the Trust and signed by an officer of the Trust,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Trust.
33. SEVERABILITY.
-------------
In the event any provision of this Agreement is determined to
be void or unenforceable, such determination shall not affect the remainder of
this Agreement, which shall continue to be in force.
- 12 -
<PAGE>
34. QUESTIONS OF INTERPRETATION.
----------------------------
This Agreement shall be governed by the laws of the State of
Ohio. Any question of interpretation of any term or provision of this Agreement
having a counterpart in or otherwise derived from a term or provision of the
1940 Act shall be resolved by reference to such term or provision of the 1940
Act and to interpretations thereof, if any, by the United States Courts or in
the absence of any controlling decision of any such court, by rules, regulations
or orders of the SEC issued pursuant to said 1940 Act. In addition, where the
effect of a requirement of the 1940 Act, reflected in any provision of this
Agreement, is revised by rule, regulation or order of the SEC, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
35. NOTICES.
--------
All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing (including telex
and telegraphic communication) and shall be (as elected by the person giving
such notice) hand delivered by messenger or courier service, telecommunicated,
or mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
To the Trust: The Tuscarora Investment Trust
3100 Tower Boulevard, Suite 800
Durham, North Carolina 27707
Attention: George W. Brumley
To MGF: MGF Service Corp.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert H. Leshner
or to such other address as any party may designate by notice complying with the
terms of this Section 35. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery; (b) on the date telecommunicated if by
telegraph; (c) on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method; and (d) on the date upon which the
return receipt is signed or delivery is refused or the notice is designated by
the postal authorities as not deliverable, as the case may be, if mailed.
36. AMENDMENT.
----------
This Agreement may not be amended or modified except by a
written agreement executed by both parties.
- 13 -
<PAGE>
37. BINDING EFFECT.
---------------
Each of the undersigned expressly warrants and represents that
he has the full power and authority to sign this Agreement on behalf of the
party indicated, and that his signature will operate to bind the party indicated
to the foregoing terms.
38. COUNTERPARTS.
-------------
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
39. FORCE MAJEURE.
-------------
If MGF shall be delayed in its performance of services or
prevented entirely or in part from performing services due to causes or events
beyond its control, including and without limitation, acts of God, interruption
of power or other utility, transportation or communication services, acts of
civil or military authority, sabotages, national emergencies, explosion, flood,
accident, earthquake or other catastrophe, fire, strike or other labor problems,
legal action, present or future law, governmental order, rule or regulation, or
shortages of suitable parts, materials, labor or transportation, such delay or
non-performance shall be excused and a reasonable time for performance in
connection with this Agreement shall be extended to include the period of such
delay or non-performance.
40. MISCELLANEOUS.
--------------
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
- 14 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
THE TUSCARORA INVESTMENT TRUST
By: /s/ George W. Brumley
---------------------------
Its: President
MGF SERVICE CORP.
By: /s/ Robert H. Leshner
---------------------------
Its: Chairman of the Board
- 15 -
<PAGE>
Schedule A
COMPENSATION
------------
Services FEE
- -------- ---
As Transfer Agent and Shareholder (Per Account)
Servicing Agent (No additional
charge for quarterly dividends):
Oak Value Fund Payable monthly at
rate of $17.00/year
The Fund will be subject to a minimum charge of $1,000 per month.
- 16 -
ACCOUNTING SERVICES AGREEMENT
AGREEMENT dated as of May 23, 1995 between The Tuscarora Investment
Trust (the "Trust"), a Massachusetts business trust, and MGF Service Corp.
("MGF"), an Ohio corporation.
WHEREAS, the Trust is an investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust wishes to employ the services of MGF to provide the
Trust with certain accounting and pricing services; and
WHEREAS, MGF wishes to provide such services under the conditions
set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust and MGF agree as follows:
1. APPOINTMENT.
-----------
The Trust hereby appoints and employs MGF as agent to perform
those services described in this Agreement for the Trust. MGF shall act under
such appointment and perform the obligations thereof upon the terms and
conditions hereinafter set forth.
2. CALCULATION OF NET ASSET VALUE.
------------------------------
MGF will calculate the net asset value of each series of the
Trust and the per share net asset value of each series of the Trust, in
accordance with the Trust's current prospectus and statement of additional
information, once daily as of the time selected by the Trust's Board of
Trustees. MGF will prepare and maintain a daily valuation of all securities and
other assets of the Trust in accordance with instructions from a designated
officer of the Trust or its investment adviser and in the manner set forth in
the Trust's current prospectus and statement of additional information. In
valuing securities of the Trust, MGF may contract with, and rely upon market
quotations provided by, outside services.
3. BOOKS AND RECORDS.
------------------
MGF will maintain and keep current the general ledger for each
series of the Trust, recording all income and expenses, capital share activity
and security transactions of the Trust. MGF will maintain such further books and
records as are necessary
<PAGE>
to enable it to perform its duties under this Agreement, and will periodically
provide reports to the Trust and its authorized agents regarding share purchases
and redemptions and trial balances of each series of the Trust. MGF will prepare
and maintain complete, accurate and current all records with respect to the
Trust required to be maintained by the Trust under the Internal Revenue Code of
1986, as amended, and under the rules and regulations of the 1940 Act, and will
preserve said records in the manner and for the periods prescribed in the Code
and the 1940 Act. The retention of such records shall be at the expense of the
Trust.
All of the records prepared and maintained by MGF pursuant to this
Section 3 which are required to be maintained by the Trust under the Code and
the 1940 Act will be the property of the Trust. In the event this Agreement is
terminated, all such records shall be delivered to the Trust at the Trust's
expense, and MGF shall be relieved of responsibility for the preparation and
maintenance of any such records delivered to the Trust.
4. PAYMENT OF TRUST EXPENSES.
--------------------------
MGF shall process each request received from the Trust or its
authorized agents for payment of the Trust's expenses. Upon receipt of written
instructions signed by an officer or other authorized agent of the Trust, MGF
shall prepare checks in the appropriate amounts which shall be signed by an
authorized officer of MGF and mailed to the appropriate party.
5. FORM N-SAR.
-----------
MGF shall maintain such records within its control and shall
be requested by the Trust to assist the Trust in fulfilling the requirements of
Form N-SAR.
6. COOPERATION WITH ACCOUNTANTS.
-----------------------------
MGF shall cooperate with the Trust's independent public
accountants and shall take all reasonable action in the performance of its
obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion where required for any document for the Trust.
7. FURTHER ACTIONS.
----------------
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof.
- 2 -
<PAGE>
8. FEES.
-----
For the performance of the services under this Agreement, each
series of the Trust shall pay MGF a monthly fee in accordance with the schedule
attached hereto as Schedule A. The fees with respect to any month shall be paid
to MGF on the last business day of such month. The Trust shall also promptly
reimburse MGF for the cost of external pricing services utilized by MGF.
9. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
---------------------------------------------------
The parties hereto acknowledge and agree that nothing
contained herein shall be construed to require MGF to perform any services for
the Trust which services could cause MGF to be deemed an "investment adviser" of
the Trust within the meaning of Section 2(a)(20) of the 1940 Act or to supersede
or contravene the Trust's prospectus or statement of additional information or
any provisions of the 1940 Act and the rules thereunder. Except as otherwise
provided in this Agreement and except for the accuracy of information furnished
to it by MGF, the Trust assumes full responsibility for complying with all
applicable requirements of the 1940 Act, the Securities Act of 1933, as amended,
and any other laws, rules and regulations of governmental authorities having
jurisdiction.
10. EQUIPMENT FAILURES.
-------------------
MGF shall take all steps necessary to minimize or avoid
service interruptions, and has entered into one or more agreements making
provision for emergency use of electronic data processing equipment. MGF shall
have no liability with respect to equipment failures beyond its control.
11. INDEMNIFICATION OF MGF.
-----------------------
A. MGF may rely on information reasonably believed by it to be accurate
and reliable. Except as may otherwise be required by the 1940 Act and the rules
thereunder, neither MGF nor its officers, directors, employees, agents, control
persons or affiliates of any thereof shall be subject to any liability for, or
any damages, expenses or losses incurred by the Trust in connection with, any
error of judgment, mistake of law, any act or omission connected with or arising
out of any services rendered under or payments made pursuant to this Agreement
or any other matter to which this Agreement relates, except by reason of willful
misfeasance, bad faith or negligence on the part of any such persons in the
performance of the duties of MGF under this Agreement or by reason of reckless
disregard by any of such persons of the obligations and duties of MGF under this
Agreement.
- 3 -
<PAGE>
B. Any person, even though also a director, officer, employee, or agent
of MGF, or any of its affiliates, who may be or become an officer, trustee,
employee or agent of the Trust, shall be deemed, when rendering services to the
Trust or acting on any business of the Trust, to be rendering such services to
or acting solely as an officer, trustee, employee or agent of the Trust and not
as a director, officer, employee, shareholder or agent of or one under the
control or direction of MGF or any of its affiliates, even though paid by one of
those entities.
C. The Trust shall indemnify and hold harmless MGF, its directors,
officers, employees, agents, control persons and affiliates from and against any
and all claims, demands, expenses and liabilities of any and every nature which
MGF may sustain or incur or which may be asserted against MGF by any person by
reason of, or as a result of: (i) any action taken or omitted to be taken by MGF
in good faith in reliance upon any certificate, instrument, order or share
certificate reasonably believed by it to be genuine and to be signed,
countersigned or executed by any duly authorized person, upon the oral
instructions or written instructions of an authorized person of the Trust or
upon the opinion of legal counsel for the Trust or its own counsel; or (ii) any
action taken or omitted to be taken by MGF in connection with its appointment in
good faith in reliance upon any law, act, regulation or interpretation of the
same even though the same may thereafter have been altered, changed, amended or
repealed. However, indemnification under this subparagraph shall not apply to
actions or omissions of MGF or its directors, officers, employees, shareholders
or agents in cases of its or their own negligence, willful misconduct, bad
faith, or reckless disregard of its or their own duties hereunder.
12. INDEMNIFICATION OF TRUST.
-------------------------
MGF shall indemnify and hold harmless the Trust, its trustees,
officers and employees from and against any and all claims, demands, expenses
and liabilities of any and every nature which the Trust or such persons may
sustain or incur by reason of, or as a result of MGF's negligence, willful
misconduct, bad faith, or reckless disregard of its duties hereunder.
13. TERMINATION.
------------
A. The provisions of this Agreement shall be effective on the
date first above written, shall continue in effect for two years from that date
and shall continue in force from year to year thereafter, but only so long as
such continuance is approved (1) by MGF, (2) by vote, cast in person at a
meeting called for the purpose, of a majority of the Trust's trustees who are
not parties to this Agreement or interested persons (as defined in the 1940 Act)
of any such party, and (3) by vote of a majority of the Trust's Board of
Trustees or a majority of the Trust's outstanding voting securities.
- 4 -
<PAGE>
B. Either party may terminate this Agreement on any date by
giving the other party at least sixty (60) days' prior written notice of such
termination specifying the date fixed therefore. Upon termination of this
Agreement, the Trust shall pay to MGF such compensation as may be due as of the
date of such termination, and shall likewise reimburse MGF for any out-of-pocket
expenses and disbursements reasonably incurred by MGF to such date.
C. In the event that in connection with the termination of
this Agreement a successor to any of MGF's duties or responsibilities under this
Agreement is designated by the Trust by written notice to MGF, MGF shall,
promptly upon such termination and at the expense of the Trust, transfer all
records maintained by MGF under this Agreement and shall cooperate in the
transfer of such duties and responsibilities, including provision for assistance
from MGF's cognizant personnel in the establishment of books, records and other
data by such successor.
14. SERVICES FOR OTHERS.
-------------------
Nothing in this Agreement shall prevent MGF or any affiliated
person (as defined in the 1940 Act) of MGF from providing services for any other
person, firm or corporation (including other investment companies); provided,
however, that MGF expressly represents that it will undertake no activities
which, in its judgment, will adversely affect the performance of its obligations
to the Trust under this Agreement.
15. LIMITATION OF LIABILITY.
------------------------
It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the Trust, personally, but bind only the trust
property of the Trust. The execution and delivery of this Agreement have been
authorized by the Trustees of the Trust and signed by an officer of the Trust,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Trust.
16. SEVERABILITY.
-------------
In the event any provision of this Agreement is determined to
be void or unenforceable, such determination shall not affect the remainder of
this Agreement, which shall continue to be in force.
- 5 -
<PAGE>
17. QUESTIONS OF INTERPRETATION.
----------------------------
This Agreement shall be governed by the laws of the State of
Ohio. Any question of interpretation of any term or provision of this Agreement
having a counterpart in or otherwise derived from a term or provision of the
1940 Act shall be resolved by reference to such term or provision of the 1940
Act and to interpretations thereof, if any, by the United States Courts or in
the absence of any controlling decision of any such court, by rules, regulations
or orders of the Securities and Exchange Commission issued pursuant to said 1940
Act. In addition, where the effect of a requirement of the 1940 Act, reflected
in any provision of this Agreement, is revised by rule, regulation or order of
the Securities and Exchange Commission, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
18. NOTICES.
-------
All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing (including telex
and telegraphic communication) and shall be (as elected by the person giving
such notice) hand delivered by messenger or courier service, telecommunicated,
or mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
To the Trust: The Tuscarora Investment Trust
3100 Tower Boulevard, Suite 800
Durham, North Carolina 27707
Attention: George W. Brumley
To MGF: MGF Service Corp.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert H. Leshner
or to such other address as any party may designate by notice complying with the
terms of this Section 18. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery; (b) on the date telecommunicated if by
telegraph; (c) on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method; and (d) on the date upon which the
return receipt is signed or delivery is refused or the notice is designated by
the postal authorities as not deliverable, as the case may be, if mailed.
19. AMENDMENT.
----------
This Agreement may not be amended or modified except by a
written agreement executed by both parties.
- 6 -
<PAGE>
20. BINDING EFFECT.
---------------
Each of the undersigned expressly warrants and represents that
he has the full power and authority to sign this Agreement on behalf of the
party indicated, and that his signature will operate to bind the party indicated
to the foregoing terms.
21. COUNTERPARTS.
-------------
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
22. FORCE MAJEURE.
--------------
If MGF shall be delayed in its performance of services or
prevented entirely or in part from performing services due to causes or events
beyond its control, including and without limitation, acts of God, interruption
of power or other utility, transportation or communication services, acts of
civil or military authority, sabotages, national emergencies, explosion, flood,
accident, earthquake or other catastrophe, fire, strike or other labor problems,
legal action, present or future law, governmental order, rule or regulation, or
shortages of suitable parts, materials, labor or transportation, such delay or
non-performance shall be excused and a reasonable time for performance in
connection with this Agreement shall be extended to include the period of such
delay or non-performance.
23. MISCELLANEOUS.
-------------
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
- 7 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
THE TUSCARORA INVESTMENT TRUST
By: /s/ George W. Brumley
----------------------
Its: President
MGF SERVICE CORP.
By: /s/ Robert H. Leshner
----------------------
Its: Chairman of the Board
- 8 -
<PAGE>
Schedule A
COMPENSATION
The Oak Value Fund series of the Trust will pay MGF a monthly fee,
according to the average net assets of such series during such month, as
follows:
Monthly Fee Average Net Assets During Month
----------- -------------------------------
$2,000 $0 - $50,000,000
$2,500 50,000,000 - $100,000,000
$3,500 $100,000,000 - $250,000,000
$4,500 Over $250,000,000
- 9 -
LICENSE AGREEMENT
-----------------
THIS LICENSE AGREEMENT made as of this 23rd day of May, 1995,
by and between OAK VALUE CAPITAL MANAGEMENT, INC., a North Carolina corporation
("Licensor"), and THE TUSCARORA INVESTMENT TRUST (the "Trust"), a business trust
organized under the laws of the Commonwealth of Massachusetts, acting with
respect to OAK VALUE FUND, a series of the Trust which is operated and
administered by the Trust (the "Licensee" or "Fund").
WHEREAS, Licensor has a proprietary interest in the names "Oak
Value" and "Oak Value Fund" and in the logo used on the Licensee's prospectus
(the "Logo"), which interests are recognized by Licensee; and
WHEREAS, Licensor wishes to permit use of the name "Oak Value
Fund" and the Logo by Licensee, subject to the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the foregoing and of other
good and valuable consideration, it is hereby understood and agreed as follows:
1. Licensee acknowledges that it adopted its corporate name
and logo through the permission of Licensor which consents to the non-exclusive
use by the Licensee of the name "Oak Value Fund" and the Logo only as long as
Licensor serves as the Licensee's investment advisor.
2. Licensee recognizes that its right to use the name "Oak
Value Fund" and the Logo is non-exclusive and that Licensor may from time to
time permit other entities, including entities engaged in the same or similar
business as the Licensee, to use the name "Oak Value Fund" or the Logo.
3. Licensee covenants and agrees to protect, exonerate,
defend, indemnify and hold harmless Licensor, its partners, agents, officers and
employees from and against any and all costs, losses, claims, damages or
liabilities, joint or several, including all legal expenses, which may arise or
have arisen out of Licensee's use or misuse of the name "Oak Value Fund" or the
Logo or out of any breach of or failure to comply with this agreement.
4. Licensee shall not distribute or circulate any
prospectus, proxy statement, sales literature, promotional material and other
printed matter required to be filed with the Securities and Exchange Commission
under Section 24(b) of the Investment Company Act of 1940, as amended, which
contains any references to or uses the name "Oak Value Fund" or the Logo without
the prior approval of Licensor and shall submit all such materials in draft
form, allowing sufficient time for review by Licensor and its counsel prior to
any deadline for printing.
- 1 -
<PAGE>
5. If Licensor or any successor to its business shall
cease to serve as Licensee's investment advisor, Licensee:
(a) As promptly as practicable, will take all
necessary director or shareholder action to
cause its Agreement and Declaration of Trust
to be amended to accomplish a change of the
Fund's name and change of logo; and
(b) Within 90 days after the termination of this
agreement or such similar contractual
arrangement, shall cease to use in any other
manner, including but not limited to use in
any prospectus, sales literature or
promotional material, the name "Oak Value
Fund" or any name, mark or logotype derived
from it or similar to it or indicating that
the Fund is advised by or otherwise
associated with Licensor.
6. This Agreement shall be binding upon the parties hereto
and their respective successors and assigns, including any successors to the
business now or thereafter conducted by them.
IN WITNESS WHEREOF, each of the Licensor and the Licensee has
caused this Agreement to be executed by its President and attested by its
Secretary as of the day and year first herein written.
ATTEST: OAK VALUE CAPITAL MANAGEMENT, INC.
/s/ Margaret Landis By: /s/ George W. Brumley
- ------------------- ----------------------------------
ATTEST: THE TUSCARORA INVESTMENT TRUST
/s/ Margaret Landis By: /s/ George W. Brumley
- ------------------- -----------------------------------
- 2 -
Consent of Independent Public Accountants
-----------------------------------------
As independent public accountants, we hereby consent to the use of our report
included in the June 30, 1996 Annual Report of Oak Value Fund of the
Tuscarora Investment Trust, and to all references to our Firm included in this
Registration Statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Cincinnati, Ohio
October 25, 1996
Oak Value Fund
Individual
Retirement
Plan
Oak Value Fund
MGF Service Corp.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
1-800-622-2474
OAK VALUE FUND IRA
DISCLOSURE STATEMENT
Oak Value Fund has prepared this Disclosure Statement to set out for you the
manner in which an Individual Retirement Account (IRA) operates. This
Disclosure Statement will cover some areas with which you are already familiar,
but you should read this information along with the other parts of this
brochure, including the Custodial Agreement and the prospectus for any fund in
which your IRA contributions are invested. This is not a comprehensive
discussion of all the rules concerning IRAs nor is it designed to serve as a
substitute for the advice of your lawyer, accountant or other personal tax
or financial advisor.
Revocation Procedure
You will have seven days from the date you complete the Adoption Agreement and
establish the Oak Value Fund IRA to cancel the account for any reason. If you
cancel the IRA, Oak Value Fund will refund all the money you contributed,
without increase or decrease for any reason.
You may cancel your IRA by sending a signed written notice delivered or mailed
within this seven-day period to:
Oak Value Fund IRA
MGF Service Corp.
P.O. Box 5354
Cincinnati, OH 45201-5354
If mailed in a properly addressed, first class postage prepaid envelope, the
date of the postmark, or if certified or registered mail is used, the date of
certification or registration will be used to determine if you notified us
within the seven-day revocation period. If you have any questions about this
revocation procedure, please call us at 800-622-2474.
General Rules Affecting IRAs
As with most laws which provide special tax treatment, there are certain
restrictions and limitations on how you may use an IRA, and the IRS has required
this special statement covering these points. This statement is only a general
discussion of these rules. Further information concerning IRAs can be
obtained at any District Office of the Internal Revenue Service or by reading
IRA Publication 590 "Individual Retirement Arrangements." This statement
discusses only the federal tax treatment of your IRA. State and city income tax
treatment of your IRA may differ, and you should contact your local tax
authorities or your own tax advisor for further information in this area.
An IRA is a Trust or Custodial Account created in the United States for the
exclusive benefit of an individual and his Beneficiary for the purpose of
accumulating funds for retirement. Under the Oak Value Fund IRA, a separate
account will be established for you and will be invested with the Oak Value Fund
as you may direct the Custodian from time to time. The pertinent federal tax
laws include a number of requirements for IRAs, relating among other things to
contributions, use of account assets, when and how distributions can be made to
you and your Beneficiary and when and how distributions will be taxed.
Contributions to Personal Accounts
In general, if you are not age 70 1/2 or older, you are eligible to
contribute to your own IRA. For any year in which you qualify, your
contribution is limited to 100% of your compensation for the year up to a
maximum of $2,000 per year. "Compensation" includes your wages and salary as an
employee and any earnings from self-employment, such as professional fees and
other amounts for your personal services. Compensation does not include passive
income such as dividends, interest, capital gains, income from pensions,
annuities or other deferred compensation or amounts which you receive which are
not includable in taxable income. After 1984, Compensation also includes
alimony received under a qualifying divorce or separation agreement.
Contributions must be made only in cash. If you and your spouse are both
working and each is otherwise eligible, you may each establish a separate IRA
and each may contribute to your own separate account up to the $2,000/100%
limit based on your respective Compensation for the year. You must take any
contributions made to any other IRAs into account to determine the maximum
amount you can contribute and deduct under this IRA. If you acquire an IRA as
the Beneficiary of the IRA owner's estate and you are not the IRA owner's
spouse, you can not make any contributions to that "Inherited IRA."
If, after 1986, you are an active participant in an employer-sponsored
retirement plan, including a Simplified Employee Pension as noted later, the
amount of your contribution which is tax-deductible will be reduced if your
income is between $40,000 and $50,000 if you are married and file a
joint return, $25,000 and $35,000 if you are unmarried and between $0 and
$10,000 if you are married and file separate returns. Note that these rules only
concern the deductibility of your contribution. You can still make
contributions under the regular rules which, although nondeductible, will earn
tax-free income. Nondeductible IRA contributions are not taxable when
distributed to you because you did not get a tax deduction when you put them
into your IRA. There are special rules for determining what part of an
IRA distribution is taxable and what part represents a non-taxable return of
your nondeductible contributions. You must keep track of your nondeductible
contributions under this and any other retirement programs. All your IRAs are
treated as one account for these contribution and distribution rules.
Spousal Accounts
If you qualify to make regular IRA contributions but your spouse does not
because your spouse has no Compensation, or after 1986 has less than $250 in
Compensation, you may establish a separate "Spousal IRA" in addition to your own
IRA and, provided you file a joint tax return and further provided neither
you nor your spouse is age 70 1/2 or older for the year, you may contribute up
to a maximum of $2,250 per year, or 100% of your Compensation if less, between
these two separate IRAs. You may divide these contributions between your
personal IRA and the Spousal IRA as you wish, provided no more than $2,000 is
deposited to either account. If you are 70 1/2 and can no longer make a
contribution to your IRA but your spouse is not 70 1/2, you may make a
contribution to the Spousal IRA based on your Compensation if the other rules
for Spousal IRAs are met.
Due Date for IRA Contributions
Your contribution for any year must be made no later than the date required
for filing your federal income tax return. An extension of time to file your
tax return does not extend your IRA contribution deadline. Unless instructed
otherwise, a contribution will be credited to your IRA for the year it is
received. If after year end, but before your return is filed, you make a
contribution which you want credited for the prior year, make a note of this
fact on your check and any forms you send with it.
SEP-IRA Contributions
If your employer has established a Simplified Employee Pension ("SEP"), your
employer can deposit as much as 15% of your Compensation (up to $22,500 or the
limit approved in future years) in your IRA or an IRA set up for you by your
employer as part of the SEP. In addition, if your employer has a
"Salary Reduction" feature to its SEP, you may elect to reduce the portion of
your Compensation reported as W-2 earnings by up to the $7,000 limit, as
adjusted each year, (the limit is $9,240 for 1994 and 1995) and have your
employer contribute that amount to the SEP on your behalf. If you are an
active participant in a SEP this may affect your ability to make a deductible
contribution as discussed earlier. SEP contributions must be freely
transferable to other IRA Sponsors. This means you can have your employer's
SEP-IRA contribution rolled over or transferred to this IRA if your employer
initially deposits it elsewhere.
Direct Rollovers, Rollover Contributions from Employer-Sponsored Qualified
Plans and Conduit IRAs.
Under certain circumstances, all or part of a distribution, less any
nondeductible, voluntary contributions, from an employer-sponsored retirement
plan (i.e. a "Qualified Plan" like a pension, profit sharing, stock bonus plan
or certain tax-sheltered programs under Section 403(b) of the
Internal Revenue Code or governmental plans) may be received without being
immediately taxable provided the distribution is reinvested in an IRA, or
another Qualified Plan, within 60 days. If you receive such a distribution,
you may roll it over into this IRA within the 60-day period and avoid current
taxes on the amount rolled over, although no tax deduction is available for the
rollover amount. Any part of a distribution not rolled over will be subject to
taxation and will not be eligible for any of the special retirement plan income
tax averaging methods.
If you are entitled to receive an eligible rollover distribution from an
employer's qualified retirement plan, a tax-sheltered program under Section
403(b) of the Internal Revenue Code or a governmental plan, you may request that
the distribution be transferred directly to your IRA rather than be distributed
to you. If you do not choose this "Direct Rollover" option, your employer will
withhold 20% of your eligible rollover distribution and remit it to the IRS on
your behalf. The administrator of the distributing plan is required to give you
information regarding this tax-free Direct Rollover option and the other tax
rules affecting your eligible rollover distribution. The Oak Value Fund IRA may
be used to receive a Direct Rollover from an employer-sponsored qualified
retirement plan, 403(b) tax-sheltered program or certain governmental plans,
provided the rollover consists solely of cash or shares of the Oak Value Fund.
IRAs have distribution rules which are similar, but not identical, to the
distribution rules for Qualified Plans. For example, there are special tax
averaging rules for Qualified Plan distributions which do not apply to IRA
distributions. A rollover from a Qualified Plan (or a rollover from an IRA
which contains amounts previously rolled over from a Qualified Plan) may be
preserved for future rollover into another employers' Qualified Plan so long as
the rollover funds are kept in their own separate IRA, often called a "Conduit
IRA," without any additional contributions being made to that account.
When you establish your "Rollover IRA", please inform us whether this IRA is to
be a Conduit IRA so we may treat the IRA accordingly.
The rules concerning tax-free rollovers are complicated. You should consult
with your financial or tax advisor to make sure your rollover is completed
properly.
Rollover Contributions and Transfers from Other IRAs
Some distributions from IRAs are also eligible for tax-free rollover into
another IRA, as long as the distribution is reinvested in an IRA within 60 days.
If you receive such a distribution, you may roll it over into this IRA within
the 60-day period and avoid current taxes on the distribution, although no tax
deduction is available for the rollover amount. You can make only one rollover
from the same IRA (or other individual retirement savings program) to another
IRA in any one-year period. This "once-a-year" rule applies only to IRA
rollovers and not to Qualified Plan rollovers. Also, if you have several IRAs,
you can make one rollover from each every year.
In addition to this rollover procedure, you can move funds between IRAs
through a "Trustee to Trustee Transfer." In this procedure, funds are not
distributed to or recontributed by you to another IRA. Instead, the Trustee or
Custodian of your present IRA would send your IRA funds directly to us for
credit to your Oak Value Fund IRA under the same rules for rollovers. The
once-a-year limitation for IRA rollovers does not apply to these transfers.
A rollover may be made to the Oak Value Fund IRA provided it consists solely
of cash or shares of the Oak Value Fund.
How the Contributions Must Be Invested
Contributions to an IRA must be placed in a special custodial or trust
account and held by a bank Trustee or Custodian (or other person who has been
approved by the Secretary of the Treasury). No part of your IRA assets may be
invested in life insurance or collectibles or be commingled with other property
except in a common trust fund or common investment fund. Your interest in the
account must be nonforfeitable at all times. The purpose of these rules is to
segregate these savings from other assets so they will be used for retirement
purposes only.
Under the Oak Value Fund IRA, your contributions and the earnings on your IRA
account will be invested in shares of the Oak Value Fund, according to your
instructions to the Custodian from time to time.
Distributions
Since the tax benefit of an IRA is intended to encourage people to save for
retirement, there are limitations on your right to withdraw money from an IRA
before you reach age 59 1/2 (unless earlier death or disability should occur).
While technically the money can be withdrawn at any time, the Internal Revenue
Service imposes a penalty tax of 10% of the taxable amount of any money or
property you receive or use (for example, as collateral for a loan) prior to
that time. Any funds withdrawn or used would also be included in your gross
income for tax purposes. Remember that part of any distribution representing a
return of nondeductible contributions will not be taxable.
The taxable part of any distribution will be classified as ordinary income
even if the program you invest in earns capital gains or tax-exempt income since
you claimed your contribution as a deduction against your ordinary income when
contributed. Monies distributed from an IRA are not eligible for the special
lump sum tax provisions as are funds distributed from a Qualified Plan.
Once you reach age 59 1/2 (or become disabled), you may begin to receive
taxable distributions from your account without the 10% penalty. You must begin
to receive distributions from an IRA by the first day of April of the year after
you reach age 70 1/2. Specifically, a minimum distribution is required to be
made each year beginning with the year in which you attain age 70 1/2. This
minimum distribution is determined by dividing the entire account balance at the
beginning of each year by your life expectancy (or the joint life and last
survivor expectancy of you and your Beneficiary) determined as of the date you
reach age 70 1/2 and/or as recalculated under regulations under the Code. If
you do not receive the minimum distribution required in any year, there is an
IRS penalty of 50% of the amount which you should have received.
Your account may be distributed to you in any one or combination of the
following ways:
1. Any part or all of your account may be paid to you in a lump-sum
cash payment.
2. Any part or all of your account may be paid to you in substantially
equal monthly or other periodic installments for any period not exceeding your
life expectancy or the combined life expectancies of you and your Beneficiary.
You may elect these installment payments under any of the available programs
in which your account is invested.
You may designate or change your Beneficiary at any time. You may also
designate the method of payment to be used after your death. If you die without
a valid designation of Beneficiary in effect, your account will be paid to your
estate. Also, if you fail to designate the method of payment to be used, the
distribution will be made to your designated Beneficiary or your surviving
spouse under the installment method chosen by such Beneficiary. Your
designation of Beneficiary will not be considered a transfer for federal
gift tax purposes. In addition, if you live in a community property state, your
spouse will not be deemed to have made a taxable gift when your entire account
is paid to your Beneficiary.
Distributions after your death will usually be taxable to your spouse or
other Beneficiary as ordinary income when received, just as they would have been
taxable to you. Before 1985, IRA distributions were excludable from your gross
estate for federal estate tax purposes, if they were paid in substantially
equal periodic installments over a period of at least 36 months after your
death. After 1984, all retirement distributions, including IRA distributions
are includable in your gross estate no matter how distributed and as noted later
may be subject to a 15% extra estate tax if they are "Excess Distributions" as
described later.
If an IRA owner dies after December 31, 1983, and the Beneficiary of the IRA
is not the owner's spouse, the Beneficiary may not make any contributions to the
IRA. In addition, this "Inherited IRA" cannot be rolled over to another IRA
and cannot receive any Rollover Contributions.
Prohibited Transactions
In general, you must treat your IRA as an investment solely for the purpose
of accumulating a retirement fund. Transactions between yourself (or your
Beneficiary) and the assets held in the account are not allowed. The specific
prohibited transactions are enumerated in the Internal Revenue Code but include
selling or exchanging a property with the account and other transactions of this
nature. Should a transaction of this type occur, your entire account would
lose its tax-exempt status and be treated as having been distributed to you.
The portion of your account representing deductible contributions would then be
included in your income for that year and could be subject to the 10% penalty
on early distributions.
You are also prohibited from pledging or using any portion of your IRA as
security for a loan. If you do this, the portion used will be treated as having
been distributed to you and will be includable in your income for the year it
was used. You may also incur the 10% tax on premature distributions because of
such a prohibited transaction.
Penalty Taxes
In addition to the 10% penalty for distributions before 59 1/2, you may also
incur penalty taxes in connection with your account under the following
circumstances.
1. Excess Contributions. If part or all of your IRA contribution exceeds
the maximum contribution you are permitted for the year and does not qualify as
a Rollover Contribution, the Excess Contribution will be subject to a 6%
penalty tax unless the excess (along with any earnings) is withdrawn from your
account by the due date (including extensions) for your federal income tax
return for that year (the withdrawn portion may not be claimed as a deduction
for the year and the earnings withdrawn will be for the taxable year you made
the Excess Contribution, even if withdrawn later). But, if you fail to withdraw
the Excess Contribution by the due date of your return, you will incur an
additional 6% penalty tax for each year that it continues to be an excess. To
avoid this recurring penalty tax for later years, you must either withdraw the
excess from the account or absorb it by reducing your future contributions by an
amount corresponding to the excess. Note also that withdrawal of the excess
before you reach age 59 1/2 (unless you are disabled) will result in imposition
of a 10% penalty tax in addition to the ordinary income taxes you must pay on
the distribution. Remember, this 10% penalty tax also applies to any portion
of your account which is treated as having been distributed to you because you
engaged in a prohibited transaction.
2. Excess Accumulations. After you reach age 70 1/2, the 50% penalty tax
noted earlier will be imposed on any amount which is required to be distributed
to you because of the minimum distribution rules and which you fail to
withdraw. In certain cases, the IRS may waive this penalty.
3. Excess Distributions. After 1986, certain "Excess Distributions" from
retirement plans and IRAs are subject to a 15% additional tax. A distribution
of more than the greater of $150,000, or $112,500 (indexed for inflation), in
any year is considered an Excess Distribution. A special additional 15% estate
tax applies to Excess Distributions after death. There are special rules and
exceptions to this 15% additional tax which you should review with your
financial or tax advisor.
Reports to the IRS
You are generally not required to file any special forms with the IRS because
you maintain an IRA. Contributions to and distributions from your IRA are
reported on your federal income tax return. However, you must file Form 5329
with the IRS as a part of your federal income tax return for any year in which
you incur a penalty tax due to Excess Contributions, accumulations or
distributions or premature distributions. There are penalties for failing to
file or late filing of the Form 5329 for any tax year it is required, so
it is extremely important to pay attention to this requirement.
The fund in which your IRA is invested is required to report annual
contributions to the account to the IRS on Form 5498.
If you made a nondeductible contribution to your IRA or if you receive a
distribution from your IRA and you have at any time made nondeductible
contributions, you are required to file a Form 8606, Nondeductible IRAs
(Contributions, Distributions and Basis), with your federal income tax return.
If you receive a distribution from your IRA, you are required to provide
certain information on your tax return for the year in which the distribution
was received. The fund in which your IRA is invested is required to report
distributions from the account on the Form 1099-R.
Income Tax Withholding
We are required to withhold income taxes on distributions from your IRA
unless you have supplied us with correct taxpayer identification information
(your Social Security Number and exempt status, if any). If you do not give us
a withholding certificate (IRS W-4P) we will withhold income tax at a rate of
10%. You can elect out of the IRA withholding rules by providing us with the
appropriately executed forms.
Investments
Under the Oak Value Fund IRA you may invest in the Oak Value Fund. Neither
investment results nor growth in the value of your account can be projected or
guaranteed for a mutual fund, but you should read the prospectus to understand
the Fund's objective and past investment record.
Fees and Charges
The only cost to maintain your IRA is a $10 annual fee. Charges for
terminations and distributions are listed below. These charges will
automatically be charged against each IRA. In some cases, you may be able to
pay these charges separately instead. A separate fee will be charged for
each separate account under a Spousal IRA or where you establish separate
accounts because of rollovers or for other reasons. Of course, the shares of
the fund in which your account is invested will be affected by management fees
and other expenses of that fund. These matters are also discussed in the Fund
prospectus which you received prior to or along with this brochure. The fee
schedule may be changed upon 30 days' written notice to the IRA owner.
Fees and Expenses for the
Oak Value Fund IRA
Annual Maintenance Charge $10
Charge for Termination of Account $10
Charge for Processing Annual Distributions
First Year $10
Each Year Thereafter $ 5
Instructions
In this booklet, we have attempted to answer many of the commonly asked
questions concerning IRAs. The Custodial Agreement and Disclosure Statement,
as required by Internal Revenue Regulations, explain the rules applicable to
IRAs in detail. If you need additional information, to open an
IRA, or to transfer an existing IRA from another institution to us, please call
one of the numbers listed below and talk with one of our qualified IRA
representatives. We will be happy to answer all of your questions.
Nationwide 800-622-2474
Cincinnati 513-629-2070
Oak Value Fund IRA
MGF Service Corp.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Custodial Agreement
Effective January 1, 1994
Approved by Internal Revenue Service
Favorable Opinion Letter Serial Number D180153a
Issued to Midwest Group Financial Services, Inc. on June 13, 1994
By executing the Adoption Agreement, the Participant hereby applies to establish
with Oak Value Fund an Individual Retirement Account intended to qualify under
Section 408 of the Internal Revenue Code.
Article I Definitions
1.1 "Account" shall mean the assets held from time to time by the Custodian
under this Agreement as part of the Oak Value Fund Individual Retirement
Account, on behalf of a Participant, a Participant's Spouse or his or her
Beneficiary or Beneficiaries.
1.2 "Adoption Agreement" shall mean the form prescribed by the Service
Company as executed by or on behalf of the Participant, the Custodian, and the
Service Company, by which the Participant adopted the IRA as set forth herein.
1.3 "Agreement" shall mean this Custodial Agreement, as amended for the Tax
Reform Act of 1986, and the Adoption Agreement.
1.4 "Beneficiary" shall mean the person or persons designated by a
Participant, a Participant's spouse or a person otherwise specified pursuant
to Section 4.5 to receive benefits by reason of the death of a Participant or
such Spouse.
1.5 "Code" shall mean the Federal Internal Revenue Code of 1986, as amended
from time to time, or other statute of similar import.
1.6 "Custodian" shall mean the bank or other person named as such in the
Adoption Agreement or any successor Custodian selected or approved by the
Sponsor.
1.7 "Excess Contribution" shall mean that portion of any contribution, other
than a Rollover Contribution under Section 2.2, by or on behalf of a Participant
which exceeds the limitations of the Code with respect to the Year in question.
1.8 "Investment Company" shall mean any one or more investment companies for
which Oak Value Capital Management, Inc. or its affiliates or successors serve
as an investment adviser or principal underwriter which has been designated by
the Participant in the Adoption Agreement or subsequent written, or if
authorized, telephone instructions, and "Investment Company Shares" shall mean
shares of any one or more of the Investment Companies, provided that the then
current form of Adoption Agreement and the prospectus of such company offers its
shares to a Participant. The word Fund(s) may be used to mean investment
companies.
1.9 "Participant" shall mean the individual whose name or names appear as
such in the Adoption Agreement and the individual's successors, assigns, or
Beneficiaries.
1.10 "IRA" shall mean an individual retirement account under Code Section
408(a), including the Oak Value Fund Individual Retirement Account under this
Agreement, an individual retirement annuity under Code Section 408(b) and an
individual retirement bond under Code Section 409, before repeal by the Tax
Reform Act of 1986. The term "IRA" shall also mean an IRA established for a
Participant's spouse under Code Section 219(c) (a "Spousal IRA"); an IRA
established by an employer or association of employees under Code Section 408(c)
(an "Employer IRA"); an IRA under a Simplified Employee Pension ("SEP") under
Code Section 408(k) (a "SEP-IRA"); an IRA established or maintained to receive
a Rollover Contribution from another IRA or a qualified employer or governmental
plan (a "Rollover IRA"); an IRA established solely to receive distributions from
an employer Qualified Plan which may be rolled over to another employer
Qualified Plan under Code Sections 402(a)(5), 402(a)(7), (402(c) for years
beginning after December 31, 1992), 403(a)(4) or 403(b)(8) (a "Conduit IRA");
and an IRA acquired by an individual other than a surviving spouse, upon the
death of an IRA Participant under Code Section 408(d)(3)(C) (an "Inherited
IRA").
1.11 "Rollover Contribution" shall mean a contribution described in Section
402(a)(5), 402(a)(7), (402(c) for years beginning after December 31, 1992),
403(a)(4), 403(b)(8) or 408(d)(3).
1.12 "Service Company" shall mean MGF Service Corp. or its successors and
assigns as designated by the Sponsor pursuant to this Agreement.
1.13 "Sponsor" shall mean Midwest Group Financial Services, Inc.
("Midwest Group"), its successors and assigns.
1.14 "Year" shall mean the calendar year.
Article II Contributions to Account
2.1 Annual Cash Contributions. Except in the case of a Rollover
Contribution, for each Year before age 70 1/2, there may be contributed to the
Account by or on behalf of a Participant such amount of cash not to exceed
whichever of the following is applicable, as determined by the Participant.
(a) the lesser of $2,000 or 100% of the Participant's Compensation for
such Year; or
(b) if either the Participant or the spouse with whom the Participant
files a joint tax return for the year has or elects to be treated as having
no Compensation for such Year, the aggregate amount contributed by or on
behalf of the Participant (or if the Participant has or elects to be treated
as having no Compensation, by or on behalf of such spouse) to this Plan, and
to a similar custodial account or trust fund for the Participant's spouse,
may not exceed the lesser of $2,250 or 100% of Compensation for such Year
provided, however, that no more than $2,000 may be contributed in any Year
to the Participant's Account, and no more than $2,000 may be contributed in
any Year to the custodial account or trust fund for the Participant's
spouse.
No contribution will be permitted to an Account which is an Inherited IRA.
Contributions in excess of the limitations in this Section 2.1 may be an Excess
Contribution subject to the 6% excise tax of Code Section 4973 unless such
Excess Contribution is corrected as provided in Section 2.3.
2.2 Rollover Contributions and Plan to Plan Transfers. In addition to any
annual contributions referred to in Section 2.1, but subject to this Section
2.2, a Participant may contribute or cause to be contributed to the Account at
any time a Rollover Contribution of such cash or other property as shall
constitute such Rollover Contribution. The Service Company will accept for the
Account all Rollover Contributions which consist of cash and/or Investment
Company Shares. The Service Company may, but shall be under no obligation to
accept any other form of property in a Rollover Contribution but if the Service
Company elects to accept such Rollover Contribution property, it will accept
all, but not less than all, of such Rollover Contribution.
No Rollover Contribution may be made to this Account from an IRA if within
the one year period before such distribution a Rollover Contribution had been
made from the same IRA. In addition, no Rollover Contributions may be made to
or from an IRA which is an Inherited IRA. Rollover Contributions will be
credited by the Service Company to any of the forms of IRAs described in Section
1.10. In the event the Participant establishes a Conduit IRA no further tax
deductible contributions may be added to such Account.
In addition to Rollover Contributions, the Service Company may, at its
discretion, accept a transfer of assets directly from a Custodian or Trustee of
an IRA or qualified governmental or employer plan (a "Plan to Plan Transfer").
The Participant may also request the Service Company to transfer all or a
portion of the Account to another IRA. Subject to the rules of this Section
2.2 relating to Rollover Contributions, such Plan to Plan Transfers may be in
cash, Investment Company Shares or other property.
2.3 Treatment of Excess Contribution. If a Participant notifies the Service
Company in writing that all or any portion of the amount contributed to the
Account by or on behalf of the Participant with respect to any Year is an Excess
Contribution, and if such written notice specifies the amount of such Excess
Contribution, the Service Company will at the election of the Participant,
either (a) distribute such Excess Contribution from the Account to the
Participant, or (b) subject to the limitations in Section 2.1, credit such
Excess Contribution as if it were a cash contribution by or on behalf of the
Participant for the current Year. If the Participant's notice indicates that he
intends for a distribution pursuant to subdivision (a) of the preceding
sentence to comply with Section 408(d)(4) of the Code (concerning a return of
Excess Contributions and net income thereon prior to the due date of the
Participant's tax return), the Service Company will, not later than the tenth
business day following receipt of the Participant's notice, distribute
to the Participant the Excess Contribution plus the amount of income
attributable to such Excess Contribution.
2.4 Responsibility of Service Company and Custodian. Neither the Service
Company nor the Custodian shall be responsible for the deductibility under
Section 219 of the Code of any contribution to the Account, for the
classification of any contribution as a Rollover Contribution or for the
propriety of any Plan to Plan Transfer and under no circumstances shall the
Service Company or the Custodian be liable to a Participant for any disallowance
of such deduction, for the failure of a contribution to qualify as a Rollover
Contribution or for the failure of a contribution to qualify as a Plan to Plan
Transfer.
2.5 Service Company to Maintain Records. The Service Company and the
Custodian shall maintain records showing the Investment Company Shares and any
other property credited to the Account of the Participant and shall maintain
such other accounts and records as it deems necessary to administer the
Accounts of all Participants in Oak Value Fund IRAs. The Service Company shall
not maintain any records concerning the deductibility of contributions to this
Account.
Article III Investment of Account
3.1 Investment Company Shares. The Custodian will invest all contributions
by or on behalf of a Participant in accordance with the written instructions of
the Participant as set forth in the Adoption Agreement or in subsequent writings
or, if so authorized, by telephone instructions delivered to the Service
Company prior to or at the time of the contribution, in full and fractional
Investment Company Shares. The Custodian will invest contributions in
Investment Company Shares within a reasonable time after receipt. The
Participant acknowledges that neither the Service Company nor the Custodian
has rendered or undertakes to render any investment advice whatsoever, and that
the assets in the Account are to be invested and controlled exclusively by the
Participant (or Beneficiary, if applicable) pursuant to the provisions of the
Agreement, and the Participant may at any time alter the investment of such
assets by giving instructions as set forth in Section 3.5.
3.2 Reinvestment of Earnings. All dividends, gains, or other distributions
received in respect of Investment Company Shares (unless received in additional
shares of Investment Companies held in Account), and all income and
distributions of every nature received in respect of any Rollover Contribution
or Plan to Plan Transfer (after liquidation to cash, if necessary, in accordance
with Section 3.3) will be reinvested in full and fractional Investment Company
Shares held in the Account. If any distribution in respect of Investment
Company Shares may be received, at the election of the shareholder, in cash
or other property, the Custodian will elect to receive such distribution in
additional shares. If a cash distribution is received in respect of shares of
a single Investment Company, the Custodian will reinvest such cash in additional
shares of that Investment Company. If any earnings or other distribution is
received in respect of the assets of the Account the reinvestment of which is
not covered by the two preceding sentences, then the distribution will be
liquidated to cash if necessary and will be reinvested in additional full and
fractional Investment Company Shares in proportion (to the extent practicable)
to the respective values of the Investment Company Shares held in the Account on
the date such reinvestment is made. The charges described in the applicable
prospectus(es) and other charges attributable to the investment in such
Investment Company Shares will be charged to the Account.
3.3 Investment of Rollover Contribution and Plan to Plan Transfers.
Submission of a Rollover Contribution or Plan to Plan Transfer by or on behalf
of a Participant shall be deemed to be the instruction of the Participant to the
Service Company that, if such Rollover Contribution or Plan to Plan Transfer is
accepted, the Service Company will use its best efforts to sell for the
Participant's Account whatever portion of the Rollover Contribution or Plan to
Plan Transfer does not consist of cash and Investment Company Shares.
The Custodian shall invest the proceeds of any such sale in accordance with
Section 3.2. To the extent permitted by law, neither the Service Company nor
the Custodian shall be liable to anyone for any loss of income or appreciation
with respect to the proceeds thereof after such sale and prior to investment
pursuant to Section 3.2; or for any failure to effect such sale if such property
proves not readily marketable in the ordinary course of business. Unless
otherwise authorized by the Service Company and instructed by the Participant,
all brokerage and other costs incidental to the sale or attempted sale of such
property will be charged to the Account.
3.4 Insurance Contracts; Collectibles; Commingling. No part of the Account
will be invested in life insurance contracts. No part of the Account will be
invested in collectibles, as defined in Code Section 408(m). No part of the
Account will be commingled with any other property except in a common trust fund
or common investment fund which includes only assets of individual retirement
accounts and the assets of trusts exempt from taxation under Section 501(a) of
the Code which are parts of plans described in Section 401(a) of the Code.
3.5 Instructions as to Investments. A Participant (or following the death
of the Participant, his Beneficiary) may at any time, by written instructions
(or, if so authorized in the Adoption Agreement, by telephone instructions)
delivered to the Service Company:
(a) instruct the Service Company to exchange all or any part of the
Investment Company Shares held in the Account for shares of any other Investment
Company or Companies available under this Agreement, provided (i) that the
Custodian, as holder of such shares, then has the right to exchange such shares
for the shares designated by the Participant, and (ii) that the then current
prospectus for the shares so designated allows such exchange on the basis
requested;
(b) instruct the Service Company to exchange all or any part of the
Investment Company Shares held in the Account and to invest the redemption
proceeds in the shares of any other Investment Company available under the
Agreement, provided (i) that such other Investment Company is then making a
public offering of its shares, and (ii) that the shares of such other Investment
Company may be sold in the state of residence of the Participant, or
(c) instruct the Service Company to invest all of any new contribution made
by or on behalf of the Participant (except for any non-cash portion of a
Rollover Contribution deemed not readily marketable by the Service Company) in
Investment Company Shares available under the Agreement but not then held
in the Account, provided (i) that such designated Investment Company is then
making a public offering of its shares, and (ii) that the shares of such
designated Investment Company may be sold in the state of residence of the
Participant.
All charges incidental to carrying out such instructions will be charged
to the Account, unless otherwise authorized by the Service Company and
instructed by the Participant. All such instructions will be in writing and
will be in a form acceptable to the Service Company. By delivering such
instructions to the Service Company, the Participant (or Beneficiary, if
applicable) will be deemed to have acknowledged receipt of the then current
prospectus for the shares of the Investment Company in which the investment is
to be made.
Article IV Distributions from Account
4.1 General Requirements as to Distributions. Subject to the provisions of
this Article IV, the Custodian will distribute a specified portion of the
Account, the entire Account or the remaining balance thereof to the Participant
(or Beneficiary, if applicable) on such date and in such manner as the
Participant (or Beneficiary, if applicable) shall have specified in written
instructions to the Service Company. All instructions as to distribution shall
be written, shall be signed by the Participant (or Beneficiary, if applicable),
and shall be delivered to the Service Company. The Service Company shall
process the instructions no later than the tenth business day after receipt
thereof. If instructions as to distributions are, in the opinion of the Service
Company, not clear, the Service Company shall request clarification from the
Participant or other person requesting distribution, and pending receipt of such
clarification, no distribution shall be made. Except in the case of the
Participant's death, disability (as defined in Section 72(m)(7) of the Code) or
attainment of age 59 1/2, or in the case of a return of Excess Contribution
under Section 2.3, before the Service Company shall be required to cause
distribution of any amount to the Participant to occur, the Service Company
shall have received from the Participant a written declaration of his intention
as to the disposition of the amount to be distributed. The Service Company may
require such certificates or other proof as to the age, death, or disability of
the Participant or other matters as the Service Company deems necessary for it
to establish the reasons for, or intended disposition of, the distribution.
4.2 Methods of Distribution. Subject to the requirements of this Article IV
and any regulations issued under the Code, a Participant (or Beneficiary, if
applicable) may elect to have his Account distributed in one or more of the
following methods:
(a) Partial Distribution. The Participant (or Beneficiary, if applicable) may
request in writing that a specific amount of money or a specific number of
Investment Company Shares be liquidated and distributed from the Account to the
Participant.
(b) Periodic Distributions. The Participant (or Beneficiary, if applicable)
may request in writing that a specific amount of money or a specific number of
Investment Company Shares be liquidated and distributed from the Account on a
monthly, quarterly, or annual basis, subject to any minimum distribution
amounts required by the Service Company from time to time.
(c) Lump Sum Distribution. The Participant (or Beneficiary, if applicable)
may request in writing that the entire Account either be distributed in kind or
liquidated and distributed in cash to the Participant.
Notwithstanding that distribution may have commenced pursuant to this Section
4.2, the Participant (or Beneficiary, if applicable) may, at any time, instruct
the Service Company to accelerate or decelerate payments or to make distribution
of the balance in the Account pursuant to Section 4.2(c).
4.3 Required Minimum Distributions to Participant. Upon the written request
of the Participant, the entire value of the Account of the Participant will be
distributed or commence to be distributed, no later than the first day of April
following the Year in which such Participant attains age 70 1/2
(Required Beginning Date), over a period certain not extending beyond the life
expectancy of the Participant or the joint and last survivor expectancy of the
Participant and his Beneficiary.
The amount to be distributed each year, beginning with the first Year for
which distributions are required and then for each succeeding Year, shall not
be less than the lesser of the entire value of the Account or the quotient
obtained by dividing the Participant's benefit by the lesser of (a) the
applicable life expectancy or (b) if the Participants' spouse is not the
Beneficiary, the applicable divisor determined from the table set forth in
Q&A-4 or Q&A-5, as applicable of Section 1.401(a)(9)-2 of the Proposed Income
Tax Regulations.
Distributions after the death of the Participant shall be distributed using
the applicable life expectancy as the relevant divisor without regard to
Proposed Regulation Section 1.401(a)(9)-2.
Life expectancy is computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations. The
Participant will make an election to either recalculate life expectancy annually
or not recalculate life expectancy annually. Such election shall be irrevocable
by the Participant and shall apply to all subsequent years. The life expectancy
of a non-spouse Beneficiary may not be recalculated. Instead, life expectancy
will be calculated using the attained age of such Beneficiary during the Year in
which the Participant attains age 70 1/2, and payment for subsequent years shall
be calculated based on such life expectancy reduced by one for each Year which
has elapsed since the Year life expectancy was first calculated.
However, no distribution needs to be made in any Year, or a lesser amount
may be distributed, if at the Required Beginning Date, the aggregate amounts
distributed by such date are at least equal to the aggregate of the minimum
amounts required to have been distributed by such date in accordance with the
preceding paragraphs.
Notwithstanding anything to the contrary contained herein, a Participant may
satisfy the minimum distribution requirements under Sections 408(a)(6) and
408(b)(3) of the Code by receiving a distribution from one IRA that is equal to
the amount required to satisfy the minimum distribution requirements for two or
more IRAs. For this purpose, the owner of two or more IRAs may use the
"alternative method" described in Notice 88-38, 1988-1 C.B.524, to satisfy the
minimum distribution requirement described above.
4.4 Required Minimum Distributions Upon the Death of the Participant. If
the Participant dies after distribution of his interest has begun, the remaining
portion of such interest will continue to be distributed at least as rapidly as
under the method of distribution being used prior to the Participant's death.
If the Participant dies before distribution of his interest begins,
distribution of the Participant's entire interest shall be completed by December
31 of the Year containing the fifth anniversary of the Participant's death
except to the extent that an election is made to receive distributions in
accordance with (a) or (b) below:
(a) If the Participant's interest is payable to a Beneficiary, then the
entire interest of the Participant may be distributed over a period
certain not greater than the life expectancy of the Beneficiary
commencing on or before December 31 of the Year immediately following
the Year in which the Participant died.
(b) If the Beneficiary is the Participant's surviving spouse, the date
distributions are required to begin in accordance with (a) above shall
not be earlier than the later of
(1) December 31 of the Year immediately following the Year in which the
Participant died or
(2) December 31 of the Year in which the Participant would have
attained age 70 1/2.
(c) If the Beneficiary is the Participant's surviving spouse, the spouse may
treat the account as his own Individual Retirement Arrangement (IRA).
This election will be deemed to have been made if such surviving spouse
makes a regular IRA contribution to the Account, makes a Rollover
Contribution to or from such Account or fails to elect any of the above
provisions.
Life expectancy is computed by use of the expected return multiples in Tables V
and VI of Section 1.72-9 of the Income Tax Regulations. For purposes of
distributions beginning after the Participants' death, if the surviving spouse
is the Beneficiary, the surviving spouse will make an election to either
recalculate life expectancy annually or not recalculate life expectancy
annually. Such election shall be irrevocable by the surviving spouse and shall
apply to all subsequent years. In the case of any other Beneficiary, life
expectancies shall be calculated using the attained age of such Beneficiary
during the Year in which distributions are required to begin pursuant to this
section, and payments for any subsequent Year shall be calculated based on such
life expectancy reduced by one for each Year which has elapsed since the Year
life expectancy was first calculated.
Distributions under this section are considered to have begun if the
distributions are made on account of the Participant reaching his required
beginning date. If the Participant receives distributions prior to the required
beginning date and the Participant dies, distributions will not be considered to
have begun.
4.5 Beneficiary. A Participant may designate a Beneficiary at any time and
any such prior designation may be changed or revoked at any time by a
Participant by written designation signed by the Participant on a form
acceptable to and filed with the Service Company; provided, however, that no
such designation, or change or revocation of a prior designation, shall be
effective unless received by the Service Company within thirty (30) days after
the death of the Participant, and provided further that the last such
designation of Beneficiary or change or revocation of Beneficiary executed by
the Participant, if received by the Service Company within the time specified,
shall control. If the Participant had not, by the date of his death properly
designated a Beneficiary in accordance with the preceding sentence, or if no
designated Beneficiary survives the Participant, the Participant's Beneficiary
for the purposes of this Agreement shall be the Participant's estate.
Unless otherwise specified in the form of designation of Beneficiary filed
by the Participant in accordance with the preceding paragraph, if a Beneficiary
shall die prior to receiving his entire interest in the Account, such
Beneficiary's remaining interest in the Account shall be paid to the estate
of such deceased Beneficiary; except that if (i) distribution to the Participant
had commenced pursuant to Section 4.3 under a method of distribution providing
for continuation of payments to the Participant's surviving spouse, and if (ii)
the Participant predeceases such surviving spouse, and if (iii) the Participant
did not otherwise specify in his written form of designation of Beneficiary,
then such surviving spouse shall be entitled to designate a Beneficiary to
receive the balance of the Account, if any, remaining upon the death of such
spouse.
4.6 Responsibility of the Custodian and Service Company. Neither the
Custodian nor the Service Company assumes, nor shall either of them have, any
responsibility to make any distribution unless and until instructions relating
thereto and in conformity with this Article IV have been received by the Service
Company. Neither the Custodian nor the Service Company assumes, nor shall
either of them have, any responsibility or liability for the timing, purpose
or propriety of any distribution from a Participant's Account, which matters
are and shall be the exclusive responsibility of the Participant or his
Beneficiary.
Article V Concerning the Custodian and the Service Company.
5.1 Powers and Duties of the Custodian. In addition to, and not in
limitation of, such powers as the Custodian has by law or under any other
provisions of this Agreement, the Custodian shall, subject to the limitations
set forth in Article III, have the following powers:
(a) to deal with all or any part of the assets in the Account;
(b) to retain uninvested (without liability for interest) such cash of the
Account held hereunder where investment of such cash in Investment
Company Shares is delayed for any reason;
(c) to enforce by suit or otherwise, or to waive its rights on behalf of the
Account held hereunder, and to defend claims asserted against it or the
Account, provided that the Custodian is indemnified to its satisfaction
against liability and expenses;
(d) to compromise, adjust and settle any and all claims against or in favor
of it or the Account;
(e) to vote, or give proxies to vote, any stock or other security, and to
waive notice of meetings, but only to the extent specified in Section
5.6 below;
(f) to oppose, or participate in and consent to, the reorganization, merger,
consolidation or readjustment of the finances or capitalization of any
enterprise, to pay assessments and expenses in connection herewith, and
to deposit securities under deposit agreements;
(g) to hold securities unregistered or to register them in its own name or
the name of nominees;
(h) to make, execute, acknowledge and deliver any and all instruments that
it deems necessary or appropriate to carry out the powers of an owner
with respect to all or any part of the Account.
5.2 Responsibility of Custodian and Service Company. To the extent
permitted by law, neither the Custodian nor the Service Company shall be liable
for any action or non-action taken pursuant to the instructions of the
Participant (or Beneficiary, if applicable), nor shall either of them be liable
for any loss which may be incurred by the Account held hereunder except to the
extent that such loss has been caused by its bad faith or negligence. The
Custodian and the Service Company serve solely to receive and invest
contributions as directed by the Participant, to hold such investments, to
reinvest all distributions made with respect thereto, to make distributions as
directed by a Participant, and to keep records with respect to the Participant's
Account, all in accordance with the provisions of this Agreement. To the extent
permitted by law, neither the Custodian nor the Service Company shall be liable
to anyone for any loss, or by reason of any breach, which results from the
Participant's (or Beneficiary's, if applicable) exercise of control over the
assets in his Account.
5.3 Responsibility as to Contributions, Transfers or Distribution. Neither
the Custodian nor the Service Company will under any circumstances be
responsible for the timing, purpose or propriety of any contribution, any
transfer or any distribution made hereunder. The Code imposes a tax upon a
Participant if any Excess Contribution is made to a Participant's Account, or
if any early distribution (referred to in Section 72(t) of the Code) is made
from the Participant's Account prior to attaining the age of 59 1/2 years
(except in the case of death or disability), or if distributions to the
Participant are not made or commenced prior to the first day of April of the
Year following the Year in which the Participant attains age 70 1/2, or if
distributions are made in a timely fashion but are insufficient in amount.
Neither the Custodian nor the Service Company shall incur any liability or
responsibility for any such tax which shall be the sole responsibility of the
Participant.
5.4 Fees and Expenses. The fees of the Custodian and the Service Company
for performing their duties hereunder shall be in such reasonable amount as each
shall establish from time to time. Until further notice, the fees for the
Account shall be as set forth in the Disclosure Statement. The Account may
incur expenses for sales charges upon the investment of funds, and the Custodian
and the Service Company may incur expenses specifically attributable to the
Account of a Participant (such as, without limitation, fees for special legal
services, taxes levied or assessed on the Account, or special expenses incurred
in connection with the liquidation or retention of all or part of a Rollover
Contribution or Plan to Plan Transfer). All such fees and expenses shall be
collected by the Service Company, either by redemption or sufficient Investment
Company Shares and application of the redemption proceeds to pay such fees and
expenses or by billing the Participant directly.
5.5 Actions in the Absence of Specific Instructions. If the Service Company
receives no response to communications sent to the Participant at the
Participant's last known address as shown in the records of the Service Company,
or if the Service Company determines on the basis of evidence satisfactory to
it, that the Participant is legally incompetent, the Service Company may make
such determinations with respect to distributions, investments and other
administrative matters arising under the Agreement as it considers reasonable
(notwithstanding any instructions or directions given by or on behalf of the
Participant). However, no distributions will be made from the Account unless
and until written instructions are received from a court appointed guardian or
legally appointed representative. The Service Company will require such
documents as it deems necessary to determine the status of the person requesting
distribution from the Account on behalf of the Participant prior to making such
distribution.
5.6 Voting with Respect to Investment Company Shares. A Participant may
direct the Custodian as to the manner in which any Investment Company Shares
(including fractional shares) held by the Custodian in such Participant's
Account shall be voted with respect to any matters coming before any meeting
of shareholders of the Investment Company which issued such shares. All such
directions by the Participant shall be in writing on a form approved by the
Service Company signed by the Participant, and delivered to the Service Company
within the time prescribed by it. The Custodian shall vote only those
Investment Company Shares with respect to which the Service Company has received
timely written directions from the Participant. Subject to any requirements of
applicable law, the Service Company shall deliver to a Participant copies of any
notice of shareholders' meetings, proxies and proxy-soliciting materials,
prospectuses, and the annual and other reports to shareholders which have been
received by the Custodian with respect to Investment Company Shares held by the
Custodian in the Participant's Account.
5.7 Nonforfeiture of Benefits. The Account shall be held for the exclusive
benefit of the Participant and his Beneficiary. The interest of the Participant
in the balance of the Account shall at all times be nonforfeitable, but shall be
subject to the fees and expenses described in Section 5.4.
Article VI Spendthrift Provisions
The interest of a Participant in the Account shall not be transferred, pledged
or assigned by a voluntary or involuntary act of the Participant or by operation
of law; nor shall it be subject to alienation, assignment, garnishment,
attachment, receivership, execution or levy of any kind. Any such assignment
or pledge of an IRA under this agreement shall be taxable as a distribution and
if the Participant has not attained age 59 1/2, shall be subject to a 10% excise
tax under the Code. Notwithstanding the foregoing, in the event of a property
settlement between a Participant and his former spouse pursuant to which the
transfer of a Participant's interest hereunder, or a portion thereof, is
incorporated in a divorce decree or in a written instrument incident to such
divorce, the interest so decreed to be the property of such former spouse shall
be re-registered in a separate Account then established hereunder for the
benefit of such former spouse. In the event of such a transfer incident to a
divorce, such former spouse shall be deemed to be a Participant under this
Agreement as to such new separate Account.
Article VII Amendment and Termination; Resignation or Removal of Custodian
7.1 Amendment. The Participant and Custodian may authorize and direct the
Service Company to amend this agreement in any respect at any time (including
retroactively) effective on a stated date, so that it may conform with
applicable provisions of the Code as in effect from time to time or in order
to obtain expeditiously an Internal Revenue Service determination, opinion or
ruling the such requirements are met, or to conform this Agreement with other
applicable law. Any such amendment shall be effected by delivery to the
Custodian and mailing to the Participant at his address as shown in the records
of the Service Company a copy of a written instrument executed by the Service
Company setting forth such amendment.
Any amendment to this Agreement other than one made for the purposes set
forth in the preceding paragraph shall require the consent of the Participant
and the Custodian; provided, however, that no such amendment shall deprive a
Participant or his Beneficiary of any amount to which he was entitled prior to
such amendment (unless such amendment is necessary to conform this Agreement to,
or to satisfy the conditions of, Section 408 of the Code or other applicable
law), and provided further than no such amendment shall permit any asset held
hereunder to be diverted to a purpose other than for the exclusive benefit of a
Participant (or Beneficiary, if applicable) for whom it is then held.
7.2 Resignation or Removal of Custodian and Service Company. The Custodian
or the Service Company may resign at any time, upon thirty (30) days' written
notice to the Participant; and the Custodian or the Service Company may be
removed at any time by the Participant upon thirty (30) days' written notice.
Upon notice of such resignation or removal of the Custodian, the Participant
shall appoint a successor Custodian, which successor shall satisfy the
requirements set forth in Section 408(1)(2) of the Code. Upon receipt by the
Custodian of written notice of such appointment by the successor Custodian, the
assets of the Account, together with copies of relevant books and records, shall
be transferred to such successor Custodian. The Custodian is authorized,
however, to reserve such sum of money or property as it may deem advisable
for payment of any liabilities constituting a charge on or against the assets of
the Account held hereunder, or on or against the Custodian or the Service
Company, with any balance of such reserve remaining after the payment of all
such items to be paid over to the successor Custodian. The successor
Custodian shall hold the assets paid over to it under terms similar to those of
this Agreement that qualify under Section 408 of the Code. The Custodian shall
not be liable for the acts or omissions of any successor to it. If within
thirty (30) days after notice of the Custodian's resignation or removal the
Participant has not appointed a successor Custodian which has accepted such
appointment, the Custodian shall terminate the Account in accordance with
Section 7.3, and this Agreement shall thereupon terminate.
Upon resignation of the Service Company, it may designate a successor to take
over its rights, functions and responsibilities hereunder, and upon such
successor's acceptance of such designation, the Service Company shall transfer
to such successor all records (or copies thereof) pertaining to the Account.
Upon removal of the Service Company, or if, upon its resignation, the Service
Company should fail to designate a successor to itself, the Service Company
shall transfer to the Participant, or to the person designated by the
Participant, all records (or copies thereof) pertaining to the Account, provided
that it may require, as a condition to such transfer, that the transferee agrees
not to dispose of any such records without the consent of the Service Company.
7.3 Termination. The Participant may at any time terminate the Account
under the Agreement by delivering to the Service Company a written notice of
termination signed by the Participant; provided, however, that if such
termination occurs prior to the Participant's death, disability (as
defined in Section 72(m) of the Code), or attainment of age 59 1/2, the
Participant shall furnish the Service Company with a written declaration of his
intention as to the disposition of the amount to be distributed in accordance
with the requirement set forth in Section 4.1. The Custodian may terminate
the Account under this Agreement under circumstances described in Section 7.2.
Termination of an Account under this Agreement shall be effected by the
Custodian's distributing the assets held hereunder in a lump sum in cash or in
kind to or for the benefit of the Participant (or Beneficiary, if applicable),
subject to the reserving of such funds as may be necessary to pay the fees
and expenses referred to in Section 5.4. Termination of this Agreement shall
occur automatically upon distribution of all assets held hereunder. Upon such
termination, the Custodian and the Service Company shall be relieved from all
further liability with respect to this Agreement.
Article VIII Miscellaneous
8.1 Notices. All notices required to be given by the Custodian or the
Service Company to the Participant shall be deemed to have been given when sent
by mail to the address of the Participant in the records of the Service Company.
All notices required to be given by the Participant to the Custodian or the
Service Company shall be deemed to have been given when received by the Service
Company at its principal office. Whenever the Custodian or the Service Company
is required or authorized to take any action under the Agreement on the
direction of a Participant, such action shall be taken on the direction of the
duly appointed representative of the Participant or his estate, in the event of
his incompetency or death.
8.2 Governing Law. This Agreement shall be construed, administered, and
enforced according to the laws of the State of Ohio, except as superseded by
Federal law or statute.
8.3 Prohibited Transactions. The Participant shall not engage in any
transaction with respect to the Account which, pursuant to Sections 408(e)(2)
and 4975 of the Code, might cause the Account to cease to qualify as an
"Individual Retirement Account."
8.4 Construction of Terms. In this Agreement, the masculine gender shall
include the feminine, the plural shall include the singular, and the singular
the plural, unless the context otherwise requires.
8.5 Information and Reports. The Participant shall furnish to the Service
Company, and the Service Company shall furnish to the Participant and
appropriate governmental agencies, such information relevant to the Account as
may be required under the Code and any regulations issued or forms adopted
by the Treasury Department thereunder, or under the other applicable laws.
Notwithstanding anything to the contrary contained herein, and as governed by
the prospectus(es) of the particular Investment Company Shares which may be held
in the Account, the Participant will receive a report concerning the status of
the Account at least once each Year (as long as there are assets in the Account
at any time during that Year).
8.6 Tax Withholding. The Participant shall furnish to the Service Company,
at such times and in such manner as requested by the Service Company, all
information necessary to comply with Treasury Department laws and regulations
concerning withholding of income taxes from distributions from IRAs. The
Participant acknowledges and agrees that if such information, including but not
limited to the Participant's tax identification number, is not furnished in a
timely manner, the Service Company will withhold and pay over to the Treasury
Department, and any other state or local authorities, the amount of income tax
otherwise required to be withheld.
<PAGE>
OAK VALUE FUND IRA
What is an IRA?
An Individual Retirement Account is a special kind of personal savings plan
that will enable you to accumulate money for retirement. The key benefits of an
IRA are that, in many cases, contributions are tax-deductible and all earnings
(from dividends, interest and gains) accumulate tax-free. No taxes are paid
until you begin to withdraw funds from your IRA. Even if you already
participate in an employer-sponsored pension, profit sharing or other retirement
or savings plan, you are still eligible to establish an IRA.
Contributions
How much can I put into an IRA?
If you are employed and under age 70 1/2, you may put in up to $2,000 from your
own income; $2,250 in two accounts if you are employed and your spouse is not
(with a maximum of $2,000 in any one account); $4,000 in two accounts if both
you and your spouse are employed and each earns at least $2,000 for the year
(with a maximum of $2,000 in any one account). Contributions may be made during
the calendar year, or no later than April 15 of the following year (even if you
obtain an extension for filing your tax return). Whether or not your
contribution is fully deductible depends upon whether you or your spouse is
covered by a qualified retirement plan at work and your income. The following
table illustrates the limitations on deductions:
Limits on Deductible Contributions for Individuals
Covered by an Employer-Sponsored Plan
Gross Income for Gross Income for
Classification Fully Deductible IRA Partially Deductible IRA
Single $25,000 $35,000
Married/Joint $40,000 $50,000
When should I contribute to my IRA?
To make the most of this tax break, you should consider making your yearly
contribution to your tax-deferred plan as soon after January 1 as possible.
(You are not just sheltering your contribution, you are also sheltering the
earnings, and the sooner you put money into the account, the sooner you protect
the earnings from taxes.) In order to qualify for a deduction on the current
year's tax return, your contribution must be made on or before April 15 of the
following year.
Must I contribute the same amount each year?
No - you may contribute any amount as long as you do not exceed the maximum
allowed.
Distributions
When can I take money out of my IRA?
You can start withdrawing funds from your IRA when you reach age 59 1/2. You
must start taking funds out by April 1 of the year following the year you reach
70 1/2. Withdrawals before age 59 1/2 can be made without any tax penalty in
the case of death or disability. Otherwise, you must pay a 10% tax penalty on
the amount withdrawn and declare the distribution as ordinary income for federal
income tax purposes.
BENEFITS OF THE OAK VALUE FUND IRA
Professional Management.
Investments are actively managed by full-time investment professionals.
Low Minimum Investment.
You can open an IRA with as little as $1,000.
No Set-Up Fee.
There is no fee for establishing an IRA. See the applicable prospectus for
details. There is a $10 annual maintenance fee.
Automatic Investment.
To establish an ongoing investment program, simply determine the amount you want
to invest each month. It can be automatically withdrawn from your checking
account for deposit into your IRA.
Rollovers/Transfers.
IRAs provide a continuing tax-deferral for rollovers from qualified employer-
sponsored retirement plans and from other IRAs. An IRA can also be used to
receive a transfer directly from the Trustee of another IRA or a Direct Rollover
from a qualified employer-sponsored retirement plan.
IRAs may also be used to receive an employer's Simplified Employee Pension (SEP)
contributions.
Convenience.
All safekeeping of securities, collection of interest and recordkeeping is
performed by the Custodian. You receive easy-to-read statements.
Benefits of an IRA.
The following table demonstrates the substantial advantage of using an IRA to
accumulate a retirement fund.
HOW AN INDIVIDUAL RETIREMENT ACCOUNT GROWS
Compounded daily at assumed rates of interest
<TABLE>
<C> <C> <C> <C> <C> <C> <C> <C>
8% 11% 14%
Total Approx. Approx. Approx.
deposits monthly monthly monthly
at age 65 Value at payment Value at payment Value at payment
Age (at $2,000/yr.) age 65 at age 65 age 65 at age 65 age 65 at age 65
- --- -------------- ------ --------- ---------- --------- ---------- ----------
20 $90,000 $961,713 $7,753 $2,845,142 $28,656 $8,958,466 $109,642
25 80,000 632,554 5,099 1,621,049 16,327 4,398,527 53,833
30 70,000 413,125 3,330 920,124 9,267 2,155,727 26,383
35 60,000 266,845 2,151 518,769 5,225 1,052,610 12,882
40 50,000 169,330 1,365 288,950 2,910 510,043 6,242
45 40,000 104,323 841 157,354 1,584 243,182 2,976
50 30,000 60,986 491 82,001 825 111,927 1,369
55 20,000 32,097 258 38,853 391 47,369 579
60 10,000 12,838 103 14,147 142 15,617 191
</TABLE>
<PAGE>
OAK VALUE FUND IRA
ADOPTION AGREEMENT (SEE INSTRUCTIONS ON
BACK OF THIS FORM)
1 PARTICIPANT -----------------------------------------
DATA Name Telephone Number
Please type or print
clearly. --------------------------------------------
clearly. Address Social Security Number
---------------------------------------------
City State Zip Date of Birth
Occupation and Employer Name/Address: ----------------------------------------
Are you an associated person of an NASD member? Yes ________ No ________
2 TYPE OF IRA
(Please check one box only.
(Fill out a separate application
for each type of account).
- -- Contributory (tax year of contribution__________)
- -- Spousal (tax year of contribution___________)
- -- Transfer (from another IRA)*
- -- SEP-IRA
- -- Rollover**
*If you are establishing this account in order to transfer assets from another
IRA, please complete the Oak Value Fund IRA Transfer and Authorization Letter or
Direct Rollover Request and send it to MGF Service Corp. along with this
Adoption Agreement.
**If you are establishing this account to receive a "Direct Rollover" from your
employer's qualified retirement plan or 403(b) annuity, please complete the Oak
Value Fund IRA Transfer and Authorization Letter or Direct Rollover Request and
send it to MGF Service Corp. along with this Adoption Agreement.
3 FUND
SELECTION
Minimum initial
purchase requirement
is $1,000. Make
checks payable to the Oak Value Fund ------------------- $---------
Oak Value Fund (and FBO
_______IRA if Direct
Rollover).
4 YOUR
SIGNATURE This adoption Agreement establishes an Individual
Retirement Account for investment in one or more of the
Investment Companies (hereafter Fund(s)) for which the Oak
Value Capital Management, Inc. or its affiliates or
successors serve or may in the future serve as Investment
Adviser.
1) I have read, accept and specifically incorporate into
this Adoption Agreement all the provisions of the
Custodial Agreement.
2) I appoint Star Bank as Custodian of the Account.
3) I acknowledge that I have received and read the Oak
Value Fund Individual Retirement Account Custodial
Agreement and Disclosure Statement at least seven days
prior to the date I signed this Adoption Agreement and that
I am aware of the fees and expenses as shown on the fee
schedule included with the Disclosure Statement. In
addition, I certify that I received a copy of the current
prospectus of the Fund indicated above and that I have
full authority and legal capacity to make the investment
applied for pursuant to this Adoption Agreement.
4) I appoint MGF Service Corp. or its successor as my agent
to enter orders for shares by direct purchase, to direct
dividends and distributions for automatic reinvestment in
additional shares of the Oak Value Fund and to authorize
for redemption of shares held in my account in accordance
with the prospectus and the procedures elected above.
5) I hereby ratify any instructions given pursuant to this
Adoption Agreement and for myself and successors and
assigns do hereby release the Oak Value Fund, Oak Value
Capital Management, Inc., MGF Service Corp., Star Bank and
their successors and assigns and their respective
officers, employees, agents and affiliates from any and all
liability in the performance of the acts instructed herein.
I further agree that MGF Service Corp. or its successor as
agent can cease to act as such agent upon ten days' notice
in writing to me at the address contained in this Adoption
Agreement.
6) I further acknowledge that I am responsible for
determining the deductibility of any contributions to my
account; that certify my Social Security Number shown on
this Adoption Agreement is correct and that I have
designated the Beneficiary(ies) on the back of this form
to receive my account upon my death.
X --------------------------------------------------------
Signature of Participant Date
FOR MGF SERVICE CORP. USE ONLY
Accepted: Star Bank Accepted: MGF Service Corp.
By: -------------- Date: ----- By: ------------- Date: -----
6 BENEFICIARY
DESIGNATION
NOTE: If you have more than one IRA you may designate
different Beneficiary(ies) for each Account by completing
separate forms; or, if the Beneficiary(ies) are
the same for both, you can use one form. If no designation
is in effect at the time of your death, or if no
Beneficiary survives you, your Account will be immediately
paid to your estate. You may change your Beneficiary
at any time by filing a new form with the Custodian.
I hereby revoke all my prior designations and designate the
following person or persons to receive any interest
remaining in the IRA upon my death.
PRIMARY BENEFICIARY(IES)
- -------------------------------------------------------------------------------
Name Relationship Date of Birth (mo-day-yr.) Share of Proceeds
(as a percentage)
- -------------------------------------------------------------------------------
Address City State Zip Social Security Number
- -------------------------------------------------------------------------------
Name Relationship Date of Birth (mo-day-yr.) Share of Proceeds
(as a percentage)
- -------------------------------------------------------------------------------
Address City State Zip Social Security Number
SECONDARY BENEFICIARY(IES)
(IN THE EVENT THERE ARE NO SURVIVING PRIMARY BENEFICIARIES)
- ------------------------------------------------------------------------------
Name Relationship Date of Birth (mo-day-yr.) Share of Proceeds
(as a percentage)
- -------------------------------------------------------------------------------
Address City State Zip Social Security Number
- -------------------------------------------------------------------------------
Name Relationship Date of Birth (mo-day-yr.) Share of Proceeds
(as a percentage)
- -------------------------------------------------------------------------------
Address City State Zip Social Security Number
7 SEP-IRA SIMPLIFIED EMPLOYEE PENSION
Complete only if contributions are to be made by your employer under a
Simplified Employee Pension.
Employer Identification Number -------------------------------
Name of Employer -------------------- Telephone Number -------------
Address of Employer ---------------------------------------------------
City -------------------- State -------- Zip ---------------
INSTRUCTIONS
1) Complete the OAK VALUE FUND IRA ADOPTION AGREEMENT:
Please fill out completely.
2) Complete the OAK VALUE FUND IRA TRANSFER AND AUTHORIZATION
LETTER OR DIRECT ROLLOVER REQUEST: If you would like to transfer
assets from a current IRA or have the Trustee of your Qualified
Retirement Plan or 403(b) Annuity make a Direct Rollover for
you, please complete the Oak Value Fund IRA Adoption
Agreement and the IRA Transfer and Authorization Letter or
Direct Rollover Request and send them to MGF Service Corp. MGF
Service Corp. will establish the IRA and then direct the current
Trustee or Custodian to send the check for deposit in the newly
established IRA.
3) Mailing Instructions: The completed Oak Value Fund IRA Adoption
Agreement, checks for your contribution payable to the
appropriate Funds, and the Oak Value Fund IRA Transfer and
Authorization Letter or Direct Rollover Request should be mailed
to:
Oak Value Fund IRA
MGF Service Corp.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
<PAGE>
OAK VALUE FUND IRA
TRANSFER AND AUTHORIZATION LETTER
OR
DIRECT ROLLOVER REQUEST
1 PARTICIPANT
DATA
Please type or print
clearly.
-------------------------------------------------------------------
Name Telephone Number
---------------------------------------------------------------------
Address Social Security Number
--------------------------------------------------------------------
City State Zip Date of Birth mo. day yr.
2 SOURCE OF
ASSETS
Minimum Investment
$1,000
To Be Completed for Direct Rollovers from To Be Completed for Transfers from
a QUALIFIED RETIREMENT PLAN: an EXISTING IRA:
- ------------------------------------ ----------------------------------
Name of Employer Telephone Number Name of Trustee Telephone Number
- ----------------------------------- ----------------------------------
Trustee or Benefits Administrator Attention
- ----------------------------------- ----------------------------------
Address Address
- ----------------------------------- ----------------------------------
City State Zip City State Zip
- -----------------------------------
Plan Name
- ----------------------------------- ---------------------------------
Account Number Account Number
3 WHERE TO
INVEST
YOUR IRA
- -- I am opening a new account and have attached an Adoption Agreement.
- -- Please deposit proceeds into my existing OAK VALUE FUND IRA.
Account Number -----------------------------------------------------
4 AUTHORIZATION FOR TRANSFER
(To be completed by Participant)
Mail proceeds to:
Oak Value Fund IRA
MGF Service Corp.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
1-800-622-2474
TO RESIGNING TRUSTEE OR CUSTODIAN:
The above mentioned Participant has established a qualified Individual
Retirement Account with the Oak Value Fund. Please liquidate the above mentioned
account and make direct payment or transfer the account as indicated below. The
signature of the Participant is your authorization to initiate the transfer or
"Direct Rollover." The Oak Value Fund would appreciate your prompt attention to
this matter.
Liquidate -- all or -- part ($___________) of the account indicated in
Section 2 and transfer the proceeds, in cash, to the Fund indicated in Section
3. If these assets are to be distributed by a qualified retirement plan, please
make check(s) payable to the Oak Value Fund
"FBO ----------------------------------------------------------------------IRA"
(your name)
X ---------------------------------------------------------------------------
Participant's Signature Date
5 TO THE
RESIGNING TRUSTEE
OR CUSTODIAN
If this is a "Direct Rollover," please certify that this amount is an eligible
rollover distribution as defined in Question and Answer #3 of the proposed
Treasury Regulation 1.402(c)-2T.
X --------------------------------------------------------------------------
Current Trustee or Custodian's Signature Date
If you are 70 1/2 or older you may not transfer your Required Minimum
Distribution to an IRA. Please make arrangements with your current Trustee or
Custodian to take your Required Minimum Distribution.
MGF Service Corp. and the successor Custodian, Star Bank, agree to accept the
rollover or transfer and deposit the Funds into an Individual Retirement
Account, which is an eligible retirement plan as defined under Section
402(c)(8)(B) of the Internal Revenue Code, in the participant's name. If this is
a "Direct Rollover" as defined in Question and Answer #3 of the proposed
Treasury Regulation 1.401(a)(31)-1T, please do not withhold from this
distribution.
---------------------------------- ---------------------------
MGF Service Corp. Date
<PAGE>
OAK VALUE FUND IRA
CHANGE OF BENEFICIARY DESIGNATION FORM
1 PARTICIPANT
NAME AND ADDRESS
Please type or print
clearly.
- ------------------------------------------------------------------------------
Name Telephone Number
- -----------------------------------------------------------------------------
Address
- -----------------------------------------------------------------------------
City State Zip
- ------------------------------------------------------------------------------
Social Security Number Account Number(s)
2 NEW PRIMARY
BENEFICIARY(IES)
If you wish to add
or change any information
relating to the primary
Beneficiary(ies) whom you
designated previously, please
complete this section.
- ------------------------------------------------------------------------------
Name Relationship Date of Birth Share of Proceeds
(mo-day-yr.) (as a percentage)
- -------------------------------------------------------------------------------
Address City State Zip Social Security Number
- -------------------------------------------------------------------------------
Name Relationship Date of Birth Share of Proceeds
(mo-day-yr.) (as a percentage)
- -------------------------------------------------------------------------------
Address City State Zip Social Security Number
3 NEW
SECONDARY
BENEFICIARY(IES)
In the event there
are no surviving
primary Beneficiary(ies).
If you wish to add or
change any information
relating to the secondary
Beneficiary(ies) whom you
designated previously,
please complete this section.
- ------------------------------------------------------------------------------
Name Relationship Date of Birth Share of Proceeds
(mo-day-yr.) (as a percentage)
- -------------------------------------------------------------------------------
Address City State Zip Social Security Number
- -------------------------------------------------------------------------------
Name Relationship Date of Birth Share of Proceeds
(mo-day-yr.) (as a percentage)
- -------------------------------------------------------------------------------
Address City State Zip Social Security Number
4 YOUR
SIGNATURE
Return completed form to:
Oak Value Fund IRA
MGF Service Corp.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
I hereby revoke all my prior designations and designate the above mentioned
person or persons to receive any interest remaining in the IRA upon my death.
X ----------------------------------------------------------------------------
Signature of Participant Date
<PAGE>
OAK VALUE FUND IRA
DISTRIBUTION REQUEST
1 PARTICIPANT
DATA
Please type or print
clearly.
- ------------------------------------------------------------------------------
Name Telephone Number
- --------------------------------------- Social Security Number --------------
Address
- ----------------------------------------- Date of birth ---------------------
City State Zip mo. day yr.
- -----------------------------------------
Account Number(s)
2 DISTRIBUTION INSTRUCTIONS
Select the type and frequency
of distributions.
- -- Total Distribution-- liquidate the account(s) shown above
(There will be a $10 charge for this transaction)
- -- Partial Distribution -- distribute $ ------------
- -- Periodic Distributions -- distribute $ ----------
on the last business day of:-- each month (Monthly)
-- March, June, September, and December (Quarterly)
-- June and December (Semiannually)
-- December or _____________________(Annually)
(Specify One Month)
- -- Check(s) should be made payable to and mailed to the Participant
named above
OR
- -- Check(s) should be made payable to -------------------------------
and Check(s) should be mailed to -------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
3 DISTRIBUTION
Choose the distribution
which most appropriately
reflects your situation.
- -- Normal -- Participant is age 59 1/2 or older
- -- Premature-- Participant has not reached age 59 1/2 (choose this even if
you intend to roll this distribution into another IRA)
(Distributions of this type are normally subject to both ordinary income
tax and an additional tax of 10% unless they are rolled into another
IRA within 60 days of this distribution)
- -- Disability -- Documentation substantiating claim of disability is
required
- -- Death-- Attach a copy of the Death Certificate (Other documentation may
be required as well. Please contact MGF Service Corp. at 1-800-622-2474
for additional information)
- -- Other -- _____________________________________________________________
4 IMPORTANT TAX
WITHHOLDING INFORMATION
AND ELECTION
Federal income taxes will be withheld from distributions at a rate of 10% unless
the Participant (or Beneficiary) elects not to have withholding apply or elects
a different rate of withholding. If you elect not to have withholding apply or
elect a different rate by completing this form or if you have previously elected
not to have withholding apply, your election will remain in effect for all
future distributions from this IRA. You may revoke or change your election in
writing at any time. Please keep in mind that, if you elect out of the
withholding requirement, penalties may be incurred under the estimated tax rules
of the Internal Revenue Service if your withholding and/or estimated tax
payments are not sufficient.
- -- Please withhold 10% from my distribution(s) and remit it to the IRS on
my behalf
- -- Please withhold _______% from my distribution(s) and remit it to the
IRS on my behalf
- -- Please do not withhold income tax from my distribution(s)
5 YOUR
SIGNATURE
X ----------------------------------------------------------------------------
Signature of Participant (or Beneficiary) Requesting Distribution Date
<TABLE>
OAK VALUE AVERAGE ANNUAL TOTAL RETURNS
AMOUNT INVESTED ON 18-Jan-93 $10,000 ALL DIVIDENDS REINVESTED
SALES CHARGE 0.0000 $10,000 ALL CAP GAINS REINVESTED
AVG. ANNUAL TOTAL RETURN (INCLUDING SALES CHARGE)
- ------------------------------------------------------------------------------
INCEPTION 17.03% 5 YEAR ERR 3 YEAR 18.43% 1 YEAR 29.04% YTD 11.10%
====== ==== ======= ======= =======
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TOTAL TOTAL ADD'L ADD'L INCEPTION INCEPTION
INCOME GAIN SHARE DIVIDEND DIVIDEND REINVEST SHARES SHARES NEW SHARE INCEPTION DOLLAR TOTAL
DATE DIV DIV BALANCE INCOME CAP GAIN PRICE INCOME CAP GAIN BALANCE VALUE INCREASE RETURN
18-Jan-93 $10.000 1,000.000 $10,000.00 $0.00 0.00%
31-Jan-93 1,000.000 $0.00 $0.00 $9.965 0.000 0.000 1,000.000 $9,965.00 ($35.00) -0.35%
28-Feb-93 1,000.000 $0.00 $0.00 $10.109 0.000 0.000 1,000.000 $10,109.00 $109.00 1.09%
31-Mar-93 1,000.000 $0.00 $0.00 $10.353 0.000 0.000 1,000.000 $10,353.00 $353.00 3.53%
30-Apr-93 1,000.000 $0.00 $0.00 $9.946 0.000 0.000 1,000.000 $9,946.00 ($54.00) -0.54%
31-May-93 1,000.000 $0.00 $0.00 $10.387 0.000 0.000 1,000.000 $10,387.00 $387.00 3.87%
30-Jun-93 1,000.000 $0.00 $0.00 $10.357 0.000 0.000 1,000.000 $10,357.00 $357.00 3.57%
31-Jul-93 1,000.000 $0.00 $0.00 $10.416 0.000 0.000 1,000.000 $10,416.00 $416.00 4.16%
31-Aug-93 1,000.000 $0.00 $0.00 $10.962 0.000 0.000 1,000.000 $10,962.00 $962.00 9.62%
30-Sep-93 1,000.000 $0.00 $0.00 $11.442 0.000 0.000 1,000.000 $11,442.00 $1,442.00 14.42%
31-Oct-93 1,000.000 $0.00 $0.00 $11.962 0.000 0.000 1,000.000 $11,962.00 $1,962.00 19.62%
30-Nov-93 1,000.000 $0.00 $0.00 $11.770 0.000 0.000 1,000.000 $11,770.00 $1,770.00 17.70%
31-Dec-93 0.2150 1,000.000 $0.00 $215.00 $11.989 0.000 17.933 1,017.933 $12,204.00 $2,204.00 22.04%
31-Jan-94 1,017.933 $0.00 $0.00 $12.579 0.000 0.000 1,017.933 $12,804.58 $2,804.58 28.05%
28-Feb-94 1,017.933 $0.00 $0.00 $12.127 0.000 0.000 1,017.933 $12,344.47 $2,344.47 23.44%
31-Mar-94 1,017.933 $0.00 $0.00 $11.406 0.000 0.000 1,017.933 $11,610.54 $1,610.54 16.11%
30-Apr-94 1,017.933 $0.00 $0.00 $11.492 0.000 0.000 1,017.933 $11,698.09 $1,698.09 16.98%
31-May-94 1,017.933 $0.00 $0.00 $11.628 0.000 0.000 1,017.933 $11,836.53 $1,836.53 18.37%
30-Jun-94 1,017.933 $0.00 $0.00 $11.610 0.000 0.000 1,017.933 $11,818.20 $1,818.20 18.18%
31-Jul-94 1,017.933 $0.00 $0.00 $11.894 0.000 0.000 1,017.933 $12,107.30 $2,107.30 21.07%
31-Aug-94 1,017.933 $0.00 $0.00 $12.499 0.000 0.000 1,017.933 $12,723.15 $2,723.15 27.23%
30-Sep-94 1,017.933 $0.00 $0.00 $12.252 0.000 0.000 1,017.933 $12,471.72 $2,471.72 24.72%
31-Oct-94 1,017.933 $0.00 $0.00 $12.270 0.000 0.000 1,017.933 $12,490.04 $2,490.04 24.90%
30-Nov-94 1,017.933 $0.00 $0.00 $11.853 0.000 0.000 1,017.933 $12,065.56 $2,065.56 20.66%
15-Dec-94 0.81 1,017.933 $0.00 $824.53 $10.867 0.000 75.874 1,093.807 $11,886.40 $1,886.40 18.86%
31-Dec-94 1,093.807 $0.00 $0.00 $10.985 0.000 0.000 1,093.807 $12,015.47 $2,015.47 20.15%
31-Jan-95 1,093.807 $0.00 $0.00 $11.252 0.000 0.000 1,093.807 $12,307.52 $2,307.52 23.08%
28-Feb-95 1,093.807 $0.00 $0.00 $11.516 0.000 0.000 1,093.807 $12,596.29 $2,596.29 25.96%
31-Mar-95 1,093.807 $0.00 $0.00 $12.029 0.000 0.000 1,093.807 $13,157.41 $3,157.41 31.57%
30-Apr-95 1,093.807 $0.00 $0.00 $11.893 0.000 0.000 1,093.807 $13,008.65 $3,008.65 30.09%
31-May-95 1,093.807 $0.00 $0.00 $12.17 0.000 0.000 1,093.807 $13,311.64 $3,311.64 33.12%
30-Jun-95 1,093.807 $0.00 $0.00 $12.19 0.000 0.000 1,093.807 $13,333.51 $3,333.51 33.34%
31-Jul-95 1,093.807 $0.00 $0.00 $12.53 0.000 0.000 1,093.807 $13,705.41 $3,705.41 37.05%
31-Aug-95 1,093.807 $0.00 $0.00 $13.10 0.000 0.000 1,093.807 $14,328.88 $4,328.88 43.29%
30-Sep-95 1,093.807 $0.00 $0.00 $13.45 0.000 0.000 1,093.807 $14,711.71 $4,711.71 47.12%
31-Oct-95 1,093.807 $0.00 $0.00 $13.36 0.000 0.000 1,093.807 $14,613.27 $4,613.27 46.13%
30-Nov-95 1,093.807 $0.00 $0.00 $13.93 0.000 0.000 1,093.807 $15,236.74 $5,236.74 52.37%
31-Dec-95 0.099 1,093.807 $0.00 $108.29 $14.06 0.000 7.702 1,101.509 $15,487.22 $5,487.22 54.87%
31-Jan-96 1,101.509 $0.00 $0.00 $14.38 0.000 0.000 1,101.509 $15,839.70 $5,839.70 58.40%
28-Feb-96 1,101.509 $0.00 $0.00 $14.83 0.000 0.000 1,101.509 $16,335.38 $6,335.38 63.35%
31-Mar-96 1,101.509 $0.00 $0.00 $15.10 0.000 0.000 1,101.509 $16,632.79 $6,632.79 66.33%
30-Apr-96 1,101.509 $0.00 $0.00 $14.83 0.000 0.000 1,101.509 $16,335.38 $6,335.38 63.35%
31-May-96 1,101.509 $0.00 $0.00 $15.35 0.000 0.000 1,101.509 $16,908.17 $6,908.17 69.08%
30-Jun-96 1,101.509 $0.00 $0.00 $15.62 0.000 0.000 1,101.509 $17,205.57 $7,205.57 72.06%
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000941722
<NAME> THE TUSCARORA INVESTMENT TRUST - OAK VALUE FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 19,452,506
<INVESTMENTS-AT-VALUE> 22,717,571
<RECEIVABLES> 66,327
<ASSETS-OTHER> 25,320
<OTHER-ITEMS-ASSETS> 7,814
<TOTAL-ASSETS> 22,817,032
<PAYABLE-FOR-SECURITIES> 507,441
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 244,054
<TOTAL-LIABILITIES> 751,495
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 18,023,351
<SHARES-COMMON-STOCK> 1,413,047
<SHARES-COMMON-PRIOR> 840,646
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 777,121
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,265,065
<NET-ASSETS> 22,065,537
<DIVIDEND-INCOME> 138,408
<INTEREST-INCOME> 66,726
<OTHER-INCOME> 0
<EXPENSES-NET> 265,539
<NET-INVESTMENT-INCOME> (60,405)
<REALIZED-GAINS-CURRENT> 926,281
<APPREC-INCREASE-CURRENT> 2,549,944
<NET-CHANGE-FROM-OPS> 3,415,820
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 92,392
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 681,397
<NUMBER-OF-SHARES-REDEEMED> 115,378
<SHARES-REINVESTED> 6,382
<NET-CHANGE-IN-ASSETS> 11,815,469
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (363)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 125,782
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 300,411
<AVERAGE-NET-ASSETS> 13,992,548
<PER-SHARE-NAV-BEGIN> 12.19
<PER-SHARE-NII> (.04)
<PER-SHARE-GAIN-APPREC> 3.57
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .10
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.62
<EXPENSE-RATIO> 1.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
