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. 3
-----
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 3
----
(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.
Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
It is proposed that this filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/X/ on November 1, 1997 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on (date) pursuant to paragraph (a) of Rule 485
TOTAL NUMBER OF PAGES:
INDEX TO EXHIBITS ON PAGE:
<PAGE>
THE TUSCARORA INVESTMENT TRUST
OAK VALUE FUND
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A) UNDER THE SECURITIES ACT OF 1933
<TABLE>
<S>
<C> <C>
Form N-1A Item No. Prospectus Caption
- ----------------- -------------------
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
-----------------------
PART B
Item 10 Cover Page Cover Page
Item 11 Table of Contents Table of Contents
Item 12 General Information and History Description of the Trust
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 Description of the Trust
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
</TABLE>
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.
<PAGE>
PROSPECTUS
NOVEMBER 1, 1997
OAK VALUE FUND
Member of 100% NO-LOADTM
MUTUAL FUND COUNCIL
<PAGE>
PROSPECTUS
November 1, 1997
THE OAK VALUE FUND
A No-Load Fund
The investment objective of the OAK VALUE FUND is to seek 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. 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 BANKING OR DEPOSITORY INSTITUTION. SHARES ARE NOT FEDERALLY INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF
THE PRINCIPAL AMOUNT INVESTED.
A Statement of Additional Information dated November 1, 1997, 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.
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
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.............................................14
HOW TO REDEEM SHARES...............................................17
HOW NET ASSET VALUE IS DETERMINED..................................20
MANAGEMENT OF THE FUND.............................................21
DIVIDENDS, DISTRIBUTIONS, TAXES AND OTHER INFORMATION..............24
ACCOUNT APPLICATION................................................27
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.
<PAGE>
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. 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.
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 over $700 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 appropriate for use in Tax Sheltered Retirement Plans and
Systematic Withdrawal Plans. (See "How to Purchase Shares.")
- 2 -
<PAGE>
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 semiannually. 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 Countrywide Fund Services,
Inc. (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 net assets)
Investment Advisory Fees............................... .90%
Administrator's Fees................................... .13%
Other Expenses......................................... .51%
Total Fund Operating Expenses ......................... 1.54%
=====
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
------ ------- ------- --------
$16 $49 $84 $183
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. In addition to the compensation shown in the table above, certain
brokerage firms and financial institutions receive from the Advisor compensation
for providing administrative, shareholder subaccounting and other services,
including sales-related services. 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, 1997, except that the Administrator's fees have been
restated to reflect the current arrangement with the Administrator. 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.
- 3 -
<PAGE>
FINANCIAL HIGHLIGHTS
The following audited financial information for the fiscal periods ended June
30, 1995 and thereafter has been audited by Arthur Andersen LLP, independent
accountants, whose report covering the fiscal year ended June 30, 1997 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. 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.
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
_______________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
For the Period
Year Year Ten Months Year January 18,
Ended Ended Ended Ended 1993(b) to
June 30, June 30, June 30, August 31, August 31,
1997 1996 1995(a) 1994 1993
__________________________________________________________________________________________________________________________
Net asset value at beginning of period........ $15.62 $12.19 $12.50 $10.96 $10.00
------ ------ ------ ------ ------
Income from investment operations:
Net investment loss...................... (0.02) (0.04) (0.05) (0.02) (0.03)
Net realized and unrealized gains on
investments........................... 6.06 3.57 0.55 1.78 0.99
---- ------ ---- ---- ----
Total from investment operations............... 6.04 3.53 0.50 1.76 0.96
---- ------ ---- ---- ----
Less distributions:
From net realized gains
from security transactions........... (1.03) (0.10) (0.81) (0.22) --
----- ------ ------ ------- ----
Net asset value at end of period.............. $20.63 $ 15.62 $12.19 $12.50 $10.96
====== ======= ====== ====== ======
Total return.................................. 39.60% 29.04% 5.78%(d) 16.07% 16.11%(d)
====== ======= ====== ====== ======
Net assets at end of period (000's).......... $82,661 $22,066 $10,250 $8,769 $1,890
======= ======= ======= ====== ======
Ratio of net expenses to average
net assets(c)........................... 1.59% 1.90% 1.89%(d) 1.89% 2.19%(d)
Ratio of net investment loss to average
net assets............................. (0.16%) (0.43%) (0.53%)(d) (0.58%) (0.81%)(d)
Portfolio turnover rate ...................... 22% 58% 103%(d) 91% 43%(d)
Average commission rate per share............. $.0593 $ -- $ -- $ -- $ --
_________________________________________________________________________________________________________________________
(a) Effective July 1, 1995, the Fund was reorganized and changed its fiscal year end from August 31 to June 30.
(b) Commencement of operations.
(c) 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%(d), 2.80%, and 6.29%(d) for the periods ended June 30, 1996, June 30, 1995, August 31, 1994
and August 31, 1993, respectively.
(d) Annualized.
</TABLE>
<PAGE>
- 4 -
PERFORMANCE INFORMATION
(Graphic Material)
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
<TABLE>
LINE CHART:
STANDARD & POOR'S 500 INDEX: OAK VALUE FUND:
<CAPTION>
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
<S> <C> <C> <C> <C> <C>
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
09/30/96 3.09% 17,341 09/30/96 7.43% 18,483
12/31/96 8.34% 18,786 12/31/96 8.08% 19,976
03/31/97 2.68% 19,290 03/31/97 0.34% 20,045
06/30/97 17.46% 22,657 06/30/97 19.83% 24,020
<CAPTION>
LIPPER GROWTH FUND INDEX:
QTRLY
DATE RETURN BALANCE
<S> <C> <C>
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 2.46% 11,030
03/31/94 -2.99% 10,700
06/30/94 -2.20% 10,465
09/30/94 4.91% 10,978
12/31/94 -1.11% 10,857
03/31/95 7.23% 11,642
06/30/95 10.70% 12,888
09/30/95 9.08% 14,058
12/31/95 2.45% 14,402
03/31/96 4.51% 15,051
06/30/96 3.33% 15,552
09/30/96 2.82% 15,991
12/31/96 5.80% 16,919
03/31/97 -0.34% 16,861
06/30/97 15.80% 19,525
Past performance is not predictive of future performance.
Oak Value Fund
Average Annual Total Returns
As of June 30, 1997
1 Year Since Inception*
39.60% 21.76%
</TABLE>
<PAGE>
<TABLE>
___________________________________________________________________________________________________________________
NON-STANDARDIZED TOTAL RETURNS
___________________________________________________________________________________________________________________
YEAR-TO-DATE SINCE
CALENDAR CALENDAR CALENDAR CALENDAR 1997 INCEPTION*
1993* 1994 1995 1996 (AS OF 6/30/97) (AS OF 6/30/97)
<S> <C> <C> <C> <C> <C> <C>
_____________________________________________________________________________________________________________________
Oak Value Fund............... 22.04% -1.54% 28.89% 28.99% 20.24% 140.20%
Lipper Growth Fund Index..... 10.30% -1.57% 32.65% 17.48% 15.40% 95.25%
S&P 500 Index................ 9.60% 1.32% 37.58% 22.96% 20.61% 126.57%
_______________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________
AVERAGE ANNUAL TOTAL RETURNS
________________________________________________________________________________________________________________________
FOR THE PERIODS ENDED JUNE 30, 1997
______________________________________________________________
SINCE
SIX MONTHS(A) ONE YEAR THREE YEARS INCEPTION*
<S> <C> <C> <C> <C>
__________________________________________________________________________________________________________________________
Oak Value Fund..................................... 20.24% 39.60% 26.67% 21.76%
Lipper Growth Fund Index........................... 15.40% 25.55% 23.11% 16.23%
S&P 500 Index...................................... 20.61% 34.70% 28.86% 20.18%
___________________________________________________________________________________________________________________________
* Inception date of the Oak Value Fund was January 18, 1993.
(A) Unannualized.
</TABLE>
- 5 -
<PAGE>
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 (the
"1940 Act"), 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.
- 6 -
<PAGE>
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 growing 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.
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 securities of comparable businesses have been
sold in arms' length transactions between parties judged to be competent
- 7 -
<PAGE>
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 not 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; or
(c) a fundamental change has occurred in the company or its market.
COMMONLY ASKED QUESTIONS
________________________________________________________________________________
THE ADVISOR IS A VALUE MANAGER USING A BOTTOM-UP INVESTMENT PROCESS. HOW DOES
THE ADVISOR DEFINE VALUE?
The Advisor's philosophy is strongly influenced by the teachings of Benjamin
Graham and Warren Buffett. Half a century ago, Graham introduced the principles
which have become the foundation for many successful value investors: (1) OWN
EQUITIES; (2) VIEW THEM AS BUSINESSES; (3) ALWAYS REQUIRE A MARGIN OF SAFETY;
AND (4) MAINTAIN THE APPROPRIATE PERSPECTIVE ON THE MARKET. These principles
have maintained their validity, but their application
- 8 -
<PAGE>
has evolved from one value investor to the next. The Advisor looks for companies
that produce predictable, growing excess cash flow and that have managements
which have demonstrated their ability to redeploy that capital for the long-term
benefit of shareholders. Further, the Advisor believes that the market is not a
perfect reflection of a company's value, but merely an auction clearinghouse
subject to emotional swings by its participants. The Advisor defines this
philosophy as investing in GOOD BUSINESSES WITH GOOD MANAGEMENT AT ATTRACTIVE
PRICES.
HOW DOES THE ADVISOR DETERMINE THE INTRINSIC VALUE OF A COMPANY?
The Advisor believes the true intrinsic value of a business is based on the
present value of the future cash flows the company can generate. All of the
Advisor's work is focused on fine tuning the inputs into its valuation equation.
The first step is to determine whether a company is a business the Advisor would
like to own based on the economics and competitive characteristics of the
industry and the company's positioning within the industry. Further qualitative
analysis is given to the company's position relative to its customers,
suppliers, competitors and substitute products. This qualitative analysis serves
a very important role in the determination of the inputs into the quantitative
analysis. The Advisor's focus on this broader approach to research and analysis
is driven by the belief that a business must be understood before it can be
valued.
HOW IMPORTANT ARE COMPANY VISITS?
Because the Advisor views equities as businesses, not pieces of paper, company
visits are critical to the investment process. The Advisor typically conducts
multiple meetings with the companies in which the Fund has holdings as well as
many of those companies' customers, suppliers and competitors. The Advisor
believes the company meetings are crucial to the investment process and to the
long term performance of the Fund.
WHAT IS THE ADVISOR'S SELL DISCIPLINE?
It is often just as difficult to sell a business as it is to buy a business. The
Advisor typically sells businesses for one of three reasons:
o A price target is met on a relative or absolute basis.
o The Advisor has identified a better opportunity with a
greater margin of safety.
o There is a change in the fundamentals of the business.
- 9 -
<PAGE>
WHAT ROLE DOES MARKET CAPITALIZATION PLAY IN THE ADVISOR'S STOCK SELECTION
PROCESS?
The Advisor does not typically place limits on investments in the Fund solely
based on market capitalization. The Fund typically owns positions in companies
which would qualify as "small-cap," "mid-cap" and "large-cap" companies.
________________________________________________________________________________
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.")
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
- 10 -
<PAGE>
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 options, 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.
SMALL AND MEDIUM CAPITALIZATION ISSUERS. The Fund may invest in securities of
small and medium capitalization companies. Small and medium capitalization
companies may or may not be more vulnerable than larger, more established
companies to adverse business or economic developments. In particular, small
capitalization companies may or may not have limited product lines, markets and
financial resources and may or may not be dependent on a relatively small
management group. Also the securities of these companies may or may not be less
actively traded than those of larger companies and, as such, may or may not be
difficult to trade at quoted prices. These securities may or may not also
experience greater market volatility than those of larger companies. These
securities may not pay dividends.
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 through 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.
- 11 -
<PAGE>
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 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 certificates, 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
- 12 -
<PAGE>
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 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 or liquid
securities 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.
The portfolio turnover of the Fund for the fiscal year ended June 30, 1997 was
22%.
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
- 13 -
<PAGE>
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 1940 Act, a repurchase agreement is considered to be a 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) purchase more than
10% of the outstanding voting securities or any class of securities of any
one issuer; or (3) 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 this
limitation). Other fundamental investment limitations are listed in the
Statement of Additional Information.
HOW TO PURCHASE SHARES
There are no sales commissions charged to investors. You may purchase shares of
the Fund by calling the Administrator at 1-800-622-2474 or by writing to the
Fund at the address shown below for regular mail orders. 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
- 14 -
<PAGE>
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.
Payment must be made by check or money order drawn on a U.S. bank and payable in
U.S. dollars. The Fund will not accept third party checks for the purchase of
shares. All orders received by the Administrator, whether by mail, bank wire or
facsimile order, from a qualified brokerage firm prior to 4:00 p.m. Eastern
time, will purchase shares at the net asset value next determined on that
business day's close of trading. If your order is not received by 4:00 p.m.,
Eastern time, your order will purchase shares at the net asset value determined
as of the close of trading on the next business day. (See "How Net Asset Value
is Determined.")
Shares of the Fund may be purchased or sold through the Charles Schwab & Co.,
Inc. Mutual Fund OneSourceTM Program, The Fidelity Brokerage Services, Inc.
FundsNetworkTM Program, the Jack White & Company, Inc. NoFee Network Mutual Fund
Service Program and, in the future, through other brokerage firms or financial
institutions. These organizations are authorized to accept purchase orders on
behalf of the Fund at the Fund's net asset value next determined after your
order is received by an organization in proper order before 4:00 p.m., Eastern
time, or such earlier time as may be required by an organization. These
organizations may be authorized to designate other intermediaries to act in this
capacity. These organizations may charge you transaction fees on purchases of
Fund shares and may impose other charges or restrictions or account options that
differ from those applicable to shareholders who purchase shares directly
through the Fund or the Administrator. These organizations may be the
shareholders of record of your shares. The Fund is not responsible for ensuring
that the organizations carry out their obligations to their customers. The
Advisor pays such organizations for administrative, shareholder subaccounting
and other services, including sales-related services, from the Advisor's own
revenues based on the amount of customer assets maintained in the Fund by such
organizations. The payment of such compensation by the Advisor will not affect
the expense ratio of the Fund.
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.
- 15 -
<PAGE>
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
For credit to Oak Value Fund #483616975
(Shareholder name and account number or
tax identification number)
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. 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.
- 16 -
<PAGE>
AUTOMATIC INVESTMENT PLAN. The automatic investment plan enables you to make
regular monthly or bimonthly investments in shares through automatic charges to
your checking account. With your 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 your Account Application. You 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 determined as of that business day's close
of trading. Otherwise, your order will redeem shares at the net asset value
determined as of the close of trading on the next business day. There is no
charge for redemptions from the Fund.
You may also redeem your shares through a brokerage firm or financial
institution that has been authorized to accept orders on behalf of the Fund at
the Fund's net asset value next determined after your order is received by such
organization in proper order before 4:00 p.m., Eastern time, or such earlier
time as may be required by such organization. These organizations may be
authorized to designate other intermediaries to act in this capacity. Such an
organization may charge you transaction fees on redemptions of Fund shares and
may impose other charges or restrictions or account options that differ from
those applicable to shareholders who redeem shares directly through the Fund or
the Administrator.
- 17 -
<PAGE>
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 you bring your
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 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
- 18 -
<PAGE>
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 will 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 at the close of trading 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 sending a letter with your new redemption instructions to
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 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.
- 19 -
<PAGE>
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.
AUTOMATIC WITHDRAWAL PLAN. If you own shares of the Fund valued at $10,000 or
more at the current offering price, you may establish an Automatic 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. You may establish this service whether dividends and
distributions are reinvested or paid in cash. Automatic withdrawals may be
deposited directly to your 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 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 or by calling the Advisor at
1-800-680-4199. See the Statement of Additional Information for further details.
- 20 -
<PAGE>
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. 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.
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
over $700 million, the vast majority of which are managed using an
- 21 -
<PAGE>
investment style and approach similar to that of the Fund. Compensation of the
Advisor is at the annual rate of 0.90% of the Fund's average daily net assets.
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 since the firm's inception and use the same value-oriented philosophy
to manage the Fund as they use to manage the Advisor's other accounts.
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 Countrywide Fund Services, Inc., P.O. Box
5354, Cincinnati, Ohio 45201, to serve as its transfer agent, dividend paying
agent and shareholder service agent. The Administrator is an indirect
wholly-owned subsidiary of Countrywide Credit Industries, Inc., a New York Stock
Exchange listed company principally engaged in the business of residential
mortgage lending.
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 Commission and state securities authorities. The Fund
pays the Administrator a fee for these administrative services at the annual
rate of .125% of the average value of its daily net assets up to $100 million
and .10% of such assets in excess of $100 million.
The Administrator also provides accounting and pricing services to the Fund. The
Administrator currently receives a monthly fee of $3,500 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.
- 22 -
<PAGE>
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 advisory 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 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, 1997, the
expense ratio of the Fund was 1.59% of its average daily net assets.
The Fund and the Advisor have arrangements with certain brokerage firms and
financial institutions to provide administrative, shareholder subaccounting and
other services, including sales- related services. The Advisor, not the Fund,
compensates these organizations for their services based on the amount of
customer assets maintained in the Fund by such organizations. The payment of
such compensation by the Advisor will not affect the expense ratio of the Fund.
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.
- 23 -
<PAGE>
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
semiannually, on dates selected by the Fund. 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 cash
payments are specified on your application or are otherwise requested by
contacting the Administrator. That request must be received by the Fund prior to
the record date to be effective as to the next dividend. If you elect to receive
dividends in cash and the U.S. Postal Service cannot deliver your checks or if
your checks remain uncashed for six months, your dividends may be reinvested in
additional shares of the Fund at the then-current net asset value and future
dividends will be reinvested in the same manner. No interest will accrue on
amounts represented by uncashed distribution checks. Tax consequences to
shareholders of dividends and distributions are the same if received in cash or
if received in additional shares of the Fund.
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.
- 24 -
<PAGE>
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.
As of the date of this Prospectus, National Financial Services Corp., 200
Liberty Street, New York, New York 10281, owned of record, for the exclusive
benefit of its customers, more than 25% of the shares of the Fund. Accordingly,
this entity may be deemed to be a "controlling person" of the Fund within the
meaning of the 1940 Act.
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.
- 25 -
<PAGE>
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.
From time to time, the Fund may advertise its performance rankings as published
by recognized independent mutual fund statistical services such as Lipper
Analytical Services, Inc. ("Lipper"), or by publications of general interest
such as Forbes, Money, The Wall Street Journal, Business Week, Barron's,
Fortune, or Morningstar Mutual Fund Values. The Fund may also compare its
performance to that of other selected mutual funds, averages of the other mutual
funds within its category as determined by Lipper, or recognized indicators such
as the Standard & Poor's 500 Stock Index. In connection with a ranking, the Fund
may provide additional information, such as the particular category of funds to
which the ranking relates, the number of funds in the category, the criteria
upon which the ranking is based, and the effect of fee waivers and/or expense
reimbursements, if any. The Fund may also present its performance and other
investment characteristics, such as volatility or a temporary defensive posture,
in light of the Advisor's view of current or past market conditions or
historical trends.
- 26 -
<PAGE>
THE OAK VALUE FUND
<TABLE>
<S> <C>
ACCOUNT APPLICATION Send completed application to:
THE OAK VALUE FUND
Account No. 60- _______________________ Shareholder Services
(For Fund Use Only) P.O. Box 5354
(Please type or print clearly) Cincinnati, OH 45201-5354
_________________________________________________________________________________________________________________
ACCOUNT REGISTRATION
[ ] Individual _____________________________________________________________________________
(First Name) (Middle Initial) (Last Name) (Birthdate) (SS#)
[ ] Joint* _______________________________________________________________________________
(First Name) (Middle Initial) (Last Name) (Birthdate) (SS#)
*Joint accounts will be registered joint tenants with the right of survivorship unless otherwise indicated.
[ ] UGMA/UTMA _______________________________________________________ under the ______ Uniform Gifts/Transfers to Minors Act
(First Name) (Middle Initial) (Last Name) (State)
__________________________________________________________________________________ as Custodian
(First Name) (Middle Name) (Last Name)
____________________________________________________________________________________
(Birthdate of Minor) (SS # of Minor)
[ ] For Corporations, ______________________________________________________________________________
Partnerships and
Trusts Name of Corporation or Partnership. If a Trust, include the name(s) of Trustees
in which account will be registered, and the date of the Trust instrument.
________________________________________________________________________________
(Taxpayer Identification Number)
_________________________________________________________________________________________________________
ADDRESS
Street or P.O. Box ________________________________________________________________________________________
City _______________________________________________________ State _______________ Zip ___________________
Telephone ________________________ U.S. Citizen ____ Resident Alien ____ Non Resident (Country of Residence) ___
_______________________________________________________________________________________________________________
DUPLICATE CONFIRMATION ADDRESS (if desired)
Name __________________________________________________________________________________________________________
Street or P.O. Box _____________________________________________________________________________________________
City ____________________________________________________________ State _______________ Zip ____________________
__________________________________________________________________________________________________________________
INITIAL INVESTMENT
[ ] Enclosed is a check payable to THE OAK VALUE FUND for $ ______________________________________________________
[ ] Funds were wired to Star Bank on __________________ in the amount of $_________________________________________
By Mail: You may purchase shares by mail by completing and signing this application. Please mail with your check to the
address above.
By Wire: You may purchase shares by wire. Prior to sending the wire, please contact the Fund at 1-800-622-2474 so that your
wire transfer is properly credited to your account. Please forward your completed application by mail immediately
thereafter to the Fund. The wire should be routed as follows:
Star Bank, N.A.
ABA #042000013
For credit to Oak Value Fund # 483616975
For (shareholder name and Social Security or Taxpayer ID Number)
<PAGE>
__________________________________________________________________________________________________________________________________
DIVIDEND AND DISTRIBUTION INSTRUCTIONS (If no election is checked, dividends will automatically be reinvested in the Fund.)
[ ] Reinvest all dividends and capital gains distributions
[ ] Reinvest all capital gains distributions; dividends to be paid in cash
[ ] Pay all dividends and capital gains distributions in cash
[ ] By Check [ ] By ACH to my bank checking or savings account. Please attach a voided check.
SIGNATURE AUTHORIZATION FOR USE BY CORPORATIONS, TRUSTS, PARTNERSHIPS AND OTHER INSTITUTIONS
____________________________________________________________________________________________________________________________________
Please retain a copy of this document for your files. Any modification of the information contained in this section will require an
Amendment to this Application Form.
[ ] New Application [ ] Amendment to previous Application dated _______________________ Account No. __________________________
Name of Registered Owner _________________________________________________________________________________________________________
The following named person(s) are currently authorized signatories of the Registered Owner. Any ____________ of them is/are
authorized under the applicable governing document to act with full power to sell, assign or transfer securities of THE OAK VALUE
FUND for the Registered Owner and to execute and deliver any instrument necessary to effectuate the authority hereby conferred:
Name Title Signature
_______________________________ __________________________________ ____________________________
_______________________________ ___________________________________ _____________________________
_______________________________ ____________________________________ ______________________________
THE OAK VALUE FUND, or any agent of the Fund may, without inquiry, rely upon the instruction of any person(s) purporting to be an
authorized person named above, or in any Amendment received by the Fund or its agent. The Fund and its Agent shall not be liable
for any claims, expenses or losses resulting from having acted upon any instruction reasonably believed to be genuine.
___________________________________________________________________________________________________________________________________
SPECIAL INSTRUCTIONS
REDEMPTION INSTRUCTIONS
Please honor any redemption instruction received via telephone or facsimile believed to be authentic.
[ ] Please mail redemption proceeds to the name and address of record
[ ] Please wire redemptions to the commercial bank account indicated below (subject to a minimum wire transfer of $5,000)
AUTOMATIC WITHDRAWAL
Please redeem sufficient shares from this account at the then net asset value, in accordance with the instructions below:
(subject to a minimum $100 per distribution)
Dollar amount of each withdrawal $ ______________ beginning the last business day of _____________________________
Withdrawals to be made: [ ] Monthly [ ] Quarterly [ ] Annually
[ ] Please DEPOSIT DIRECTLY the proceeds to the bank account below
[ ] Please mail redemption proceeds to the name and address of record
AUTOMATIC INVESTMENT
Please purchase shares of The Oak Value Fund by withdrawing from the commercial bank account below, per the instructions below:
Amount $ ____________________ (minimum $100) Please make my automatic investment on:
________________________________ [ ] the last business day of each month
(Name of Bank) [ ] the 15th day of each month
is hereby authorized to charge to [ ] both the 15th and last business day
my account the bank draft amount
here indicated. I understand the
payment of this draft is subject to all
provisions of the contract as stated
on my bank account signature card.
_________________________________________________________________
(Signature as your name appears on the bank account to be drafted)
Name as it appears on the account ____________________________________________________
Commercial bank account # _____________________________________________________________
ABA Routing # _________________________________________________________________________
City, State and Zip in which bank is located __________________________________________
For AUTOMATIC INVESTMENT or AUTOMATIC WITHDRAWAL please attach a voided check from the above account.
<PAGE>
___________________________________________________________________________________________________________________________________
SIGNATURE AND TIN CERTIFICATION
I/We certify that I have full right and power, and legal capacity to purchase shares of the Fund and affirm that I have received a
current prospectus and understand the investment objectives and policies stated therein. The investor hereby ratifies any
instructions given pursuant to this Application and for himself and his successors and assigns does hereby release Countrywide Fund
Services, Inc., the Oak Value Fund, Oak Value Capital Management, Inc., and their respective officers, employees,
agents and affiliates from any and all liability in the performance of the acts instructed herein provided that such entities have
exercised due care to determine that the instructions are genuine. I certify under the penalties of perjury that (1) the Social
Security Number or Tax Identification Number shown is correct and (2) I am not subject to backup withholding. The certifications in
this paragraph are required from all non-exempt persons to prevent backup withholding of 31% of all taxable
distributions and gross redemption proceeds under the federal income tax law. 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 here if you
are subject to backup withholding) [ ].
________________________________________________________ _______________________________________________________________
APPLICANT DATE JOINT APPLICANT DATE
_________________________________________________________ _______________________________________________________________
OTHER AUTHORIZED SIGNATORY DATE OTHER AUTHORIZED SIGNATORY DATE
</TABLE>
<PAGE>
THE TUSCARORA INVESTMENT TRUST
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
Countrywide Fund Services, Inc.
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>
STATEMENT OF ADDITIONAL INFORMATION
OAK VALUE FUND
November 1, 1997
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.................................................. 12
ADMINISTRATOR....................................................... 13
OTHER SERVICES...................................................... 14
BROKERAGE........................................................... 14
SPECIAL SHAREHOLDER SERVICES........................................ 15
PURCHASE OF SHARES.................................................. 17
REDEMPTION OF SHARES................................................ 18
NET ASSET VALUE DETERMINATION....................................... 18
ADDITIONAL TAX INFORMATION.......................................... 19
DESCRIPTION OF THE TRUST............................................ 20
CALCULATION OF PERFORMANCE DATA..................................... 20
FINANCIAL STATEMENTS AND REPORTS.................................... 23
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, 1997. The Prospectus may be obtained at no charge by contacting the
Fund, at the address and phone number shown above.
- 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.
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.
- 2 -
<PAGE>
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 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
- 3 -
<PAGE>
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 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,
- 4 -
<PAGE>
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.
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.
- 5 -
<PAGE>
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 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:
- 6 -
<PAGE>
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.
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.
- 7 -
<PAGE>
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.
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, 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.
- 8 -
<PAGE>
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 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;
- 9 -
<PAGE>
(10) 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 asssets);
(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 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, 1997:
<TABLE>
<S>
<C> <C> <C>
Name, Age, Position Principal Occupation Compensation
and Address During Past 5 Years From the Trust
- ---------------------- -------------------- --------------
*George W. Brumley III (age 37) Chairman and CEO of $ 0
Trustee and President Oak Value Capital
3100 Tower Blvd., Suite 800 Management, Inc.
Durham, North Carolina 27707
C. Russell Bryan (age 37) Vice President, Mergers and $ 6,000
Trustee Acquisitions Group of
100 North Tryon Street, 14th Floor NationsBanc Capital Markets, Inc.
Charlotte, North Carolina 28210
- 10 -
<PAGE>
*David R. Carr, Jr. (age 37) President of Oak Value $ 0
Trustee, Vice President Capital Management, Inc.
and Treasurer
3100 Tower Blvd., Suite 800
Durham, North Carolina 27707
John M. Day (age 43) Managing Partner, Maynard $ 5,500
Trustee Capital Partners LLC; prior to
5151 Glenwood Avenue March 1996, Vice President of
Raleigh, North Carolina 27612 Investors Management Corporation.
Joseph T. Jordan, Jr. (age 51) President of Practice $ 6,500
Trustee Management Services, Inc.
114 Crutchfield (a medical practice management
Durham, North Carolina 27704 firm); Director of Durham
Ambulatory Surgical Center
John F. Splain (age 41) Vice President, Secretary and $ 0
Secretary General Counsel of Countrywide
312 Walnut Street Fund Services, Inc. (a registered
Cincinnati, Ohio 45202 transfer agent), Secretary and
General Counsel of Countrywide
Investments, Inc. (a registered
broker-dealer and investment adviser)
and Countrywide Financial Services,
Inc. (parent company of Countrywide
Fund Services, Inc. and Countrywide
Investments, Inc.)
</TABLE>
*Indicates that Trustee is an "interested person" for purposes of the 1940 Act.
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 3, 1997, the Trustees and
officers of the Trust as a group owned beneficially (i.e., had voting and/or
investment power) less than 1% of the then outstanding shares of the Fund. On
the same date, National Financial Services Corp. For the Exclusive Benefit of
Its Customers, 200 Liberty Street, One World Financial Center, New York, New
York 10281 owned of record 25.46% of the then outstanding shares of the Fund;
and Charles Schwab and Co., Inc.
- 11 -
<PAGE>
Reinvest Account, Attn: Mutual Funds Department, 101 Montgomery Street, San
Francisco, California owned of record 20.32% of the then outstanding shares of
the Fund. National Financial Services Corp. may be deemed to control the Fund
by virtue of the fact that it owns of record more than 25% of its outstanding
shares.
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, 1998 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, 1997, the Fund paid the
Advisor advisory fees of $349,761. 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).
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.
Messrs. Brumley and Carr may be deemed to be affiliates of the Advisor and may
directly or indirectly receive benefits from the advisory fees paid to the
Advisor. 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.
- 12 -
<PAGE>
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
Countrywide Fund Services, Inc. (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 the
Administrator a fee at the annual rate of .125% of the average value of its
daily net assets up to $100,000,000 and 0.10% of such assets in excess of
$100,000,000.
The Administrator also provides accounting and pricing services to 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, the
Fund pays the Administrator a fee in accordance with the following schedule:
Asset Size of Fund Monthly Fee
-------------------- -----------
$ 0 - $ 50,000,000 $2,000
50,000,000 - 100,000,000 2,500
100,000,000 - 250,000,000 3,500
Over 250,000,000 4,500
- 13 -
<PAGE>
For the fiscal year ended June 30, 1997, the Administrator received from the
Fund transfer agent fees of $19,201, accounting and pricing fees of $25,000 and
administrative fees of $70,604. For the fiscal year ended June 30, 1996, the
Administrator received from the Fund transfer agent fees of $12,000, accounting
and pricing fees of $24,000 and administrative fees of $28,013. For the fiscal
period ended June 30, 1995, the Administrator and the prior administrator
received from the Fund and the Predecessor Fund transfer agent fees of $3,254,
accounting and pricing fees of $17,750 and administrative fees of $19,576.
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 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.
During the fiscal years ended June 30, 1997 and June 30, 1996, the total amount
of brokerage commissions paid by the Fund was $59,862 and $25,218, respectively.
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. The increase
in brokerage commissions paid by the Fund during the fiscal year ended June 30,
1997 was due to a sharp increase in net assets of the Fund.
- 14 -
<PAGE>
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, 1997, the amount
of brokerage transactions and related commissions directed to brokers because of
research services provided was $9,363,403 and $14,315, 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.
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.
- 15 -
<PAGE>
AUTOMATIC WITHDRAWAL PLAN. Shareholders owning shares with a value of $10,000 or
more may establish an Automatic 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 automatic 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 Automatic 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
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
- 16 -
<PAGE>
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. The
Trust has filed an irrevocable election with the Securities and Exchange
Commission (the "Commission") under Rule 18f-1 of the 1940 Act, wherein the Fund
has committed 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 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.
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.
- 17 -
<PAGE>
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 shareholders 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 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, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Fourth of 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.
- 18 -
<PAGE>
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. For the fiscal year ending June 30, 1998, 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.
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
- 19 -
<PAGE>
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.
DESCRIPTION OF THE TRUST
The Trust was organized as a Massachusetts business t rust pursuant to an
Agreement and Declaration of Trust. 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.).
Shareholder inquiries may be made in writing, addressed to the Fund at the
address contained in this Statement of Additional Information. 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.
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.
Prior to May 19, 1995, the Predecessor Fund was a series of Albemarle Investment
Trust.
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
- 20 -
<PAGE>
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, 1997 and for the
period since inception (January 18, 1993) to June 30, 1997 are 39.60% and
21.76%, 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. The
Nonstandardized Returns of the Fund for each year and since inception, as
compared to the performance of the Lipper Growth Fund Index and the S&P 500
Index for such periods, are as follows:
<TABLE>
<S>
<C> <C> <C> <C> <C> <C> <C>
Year-to-Date Since
Calendar Calendar Calendar Calendar 1997 Inception*
1993* 1994 1995 1996 (as of 6/30/97) (as of 6/30/97)
-------- -------- ------- -------- --------------- --------------
Oak Value Fund ....................... 22.04% -1.54% 28.89% 28.99% 20.24% 140.20%
Lipper Growth Fund Index...............10.30% -1.57% 32.65% 17.48% 15.40% 95.25%
S&P 500 Index...........................9.60% 1.32% 37.58% 22.96% 20.61% 126.57%
* Inception date of the Fund was January 18, 1993.
</TABLE>
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
- 21 -
<PAGE>
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 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.
- 22 -
<PAGE>
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 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, 1997, together with the report of the independent
accountants thereon, are included on the following pages.
- 23 -
<PAGE>
LETTER TO SHAREHOLDERS August 22, 1997
==============================================================================
The Oak Value Fund (the Fund) continued its trend of superior performance
and growth during the 1997 fiscal year. The Fund achieved several major
milestones during the year.
o CONTINUED ASSET GROWTH - The net assets of the Fund have increased from
$31.9 million on December 31, 1996 to more than $82.6 million on June 30,
1997. At this writing, net assets in the Fund exceeded $93 million. Total
shareholders in the Fund increased from 886 to 1703 during the fiscal year.
o CONTINUED REDUCTION OF EXPENSE RATIO - As a result of the continued growth
of the Fund, the total expense ratio of the Fund has been reduced to 1.59%
of average net assets on an annualized basis for the year ended June 30,
1997. The current accrual rate for expenses of the Fund is 1.30%. This
decline represents a significant reduction from the 1.90% expense ratio of
the Fund less than two years ago.
o SUPERIOR PERFORMANCE - The Fund outperformed both the S&P 500 Index and its
peer group as measured by the Lipper Growth Fund Index during the fiscal
year. Listed below is a comparison of the Fund's performance versus the S&P
500 Index and the Lipper Growth Fund Index for the periods ended June 30,
1997.
<TABLE>
<CAPTION>
Six One Three Since
Months Year Years* Inception*
<S> <C> <C> <C> <C>
Oak Value Fund.... 20.24% 39.60% 26.67% 21.76%
Lipper Growth
Fund Index..... 15.40% 25.55% 23.11% 16.23%
S&P 500 Index..... 20.61% 34.70% 28.86% 20.18%
<FN>
*Annualized.
</FN>
</TABLE>
Our primary goal is to produce above average returns. We are certainly pleased
with our long term success in this regard. We are also sensitive to both the
expense ratio of the Fund and to the long term tax efficiency of the Fund. The
tax efficiency concern is receiving attention in the investment community and we
believe is of paramount importance to investors. The issue addresses the fact
that investment returns achieved through long term compounding are vastly
superior to similar returns realized over shorter holding periods because of the
tax costs which are incurred along the way.
Rising market valuations and continued cash flows into the Fund make for a
challenging environment. The good news is that we are able to allocate capital
to the companies which represent the largest discounts to their intrinsic value.
While valuations often limit our ability to allocate new capital to existing
companies in our portfolio, we were able to make additional investments in
several of the Fund's holdings during the recent period. We also initiated
positions in a few new holdings during the quarter including investments in
Jacor Communications, True North Communications and General Re Corp. Jacor is a
radio consolidator with major market shares in diverse mid-size markets. Rapidly
growing cash flow and recent legislative changes provide us with many of the
characteristics we enjoy in our newspaper and television broadcasting holdings.
We returned to True North as the discount to intrinsic value provided
substantial upside in this advertising agency. Finally, we are pleased to have
found in General Re Corp. a reinsurer which offers great management, an
international platform and a compelling valuation. Nike was also added to the
portfolio during the period. We will discuss this holding specifically and at
length in the balance of this letter.
We also sold several positions during the most recent six months, including
American Express, Colgate and Torstar. The Fund had owned American Express since
the fall of 1994 when American Express divested Lehman Brothers. Impressed with
Harvey Golub's focus on the core business, we continued to purchase shares of
American Express until as recently as November 1996 as the company continued to
trade at a sufficient discount to our assessment of its intrinsic value. The
stock recently reached and exceeded our price targets. We do not believe the
American Express franchise is unique enough, nor is the moat around the business
wide enough, to warrant current valuations. Colgate also reached our price
target during the period. The competitive nature of the personal care market was
a determining factor in our sale of Colgate. Colgate is one of the smaller
competitors in this global market, yet it was their significant exposure to the
international growth that first attracted us to the company. We hope to return
to this and potentially other personal care product companies at more attractive
valuations in the future. Our intense research into the media group led us to
Torstar as a particularly undervalued company some time ago. As the discount to
the company's intrinsic value closed, we recently sold this position to
concentrate on other media industry holdings such as Washington Post, E. W.
Scripps, Pulitzer Publishing and LIN Television.
<PAGE>
Research
We believe the research process is the distinguishing factor at Oak Value. We
conduct over one hundred face-to-face meetings each year with the management
teams of various publicly traded companies. Why? Our company visits reinforce
our long-standing conviction of the need for barriers to entry to protect our
business franchises from competitors. Above average returns on assets and
capital employed always appear tempting to competitors. Superior franchises are
defined by their ability to establish and maintain formidable barriers to entry.
Company visits help us to understand business models and the position of
companies relative to their competitors, suppliers, customers and substitute
products. The details obtained through the visit process and the reading of a
myriad of trade journals help us to understand the business from the point of
view of someone within the industry. Understanding begets knowledge. From an
understanding of the business model we ask better questions, obtain better
feedback from management and have greater confidence in the inputs into our
valuation equation, thereby reinforcing the "business model" cycle of investing.
Core Holdings, Great Businesses
We continue to search for those elusive core holdings that represent great
companies with wonderful franchises which we hope to own for a long period of
time. We continue to own a few companies in the Fund that we bought during the
inception quarter of the Fund. These holdings, which include AFLAC, Berkshire
Hathaway and Markel, exemplify our "core holding" mentality. These were and
still are "great businesses" with "great management" that we have been afforded
the opportunity to purchase at "attractive prices".
We continue to be mystified by the pundits on Wall Street who choose to use
various public forums to "knock" Berkshire Hathaway. Numerous columnists have
been absolutely wrong in their assessment of Berkshire Hathaway for many years,
yet they continue to bet against the greatest investor of this century. One
would think they would grant themselves more favorable odds by choosing a weaker
opponent.
Our valuation of Berkshire is based on the businesses it owns. We do not factor
in future excess returns from the abilities of Buffett and Munger. We hope that
both of them will be with Berkshire for many years to come. However, when the
day occurs that we lose one or both of them, you should expect the stock price
to decline. We are aware of this potential future scenario and will respond
accordingly. No one will have the ability to provide returns like Buffett, but
the business should continue to have substantial value apart from his daily
activities of allocating capital.
Global Brands
We continue to respect companies that have developed superior, global brand
names. There are far fewer such companies than Wall Street realizes. Pitfalls
abound for those awarding high valuations to companies that are unable to
deliver consistently across a diverse global platform. Conversely, we believe
the investment community may not realize how valuable (and quite possibly how
impenetrable) the companies that have fully developed a seamless global presence
have become. Brand name development in the United States occurred gradually in
an environment where years of mercantile trade had created an extremely
effective distribution mechanism for goods. As our society and our economy
evolved, companies layered on marketing and began to focus on brand building.
Television, newspaper and other forms of advertising allowed them to nurture and
enhance their brands. Advertising continued to create this distinction as the
successful brands became stronger and companies focused even more on national
brand building. Eventually the remaining regional brands (and poorly supported
national brands) declined into extinction or inferior competitive positions.
Current international platforms appear to be developing through a compressed and
somewhat reversed system which we believe plays into the hands of the strong
brand names that are able to couple expert marketing and brand building skills
with efficient distribution. While companies late to the advertising game in the
U.S. often lost any chance of building a national brand presence, it appears to
us that companies late to the international distribution game may risk the same
inability to build a global brand. The new rules of the game require expertise
in both marketing and distribution. We believe the companies possessing these
dual abilities are worth more, have more predictable growth patterns and will
have higher growth rates over the long term. Though we are not currently willing
to pay higher prices than our traditional valuation models indicate for such
businesses, we are ever diligent to identify and stay extremely current with
those companies that potentially fall into this category.
We do not spend a great deal of time worrying about what price to sell our Coca
Cola shares. Our time is more productively spent attempting to better understand
the Coke model for fear that we miss an opportunity to buy a share at a price
that reflects our required margin of safety. We will not sell our core holdings,
even if for some short period of time they fully reflect the future prospects or
even become overvalued. In many cases, overvaluation beliefs are based on models
that truly do not reflect properly the fact that, for these global super-brands,
the future is the brightest it has ever been. We continue to be prudent because
we do not think the rules of investing have been repealed and we believe
patience and prudent behavior will be rewarded once again. We will not overpay!
<PAGE>
Just Like...
Wall Street analysts often suggest that we consider companies they believe are
"just like" some of our superior core holdings, but cheaper. It is our belief (a
lesson learned at great length and some expense) that many of these competitors
are such in appearance only. Peering ever deeper into the business models of our
core holdings leads us to believe that those so called competitors are in fact
not cheaper at all but offer to the investor very different future returns and
much less control of their destiny. We visit many of our companies' competitors
often. We typically leave those visits believing the franchises we own are
superior and that the investing community is not paying attention. While it may
be true we would rather own Pepsi than a shirt manufacturer, those are not our
choices. Our challenge is to determine which of the many companies we visit
offer us predictable growing excess cash flow controlled by management who have
demonstrated their ability to grow and allocate that cash flow. Our fear of
obtaining just that inferior stream of cash flow (less predictable) and being
subject to reinvestment risks in ancillary businesses with poor returns makes us
joyful to miss the "just like" but cheaper group. If these companies were in
fact just like the superior companies, they would not likely be cheaper. Poor
execution of a superior business rarely provides the return of the best
participant. The "just likes" will continue to say they are as good and the
analysts will say they are cheaper. We will continue to visit many of these
companies in the chance that maybe things really are different or a management
change has resulted in brighter prospects.
SWOOSH!
Technologically challenged as we are, we are unable to place the Nike "swoosh"
at the beginning of this paragraph. Had we done so, most of you would know what
it represents. We believe Nike is an undervalued company with many of the
characteristics that may allow it to one day enter the sanctity of our core
holdings. Not yet! It will take us a long period and many trips to Nike, its
competitors, its retailers and its suppliers to know if this company possesses
all the requirements to become part of this class. Nike may in fact already be a
global super-brand, but your managers, being slow to learn, will need more time
and more work to be hit between the eyes. We do believe our significant position
bought at recent prices affords us a solid company meeting our undervalued
requirements. If we are correct in our early thoughts on Nike, we will
experience substantial returns for many years. If we are wrong, we believe we
have a reasonably undervalued company with limited downside and good potential
returns. We will not know the answer for some time.
Nike is followed by a group of Wall Street analysts who follow the footwear,
textile and apparel industries. If Nike were followed by the personal care
products analysts or the consumer non-durable analysts, we believe it would
never have gotten as cheap as it has recently. Nike's dominance and strength in
the United States has resulted in phenomenal growth for the last few years.
Growth in recent years reached rates which were simply not sustainable on such a
large base of business. We suppose analysts would have preferred a lot less
success at slower rates.
Nike has built its brand rapidly. We do expect competitors to emerge over time,
though we would seriously challenge any predictions of the demise of Nike in the
foreseeable future. Nike's footwear, apparel and equipment platform across
different sports and over an ever-increasing global base gives them a true
competitive advantage. Such leadership is not always clear early in the game but
emerges as companies do things that the others cannot because of capital
constraints or earnings. Nike's international platform is virtually unmatchable
by its competitors. Nike is experiencing results in overseas markets that even
our global super-brands only dream about. Nike will double its revenues in Japan
this year after a phenomenal year last year. Such results are both unique and
unprecedented in the Japanese market. Our discussions with AFLAC, Coke,
Gillette, Interpublic Group, Avon Products and R. P. Scherer underscore our
conviction of the superiority of the Nike model and our belief that these
results are phenomenal. Similar results are occurring around the world in other
markets and as we test normal expectations for those markets with many of our
other global players we continue to be amazed at the strength and growth at
Nike.
<PAGE>
Nike's management, led by Phil Knight, thinks about the business along the same
lines as many of the great companies we respect. "Share of mind" for Nike (much
like Disney or Coke or Gillette) is reflected as they track per capita spending
in various countries around the world. Nike is not satisfied to sit back,
produce shoes and fill retailers' demand. They actively participate in the
development of new systems, stores and merchandising to teach the retailer how
to better sell their products. This dissatisfaction with the status quo is
another mark of a great company. Nike's plan of athlete compensation is
rational, well thought out and well executed as they always seek the mantle of
authenticity. As Nike expands its global business, economies of scale become
evident in the cost of endorsements, marketing, distribution and research and
development. This strategy should serve to widen the moat around their
franchise.
Consider the risk to Fila when the large sums paid to Grant Hill cannot be
amortized over a large enough business. Reebok's payments to Allen Iverson
appear risky. Nike's strategy is focused and, with a group of athletes, has less
risk from big name individuals. Michael Jordan's Jump Man shoe is already
recognized as a separate brand name with no Nike logo at all. Multiple brands
confuse the competitors and retain shelf space. Nike will work with Tiger Woods
to launch a major platform transcending golf. Soccer is a new target and as Nike
combines major endorsements (Brazilian national soccer team and many others)
with a global business platform and improved shoe technology, we believe they
will execute their well planned, long term assault on soccer - the most popular
sport in the world. Competitors with isolated strengths in disparate categories
or countries will be unable to spend the dollars necessary to battle with Nike.
We believe the competitors will be relegated to country strengths or single shoe
category strengths as it becomes a matter of time before the Nike "juggernaut"
turns its attention their way. Nike's vast resources, marketing expertise and
global execution skills will continue to thrust it to the lead.
In Closing
Many investors (both professional and lay) worry about what is going to go up
next so they can buy. They seek momentum as a place to catch the trend of rising
prices. Capital is allocated with an eye on the exit and happiness is achieved
if momentum carries the day. Experienced, seasoned professionals now spend much
of their time trying to determine what will go up next or into what sectors
money will flow. We spend our time trying to determine what businesses are
worth. We care only if the business model is sound, management is adept and we
can purchase at a discount. We judge the managers of our companies not by the
increase or decrease in their stock price, but by the fair and rational measure
of increases or decreases in underlying business value. Those changes in
enterprise value are within our management's control and those results are the
basis for our judgment. We have no interest in management that spends more time
promoting than it does running the business - they should be managers, not
promoters.
Over time our methodology has produced above average returns. We believe it will
continue to do so. When (not if) the markets become more challenging, we believe
owners of companies that have demonstrated an ability to increase business
values will shine. Flow of funds, momentum investing and the like are not our
cup of tea. We believe such investment strategies will leave many people trying
to find a chair when the music stops. We and our investors will own good
businesses with good management and we will have purchased those investments at
attractive prices. Markets will fluctuate and will decline, but you have
entrusted your capital to managers making informed rational business decisions
based on proven principles. When declines occur we will all suffer, but the
soundness of our philosophy and the quality our businesses and their management
should provide us comfort and continued long term success. Thank you for your
confidence and support.
Sincerely,
/s/ David R. Carr, Jr.
David R. Carr, Jr.
Co-Manager
/s/ George W. Brumley, III
George W. Brumley, III
Co-Manager
<PAGE>
OAK VALUE FUND
PERFORMANCE INFORMATION
===============================================================================
OAK VALUE FUND
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
A Representation of the Graphic Material Contained in the Oak Value Fund
June 30, 1997 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
<TABLE>
LINE CHART:
STANDARD & POOR'S 500 INDEX: OAK VALUE FUND:
<CAPTION>
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
<S> <C> <C> <C> <C> <C>
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
09/30/96 3.09% 17,341 09/30/96 7.43% 18,483
12/31/96 8.34% 18,786 12/31/96 8.08% 19,976
03/31/97 2.68% 19,290 03/31/97 0.34% 20,045
06/30/97 17.46% 22,657 06/30/97 19.83% 24,020
<CAPTION>
LIPPER GROWTH FUND INDEX:
QTRLY
DATE RETURN BALANCE
<S> <C> <C>
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 2.46% 11,030
03/31/94 -2.99% 10,700
06/30/94 -2.20% 10,465
09/30/94 4.91% 10,978
12/31/94 -1.11% 10,857
03/31/95 7.23% 11,642
06/30/95 10.70% 12,888
09/30/95 9.08% 14,058
12/31/95 2.45% 14,402
03/31/96 4.51% 15,051
06/30/96 3.33% 15,552
09/30/96 2.82% 15,991
12/31/96 5.80% 16,919
03/31/97 -0.34% 16,861
06/30/97 15.80% 19,525
Past performance is not predictive of future performance.
Oak Value Fund Average Annual Total Returns
As of June 30, 1997
1 Year Since Inception*
39.60% 21.76%
<FN>
*Inception date of the Oak Value Fund was January 18, 1993.
</FN>
</TABLE>
<TABLE>
NON-STANDARDIZED TOTAL RETURNS
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
YEAR-TO-DATE SINCE
CALENDAR CALENDAR CALENDAR CALENDAR 1997 INCEPTION*
1993* 1994 1995 1996 (AS OF 6/30/97) (AS OF 6/30/97)
<S> <C> <C> <C> <C> <C> <C>
- - --------------------------------------------------------------------------------------------------------------------
Oak Value Fund............... 22.04% -1.54% 28.89% 28.99% 20.24% 140.20%
Lipper Growth Fund Index..... 10.30% -1.57% 32.65% 17.48% 15.40% 95.25%
S&P 500 Index................ 9.60% 1.32% 37.58% 22.96% 20.61% 126.57%
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - --------------------------------------------------------------------------------------------------------------------
FOR THE PERIODS ENDED JUNE 30, 1997
SINCE
SIX MONTHS(A) ONE YEAR THREE YEARS INCEPTION*
<S> <C> <C> <C> <C>
- - --------------------------------------------------------------------------------------------------------------------
Oak Value Fund..................................... 20.24% 39.60% 26.67% 21.76%
Lipper Growth Fund Index........................... 15.40% 25.55% 23.11% 16.23%
S&P 500 Index...................................... 20.61% 34.70% 28.86% 20.18%
<FN>
* Inception date of the Oak Value Fund was January 18, 1993.
(A) Unannualized.
</FN>
</TABLE>
<PAGE>
<TABLE>
OAK VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997
============================================================================================================
<CAPTION>
<S> <C>
ASSETS
Investments in securities at value (Note 1) (acquisition cost of $54,891,777)............... $ 70,915,067
Investments in repurchase agreements (Note 1)............................................... 14,520,000
Cash ....................................................................................... 605
Receivable for capital shares sold.......................................................... 992,719
Dividends receivable........................................................................ 51,051
Interest receivable......................................................................... 2,117
Organization expenses, net (Note 1)......................................................... 3,749
Other assets................................................................................ 12,031
--------------
TOTAL ASSETS........................................................................... 86,497,339
--------------
LIABILITIES
Payable for securities purchased............................................................ 3,627,794
Distributions payable....................................................................... 73,799
Payable for capital shares redeemed......................................................... 53,139
Payable to affiliates (Note 3).............................................................. 68,146
Other accrued expenses and liabilities...................................................... 13,049
--------------
TOTAL LIABILITIES........................................................................ 3,835,927
--------------
NET ASSETS ................................................................................. $ 82,661,412
==============
Net assets consist of:
Paid-in capital............................................................................. $ 66,626,124
Accumulated net realized gains from security transactions................................... 11,998
Net unrealized appreciation on investments.................................................. 16,023,290
--------------
Net assets.................................................................................. $ 82,661,412
==============
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value)................................................................ 4,006,713
==============
Net asset value, offering price and redemption price per share (Note 1)..................... $ 20.63
==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
OAK VALUE FUND
STATEMENT OF OPERATIONS
Year Ended June 30, 1997
============================================================================================================
<CAPTION>
<S> <C>
INVESTMENT INCOME
Dividends................................................................................ $ 367,040
Interest................................................................................. 190,964
--------------
TOTAL INVESTMENT INCOME................................................................ 558,004
--------------
EXPENSES
Investment advisory fees (Note 3)........................................................ 349,761
Administrative services fees (Note 3).................................................... 70,604
Registration fees........................................................................ 56,661
Accounting services fees (Note 3)........................................................ 25,000
Professional fees........................................................................ 23,834
Postage and supplies..................................................................... 22,287
Trustees' fees and expenses.............................................................. 21,835
Shareholder services and transfer agent fees (Note 3).................................... 19,201
Insurance expense........................................................................ 12,075
Custodian fees........................................................................... 10,062
Amortization of organization expenses (Note 1)........................................... 4,000
Other expenses........................................................................... 4,525
--------------
TOTAL EXPENSES......................................................................... 619,845
--------------
NET INVESTMENT LOSS ........................................................................ (61,841)
--------------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions............................................ 1,928,590
Net change in unrealized appreciation/depreciation on investments........................ 12,758,225
--------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS ........................................... 14,686,815
--------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ................................................. $ 14,624,974
==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
OAK VALUE FUND STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended June 30, 1997 and 1996
=============================================================================================================
<CAPTION>
YEAR YEAR
ENDED ENDED
JUNE 30, JUNE 30,
1997 1996
<S> <C> <C>
- - -------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment loss................................................... $ (61,841) $ (60,405)
Net realized gains from security transactions......................... 1,928,590 926,281
Net change in unrealized appreciation/depreciation on investments..... 12,758,225 2,549,944
-------------- ---------------
Net increase in net assets from operations............................... 14,624,974 3,415,820
-------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net realized gains from security transactions.................... (2,635,872) (92,392)
-------------- ---------------
FROM CAPITAL SHARE TRANSACTIONS(A):
Proceeds from shares sold............................................. 51,487,814 10,044,743
Net asset value of shares issued in reinvestment
of distributions to shareholders.................................... 2,518,348 89,729
Payments for shares redeemed.......................................... (5,399,389) (1,642,431)
-------------- ---------------
Net increase in net assets from capital share transactions............... 48,606,773 8,492,041
-------------- ---------------
TOTAL INCREASE IN NET ASSETS ............................................ 60,595,875 11,815,469
NET ASSETS:
Beginning of year..................................................... 22,065,537 10,250,068
-------------- ---------------
End of year........................................................... $ 82,661,412 $ 22,065,537
============== ===============
(a)Summary of capital share activity:
Shares sold........................................................... 2,752,396 681,397
Shares issued in reinvestment of distributions to shareholders........ 132,044 6,382
Shares redeemed....................................................... (290,774) (115,378)
-------------- ---------------
Net increase in shares outstanding.................................... 2,593,666 572,401
Shares outstanding, beginning of year................................. 1,413,047 840,646
-------------- ---------------
Shares outstanding, end of year....................................... 4,006,713 1,413,047
============== ===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
OAK VALUE FUND
FINANCIAL HIGHLIGHTS
Per Share Data for a Share Outstanding Throughout Each Period
<CAPTION>
================================================================================================================
FOR THE PERIOD
YEAR YEAR TEN MONTHS YEAR JANUARY 18,
ENDED ENDED ENDED ENDED 1993(B) TO
JUNE 30, JUNE 30, JUNE 30, AUG. 31, AUG. 31,
1997 1996 1995(A) 1994 1993
<S> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period.......... $ 15.62 $ 12.19 $ 12.50 $ 10.96 $ 10.00
---------- --------- ---------- --------- -----------
Income from investment operations:
Net investment loss.......................... ( 0.02) ( 0.04) ( 0.05) ( 0.02) ( 0.03)
Net realized and unrealized gains
on investments............................. 6.06 3.57 0.55 1.78 0.99
---------- --------- ---------- --------- -----------
Total from investment operations................ 6.04 3.53 0.50 1.76 0.96
---------- --------- ---------- --------- -----------
Less distributions:
From net realized gains from
security transactions...................... ( 1.03) ( 0.10) ( 0.81) ( 0.22) --
---------- --------- ---------- --------- -----------
Net asset value at end of period................ $ 20.63 $ 15.62 $ 12.19 $ 12.50 $ 10.96
========== ========= ========== ========= ===========
Total return.................................... 39.60% 29.04% 5.78%(d) 16.07% 16.11%(d)
========== ========= ========== ========= ===========
Net assets at end of period (000's)............. $ 82,661 $ 22,066 $ 10,250 $ 8,769 $ 1,890
========== ========= ========== ========= ===========
Ratio of net expenses to average net assets(c).. 1.59% 1.90% 1.89%(d) 1.89% 2.19% (d)
Ratio of net investment loss to average
net assets.................................... ( 0.16%) (0.43%) (0.53%)(d) (0.58%) (0.81%)(d)
Portfolio turnover rate ........................ 22% 58% 103%(d) 91% 43% (d)
Average commission rate per share............... $ .0593 $ -- $ -- $ -- $ --
<FN>
(a) Effective July 1, 1995, the Fund was reorganized and changed its fiscal
year end from August 31 to June 30.
(b) Commencement of operations.
(c) 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.
(d) Annualized.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
OAK VALUE FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
<CAPTION>
==============================================================================================================
MARKET
SHARES COMMON STOCKS -- 85.8% VALUE
<S> <C> <C>
- - --------------------------------------------------------------------------------------------------------------
ADVERTISING -- 4.9%
35,550 Interpublic Group Companies, Inc........................................... $ 2,179,659
76,225 True North Communications Inc.............................................. 1,886,569
---------------
4,066,228
---------------
BEVERAGES --1.9%
23,200 Coca-Cola Company.......................................................... 1,566,000
---------------
BROADCASTING -- 6.3%
60,475 Jacor Communications, Inc. (a) ........................................... 2,313,169
66,225 LIN Television Corporation(a) ............................................. 2,922,178
---------------
5,235,347
---------------
CONGLOMERATE -- 5.9%
76 Berkshire Hathaway, Inc., Class A(a) ...................................... 3,587,200
799 Berkshire Hathaway, Inc., Class B(a) ...................................... 1,262,420
---------------
4,849,620
---------------
CONSUMER PRODUCTS-- 6.6%
30,250 Avon Products, Inc......................................................... 2,134,516
56,325 Nike, Inc., Class B........................................................ 3,287,972
---------------
5,422,488
---------------
ENTERTAINMENT -- 4.6%
47,401 The Walt Disney Company.................................................... 3,803,930
---------------
FINANCIAL INSTITUTIONS -- 3.6%
2,500 Associates First Capital Corporation ...................................... 138,750
24,325 Household International, Inc. ............................................. 2,856,667
---------------
2,995,417
---------------
HEALTHCARE/PHARMACEUTICAL -- 6.7%
107,150 R. P. Scherer Corporation(a) .............................................. 5,531,619
---------------
INFORMATION SERVICES -- 1.4%
45,425 Dun & Bradstreet Corporation .............................................. 1,192,406
---------------
INSURANCE - ACCIDENT & HEALTH -- 2.4%
41,975 AFLAC, Inc................................................................. 1,983,319
---------------
INSURANCE - PROPERTY & CASUALTY -- 17.1%
109,475 Acceptance Insurance Companies, Inc.(a) ................................... 2,490,556
22,490 Markel Corporation(a) ..................................................... 2,878,720
35,900 Progressive Corporation ................................................... 3,123,300
153,000 RLI Corporation ........................................................... 5,574,938
---------------
14,067,514
---------------
INSURANCE - REINSURANCE -- 2.4%
11,000 General Re Corporation .................................................... 2,002,000
---------------
<PAGE>
<CAPTION>
OAK VALUE FUND (Continued)
==============================================================================================================
MARKET
SHARES COMMON STOCKS -- 85.8% VALUE
<S> <C> <C>
- - --------------------------------------------------------------------------------------------------------------
MANUFACTURED HOUSING -- 4.1%
141,100 Oakwood Homes Corporation.................................................. $ 3,386,400
---------------
MEDIA -- 13.9%
69,033 Pulitzer Publishing Company................................................ 3,658,749
97,325 Scripps (E.W.) Company..................................................... 4,051,153
9,485 Washington Post Company, Class B........................................... 3,775,030
---------------
11,484,932
---------------
MORTGAGE BANKING -- 2.1%
50,200 Federal Home Loan Mortgage Corporation..................................... 1,725,625
---------------
PERSONAL CARE/COSMETICS -- 1.9%
16,910 Gillette Company........................................................... 1,602,222
---------------
TOTAL COMMON STOCKS (COST $54,891,777) .................................... $ 70,915,067
---------------
<CAPTION>
==============================================================================================================
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS(B) -- 17.6% VALUE
<S> <C> <C>
- - --------------------------------------------------------------------------------------------------------------
$ 14,520,000 Star Bank, N.A., 5.25%, dated 06/30/97, due 07/01/97,
repurchase proceeds $14,522,118 (Cost $14,520,000)...................... $ 14,520,000
---------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS AT VALUE-- 103.4% ............. $ 85,435,067
LIABILITIES IN EXCESS OF OTHER ASSETS-- ( 3.4% ) .......................... ( 2,773,655 )
---------------
NET ASSETS-- 100.0% ....................................................... $ 82,661,412
===============
<FN>
(a) Non-income producing security.
(b) Repurchase agreement is fully collateralized by U.S. Government
obligations.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
OAK VALUE FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
==============================================================================
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, 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.
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 is 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.
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.
<PAGE>
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 30,1997:
<TABLE>
<CAPTION>
<S> <C>
- - -----------------------------------------------------------------------
Gross unrealized appreciation........................ $ 16,137,805
Gross unrealized depreciation........................ (117,489)
--------------
Net unrealized appreciation.......................... $ 16,020,316
==============
- - -----------------------------------------------------------------------
</TABLE>
The tax basis of investments for the Fund as of June 30, 1997 was $54,894,751.
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 $61,841 for 1997 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 $45,538,764 and $8,038,083
respectively, for the year ended June 30, 1997.
3. TRANSACTIONS WITH AFFILIATES
Certain trustees and officers of the Trust are also officers of Oak Value
Capital Management, Inc. (the Adviser) or Countrywide Fund Services, Inc. (CFS),
formerly MGF Service Corp., 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 0.90% of the Fund's average daily net assets.
ADMINISTRATION AGREEMENT
Under the terms of the Administration Agreement with the Trust, CFS supplies
non-investment related statistical and research data, internal regulatory
compliance services and executive and administrative services for the Fund. CFS
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, CFS 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, CFS 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, CFS 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, CFS
calculates the daily net asset value per share and maintains the financial books
and records of the Fund. For these services, CFS receives a monthly fee from the
Fund. In addition, the Fund pays certain out-of-pocket expenses incurred by CFS
in obtaining valuations for the Fund's portfolio securities.
<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, 1997, the related
statement of operations for the year then ended, and the statements of changes
in net assets for the periods indicated thereon, and financial highlights for
each of the three periods in the period then ended. 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 were
audited by other auditors whose report thereon dated October 20, 1994, expressed
an unqualified opinion on those financial highlights. The financial highlights
for the period from January 18, 1993 to August 31, 1993 were audited by other
auditors whose report thereon dated September 24, 1993, expressed an unqualified
opinion 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, 1997, 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, 1997, the results of
its operations for the year then ended, and the changes in its net assets for
the periods indicated thereon and the financial highlights for each of the three
periods in the period then ended, in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Cincinnati, Ohio
July 23, 1997
<PAGE>
OAK VALUE FUND
INVESTMENT ADVISOR
Oak Value Capital Management, Inc.
3100 Tower Boulevard, Suite 800
Durham, North Carolina 27707
1-800-680-4199
ADMINISTRATOR
Countrywide Fund Services, Inc.
312 Walnut Street
P.O. Box 5354
Cincinnati, OH 45201-5354
1-800-622-2474
INDEPENDENT AUDITORS
Arthur Andersen LLP
425 Walnut Street
Cincinnati, OH 45202
CUSTODIAN
Star Bank, N.A.
425 Walnut Street
Cincinnati, OH 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
<PAGE>
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,
1997
Statement of Operations for year ended June 30,
1997
Statements of Changes in Net Assets for the years
ended June 30, 1997 and 1996
Financial Highlights
Portfolio of Investments, June 30, 1997
Notes to Financial Statements
(b) Exhibits
(1) Registrant's Agreement and Declaration of
Trust, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 2,
is hereby incorporated by reference.
(2) Registrant's Bylaws, which were filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 2, are hereby incorporated by
reference.
(3) Inapplicable
(4) Inapplicable
(5) Investment Advisory Agreement with Oak Value
Capital Management, Inc., which was filed as
an Exhibit to Registrant's Post-Effective
Amendment No. 2, is hereby incorporated by
reference.
(6) Inapplicable
<PAGE>
(7) Inapplicable
(8) Custody Agreement with Star Bank N.A., which
was filed as an Exhibit to Registrant's
Post- Effective Amendment No. 2, is hereby
incorporated by reference.
(9) (i) Administration Agreement with Countrywide
Fund Services, Inc. is filed herewith.
(ii) Transfer, Dividend Disbursing, Shareholder
Service and Plan Agency Agreement with
Countrywide Fund Services, Inc. is filed
herewith.
(iii) Accounting Services Agreement with
Countrywide Fund Services, Inc. is filed
herewith.
(iv) License Agreement with Oak Value Capital
Management, Inc., which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 2, is hereby incorporated by
reference.
(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) Consent of Arthur Andersen LLP is filed
herewith.
(12) Inapplicable
(13) Inapplicable
(14) Individual Retirement Plan, which was filed
as an Exhibit to Registrant's Post-Effective
Amendment No. 2, is hereby incorporated by
reference.
(15) Inapplicable
(16) Computation of Performance Quotation, which
was filed as an Exhibit to Registrant's Post-
Effective Amendment No. 2, is hereby
incorporated by reference.
(17) Financial Data Schedule is filed herewith.
- 2 -
<PAGE>
(18) Inapplicable.
Item 25. Persons Controlled by or Under Common Control with
Registrant.
None
Item 26. Number of Holders of Securities.
As of August 31, 1997, there were 1,935 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").
- 3 -
<PAGE>
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
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
- 4 -
<PAGE>
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."
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
- 5 -
<PAGE>
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 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
- 6 -
<PAGE>
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.
"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 $700 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.
- 7 -
<PAGE>
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
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, 1997.
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, 1997
- -------------------------- and Trustee
George W. Brumley III
/s/ David R. Carr, Jr. Vice President, October 31, 1997
- -------------------------- Treasurer and
David R. Carr, Jr. Trustee
*C. RUSSELL BRYAN Trustee By:/s/ John F. Splain
-------------------
*JOHN M. DAY Trustee Attorney-in-Fact*
October 31, 1997
*JOSEPH T. JORDAN, JR. Trustee
INDEX TO EXHIBITS
(1) Administration Agreement with Countrywide Fund Services, Inc.
(2) Transfer, Dividend Disbursing, Shareholder Service and Plan
Agency Agreement with Countrywide Fund Services, Inc.
(3) Accounting Services Agreement with Countrywide Fund Services,
Inc.
(4) Consent of Arthur Andersen LLP
(5) Financial Data Schedule
ADMINISTRATION AGREEMENT
AGREEMENT dated as of May 23, 1997 between The Tuscarora Investment
Trust (the "Trust"), a Massachusetts business trust, and Countrywide Fund
Services, Inc. ("Countrywide"), 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
Countrywide to serve as its administrative agent; and
WHEREAS, Countrywide 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 Countrywide agree as follows:
1. APPOINTMENT.
The Trust hereby appoints and employs Countrywide as agent to
perform those services described in this Agreement for the Trust. Countrywide
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
Countrywide;
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
Countrywide 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 Countrywide is to act as
plan agent.
3. TRUST ADMINISTRATION.
Subject to the direction and control of the Trustees of the
Trust, Countrywide 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, Countrywide shall
supply (i) office facilities, (ii) internal auditing and regulatory services,
and (iii) executive and administrative services. Countrywide 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. Countrywide shall also supervise the preparation of
all federal, state and local tax returns and reports of the Trust required by
applicable law. Countrywide 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 Countrywide 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.
Countrywide 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 Countrywide for the periods and
in the places required by Rule 31a-2 under the 1940 Act. The retention of such
- 2 -
<PAGE>
records shall be at the expense of the Trust. Countrywide 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.
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 Countrywide's obligations under this
Agreement, each series of the Trust shall pay Countrywide, on the first business
day following the end of each month, a monthly fee at the annual rate of .125%
of such series' average daily net assets up to $100 million; and .1% of such
assets in excess of $100 million. Countrywide 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 Countrywide to perform any
services for the Trust which services could cause Countrywide 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 Countrywide, 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 COUNTRYWIDE.
A. Countrywide 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 Countrywide 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
- 3 -
<PAGE>
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 Countrywide under this Agreement or by reason of reckless
disregard by any of such persons of the obligations and duties of Countrywide
under this Agreement.
B. Any person, even though also a director, officer, employee,
shareholder or agent of Countrywide, 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 Countrywide or any of its affiliates, even
though paid by one of these entities.
C. The Trust shall indemnify and hold harmless Countrywide, 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 Countrywide may sustain or incur by reason of, or as a result of:
(i) any action taken or omitted to be taken by Countrywide 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
Countrywide 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 Countrywide 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.
Countrywide 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 Countrywide's negligence,
willful misconduct, bad faith, or reckless disregard of its duties hereunder.
- 4 -
<PAGE>
10. TERMINATION
A. The provisions of this Agreement shall be effective on the
date first above written, shall continue in effect until May 31, 1998 and shall
continue in force from year to year thereafter, but only so long as such
continuance is approved (1) by Countrywide, (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.
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 Countrywide such compensation as may be due as
of the date of such termination, and shall likewise reimburse Countrywide for
any out-of-pocket expenses and disbursements reasonably incurred by Countrywide
to such date.
C. In the event that in connection with the termination of
this Agreement a successor to any of Countrywide's duties or responsibilities
under this Agreement is designated by the Trust by written notice to
Countrywide, Countrywide shall, promptly upon such termination and at the
expense of the Trust, transfer all records maintained by Countrywide under this
Agreement and shall cooperate in the transfer of such duties and
responsibilities, including provision for assistance from Countrywide'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 Countrywide or any
affiliated person (as defined in the 1940 Act) of Countrywide from providing
services for any other person, firm or corporation (including other investment
companies); provided, however, that Countrywide 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
- 5 -
<PAGE>
any liability on any of them personally, but shall bind only the trust property
of the Trust.
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 Countrywide: Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert G. Dorsey
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)
- 6 -
<PAGE>
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.
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 Countrywide 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
COUNTRYWIDE FUND SERVICES, INC.
By: /s/ Robert G. Dorsey
--------------------------
Its: President
- 8 -
TRANSFER, DIVIDEND DISBURSING, SHAREHOLDER SERVICE
AND PLAN AGENCY AGREEMENT
AGREEMENT dated as of May 23, 1997 between The Tuscarora Investment
Trust (the "Trust"), a Massachusetts business trust, and Countrywide Fund
Services, Inc. ("Countrywide"), 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 Countrywide to
serve as its transfer, dividend disbursing, shareholder service and plan agent;
and
WHEREAS, Countrywide 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 Countrywide agree as follows:
1. APPOINTMENT.
The Trust hereby appoints and employs Countrywide as agent to
perform those services described in this Agreement for the Trust. Countrywide
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 Bylaws of the Trust;
D. Certified copies of each resolution of the Board of
Trustees authorizing officers to give instructions to
Countrywide;
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
Countrywide 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 Countrywide is to act as
plan agent.
3. COUNTRYWIDE TO RECORD SHARES.
Countrywide 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. Countrywide 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. COUNTRYWIDE TO VALIDATE TRANSFERS.
Upon receipt of a proper request for transfer and upon
surrender to Countrywide of certificates, if any, in proper form for transfer,
Countrywide 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, Countrywide shall notify the Trust in writing of each such
transaction and shall make appropriate entries on the shareholder records
maintained by Countrywide.
5. SHARE CERTIFICATES.
If the Trust authorizes the issuance of share certificates and
an investor requests a share certificate, Countrywide 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
- 2 -
<PAGE>
been collected and credited to the account of the Trust maintained by the
Custodian. The Trust shall supply Countrywide with a sufficient supply of blank
share certificates and from time to time shall renew such supply upon request of
Countrywide. 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, Countrywide 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 Countrywide and the Trust, and
issued by a surety company satisfactory to Countrywide 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, Countrywide 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, Countrywide 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 Countrywide to establish
a shareholder account, Countrywide 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 Countrywide is notified by the Trust's
Custodian that any check or other order for the payment of money is returned
unpaid for any reason, Countrywide will:
- 3 -
<PAGE>
A. Give prompt notification to the Trust of the non-payment
of said check;
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 Countrywide pursuant to this Agreement.
9. DIVIDENDS AND DISTRIBUTIONS.
The Trust shall furnish Countrywide with appropriate evidence
of trustee action authorizing the declaration of dividends and other
distributions. Countrywide 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, Countrywide 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 Countrywide shall
disburse dividends to shareholders of record in accordance with the Trust's then
current prospectus and statement of additional information. Countrywide 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. Countrywide 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, Countrywide 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.
- 4 -
<PAGE>
10. UNCLAIMED DIVIDENDS AND UNCLAIMED REDEMPTION PROCEEDS.
Countrywide shall, at least annually, furnish in writing to
the Trust the names and addresses, as shown in the shareholder accounts
maintained by Countrywide, 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. Countrywide shall use its best efforts to contact the shareholders
affected and to 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. Countrywide 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 Countrywide. Upon its approval of such
redemption transactions, Countrywide, 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, Countrywide shall either: (a)
prepare checks in the appropriate amounts for approval and verification by the
Trust and signature by an authorized officer of Countrywide 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 Countrywide. If Countrywide or the Trust
determines that a request for redemption does not comply with the requirements
for redemptions, Countrywide 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, Countrywide, 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.
- 5 -
<PAGE>
C. Countrywide 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 Countrywide
and the Trust consistent with the Trust's then current prospectus and statement
of additional information.
D. The authority of Countrywide 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.
Countrywide 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 Countrywide 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
Countrywide, 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.
Countrywide 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 Countrywide. Upon receipt of any check drawn or endorsed to the Trust
(or Countrywide, as agent) or otherwise identified as being payment of an
outstanding wire-order, Countrywide will stamp said check with the date of its
receipt and deposit the amount represented by such check to Countrywide's
deposit accounts maintained with the Custodian. Countrywide 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
- 6 -
<PAGE>
total amount deposited in the Trust's deposit accounts, and in the event that
payment for a purchase order is not received by Countrywide 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.
Countrywide 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 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.
Countrywide 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 Countrywide 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. Countrywide 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.
Countrywide 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;
- 7 -
<PAGE>
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;
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 Countrywide to
perform the calculations contemplated under this
Agreement.
17. TAX RETURNS AND REPORTS.
Countrywide 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,
Countrywide 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, Countrywide shall arrange for the Trust's
investment adviser to have direct access to shareholder information contained in
Countrywide's computer system, including account balances, performance
information and such other information which is available to Countrywide with
respect to shareholder accounts.
- 8 -
<PAGE>
20. COOPERATION WITH ACCOUNTANTS.
Countrywide 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.
21. SHAREHOLDER SERVICE AND CORRESPONDENCE.
Countrywide 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. Countrywide 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 Countrywide will notify the Trust of any correspondence or inquiries
which may require an answer from the Trust.
22. PROXIES.
Countrywide 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 Countrywide's obligations under this
Agreement, each series of the Trust shall pay Countrywide, on the first business
day following the end of each month, a monthly fee in accordance with the
schedule attached hereto as Schedule A. Countrywide 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 Countrywide for any out-of-pocket expenses and advances which
are to be paid by the Trust in accordance with Paragraph 25.
- 9 -
<PAGE>
25. EXPENSES.
Countrywide 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
Countrywide under this Paragraph 25 shall be paid by the Trust, including, but
not limited to, costs and expenses of officers and employees of Countrywide in
attending meetings of the Board of Trustees and shareholders of the Trust, as
well as costs and expenses for postage, 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 Countrywide for services provided under this Agreement.
Postage for mailings of dividends, proxies, reports and other mailings to all
shareholders shall be advanced to Countrywide 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 Countrywide to perform any
services for the Trust which services could cause Countrywide 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 Countrywide, 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.
Countrywide 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. Countrywide
shall have no liability with respect to equipment failures beyond its control.
28. INDEMNIFICATION OF COUNTRYWIDE.
A. Countrywide 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 Countrywide nor its officers, directors,
employees, agents,
- 10 -
<PAGE>
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 Countrywide under this Agreement or by
reason of reckless disregard by any of such persons of the obligations and
duties of Countrywide under this Agreement.
B. Any person, even though also a director, officer, employee,
shareholder or agent of Countrywide, 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 Countrywide or any of its affiliates, even
though paid by one of these entities.
C. The Trust shall indemnify and hold harmless Countrywide, 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 Countrywide may sustain or incur by reason of, or as a result of:
(i) any action taken or omitted to be taken by Countrywide 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
Countrywide 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 Countrywide 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.
Countrywide 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 Countrywide's negligence,
willful misconduct, bad faith, or reckless disregard of its duties hereunder.
- 11 -
<PAGE>
30. TERMINATION
A. The provisions of this Agreement shall be effective on the
date first above written, shall continue in effect until May 31, 1998 and shall
continue in force from year to year thereafter, but only so long as such
continuance is approved (1) by Countrywide, (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.
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 Countrywide such compensation as may be due as
of the date of such termination, and shall likewise reimburse Countrywide for
any out-of-pocket expenses and disbursements reasonably incurred by Countrywide
to such date.
C. In the event that in connection with the termination of
this Agreement a successor to any of Countrywide's duties or responsibilities
under this Agreement is designated by the Trust by written notice to
Countrywide, Countrywide shall, promptly upon such termination and at the
expense of the Trust, transfer all records maintained by Countrywide under this
Agreement and shall cooperate in the transfer of such duties and
responsibilities, including provision for assistance from Countrywide'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 Countrywide or any
affiliated person (as defined in the 1940 Act) of Countrywide from providing
services for any other person, firm or corporation (including other investment
companies); provided, however, that Countrywide 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
- 12 -
<PAGE>
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.
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 Countrywide: Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert G. Dorsey
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)
- 13 -
<PAGE>
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.
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 Countrywide 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
COUNTRYWIDE FUND SERVICES, INC.
By: /s/ Robert G. Dorsey
---------------------------
Its: President
- 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, 1997 between The Tuscarora Investment
Trust (the "Trust"), a Massachusetts business trust, and Countrywide Fund
Services, Inc. ("Countrywide"), 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 Countrywide to
provide the Trust with certain accounting and pricing services; and
WHEREAS, Countrywide 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 Countrywide agree as follows:
1. APPOINTMENT.
The Trust hereby appoints and employs Countrywide as agent to
perform those services described in this Agreement for the Trust. Countrywide
shall act under such appointment and perform the obligations thereof upon the
terms and conditions hereinafter set forth.
2. CALCULATION OF NET ASSET VALUE.
Countrywide 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. Countrywide 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, Countrywide may contract with, and rely upon
market quotations provided by, outside services.
3. BOOKS AND RECORDS.
Countrywide 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. Countrywide will maintain such
further books and records
<PAGE>
as are necessary 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. Countrywide 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 Countrywide 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 Countrywide shall be relieved of responsibility for the preparation
and maintenance of any such records delivered to the Trust.
4. PAYMENT OF TRUST EXPENSES.
Countrywide 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, Countrywide shall prepare checks in the appropriate amounts which shall
be signed by an authorized officer of Countrywide and mailed to the appropriate
party.
5. FORM N-SAR.
Countrywide 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.
Countrywide 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 Countrywide a monthly fee in accordance with the
schedule attached hereto as Schedule A. The fees with respect to any month shall
be paid to Countrywide on the last business day of such month. The Trust shall
also promptly reimburse Countrywide for the cost of external pricing services
utilized by Countrywide.
9. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
The parties hereto acknowledge and agree that nothing
contained herein shall be construed to require Countrywide to perform any
services for the Trust which services could cause Countrywide 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 Countrywide, 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.
Countrywide 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. Countrywide
shall have no liability with respect to equipment failures beyond its control.
11. INDEMNIFICATION OF COUNTRYWIDE.
A. Countrywide 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 Countrywide 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 Countrywide under this
Agreement or by reason of reckless disregard by any of such persons of the
obligations and duties of Countrywide under this Agreement.
- 3 -
<PAGE>
B. Any person, even though also a director, officer, employee, or agent
of Countrywide, 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 Countrywide or any of its affiliates, even
though paid by one of those entities.
C. The Trust shall indemnify and hold harmless Countrywide, 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 Countrywide may sustain or incur or which may be asserted against
Countrywide by any person by reason of, or as a result of: (i) any action taken
or omitted to be taken by Countrywide 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 Countrywide 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 Countrywide 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.
Countrywide 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 Countrywide'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 until May 31, 1998 and shall
continue in force from year to year thereafter, but only so long as such
continuance is approved (1) by Countrywide, (2) by vote, cast in person at a
meeting called for the purpose, of a majority of the Trust's
- 4 -
<PAGE>
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 Countrywide such compensation as may be due as
of the date of such termination, and shall likewise reimburse Countrywide for
any out-of-pocket expenses and disbursements reasonably incurred by Countrywide
to such date.
C. In the event that in connection with the termination of
this Agreement a successor to any of Countrywide's duties or responsibilities
under this Agreement is designated by the Trust by written notice to
Countrywide, Countrywide shall, promptly upon such termination and at the
expense of the Trust, transfer all records maintained by Countrywide under this
Agreement and shall cooperate in the transfer of such duties and
responsibilities, including provision for assistance from Countrywide'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 Countrywide or any
affiliated person (as defined in the 1940 Act) of Countrywide from providing
services for any other person, firm or corporation (including other investment
companies); provided, however, that Countrywide 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.
- 5 -
<PAGE>
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.
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 Countrywide: Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert G. Dorsey
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.
- 6 -
<PAGE>
19. AMENDMENT.
This Agreement may not be amended or modified except by a
written agreement executed by both parties.
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 Countrywide 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
COUNTRYWIDE FUND SERVICES, INC.
By: /s/ Robert G. Dorsey
----------------------------
Its: President
- 8 -
<PAGE>
Schedule A
COMPENSATION
The Oak Value Fund series of the Trust will pay Countrywide 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
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated July 23, 1997 and to all references to our Firm included in or made a
part of this Post-Effective Amendment No. 3.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Cincinnati, Ohio,
October 29, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000941722
<NAME> OAK VALUE FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 69,411,777
<INVESTMENTS-AT-VALUE> 85,435,067
<RECEIVABLES> 1,045,887
<ASSETS-OTHER> 15,780
<OTHER-ITEMS-ASSETS> 605
<TOTAL-ASSETS> 86,497,339
<PAYABLE-FOR-SECURITIES> 3,627,794
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 208,133
<TOTAL-LIABILITIES> 3,835,927
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 66,626,124
<SHARES-COMMON-STOCK> 4,006,713
<SHARES-COMMON-PRIOR> 1,413,047
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 11,998
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16,023,290
<NET-ASSETS> 82,661,412
<DIVIDEND-INCOME> 367,040
<INTEREST-INCOME> 190,964
<OTHER-INCOME> 0
<EXPENSES-NET> 619,845
<NET-INVESTMENT-INCOME> (61,841)
<REALIZED-GAINS-CURRENT> 1,928,590
<APPREC-INCREASE-CURRENT> 12,758,225
<NET-CHANGE-FROM-OPS> 14,624,974
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 2,635,872
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,752,396
<NUMBER-OF-SHARES-REDEEMED> 290,774
<SHARES-REINVESTED> 132,044
<NET-CHANGE-IN-ASSETS> 60,595,875
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 777,121
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 349,761
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 619,845
<AVERAGE-NET-ASSETS> 39,064,712
<PER-SHARE-NAV-BEGIN> 15.62
<PER-SHARE-NII> (0.02)
<PER-SHARE-GAIN-APPREC> 6.06
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 1.03
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.63
<EXPENSE-RATIO> 1.59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
