<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 26, 1999
REGISTRATION NOS. 33-90358 - 811-9000
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. 5
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 5
(CHECK APPROPRIATE BOX OR BOXES)
THE TUSCARORA INVESTMENT TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
3100 TOWER BOULEVARD, SUITE 700
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 700
DURHAM, NORTH CAROLINA 27707
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPIES TO:
TINA HOSKING CURTIS BARNES
COUNTRYWIDE FUND SERVICES, INC. BISYS FUND SERVICES, INC.
312 WALNUT STREET, 21ST FLOOR 3435 STELZER ROAD
CINCINNATI, OHIO 45202 COLUMBUS, OH 43219
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
/ / IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B)
/ / ON (DATE) PURSUANT TO PARAGRAPH (B)
/ / 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)
/ X/ ON OCTOBER 29, 1999 PURSUANT TO PARAGRAPH (A) OF RULE 485
TOTAL NUMBER OF PAGES:
INDEX TO EXHIBITS ON PAGE:55
<PAGE>
THE OAK VALUE FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -------------------------------------
QUESTIONS?
CALL 1-800-622-2474
OR YOUR INVESTMENT REPRESENTATIVE.
- -------------------------------------
TICKER SYMBOL: OAKVX
NO SALES CHARGES
NO REDEMPTION FEES
NO 12b-1 FEES
- ------------
PROSPECTUS
- ------------
NOVEMBER 1, 1999
THE OAK VALUE FUND
MANAGED BY
OAK VALUE CAPITAL MANAGEMENT, INC.
THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT APPROVED OR DISAPPROVED
THE SHARES DESCRIBED IN THIS
PROSPECTUS OR DETERMINED
WHETHER THIS PROSPECTUS IS
ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CAREFULLY REVIEW THIS IMPORTANT SECTION, WHICH SUMMARIZES THE FUND'S INVESTMENT
STRATEGIES, RISKS, PAST PERFORMANCE, AND FEES.
RISK/RETURN SUMMARY AND FUND EXPENSES
3 RISK/RETURN SUMMARY OF THE OAK VALUE FUND
4 PERFORMANCE BAR CHART AND TABLE
5 FEES AND EXPENSES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REVIEW THIS SECTION FOR MORE INFORMATION ON INVESTMENT STRATEGIES AND THEIR
RISKS.
INVESTMENT GOAL, STRATEGIES AND RISKS
6 MAIN INVESTMENT STRATEGIES
9 MAIN RISKS OF INVESTING IN THE FUND
9 OTHER INFORMATION ABOUT THE FUND'S INVESTMENT
TECHNIQUES AND POLICIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REVIEW THIS SECTION FOR DETAILS ON THE PEOPLE AND ORGANIZATIONS WHO OVERSEE THE
FUND.
FUND MANAGEMENT
11 THE INVESTMENT ADVISER
11 PORTFOLIO MANAGERS
COMMONLY ASKED QUESTIONS ABOUT OAK VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REVIEW THIS SECTION FOR DETAILS ON HOW SHARES ARE VALUED, HOW TO PURCHASE, SELL
AND EXCHANGE SHARES, RELATED CHARGES AND PAYMENTS OF DIVIDENDS AND
DISTRIBUTIONS.
SHAREHOLDER INFORMATION
12 PRICING OF FUND SHARES
13 PURCHASING AND ADDING TO YOUR SHARES
16 SELLING YOUR SHARES
18 GENERAL POLICIES ON SELLING SHARES
19 DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
20
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BACK COVER
21 WHERE TO LEARN MORE ABOUT THIS FUND
2
<PAGE>
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE FOLLOWING IS A SUMMARY OF CERTAIN KEY INFORMATION ABOUT THE OAK VALUE FUND.
THE RISK/RETURN SUMMARY AND FUND EXPENSES DESCRIBE THE FUND'S OBJECTIVES,
PRINCIPAL INVESTMENT STRATEGIES, PRINCIPAL INVESTMENT RISKS AND CERTAIN
PERFORMANCE INFORMATION UNDER "RISK/RETURN SUMMARY" AND THE FUND'S EXPENSES
UNDER "FUND EXPENSES." DETAILED DESCRIPTIONS OF THE FUND CAN BE FOUND BY
REFERRING TO PAGES _______ IN THIS PROSPECTUS. PLEASE BE SURE TO READ THE MORE
COMPLETE DESCRIPTIONS OF THE FUND FOLLOWING THIS SUMMARY BEFORE YOU INVEST. THE
FUND IS MANAGED BY OAK VALUE CAPITAL MANAGEMENT ("OAK VALUE" OR THE "ADVISER").
RISK/RETURN SUMMARY OF THE OAK VALUE FUND
INVESTMENT GOAL To seek capital appreciation. Current income will
be of secondary importance.
MAIN INVESTMENT STRATEGIES The Fund invests primarily in equity securities,
consisting of common and preferred stocks and
securities convertible into common stocks traded
in domestic and foreign markets. In selecting
investments for the Fund, the Adviser, by
performing fundamental research on individual
companies, seeks to identify securities of
companies whose intrinsic values are less than
their market values. The Adviser considers several
factors, including a company's competitive position
in its industry, its earnings and cash flow, the
value of a company's assets, the market prices of
comparable businesses, and the quality of the
company's management. Once the Adviser has
identified undervalued securities, the Fund will
seek to hold them for the long-term and achieve
long-term capital appreciation as the marketplace
realizes the value of these companies over time.
MAIN INVESTMENT RISKS The Fund may or may not achieve its goal. You could
lose money on your investment in the Fund.
Other risks are:
MARKET RISK. This is the risk that the value of the
Fund's investments, and therefore, the Fund's share
price, will fluctuate as the stock market
fluctuates and that prices overall may decline
over short or longer-term periods.
SELECTION RISK. This risk is the possibility that
the Fund manager's investment strategies may not
work as planned and that the securities selected
may underperform the market or other investments.
CAPITALIZATION RISK. To the extent the Fund
invests in small-cap and mid-cap companies it may
have capitalization risk. These companies' stocks
may be more volatile than the overall market. In
particular, these 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. Their shares
may or may not also trade less frequently and in
limited volume, negatively affecting the share
price and making them potentially more difficult to
sell or less liquid than larger capitalized
companies. For this reason, the Fund's returns may
vary from the stock market
3
<PAGE>
generally.
WHO MAY WANT TO INVEST? Consider investing in the Fund if you are:
/ / LOOKING TO ADD A VALUE COMPONENT TO YOUR
PORTFOLIO
/ / WILLING TO ACCEPT HIGHER RISKS OF INVESTING IN
THE STOCK MARKET
/ / SEEKING A LONG-TERM INVESTMENT GOAL SUCH AS
RETIREMENT, EDUCATIONAL FUND, OR WEALTH
ACCUMULATION
This Fund will not be appropriate for anyone:
/ / SEEKING MONTHLY INCOME
/ / PURSUING A SHORT TERM GOAL OR INVESTING
EMERGENCY RESERVES
/ / SEEKING TO AVOID MARKET FLUCTUATION IN SHARE
PRICE
The Fund is not intended as a complete investment
program.
RISK/RETURN SUMMARY AND FUND EXPENSES
The chart and table on this page provide some indication of the risks of
investing in the Fund by showing how the Fund has performed and how its
performance has varied from year to year. The bar chart shows changes in the
Fund's yearly performance over five years to demonstrate that the Fund's value
varied at different times. The table below it compares the Fund's average annual
returns over time to that of the S&P 500 Index, a widely recognized, unmanaged
index of common stocks.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31/98(1)
[GRAPH]
Of course, past performance does not indicate how the Fund will perform in the
future.
* For the period January 1, 1999 through September 30, 1999 the Fund's aggregate
(non annualized) total return was ___%.
- --------------------------------------------------------------------------------
Best quarter: 4th Qtr 1998 +24.41%
Worst quarter: 3rd Qtr 1998 -18.64%
- --------------------------------------------------------------------------------
- -----------------------
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
4
<PAGE>
The table assumes shareholders redeem all their Fund shares at the end of the
period indicated.
- ---------------------------------------------------------------
WHAT IS AN INDEX?
An Index measures the market price of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. An index does not have an investment adviser and does not pay any
commissions or expenses. If an index had expenses, its performance would be
lower.
<TABLE>
<CAPTION>
Past Year Past 5 Since Inception
Years January 18,
1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
FUND 18.93% 21.80% 22.03%
- --------------------------------------------------------------------------------
S & P 500
INDEX 28.58% 24.06% 21.72%
- --------------------------------------------------------------------------------
</TABLE>
RISK/RETURN SUMMARY AND FUND EXPENSES - CONTINUED
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Fund shares. . Annual Fund operating expenses are paid out of Fund assets, and
are reflected in the share price.
<TABLE>
<S> <C>
Shareholder Transaction
Expenses (fees paid directly from
your investment)
Maximum sales charge (load) imposed
on purchases (as a percentage of
offering price) 0.00%
- ----------------------------------------------------------------
Annual Fund Operating Expenses
(expenses that are deducted from Fund
assets)
- ----------------------------------------------------------------
Advisory Fee 0.90%
- ----------------------------------------------------------------
12b-1 Fees 0.00%
- ----------------------------------------------------------------
Other Expenses (including
Administration Fee) 0.20%
- ----------------------------------------------------------------
Total Annual Fund
Operating Expenses 1.10%
- ----------------------------------------------------------------
</TABLE>
5
<PAGE>
EXPENSE EXAMPLE
USE THIS EXAMPLE TO COMPARE FEES AND EXPENSES WITH THOSE OF OTHER FUNDS. IT
ILLUSTRATES THE AMOUNT OF FEES AND EXPENSES YOU WOULD PAY, ASSUMING THE
FOLLOWING:
- $10,000 INVESTMENTS
- 5% ANNUAL RETURN
- REDEMPTION AT THE END OF EACH PERIOD
- NO CHANGES IN THE FUND'S OPERATING EXPENSES
- REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS
BECAUSE THIS EXAMPLE IS HYPOTHETICAL AND FOR COMPARISON ONLY, YOUR ACTUAL COSTS
WILL BE DIFFERENT.
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
$112 $350 $606 $1,340
- ---------------------- -------- ---------- ---------- ----------
</TABLE>
6
<PAGE>
INVESTMENT GOAL, STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALUE INVESTING:
The VALUE PHILOSOPHY that the Adviser 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 Adviser 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.
- --------------------------------------------------------------------------------
INVESTMENT GOAL
The Fund seeks capital appreciation; current income is a secondary
consideration. As a matter of policy, the Trustees will not change the Fund's
investment goal without shareholder approval.
MAIN INVESTMENT STRATEGIES
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 Adviser, are priced at a discount to
intrinsic value.
The Adviser will select securities based upon the Adviser'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 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)
- 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 businesspersons;
- Substantial discount to the value of the business determined by cash flow
analysis and qualitative characteristics; or
- Substantial discount from asset value which is based on the sum of the
company's parts including for consideration 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 Adviser in selecting potential
investments include:
- Indications of a shareholder- oriented management - The Adviser 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
7
<PAGE>
- --------------------------------------------------------------------------------
BOTTOM-UP INVESTMENT PROCESS:
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 an
investor buys a growing business at a sufficient discount, he should be rewarded
as the intrinsic value increases. In a growing enterprise the investor is 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.
- --------------------------------------------------------------------------------
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;
- Competitive 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 Adviser believes that:
- The anticipated price appreciation has been achieved or is no longer
probable;
- Alternate investments offer superior total return prospects; or
- A fundamental change has occurred in the company or its market.
ADDITIONAL RISKS OF INVESTING IN THE FUND
8
<PAGE>
FOREIGN INVESTMENT RISK. 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.
Overseas investing carries potential risks not associated with domestic
investments. Such risks include, but are not limited to: (1) currency exchange
rate fluctuations, (2) political and financial instability, (3) less liquidity
and greater volatility of foreign investments, (4) lack of uniform accounting,
auditing and financial reporting standards, (5) less government regulation and
supervision of foreign stock exchanges, brokers and listed companies, (6)
increased price volatility, and (7) delays in transaction settlement in some
foreign markets.
YEAR 2000 RISKS. Like other funds and business organizations around the world,
the Fund could be adversely affected if the computer systems used by its service
providers do not properly process and calculate date-related information for the
Year 2000. The Fund has asked its service providers whether they expect to have
their computer systems adjusted for the year 2000 transition and is seeking
assurances from each service provider that they are devoting significant
resources to minimize risks to services critical to the Fund's resources. While
it is likely that such assurances will be obtained, the Fund and its
shareholders may experience losses if these assurances prove to be incorrect or
as a result of year 2000 computer difficulties experienced by issuers of the
securities held in the Fund's portfolio.
OTHER INFORMATION ABOUT THE FUND'S
INVESTMENT TECHNIQUES AND POLICIES
CHANGE IN POLICY. The Trustees may change any policy not specifically described
as fundamental in this prospectus or in the SAI without a shareholder vote.
PORTFOLIO TURNOVER. The Fund's portfolio turnover rates for the past five years
are included in the Financial Highlights of this Prospectus. While the Fund does
not engage routinely in short-term trading, in some cases in response to market
conditions, the Fund's portfolio turnover may exceed 100%. A higher rate of
portfolio turnover increases brokerage and other expenses and may affect the
Fund's returns. A higher portfolio turnover rate also may result in the
realization of substantial net short-term gains, which when distributed, are
taxable to the Fund's shareholders.
TEMPORARY DEFENSIVE POSITION. Although it is not anticipated to happen, the Fund
is permitted for temporary defensive purposes in response to adverse market or
other conditions, to make short-term investments, or hold substantial cash
reserves. While the Fund is investing for temporary defensive purposes, it may
not meet its investment objective.
FUND MANAGEMENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE INVESTMENT ADVISER
Oak Value Capital Management, Inc., ("Oak Value" or the "Adviser"), 3100 Tower
Boulevard, Suite 700, Durham, North Carolina 27707 is the investment adviser for
the Fund. George W. Brumley III, Chairman and Chief Executive Officer of the
Adviser and David R. Carr, Jr., Chief Investment Officer and President of the
Adviser, are controlling persons of the Adviser. Mr. Brumley and Mr. Carr
founded the predecessor firm to the Adviser in May 1986. Oak Value 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. In addition to acting as Adviser to the Fund, Oak Value also
provides investment advice to corporations, trusts, pension and profit sharing
plans, other business and institutional accounts and individuals.
9
<PAGE>
For these advisory services during the fiscal year ended June 30, 1999, the Fund
paid Oak Value a fee equal to .90% of the Fund's average net assets.
PORTFOLIO MANAGERS
Mr. Brumley and Mr. Carr are primarily responsible for the day-to-day management
of the Fund's portfolio and have acted in this capacity since its inception in
1993. Mr. Brumley received his Bachelor of Arts degree from Emory University and
his Master of Business Administration from Duke University. Mr. Carr 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 Adviser's other accounts.
The STATEMENT OF ADDITIONAL INFORMATION has more detailed information about the
Investment Adviser and other service providers.
- --------------------------------------------------------------------------------
COMMONLY ASKED QUESTIONS ABOUT OAK VALUE
OAK VALUE IS A VALUE MANAGER USING A BOTTOM-UP INVESTMENT PROCESS. HOW DOES OAK
VALUE DEFINE VALUE?
Oak Value'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 has evolved from one value
investor to the next. Oak Value 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, Oak Value 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. Oak Value defines this philosophy as investing in GOOD
BUSINESSES WITH GOOD MANAGEMENT AT ATTRACTIVE PRICES.
HOW DOES OAK VALUE DETERMINE THE INTRINSIC VALUE OF A COMPANY?
Oak Value believes the true intrinsic value of a business is based on the
present value of the future cash flows the company can generate. Oak Value'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 Oak Value 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. Oak Value'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 Oak Value views equities as businesses, not pieces of paper, company
visits are critical to the investment process. Oak Value typically conducts
meetings with the companies in which Oak Value has holdings as well as many of
those companies' customers, suppliers and competitors. Oak Value believes the
company meetings are crucial to the investment process and to the long-term
performance of its client's investments.
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
WHAT IS OAK VALUE'S SELL DISCIPLINE?
It is often just as difficult to sell a business as it is to buy a business. Oak
Value typically sells businesses for one of three reasons:
- A price target is met on a relative or absolute basis.
- Oak Value has identified a better opportunity with a greater margin of
safety.
- There is a change in the fundamentals of the business.
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRICING OF FUND SHARES
HOW NAV IS CALCULATED
The NAV is calculated by adding the total value of the Fund's investments and
other assets, subtracting its liabilities and then dividing that figure by the
number of outstanding shares of the Fund:
NAV =
TOTAL ASSETS - LIABILITIES
--------------------------
Number of Shares
Outstanding
You can find the Fund's NAV daily in THE WALL STREET JOURNAL and other
newspapers under:
OAK VALUE
Ticker Symbol: OAKVX
Per share net asset value (NAV) for the Fund is determined and its shares are
priced at the close of regular trading on the New York Stock Exchange ("NYSE"),
normally at 4:00 p.m. Eastern time. Shares are not priced on days the Exchange
is closed for trading.
Your order for purchase or sale of shares is priced at the next NAV calculated
after it is received in good order by the Fund. This is what is known as the
offering price.
The Fund's investments and other assets are valued daily at their current market
value, unless market quotations are not available, in which case securities will
be valued in good faith at fair value under procedures approved by the Fund's
Trustees.
11
<PAGE>
PURCHASING AND ADDING TO YOUR SHARES
You may purchase the Fund directly or through a participating dealer which may
charge additional fees and may require higher minimum investments or impose
other limitations on buying and selling shares.** If you purchase shares through
a participating dealer, the dealer is responsible for transmitting orders by
close of business and may have an earlier cut-off time for purchase and sale
requests. Consult your dealer or institution for specific information.
<TABLE>
<CAPTION>
MINIMUM MINIMUM
ACCOUNT TYPE INITIAL INVESTMENT* SUBSEQUENT INVESTMENT*
- --------------------------------------------------------------------------------------
<S> <C> <C>
REGULAR ACCOUNT $2,500 $100
- --------------------------------------------------------------------------------------
RETIREMENT PLAN ACCOUNT $1,000 $100
- --------------------------------------------------------------------------------------
AUTOMATIC INVESTMENT PLAN $2,500 $100
- --------------------------------------------------------------------------------------
</TABLE>
All purchases must be in U.S. dollars. A fee will be charged for any checks
that do not clear. Third-party or foreign checks are not accepted.
The Fund may waive its minimum purchase requirement and the Distributor may
reject a purchase order if it considers it in the best interest of the Fund and
its shareholders.
* The minimum initial and subsequent amounts do not apply to accounts of the
Trustees, officers, employees of the Fund or certain related parties.
** Shares of the Fund may be purchased or sold through the Charles Schwab &
Co., Inc. Mutual Fund OneSource-TM- Program, The Fidelity Brokerage Services,
Inc. FundsNetWork-TM- Program, the Jack White & Company, Inc. NoFee Network
Mutual Fund Service Program, The Pershing FundVest-TM- 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 Adviser pays such organizations for administrative,
shareholder subaccounting and other services, including sales-related
services, from the Adviser's own revenues based on the amount of customer
assets maintained in the Fund by such organizations. The payment of such
compensation by the Adviser will not affect the expense ratio of the Fund.
12
<PAGE>
PURCHASING AND ADDING TO YOUR SHARES- CONTINUED
- --------------------------------------------------------------------------------
INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT
If purchasing through your dealer or broker, simply tell your dealer or broker
that you wish to purchase shares of the Funds and he or she will take care of
the necessary documentation. For all other purchases, follow the instructions
below.
- --------------------------------------------------------------------------------
BY MAIL
Initial Investment:*
1. Carefully read and complete the application. Establishing your account
privileges now saves you the inconvenience of having to add them later.
2. Make check, bank draft or money order payable to "The Oak Value Fund."
3. Mail to: The Oak Value Fund, P.O. Box _____, Columbus, OH 43218-____
Subsequent Investment:
1. Use the investment slip attached to your account statement, or, if
unavailable,
2. Include the following information:
* The Oak Value Fund
* Amount invested
* Account name
* Account number
Include your account number on your check.
3. Mail to: The Oak Value Fund, P.O. Box _____, Columbus, OH 43218-____
- --------------------------------------------------------------------------------
BY OVERNIGHT SERVICE
See instructions 1-2 above for subsequent investments, and
send to: The Oak Value Fund,
c/o BISYS Fund Services,
Attn: T.A. Operations, 3435 Stelzer Road, Columbus, OH 43219.
- --------------------------------------------------------------------------------
ELECTRONIC PURCHASES
Your bank must participate in the Automated Clearing House (ACH) and must be a
United States bank. Your bank or broker may charge for this service.
Establish electronic purchase option on your account application or call
1-800-___-____. Your account can generally be set up for electronic purchases
within 10 business days.
13
<PAGE>
PURCHASING AND ADDING TO YOUR SHARES - CONTINUED
- --------------------------------------------------------------------------------
BY WIRE TRANSFER
NOTE: YOUR BANK MAY CHARGE A WIRE TRANSFER FEE.
For initial and subsequent investments:
Call the Fund at 1-800-622-2474 to obtain the necessary information to instruct
your bank to wire transfer your investment.
After instructing your bank to wire the funds, call 1-800-622-2474 to advise us
of the amount being transferred and the name of your bank.
- --------------------------------------------------------------------------------
ELECTRONIC VS. WIRE TRANSFER. Wire transfers allow financial institutions to
send funds to each other, almost instantaneously. With an electronic purchase
or sale, the transaction is made through the Automated Clearing House (ACH) and
may take up to eight business days to clear. There is generally no fee for ACH
transactions.
- --------------------------------------------------------------------------------
14
<PAGE>
PURCHASING AND ADDING TO YOUR SHARES - CONTINUED
You can add to your account by using the convenient options described below. The
Fund reserves the right to change or eliminate these privileges at any time with
60 days' notice.
AUTOMATIC INVESTMENT PLAN
You can make automatic investments in the Fund from your bank account. Automatic
investments can be as little as $100, once you've invested the minimum initial
amount required to open the account.
To invest regularly from your bank account:
/ / Complete the Automatic Investment Program portion on your Account
Application.
Make sure you note:
- Your bank name, address and account number
- The amount you wish to invest automatically (minimum $100)
How often you want to invest (monthly, 4 times a year, twice a
year or once a year)
/ / Attach a voided personal check.
PAYROLL DIRECT DEPOSIT
You may set up a payroll direct deposit arrangement through your employer or
retirement benefit source. You may make periodic investments of at least $100
per pay period.
To invest regularly from your paycheck or government check:
Call 1-800-622-2474 for an enrollment form.
- --------------------------------------------------------------------------------
SELLING YOUR SHARES
You may sell your shares at any time. Your sales price will be the next NAV
after your sell order is received by the Fund, its transfer agent, or your
investment representative. Normally you will receive your proceeds within a week
after your request is received.
WITHDRAWING MONEY FROM YOUR FUND INVESTMENT
- --------------------------------------------------------------------------------
As a mutual fund shareholder, you are technically selling shares when you
request a withdrawal in cash. This is also known as redeeming shares or a
redemption of shares.
- --------------------------------------------------------------------------------
INSTRUCTIONS FOR SELLING SHARES
If selling your shares through your dealer or broker, ask him or her for
redemption procedures. The request must be received by the Transfer Agent before
the close of regular trading on the NYSE, normally 4:00 p.m. Eastern time, to
receive the next determined NAV. Your dealer or broker may have transaction
minimums and/or transaction times, which will affect your redemption. For all
other sales transactions, follow the instructions below.
15
<PAGE>
SELLING YOUR SHARES - CONTINUED
By telephone Call 1-800-622-2474 with instructions on
(UNLESS YOU HAVE DECLINED how you wish to receive your funds (mail,
TELEPHONE SALES PRIVILEGES) wire, electronic transfer). (See "General
Policies on Selling Shares--Verifying
Telephone Redemptions" below)
- --------------------------------------------------------------------------------
By mail 1. Call 1-800-622-2474 to request
(See "General Policies on redemption forms or write a letter of
Selling Shares--Redemptions in instruction indicating:
Writing Required" below) - Fund name, account number, social
security number and account
registration
- amount you wish to redeem
- address where your check should be
sent
- account owner signature
2. Mail to:
The Oak Value Fund
PO Box _____
Columbus, OH 43218-_____
- --------------------------------------------------------------------------------
By overnight service See instruction 1 above, and
(See "General Policies on Send to:
Selling Shares--Redemptions in The Oak Value Fund
Writing Required" below) co/BISYS Fund Services
Attn: T.A. Operations
3435 Stelzer Road
Columbus, OH 43219
- --------------------------------------------------------------------------------
Wire transfer Call 1-800-622-2474 to request a wire
YOU MUST ELECT THIS OPTION transfer. If you call by 4 p.m. Eastern
ON YOUR APPLICATION. time, your payment will normally be wired
to your bank on the next business day.
Note: Your financial
institution may also charge
a separate fee.
- --------------------------------------------------------------------------------
Electronic Redemptions Call 1-800-622-2474 to request an
electronic redemption. If you call by
Your bank must participate in 4 p.m. Eastern time, the NAV of your
the Automated Clearing House shares will normally be determined on the
(ACH) and must be a U.S. bank. same day and the proceeds credited
within 8 days.
Your bank may charge for
this service.
16
<PAGE>
SELLING YOUR SHARES - CONTINUED
AUTOMATIC WITHDRAWAL PLAN
You can receive automatic payments from your account on a monthly, quarterly,
semi-annual or annual basis. The minimum withdrawal is $100.
To activate this feature:
- - Make sure you've checked the appropriate box on the Account Application, or
call 1-800-622-2474.
- - Your account must have a value of $10,000 or more to start withdrawals.
GENERAL POLICIES ON SELLING SHARES
REDEMPTIONS IN WRITING REQUIRED
Each of the following situations requires that you request redemption in writing
and provide a signature guarantee:
- Redemptions over $25,000
- Your account registration or the name(s) on your account has changed
within the last 15 days
- The check is not being mailed to the address on your account
- The check is not being made payable to the owner of the account
- The redemption proceeds are being transferred to another Fund account
with a different registration
A signature guarantee can be obtained from a financial institution, such as a
bank, broker-dealer, or credit union, or from members of the STAMP (Securities
Transfer Agents Medallion Program), MSP (New York Stock Exchange Medallion
Signature Program) or SEMP (Stock Exchanges Medallion Program). Members are
subject to dollar limitations which must be considered when requesting their
guarantee. The Transfer Agent may reject any signature guarantee if it believes
the transaction would otherwise be improper.
VERIFYING TELEPHONE REDEMPTIONS
The Fund makes every effort to ensure that telephone redemptions are only made
by authorized shareholders. All telephone calls are recorded for your protection
and you will be asked for information to verify your identity. Unless you have
specifically indicated on your application that you do not want the telephone
redemption feature, you may be responsible for any fraudulent telephone orders
which are not detected by the use of reasonable precautions.
REDEMPTIONS WITHIN 10 BUSINESS DAYS OF INITIAL INVESTMENT
When you have made your initial investment by check or ACH, proceeds of your
redemption will be delayed until the check has cleared (which may require up to
10 business days). You can avoid this delay by purchasing shares with a
certified check or a federal funds wire.
REDEMPTION IN KIND
The Fund reserves the right to make payment in securities rather than cash,
known as "redemption in kind," for amounts redeemed by a shareholder, in any
90-day period, in excess of $250,000 or 1% of Fund net assets, whichever is
less. If the Fund deems it advisable for the benefit of all shareholders,
redemption in kind will consist of securities equal in market value to your
shares. When you convert these securities to cash, you will pay brokerage
charges.
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the Securities and Exchange Commission in order to protect
remaining shareholders.
17
<PAGE>
GENERAL POLICIES ON SELLING SHARES - CONTINUED
CLOSING OR EXCHANGE OF SMALL ACCOUNTS
If your account falls below $1,000 as a result of redemptions, the Fund may ask
you to increase your balance. If it is still below $1,000 two months after the
request, the Fund may close your account and send you the proceeds.
UNDELIVERABLE REDEMPTION CHECKS
For any shareholder who chooses to receive distributions in cash: If
distribution checks (1) are returned and marked as "undeliverable" or (2) remain
uncashed for six months, your account will be changed automatically so that all
future distributions are reinvested in your account. Checks that remain uncashed
for six months will be canceled and the money reinvested in the Fund.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Any income the Fund receives is paid out semi-annually, less expenses, to its
shareholders as dividends. Any capital gains for the Fund are distributed at
least annually. There is no fixed dividend rate and there can be no assurance as
to payment of any dividends or the realization of any gains.
You can choose from three distribution options:
- - Reinvest all distributions in additional Fund shares
- - Receive dividends from net investment income in cash while reinvesting
capital gains distributions in Fund shares
- - Receive all distributions in cash
All dividends and distributions will be automatically reinvested at net asset
value unless you request otherwise.
DISTRIBUTIONS ARE MADE ON A PER SHARE BASIS REGARDLESS OF HOW LONG YOU'VE OWNED
YOUR SHARES. THEREFORE, IF YOU INVEST SHORTLY BEFORE THE DISTRIBUTION DATE, SOME
OF YOUR INVESTMENT WILL BE RETURNED TO YOU IN THE FORM OF A DISTRIBUTION.
Long-term capital gains designated by the Fund as such will be taxable generally
at a 20% rate for noncorporate shareholders. Taxes on capital gains by the Fund
will vary with the length of time the Fund has held the security - NOT how long
you have had your money invested in the Fund.
Dividends are taxable in the year in which they are declared, even if they
appear on your account statement the following year. Dividends and distributions
are treated in the same manner for federal income tax purposes whether you
receive them in cash or in additional shares.
You will be notified in January each year about the federal tax status of
distributions made by the Fund. Depending on your residence for tax purposes,
distributions also may be subject to state and local taxes, including
withholding taxes.
18
<PAGE>
- --------------------------------------------------------------------------------
Avoid 31% Tax Withholding
The Fund is required to withhold 31% of taxable dividends, capital gains
distributions and redemptions paid to shareholders who have not provided the
Fund with their certified Taxpayer Identification Number in compliance with IRS
rules. To avoid this, make sure you provide your correct Tax Identification
Number (Social Security Number for most investors) on your account application.
- --------------------------------------------------------------------------------
Foreign shareholders may be subject to special withholding requirements. Consult
your tax adviser about the federal, state and local tax consequences in your
particular circumstances.
19
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE FINANCIAL HIGHLIGHTS TABLE IS INTENDED TO HELP YOU UNDERSTAND THE FUND'S
FINANCIAL PERFORMANCE FOR THE PAST 5 YEARS. CERTAIN INFORMATION REFLECTS
FINANCIAL RESULTS FOR A SINGLE FUND SHARE. THE TOTAL RETURNS IN THE TABLE
REPRESENT THE RATE THAT YOU WOULD HAVE EARNED ON AN INVESTMENT IN THE FUND
(ASSUMING REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS). THIS INFORMATION HAS
BEEN AUDITED BY ARTHUR ANDERSEN LLP, WHOSE REPORT, ALONG WITH THE FUND'S
FINANCIAL STATEMENTS, ARE INCLUDED IN THE ANNUAL REPORT, WHICH IS AVAILABLE UPON
REQUEST.
THE OAK VALUE FUND FINANCIAL HIGHLIGHTS [TO BE INSERTED FROM ANNUAL REPORT.]
20
<PAGE>
FOR MORE INFORMATION
For more information about the Fund, the following documents are available free
upon request:
ANNUAL AND SEMI-ANNUAL REPORTS:
The Fund's annual and semi-annual reports to shareholders contain additional
information on the Fund's investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Fund, including its
operations and investment policies. It is incorporated by reference and is
legally considered a part of this prospectus.
YOU CAN GET FREE COPIES OF THE ANNUAL AND SEMI-ANNUAL REPORTS AND THE SAI, OR
REQUEST OTHER INFORMATION AND DISCUSS YOUR QUESTIONS ABOUT THE OAK VALUE FUND BY
CONTACTING A PARTICIPATING DEALER THAT SELLS THE FUND, OR BY CONTACTING:
THE OAK VALUE FUND
3435 STELZER ROAD
COLUMBUS, OHIO 43219
TELEPHONE: 1-800-622-2474 (8:00 A.M. - 9:00 P.M. EASTERN TIME)
http://www.oakvaluefund.com.
You can review the Fund's Annual and Semi-Annual Reports and SAI at the Public
Reference Room of the Securities and Exchange Commission. You can get copies:
- For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009
- Free from the Commission's Website at http://www.sec.gov.
- For information about obtaining information from the Commission, you can
call 1-800-SEC-0330.
(Investment Company Act file no. 811-9000)
21
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
OAK VALUE FUND
November 1, 1999
A series of
THE TUSCARORA INVESTMENT TRUST
3435 Stelzer Road
Columbus, Ohio 43219
Telephone 1-800-622-2474
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT OBJECTIVE AND POLICIES....................................... 2
DESCRIPTION OF BOND RATINGS............................................. 5
INVESTMENT LIMITATIONS.................................................. 8
TRUSTEES AND OFFICERS................................................... 10
INVESTMENT ADVISER...................................................... 12
ADMINISTRATOR........................................................... 13
TRANSFER AGENT AND FUND ACCOUNTING SERVICES............................. 14
OTHER SERVICES.......................................................... 14
BROKERAGE............................................................... 14
SPECIAL SHAREHOLDER SERVICES............................................ 15
PURCHASE OF SHARES...................................................... 18
REDEMPTION OF SHARES.................................................... 18
NET ASSET VALUE DETERMINATION........................................... 19
ADDITIONAL TAX INFORMATION.............................................. 19
DESCRIPTION OF THE TRUST................................................ 20
CALCULATION OF PERFORMANCE DATA......................................... 21
FINANCIAL STATEMENTS AND REPORTS........................................ 24
</TABLE>
This Statement of Additional Information ("SAI") is not a prospectus and
should only be read in conjunction with the Prospectus of the Oak Value Fund
(the "Fund") dated November 1, 1999. The Financial Statements included in the
Fund's Annual Report dated June 30, 1999 are incorporated by reference to this
SAI. The Prospectus and Annual Report may be obtained at no charge by contacting
the Fund at the address shown above or calling 1-800-622-2474.
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.
DESCRIPTION OF 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 Adviser 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 Adviser's opinion.
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 "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
Adviser'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
Adviser 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.
REPURCHASE AGREEMENTS. The Fund may acquire U.S. Government Securities or other
high-grade debt securities subject to repurchase agreements. 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
2
<PAGE>
securities. 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 Adviser will carefully consider the
creditworthiness of a vendor during the term of the repurchase agreement.
Repurchase agreements are considered as loans collateralized by the Repurchase
Securities, such agreements being defined as "loans" under the Investment
Company Act of 1940 (the "1940 Act"). The return on such "collateral" may be
more or less than that from the repurchase agreement. The market value of the
resold securities will be monitored so that the value of the "collateral" is at
all times as least equal to the value of the loan, including the accrued
interest earned thereon. The Fund's custodian will hold all Repurchase
Securities either directly or through a securities depository.
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.
FOREIGN SECURITIES. The Fund may invest in foreign securities if the Adviser
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
3
<PAGE>
income. Currency exchange rates and regulations may cause fluctuation in the
value of foreign securities. Foreign securities are subject to different
regulatory environments than in the United States and, compared to the United
States, there may be a lack of uniform accounting, auditing and financial
reporting standards, less volume and liquidity and more volatility, less public
information, and less regulation of foreign issuers. Countries have been known
to 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 are 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.
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 Adviser 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 COMMITMENT 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. In such purchase transactions the
Fund will not accrue interest on the purchased security until the actual
settlement. Similarly, if a security is sold for a forward date, the Fund will
accrue the interest until the settlement of the sale. When-issued security
purchases and forward commitments have a higher degree of risk of price movement
before settlement due to the extended time period between the execution and
settlement of the purchase or sale. As a result, the exposure to the
counterparty of the purchase or sale is increased. Although the Fund would
generally purchase securities on a forward commitment or when-issued basis with
the intention of taking delivery, the Fund may sell such a security prior to the
settlement date if the Adviser felt such action was appropriate. In such a case
the Fund could incur a short-term gain or loss.
SHORT SALES "AGAINST THE BOX." The Fund may sell securities short "against the
box." Selling securities short involves selling securities the seller (e.g., the
Fund) has
4
<PAGE>
borrowed in anticipation of a decline in the market price of such securities. A
short sale is "against the box" if, at all times during which the short position
is open, the Fund owns at least an equal amount of the securities or securities
convertible into, or exchangeable without further consideration for, securities
of the same issuer as the securities that are sold short. To deliver the
securities to the buyer, the seller must arrange through a broker to borrow the
securities and, in so doing, the seller becomes obligated to replace the
securities borrowed at their market price at the time of the replacement. The
seller may have to pay a premium to borrow the securities and must pay any
dividends or interest payable on the securities until they are replaced.
WRITING COVERED CALL OPTIONS. When the Adviser believes that individual
portfolio securities are approaching the Adviser'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 Adviser is incorrect in its expectations and the market price of
a stock subject to a call option rises above the exercise price of the option,
the Fund will lose the opportunity for further appreciation of that security.
Profits on closing purchase transactions and premiums on lapsed calls
written are considered capital gains for financial reporting purposes and are
short term gains for federal income tax purposes. When short-term gains are
distributed to shareholders, they are taxed as ordinary income. If the Fund
desires to enter into a closing purchase transaction, but there is no market
when it desires to do so, it would have to hold the securities underlying the
call until the call lapses or until the call is exercised. The 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 Adviser. An exchange may order
the liquidation of positions found to be in violation of these limits and may
impose certain other sanctions.
5
<PAGE>
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.
BORROWING. The Fund may borrow, temporarily, up to 5% of its total assets for
extraordinary purposes and may increase this limit to 33-1/3% of its total
assets to meet redemption requests which might otherwise require untimely
disposition of portfolio holdings. To the extent the Fund borrows for these
purposes, the effects of market price fluctuations on portfolio net asset value
will be exaggerated. If, while such borrowing is in effect, the value of the
Fund's assets declines, the Fund would be forced to liquidate portfolio
securities when it is disadvantageous to do so. The Fund would incur interest
and other transaction costs in connection with such borrowing. The Fund will not
make any additional investments while its borrowings are outstanding.
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 Adviser believes that the quality of fixed-income securities
in which the Fund may invest should be continuously reviewed and that individual
analysts give different weightings to the various factors involved in credit
analysis. A rating is not a recommendation to purchase, sell or hold a security
because it does not take into account market value or suitability for a
particular investor. When a security has received a rating from more than one
NRSRO, each rating is evaluated independently. Ratings are based on current
information furnished by the issuer or obtained by the NRSROs from other sources
that they consider reliable. Ratings may be changed, suspended or withdrawn as a
result of changes in or unavailability of such information, or for other
reasons.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S RATINGS:
The following summarizes the highest three ratings used by Moody's
Investors Service, Inc. ("Moody's") for bonds:
6
<PAGE>
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:
AAA: This is the highest rating assigned by S&P 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
7
<PAGE>
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.
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:
8
<PAGE>
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.
Under these limitations, the Fund MAY NOT:
(1) Purchase more than 10% of the outstanding voting securities or 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 this limitation);
(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
9
<PAGE>
borrowings.
(4) Invest for the purpose of exercising control or management of another
issuer;
(5) Invest in interests in real estate, real estate mortgage loans, oil, gas or
other mineral exploration or development programs, except that the Fund may
invest in the securities of companies (other than those which are not
readily marketable) which own or deal in such things.
(6) Underwrite securities issued by others except to the extent the Fund may be
deemed to be an underwriter under the federal securities laws in connection
with the disposition of portfolio securities;
(7) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of transactions);
(8) Make short sales of securities or maintain a short position, except short
sales "against the box." (A short sale is made by selling a security the
Fund does not own. A short sale is "against the box" to the extent that the
Fund contemporaneously owns or has the right to obtain at no added cost
securities identical to those sold short.);
(9) Participate on a joint or joint and several basis in any trading account in
securities;
(10) Make loans of money or securities, except that the Fund may invest in
repurchase agreements (but repurchase agreements having a maturity of
longer than seven days, together with other securities which are not
readily marketable, are limited to 10% of the Fund's net assets);
(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.
10
<PAGE>
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.
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:
<TABLE>
<CAPTION>
NAME, AGE, POSITION PRINCIPAL OCCUPATION
AND ADDRESS DURING PAST 5 YEARS
- ----------- ---------------------
<S> <C>
*George W. Brumley III (39) Chairman and CEO of
Trustee and President Oak Value Capital
3100 Tower Blvd., Ste. 700 Management, Inc.
Durham, NC 27707
C. Russell Bryan (39) Managing Director
Trustee Brookwood Associates, Inc.
100 North Tryon Street,
suite 1500
Charlotte, NC 28284
*David R. Carr, Jr. (39) President of Oak Value
Trustee, Vice President Capital Management, Inc.
and Treasurer
3100 Tower Blvd., Ste. 700
Durham, NC 27707
John M. Day (45) Managing Partner, Maynard
Trustee Capital Partners LLC (an
5151 Glenwood Avenue investment firm); prior to March
Raleigh, NC 27612 1996, Vice President of
Investors Management Corp.
(a holding company).
Joseph T. Jordan, Jr. (53) President of Practice
Trustee Management Services, Inc.
3310 Croasdaile Drive, (a medical practice management
11
<PAGE>
Suite 400 firm); Director of Durham
Durham, NC 27705 Ambulatory Surgical Center
Tina D. Hosking(age 31)
Secretary Associate Counsel and Assist
Ant Vice President of Countrywide
312 Walnut Street Fund Services, Inc. (a registered
Cincinnati, OH 45202 transfer agent) and CW Fund
Distributors, Inc. (a registered
broker-dealer)
</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.
Trustees of the Trust who are not trustees, officers or employees of the
Adviser or the Administrator receive from the Trust an annual retainer of
$ (plus $ for serving on the Board's Audit Committee) and a fee
of $ for each Board of Trustees and Board committee meeting of the Trust
attended and are reimbursed for all out-of-pocket expenses relating to
attendance at such meetings. Trustees who are trustees, officers or employees
of the Adviser or the Administrator do not receive compensation from the
Trust. The table below sets forth the compensation received by each
independent Trustee from the Trust for the fiscal year ended June 30, 1999.
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT
AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL
NAME OF PERSON, COMPENSATION AS A PART OF FUND BENEFITS UPON
POSITION FROM FUND EXPENSES RETIREMENT
- --------------------- ------------------ -------------------- -----------------
<S> <C> <C> <C>
C. Russell Bryan $17,500 -0- -0-
John M. Day $17,500 -0- -0-
Joseph T. Jordan, Jr. $17,500 -0- -0-
</TABLE>
12
<PAGE>
PRINCIPAL HOLDERS OF VOTING SECURITIES. As of August 20, 1999 , 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[TO BE UPDATED], 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 % of the
then outstanding shares of the Fund; and Charles Schwab and Co., Inc., 101
Montgomery Street, San Francisco, California owned of record % of the then
outstanding shares of the Fund. Charles Schwab & Co., Inc. 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 ADVISER
Oak Value Capital Management, Inc. (the "Adviser") supervises the Fund's
investments pursuant to an Investment Advisory Agreement (the "Advisory
Agreement") described in the Prospectus. The Advisory Agreement is dated May 23,
1995 and is subject to annual approval 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 Adviser 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
Adviser. The Advisory Agreement provides that it will terminate automatically in
the event of its assignment.
Compensation of the Adviser is at the annual rate of 0.90% of the Fund's
average daily net assets. For the fiscal years ended June 30, 1999, 1998 and
1997, the Fund paid the Adviser advisory fees of $________, $1,740,919 and
$349,761, respectively.
The Adviser, 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 Adviser
and may directly or indirectly receive benefits from the advisory fees paid to
the Adviser. In addition to acting as Adviser to the Fund, the Adviser also
provides investment advice to corporations, trusts, pension and profit sharing
plans, other business and institutional accounts and individuals.
The Adviser 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 Adviser 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 Adviser places all
securities orders for the Fund, determining with which broker, dealer, or issuer
to place the orders. The Adviser must adhere to the brokerage policies of the
Fund in placing all orders, the substance of which policies are that the Adviser
must seek at all times the most favorable price and execution for all securities
brokerage transactions.
13
<PAGE>
The Adviser also provides, at its own expense, certain executive officers
to the Trust, and pays the entire cost of distributing Fund shares.
ADMINISTRATOR
BISYS Fund Services Ohio, Inc. ("BISYS Ohio") , 3435 Stelzer Road,
Columbus, Ohio 43219, serves as Administrator to the Fund pursuant to an
administration agreement dated _________, 199___ (the "Administration
Agreement"). The Administration Agreement continues in effect until _________,
2002, and is renewed automatically thereafter , unless terminated , for
successive one year terms. This Agreement may be terminated at any time without
penalty( note under terms set forth in the Administration Agreement. The
Administration Agreement contains provisions limiting the liability of BISYS
Ohio and requiring its indemnification by the Fund. Pursuant to the
Administration Agreement, BISYS Ohio provides the Fund with general office
facilities and supervises the overall administration of the Fund, including
among other responsibilities, assisting in the preparation and filing of all
documents required for compliance by the Fund with applicable laws and
regulations and arranging for the maintenance of books and records of the Fund.
BISYS Ohio provides persons (including directors, officers or other employees of
BISYS Ohio or its affiliates) satisfactory to the Board of Trustees to serve as
officers of the Fund. BISYS Ohio is a wholly owned indirect subsidiary of The
BISYS Group, Inc., which is headquartered in Little Falls, New Jersey, and
through its subsidiaries provides a comprehensive array of products and services
to financial institutions and corporate clients including: mutual fund
distribution and administration, retirement plan services, insurance
distribution and support services and image and data processing outsourcing.
Pursuant to the Administration Agreement, the Fund pays BISYS Ohio an
annual fee, computed daily and paid monthly, at the following annualized rates:
.04% for portfolio assets of $500 million and less
.028% for the next $500 million through $1 billion of portfolio
assets;and
.014% for portfolio assets greater than $1 billion
For the fiscal year ended June 30, 1999, Countrywide Fund Services, Inc.
("Countrywide"), the Fund's previous administrator, received from the Fund,
accounting and pricing fees of $ and administrative fees of $ . For the
fiscal year ended June 30, 1998, Countrywide received from the Fund
accounting and pricing fees of $43,000 and administrative fees of $213,152.
For the fiscal year ended June 30, 1997, Countrywide received from the Fund
accounting and pricing fees of $25,000 and administrative fees of $70,604.
TRANSFER AGENT AND FUND ACCOUNTING SERVICES
BISYS Ohio also provides certain accounting services pursuant to a Fund
Accounting Agreement dated _________, 199___ (the "Fund Accounting Agreement").
The Fund Accounting Agreement continues in effect until _________, 2002 and is
renewed automatically, unless terminated, for successive one year periods. The
Agreement's provisions for termination, limitation of liability and
indemnification are similar to those of
14
<PAGE>
the Fund's Administration Agreement. Under the Fund Accounting Agreement, BISYS
Ohio maintains all Fund books and records required under Rule 31a-1 under the
Investment Company Act, performs daily accounting services and satisfies
additional Fund reporting and record keeping requirements.
Pursuant to the Fund Accounting Agreement, the Fund pays BISYS Ohio an annual
fee, computed daily and paid monthly, at the following annualized rates:
.02% for the Trust's assets of $500 million and less
.015% for the next $500 million through $1 billion of the Trust's
assets;and
.01% for the Trust's assets greater than $1 billion. Fund
accounting fees paid by Countrywide for the past three years are
disclosed above.
BISYS Ohio also serves as transfer agent and dividend disbursing agent for the
Fund pursuant to a separate agreement.
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 Bank of New York [address] 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.
Morgan, Lewis & Bockius, 1800 M Street, N.W., Washington, D.C. 20036,
passes upon certain legal matters in connection with shares offered by the Trust
and also acts as Counsel to the Trust.
OTHER FUND COSTS
The Fund pays all expenses not assumed by the Adviser, 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
Adviser, 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
15
<PAGE>
expenses expected to be incurred by the Fund in accordance with generally
accepted accounting practices.
The Fund and the Adviser have arrangements with certain brokerage firms and
financial institutions to provide administrative, shareholder subaccounting and
other services, including sales-related services. The Adviser, 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 Adviser will not affect the expense ratio of the Fund.
BROKERAGE
It is the Fund's practice to seek the best price and execution for all
portfolio securities transactions. The Adviser (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
Adviser 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 Adviser 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 will 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, 1999, 1998 and 1997, the total
amount of brokerage commissions paid by the Fund was $______, $306,718 and
$59,862, respectively. The increase in brokerage commissions paid by the Fund
during the fiscal year ended June 30, 1998 was due to the substantial increase
in net assets of the Fund.
While there is no formula, agreement or undertaking to do so, the Adviser
may allocate a portion of the Fund's brokerage commissions to persons or firms
providing the Adviser 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 Adviser 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 Adviser is obligated to effect transactions for the
Fund based upon obtaining the most favorable price and execution. Factors
considered by the Adviser 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 Adviser's perception of the broker's reliability, integrity
and financial condition. During the fiscal year ended June 30,
16
<PAGE>
1999, the amount of brokerage transactions and related commissions directed to
brokers because of research services provided was $________ and $________,
respectively.
Portfolio turnover rates for the fiscal years ended June 30, 1998 and 1999
were _____% and _____%, 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 Transfer Agent 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 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 Transfer Agent.
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 "Redemptions In Writing Required" 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
17
<PAGE>
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 ________
Columbus, Ohio 43219
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 Adviser 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 Adviser may
deem appropriate. If accepted, the securities will be valued using the same
criteria and methods as described in " Net Asset Value Determination."
REDEMPTIONS IN KIND. The Fund does not intend, under normal circumstances,
to redeem its securities by payment in kind. It is possible, however, that
conditions may arise in the future which would, in the opinion of the Trustees,
make it undesirable for the Fund to pay for all redemptions in cash. In such
case, the Board of Trustees may authorize payment to be made in portfolio
securities or other property of the Fund. Securities delivered in payment of
redemptions would be valued at the same value assigned to them in computing the
net asset value per share. Shareholders receiving them would incur brokerage
costs when these securities are sold. The Trust has filed an irrevocable
election with the SEC 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 Transfer Agent 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 "Redemptions in Writing Required"); 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 the close of
trading on the New York Stock Exchange (normally 4:00 p.m., Eastern time) will
be executed at the price computed on the
18
<PAGE>
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.
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 Adviser and certain parties
related thereto, including clients of the Adviser 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 is closed, or trading on
the New York Stock Exchange is restricted as determined by the SEC, (ii) during
any period when an emergency exists as defined by the rules of the SEC 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 SEC 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 amount of the shareholder's investment 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 on the New York Stock Exchange (normally
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
19
<PAGE>
assets, less liabilities, by the total number of shares then outstanding. Net
asset value includes interest on fixed-income securities, which is accrued
daily.
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.
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.
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
20
<PAGE>
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 "Avoid 31% Tax
Withholding" 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 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 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. The
Trust was organized as a Massachusetts business trust pursuant to an Agreement
and Declaration of Trust. Shares of the Fund 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. Shareholders are entitled to
one vote for each full share and a fractional vote for each fractional share
held. 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. 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. 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
21
<PAGE>
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 Fund was a series of Albemarle Investment Trust.
As of the [date], Charles Schwab & Co., Inc., 101 Montgomery Street, San
Francisco, California 94104, 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
The Fund may, from time to time, advertise certain total return and yield
information. 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. The average annual total return of the Fund for a period is
computed by subtracting the net asset value per share at the beginning of the
period from the net asset value per share at the end of the period (after
adjusting for the reinvestment of any income dividends and capital gain
distributions), and dividing the result by the net asset value per share at the
beginning of the period. In particular, the average annual total return of the
Fund ("T") is computed by using the redeemable value at the end of a specified
period of time ("ERV") of a hypothetical initial investment of $1,000 ("P") over
a period of time ("n") according to the formula P(l+T)n=ERV. The average annual
total return quotations for the Fund for the one year and five year periods
ended June 30, 1999 and for the period since inception (January 18, 1993) to
June 30, 1999 are 6.80%, 23.91% and 21.18%, 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.
22
<PAGE>
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>
<CAPTION>
Year-to-Date Since
Calendar Calendar Calendar Calendar Calendar Calendar 1999 Inception*
1993* 1994 1995 1996 1997 1998 (as of 6/30/99) (as of 6/30/99)
------ ------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Oak Value Fund............ 22.04% (1.54%) 28.89% 28.99% 37.70% 18.93% 5.51% 21.18%
Lipper Growth Fund Index.. 10.30% (1.57%) 32.65% 17.53% 28.03% 25.69% 11.89% 18.83%
S&P 500 Index............. 9.60% 1.32% 37.58% 22.96% 33.36% 28.58% 12.38% 22.07%
</TABLE>
* Inception date of the Fund was January 18, 1993.
From time to time, the Fund may advertise its yield. A yield quotation is
based on a 30-day (or one month) period and is computed by dividing the net
investment income per share earned during the period by the maximum offering
price per share on the last day of the period, according to the following
formula:
Yield = 2[a-b/cd + 1)6 - 1]
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period that
were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period
Solely for the purpose of computing yield, dividend income is recognized by
accruing 1/360 of the stated dividend rate of the security each day that the
Fund owns the security. Generally, interest earned (for the purpose of "a"
above) on debt obligations is computed by reference to the yield to maturity of
each obligation held based on the market value of the obligation (including
actual accrued interest) at the close of business on the last business day prior
to the start of the 30-day (or one 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, Inc. or
Morningstar, Inc., or published by one or more newspapers, newsletters or
financial periodicals such as FORBES, MONEY, THE WALL STREET JOURNAL, BUSINESS
WEEK, BARRON'S, AND FORTUNE. Performance comparisons may be useful to investors
23
<PAGE>
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.
- - LIPPER, 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.
- - MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
Investors may use such indices in addition to the Fund's Prospectus to
obtain a more complete view of the Fund's performance before investing. Of
course, when comparing the Fund's performance to any index, factors such as
composition of the index and prevailing market conditions should be considered
in assessing the significance of such comparisons. When comparing funds using
reporting services, or total return, investors should take into consideration
any relevant differences in funds such as permitted portfolio compositions and
methods used to value portfolio securities and compute offering price.
Advertisements and other sales literature for the Fund may quote total returns
that are calculated on non-standardized base periods. The total returns
represent the historic change in the value of an investment in the Fund based on
monthly reinvestment of dividends over a specified period of time.
From time to time the Fund may include in advertisements and other
communications information, charts, and illustrations 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 present its performance and other investment characteristics,
such as volatility or a temporary defensive posture, in light of the Adviser's
view of current or past market conditions or historical trends. 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%
24
<PAGE>
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 SAI whenever the SAI is requested by a
shareholder or prospective investor.
25
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits
(a) 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.
(b) Registrant's Bylaws, which were filed as an Exhibit
to Registrant's Post-Effective Amendment No. 2, are
hereby incorporated by reference.
(c) None
(d) 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.
(e) None
(f) None
(g) (1) 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.
(g) (2) Custody Agreement with Bank of New York - to
be filed by Post-Effective Amendment.
(h) (1) Administration Agreement with Countrywide Fund
Services, Inc. which was filed as an exhibit To
Post Effective Amendment No. 4 is hereby
Incorporated by reference.
(h) (2) Transfer, Dividend Disbursing, Shareholder
Service and Plan Agency Agreement with
Countrywide Fund Services, Inc., which was filed
as an Exhibit to Registrant's Post-Effective
Amendment No. 3, is hereby incorporated by
reference.
(h) (3) Accounting Services Agreement with Countrywide
Fund Services, Inc. which was filed as an
exhibit To Post Effective Amendment No. 4 is
hereby incorporated by reference.
(h) (4) 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.
C-1
<PAGE>
(h) (5) Form of Administration Agreement with BISYS Fund
Services Ohio - filed herewith.
(h) (6) Form of Transfer Agency Agreement with BISYS
Fund Services Ohio - filed herewith.
(h) (7) Form of Fund Accounting Agreement with BISYS
Fund Services Ohio - filed herewith.
(i) Opinion and Consent of Morgan, Lewis & Bockius -
to be filed by Post-Effective Amendment
(j) Consent of Arthur Andersen LLP - to be filed by
Post-Effective Amendment
(k) None
(l) None
(m) None
(n) Financial Data Schedule - to be filed by
Post-Effective Amendment
(o) None
Item 24. Persons Controlled by or Under Common Control with
Registrant.
None
Item 25. 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
C-2
<PAGE>
being or having been such a Trustee or officer, except with
respect to any matter as to which it has been determined that such
Covered Person (i) did not act in good faith in the reasonable
belief that his action was in or not opposed to the best interests
of the Trust or (ii) had acted with willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office (either and both of the
conduct described in clauses (i) and (ii) above being referred to
hereinafter as "Disabling Conduct").
A determination that the Covered Person is entitled to
indemnification may be made by (i) a final decision on the merits
by a court or other body before whom the proceeding was brought
that such Covered Person was not liable by reason of Disabling
Conduct, (ii) dismissal of a court action or an administrative
action against such Covered Person for insufficiency of evidence
of Disabling Conduct, or (iii) a reasonable determination, based
upon a review of the facts, that such Covered Person was not
liable by reason of Disabling Conduct by (a) vote of a majority of
a quorum of Trustees who are neither "interested persons" of the
Trust as the quoted phrase is defined in Section 2(a)(19) of the
1940 Act nor parties to the action, suit or other proceeding on
the same or similar grounds is then or has been pending or
threatened (such quorum of such Trustees being referred to
hereinafter as the "Disinterested Trustees"), or (b) an
independent legal counsel in a written opinion. Expenses,
including accountants' and counsel fees so incurred by any such
Covered Person (but excluding amounts paid in satisfaction of
judgments, in compromise or as fines or penalties), may be paid
from time to time by the Fund or Funds to which the conduct in
question related in advance of the final disposition of any such
action, suit or proceeding; provided, that the Covered Person
shall have undertaken to repay the amounts so paid if it is
ultimately determined that indemnification of such expenses is not
authorized under this Article VIII and if (i) the Covered Person
shall have provided security for such undertaking, (ii) the Trust
shall be insured against losses arising by reason of any lawful
advances, or (iii) a majority of the Disinterested Trustees, or an
independent legal counsel in a written opinion, shall have
determined, based on a review of readily available facts (as
opposed to a full inquiry), that there is reason to believe that
the Covered Person ultimately will be entitled to indemnification
hereunder.
"Section 8.5 COMPROMISE PAYMENT. As to any matter disposed of by a
compromise payment by any Covered Person referred to in Section
8.4 hereof, pursuant to a consent decree or otherwise, no such
indemnification either for said payment or for any other expenses
shall be provided unless such indemnification shall be approved
(i) by a majority of the Disinterested Trustees or (ii) by an
independent legal counsel in a written opinion. Approval by the
Disinterested Trustees pursuant to clause (i) shall not prevent
the recovery from any Covered Person of any amount paid to such
Covered Person in accordance with either of such clauses as
indemnification if such Covered
C-3
<PAGE>
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 Adviser. 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 "Adviser")
provides for indemnification of the Adviser 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 Adviser 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 Adviser 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 Adviser in the
performance of its duties or from reckless disregard by it of its
duties under this Agreement (either and both of the conduct
described in clauses (i) and (ii) above being referred to
hereinafter as "Disabling Conduct"). A determination that the
Adviser 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 Adviser was not liable by reason
of Disabling Conduct, (ii) dismissal of a court action or an
administrative proceeding against the Adviser for insufficiency of
evidence of Disabling Conduct, or (iii) a reasonable
determination, based upon a review of the facts, that the Adviser
was not liable by reason of Disabling Conduct by (a) vote of a
majority of a quorum of Trustees who are neither "interested
C-4
<PAGE>
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 Adviser
(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 Adviser 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 Adviser 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 Adviser
ultimately will be entitled to indemnification hereunder.
"As to any matter disposed of by a compromise payment by the
Adviser 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 Adviser of any
amount paid to the Adviser in accordance with either of such
clauses as indemnification if the Adviser is subsequently
adjudicated by a court of competent jurisdiction not to have acted
in good faith in the reasonable belief that the Adviser'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
Adviser 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
C-5
<PAGE>
determine whether the Adviser is entitled to indemnification
hereunder and the reasonable amount of any indemnity due it
hereunder, or employ independent legal counsel for that purpose."
Item 26. Business and Other Connections of the Investment Adviser
(a) The Adviser was organized in 1992 and has assets
under management in excess of $1 billion. In
addition to providing investment advisory services
to the Registrant, the Adviser provides investment
advisory services to individual and institutional
accounts.
(b) The directors and officers of the Adviser set forth
below have not engaged in any other business,
profession, vocation or employment of a substantial
nature at any time during the past two years.
<TABLE>
<CAPTION>
<S> <C>
George W. Brumley, III Chairman, Chief Executive Officer
Treasurer and Director of the Adviser
Since January 1992
David R. Carr, Jr. President, Director and Chief Investment
Officer of the Adviser since January 1992
Larry D. Coats, Jr. Executive Vice President, Director of
Marketing and Director of the Adviser
Since January 1994
Matthew F. Sauer Vice-President of the Adviser since
December 1992
</TABLE>
Item 27. Principal Underwriters
Inapplicable
Item 28. 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 700, Durham, North Carolina 27707, as well as at the
office of the Registrant's administrator located at 312 Walnut Street,
Cincinnati, Ohio 45202.
Item 29. Management Services Not Discussed in Parts A or B
Inapplicable
Item 30. Undertakings
(a) Inapplicable
(b) Inapplicable
C-6
<PAGE>
(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.
C-7
<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(a) 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 Durham and State of North Carolina on
the 26th day of August, 1999.
THE TUSCARORA INVESTMENT TRUST
By: /s/ George W. Brumley, III
-------------------------------------
George W. Brumley, III
-------------------------------------
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
/s/ George W. Brumley III President August 26, 1999
- -------------------------- and Trustee
George W. Brumley III
/s/ David R. Carr, Jr.* Vice President, August 26, 1999
- -------------------------- Treasurer and
David R. Carr, Jr. Trustee
/s/ C. Russell Bryan*
- --------------------------
C. Russell Bryan Trustee August 26, 1999
/s/John M. Day*
- --------------------------
John M. Day Trustee August 26, 1999
/s/ Joseph T. Jordan, Jr.*
- --------------------------
Joseph T. Jordan, Jr. Trustee August 26, 1999
*By:/s/George W. Brumley, III
--------------------------
George W. Brumley, III
Attorney-in-Fact
August 26, 1999
C-8
<PAGE>
INDEX TO EXHIBITS
(1) (g) (2) Form of Custody Agreement with Bank of New York - to be filed
by Post-Effective Amendment.
(2) (h) (5) Form of Administration Agreement with BISYS Fund Services
Ohio, Inc.
(3) (h) (6) Form of Transfer Agency Agreement with BISYS Fund Services
Ohio, Inc.
(4) (h) (7) Form of Fund Accounting Agreement with BISYS Fund Services
Ohio, Inc.
(5) (i) Opinion and consent of Morgan, Lewis & Bockius - to be filed
by Post-Effective Amendment.
C-9
<PAGE>
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of this ________ day of __________________, 1999,
by and between THE TUSCARORA INVESTMENT TRUST, a Massachusetts business trust
(the "Trust"), having its principal place of business at 3435 Stelzer Road,
Columbus, Ohio 43219, and BISYS FUND SERVICES OHIO, INC. (the "Administrator"),
an Ohio corporation organized under the laws of the State of Ohio and having its
principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"),
consisting of several series of shares of beneficial interest or common stock
("Shares"); and
WHEREAS, the Trust desires the Administrator to provide, and the
Administrator is willing to provide, management and administrative services to
each series of the Trust, listed on Schedule A attached hereto and made part of
this Agreement, as such Schedule A may be amended from time to time
("Portfolios"), on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Trust and the Administrator hereby agree as follows:
ARTICLE 1. RETENTION OF THE ADMINISTRATOR. The Trust hereby retains the
Administrator to act as the administrator of the Portfolios and to furnish the
Portfolios with the management and administrative services as set forth in
Article 2 below. The Administrator hereby accepts such employment to perform the
duties set forth below.
The Administrator shall, for all purposes herein, be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Trust in any way and shall
not be deemed an agent of the Trust.
ARTICLE 2. ADMINISTRATIVE SERVICES. The Administrator shall coordinate,
supervise and effect a full conversion of the Trust's administrative, transfer
agent and fund accounting services to the Administrator prior to December 1,
1999 and shall perform or supervise the performance by others of other
administrative services in connection with the operations of the Portfolios,
and, on behalf of the Trust, will investigate, assist in the selection of and
conduct relations with custodians, depositories, accountants, legal counsel,
underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and
persons in any other capacity deemed to be necessary or desirable for the
Portfolios' operations. The Administrator shall provide the Board of Trustees of
the Trust (hereafter referred to as the "Trustees") with such reports regarding
investment performance as they may reasonably request but shall have no
responsibility for supervising the performance by any investment adviser or
sub-adviser of its responsibilities.
<PAGE>
The Administrator shall provide the Trust with regulatory reporting, all
necessary office space, equipment, personnel, compensation and facilities
(including facilities for Shareholders' and Trustees' meetings) for handling the
affairs of the Portfolios and such other services as the Administrator shall,
from time to time, determine to be necessary to perform its obligations under
this Agreement. In addition, at the request of the Trustees, the Administrator
shall make reports to the Trust's Trustees concerning the performance of its
obligations hereunder.
Without limiting the generality of the foregoing, the Administrator shall:
(a) calculate contractual Trust expenses and control all disbursements
for the Trust, and as appropriate compute the Trust's yields, total
return, expense ratios, portfolio turnover rate and, if required,
portfolio average dollar-weighted maturity;
(b) coordinate and supervise, in consultation with Trust counsel, the
preparation of prospectuses, statements of additional information,
registration statements and proxy materials;
(c) prepare such reports, notice filing forms and other documents
(including reports regarding the sale and redemption of Shares as may
be required in order to comply with Federal and state securities law)
as may be necessary or desirable to make notice filings relating to
the Trust's Shares with state securities authorities, monitor the sale
of Trust Shares for compliance with state securities laws, and file
with the appropriate state securities authorities the registration
statements and reports for the Trust and the Trust's Shares and all
amendments thereto, as may be necessary or convenient to qualify and
keep effective the Trust and the Trust's Shares with state securities
authorities to enable the Trust to make a continuous offering of its
Shares;
(d) develop and prepare, with the assistance of the Trust's investment
adviser, communications to Shareholders, including the annual report
to Shareholders, coordinate the mailing of prospectuses, notices,
proxy statements, proxies and other reports to Trust Shareholders, and
supervise and facilitate the proxy solicitation process for all
shareholder meetings, including the tabulation of shareholder votes;
(e) administer contracts on behalf of the Trust with, among others,
the Trust's investment adviser, distributor, custodian, transfer agent
and fund accountant;
(f) supervise the Trust's transfer agent with respect to the payment
of dividends and other distributions to Shareholders;
2
<PAGE>
(g) calculate performance data of the Portfolios for dissemination to
information services covering the investment Trust industry;
(h) coordinate and supervise the preparation and filing of the Trust's
tax returns;
(i) examine and review the operations and performance of the various
organizations providing services to the Trust or any Portfolio of the
Trust, including, without limitation, the Trust's investment adviser,
distributor, custodian, fund accountant, transfer agent, outside legal
counsel and independent public accountants, and at the request of the
Trustees, report to the Board on the performance of such
organizations;
(j) assist with the layout and printing of publicly disseminated
prospectuses and assist with and coordinate layout and printing of the
Trust's semi-annual and annual reports to Shareholders;
(k) assist with the design, development, and operation of the
Portfolios, including new classes, investment objectives, policies and
structure;
(l) provide individuals reasonably acceptable to the Trust's Trustees
to serve as officers of the Trust, who will be responsible for the
management of certain of the Trust's affairs as determined by the
Trust's Trustees;
(m) advise the Trust and its Trustees on matters concerning the Trust
and its affairs;
(n) obtain and keep in effect fidelity bonds and directors and
officers/errors and omissions insurance policies for the Trust in
accordance with the requirements of Rules 17g-1 and 17d-1(7) under the
1940 Act as such bonds and policies are approved by the Trust's
Trustees;
(o) monitor and advise the Trust and its Portfolios on their
registered investment company status under the Internal Revenue Code
of 1986, as amended;
(p) monitor and advise the Trust and its Portfolios on compliance with
applicable limitations as imposed by the 1940 Act and the rules and
regulations thereunder or set forth in the Trust's or any Portfolios'
then current Prospectus or Statement of Additional Information;
(q) provide such internal legal services as are requested by the Trust
from time
3
<PAGE>
including, but not limited to, the coordination of meetings and
preparation of materials for the quarterly and special meetings of the
Trustees;
(r) cooperate with, and take all reasonable actions in the performance
of its duties under this Agreement to ensure that all necessary
information is made available to, the Trust's independent public
accountants in connection with the preparation of any audit or report
requested by the Trust;
(s) cooperate with, and take all reasonable actions in the performance
of its duties under this Agreement to ensure that the necessary
information is made available to, the Securities and Exchange
Commission in connection with any regulatory audit of the Trust or the
investment adviser of the Trust;
(t) perform all administrative services and functions of the Trust and
each Portfolio to the extent administrative services and functions are
not provided to the Trust or such Portfolio pursuant to the Trust's or
such Portfolio's investment advisory agreement, distribution
agreement, custodian agreement, transfer agent agreement and fund
accounting agreement;
(u) furnish advice and recommendations with respect to other aspects
of the business and affairs of the Portfolios as the Trust and the
Administrator shall determine desirable; and
(v) prepare and file with the SEC the semi-annual report for the Trust
on Form N-SAR and all required notices pursuant to Rule 24f-2.
The Administrator shall perform such other services for the Trust that are
mutually agreed upon by the parties from time to time. Such services may include
performing internal audit examinations; mailing the annual reports of the
Portfolios; preparing an annual list of Shareholders; and mailing notices of
Shareholders' meetings, proxies and proxy statements, for all of which the Trust
will pay the Administrator's reasonable out-of-pocket expenses.
ARTICLE 3. ALLOCATION OF CHARGES AND EXPENSES.
(A) THE ADMINISTRATOR. The Administrator shall furnish at its own expense
the executive, supervisory and clerical personnel necessary to perform its
obligations under this Agreement. The Administrator shall also provide the items
which it is obligated to provide under this Agreement, and shall pay all
compensation, if any, of officers of the Trust as well as all Trustees of the
Trust who are affiliated persons of the Administrator or any affiliated
corporation of the Administrator; provided, however, that unless otherwise
specifically provided, the Administrator shall not be obligated to pay the
compensation of any employee of the Trust retained by the Trustees of the Trust
to perform services on behalf of the Trust.
4
<PAGE>
(B) THE TRUST. The Trust assumes and shall pay or cause to be paid all
other expenses of the Trust not otherwise allocated herein, including, without
limitation, organization costs, taxes, expenses for legal and auditing services,
the expenses of preparing (including typesetting), printing and mailing reports,
prospectuses, statements of additional information, proxy solicitation material
and notices to existing Shareholders, all expenses incurred in connection with
issuing and redeeming Shares, the costs of custodial services, the cost of
initial and ongoing registration and/or qualification of the Shares under
Federal and state securities laws, fees and out-of-pocket expenses of Trustees
who are not affiliated persons of the Administrator or the Investment Adviser to
the Trust or any affiliated corporation of the Administrator or the Investment
Adviser, insurance, interest, brokerage costs, litigation and other
extraordinary or nonrecurring expenses, and all fees and charges of investment
advisers to the Trust.
ARTICLE 4. COMPENSATION OF THE ADMINISTRATOR.
(A) ADMINISTRATION FEE. For the services to be rendered, the facilities
furnished and the expenses assumed by the Administrator pursuant to this
Agreement, the Company shall pay to the Administrator compensation at an annual
rate specified in Schedule A attached hereto. Such compensation shall be
calculated and accrued daily, and paid to the Administrator monthly. The Company
shall also reimburse the Administrator for its reasonable out-of-pocket
expenses, including the travel and lodging expenses incurred by officers and
employees of the Administrator in connection with attendance at Board meetings.
If this Agreement becomes effective subsequent to the first day of a
month or terminates before the last day of a month, the Administrator's
compensation for that part of the month in which this Agreement is in effect
shall be prorated in a manner consistent with the calculation of the fees as set
forth above. Payment of the Administrator's compensation for the preceding month
shall be made promptly.
(B) SURVIVAL OF COMPENSATION RIGHTS. All rights of compensation under this
Agreement for services performed as of the termination date shall survive the
termination of this Agreement.
5
<PAGE>
ARTICLE 5. STANDARD OF CARE. The duties of the Administrator shall be
confined to those expressly set forth herein, and no implied duties are assumed
by or may be asserted against the Administrator hereunder. The Administrator
shall be obligated to exercise care and diligence in the performance of its
duties hereunder and to act in good faith in performing the services provided
for under this Agreement. The Administrator shall be liable for any damages
arising directly or indirectly out of the Administrator's failure to perform its
duties under this Agreement to the extent such damages arise directly or
indirectly out of the Administrator's willful misfeasance, bad faith, negligence
in the performance of its duties, or reckless disregard of it obligations and
duties hereunder. (As used in this Article 5, the term "Administrator" shall
include directors, officers employees and other agents of the Administrator as
well as the Administrator itself.)
Without limiting the generality of the foregoing or any other
provision of this Agreement, (i) the Administrator shall not be liable for
losses beyond its reasonable control, provided that the Administrator has acted
in accordance with the standard of care set forth above; and (ii) the
Administrator shall not be liable for the validity or invalidity or authority or
lack thereof of any instruction, notice or other instrument that the
Administrator reasonably believes to be genuine and to have been signed or
presented by a duly authorized representative of the Trust (other than an
employee or other affiliated persons of the Administrator who may otherwise be
named as an authorized representative of the Trust for certain purposes).
The Administrator may apply to the Trust at any time for instructions
and may consult with counsel for the Trust or its own counsel and with
accountants and other experts with respect to any matter arising in connection
with the Administrator's duties hereunder, and the Administrator shall not be
liable or accountable for any action taken or omitted by it in good faith in
accordance with such instruction or with the reasonable opinion of such counsel,
accountants or other experts qualified to render such opinion.
ARTICLE 6. INDEMNIFICATION. The Trust agrees to indemnify and hold harmless
the Administrator from and against any and all actions, suits, claims, losses,
damages, costs, charges, reasonable counsel fees and disbursements, payments,
expenses and liabilities (including reasonable investigation expenses)
(collectively, "Losses") arising directly or indirectly out of any action or
omission to act which the Administrator takes (i) at any request or on the
direction of or in reliance on the reasonable advice of the Trust, (ii) upon any
instruction, notice or other
6
<PAGE>
instrument that the Administrator reasonably believes to be genuine and to have
been signed or presented by a duly authorized representative of the Trust (other
than an employee or other affiliated person of the Administrator who may
otherwise be named as an authorized representative of the Trust for certain
purposes) or (iii) on its own initiative, in good faith and in accordance with
the standard of care set forth herein, in connection with the performance of its
duties or obligations hereunder; provided, however that the Trust shall have no
obligation to indemnify or reimburse the Administrator under this Article 6 to
the extent that the Administrator is entitled to reimbursement or
indemnification for such Losses under any liability insurance policy described
in this Agreement or otherwise.
The Administrator shall not be indemnified against or held harmless
from any Losses arising directly or indirectly out of the Administrator's own
willful misfeasance, bad faith, negligence in the performance of its duties, or
reckless disregard of its obligations and duties hereunder. (As used in this
Article 6, the term "Administrator" shall include directors, officers, employees
and other agents of the Administrator as well as the Administrator itself.)
ARTICLE 7. YEAR 2000 READINESS DISCLOSURE. The Administrator (a) has
reviewed its business and operations as they relate to the services provided
hereunder, (b) has developed or is developing a program to remediate or replace
computer applications and systems, and (c) has developed a testing plan to test
the redemption or replacement of computer application/systems, in each case, to
address on a timely basis the risk that certain computer applications/systems
used by the Administrator may be unable to recognize and perform properly date
sensitive functions involving the dates prior to, including and after December
31, 1999, including dates such as February 29, 2000 (the "Year 2000 Challenge").
The Administrator represents and warrants that, to the best of its knowledge and
belief, the reasonably foreseeable consequences of the Year 2000 Challenge will
not adversely effect the Administrator's ability to perform its duties and
obligations under this Agreement.
ARTICLE 8. ACTIVITIES OF THE ADMINISTRATOR. The services of the
Administrator rendered to the Trust are not to be deemed to be exclusive. The
Administrator is free to render such services to others and to have other
businesses and interests. It is understood that Trustees, officers, employees
and Shareholders of the Trust are or may be or become interested in the
Administrator, as officers, employees or otherwise and that partners, officers
and employees of the Administrator and its counsel are or may be or become
similarly interested in the Trust, and that the Administrator may be or become
interested in the Trust as a Shareholder or otherwise.
ARTICLE 9. DURATION OF THIS AGREEMENT. The Term of this Agreement shall be
as specified in Schedule A hereto.
ARTICLE 10. ASSIGNMENT. This Agreement shall not be assignable by either
party without the written consent of the other party; provided, however, that
the Administrator may, at its expense and upon written notice to the Trust,
subcontract with any entity or person concerning
7
<PAGE>
the provision of the services contemplated hereunder. The Administrator shall
not, however, be relieved of any of its obligations under this Agreement by the
appointment of such subcontractor and provided further, that the Administrator
shall be responsible, to the extent provided in Article 5 hereof, for all acts
of such subcontractor as if such acts were its own. This Agreement shall be
binding upon, and shall inure to the benefit of, the parties hereto and their
respective successors and permitted assigns.
ARTICLE 11. AMENDMENTS. This Agreement, or any term thereof, may be changed
or waived only by written amendment signed by the party against whom enforcement
of such change or waiver is sought.
For special cases, the parties hereto may amend such procedures set
forth herein as may be appropriate or practical under the circumstances, and the
Administrator may conclusively assume that any special procedure which has been
approved by the Trust does not conflict with or violate any requirements of its
Declaration of Trust or then current prospectuses, or any rule, regulation or
requirement of any regulatory body.
ARTICLE 12. CERTAIN RECORDS. The Administrator shall maintain customary
records in connection with its duties as specified in this Agreement. Any
records required to be maintained and preserved pursuant to Rules 31a-1 and
31a-2 under the 1940 Act which are prepared or maintained by the Administrator
on behalf of the Trust shall be prepared and maintained at the expense of the
Administrator, but shall be the property of the Trust and will be made available
to or surrendered promptly to the Trust on request.
In case of any request or demand for the inspection of such records by
another party, the Administrator shall notify the Trust and follow the Trust's
instructions as to permitting or refusing such inspection; provided that the
Administrator may exhibit such records to any person in any case where it is
advised by its counsel that it may be held liable for failure to do so, unless
(in cases involving potential exposure only to civil liability) the Trust has
agreed to indemnify the Administrator against such liability.
ARTICLE 13. DEFINITIONS OF CERTAIN TERMS. The terms "interested person" and
"affiliated person," when used in this Agreement, shall have the respective
meanings specified in the 1940 Act and the rules and regulations thereunder,
subject to such exemptions as may be granted by the Securities and Exchange
Commission.
ARTICLE 14. NOTICE. Any notice required or permitted to be given by either
party to the other shall be deemed sufficient if sent by registered or certified
mail, postage prepaid, addressed by the party giving notice to the other party
at the following address: if to the Trust, at 3100 Tower Boulevard, Suite 700,
Durham, North Carolina 27707, attn: __________________ and if to the
Administrator, at 3435 Stelzer Road, Columbus, Ohio 43219, attn: William J.
Tomko or at such other address as such party may from time to time specify in
writing to the other party pursuant to this Section.
8
<PAGE>
ARTICLE 15. GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Ohio and the applicable provisions of the 1940
Act. To the extent that the applicable laws of the State of Ohio, or any of the
provisions herein, conflict with the applicable provisions of the 1940 Act, the
latter shall control.
ARTICLE 16. LIMITATION OF LIABILITY. A copy of the Declaration of Trust of
the Trust is on file with the Secretary of the Commonwealth of Massachusetts,
and notice is hereby given that this instrument is executed on behalf of the
Board of Trustees of the Trust and not individually and that the obligations of
this instrument are not binding upon any of the Trustees, officers or
shareholders individually but are binding only upon the assets and property of
the Trust (or if the matter relates only to a particular Portfolio, that
Portfolio), and the Administrator shall look only to the assets of the Trust, or
the particular Portfolio, for the satisfaction of such obligations.
ARTICLE 17. MULTIPLE ORIGINALS. This Agreement may be executed in two or
more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
THE TUSCARORA INVESTMENT TRUST
By:
----------------------------------------------
Title:
-------------------------------------------
BISYS FUND SERVICES OHIO, INC.
By:
----------------------------------------------
Title:
-------------------------------------------
9
<PAGE>
DATED: _________________________
SCHEDULE A
TO THE ADMINISTRATION AGREEMENT
DATED AS OF _________________________________
BETWEEN
THE TUSCARORA INVESTMENT TRUST
AND
BISYS FUND SERVICES OHIO, INC.
PORTFOLIOS: This Agreement shall apply to all such Portfolios of The
Tuscarora Investment Trust (the "Trust"), either now or hereafter
created, as the Trust and the Administrator may agree
(individually, the "Portfolio", and collectively, the
"Portfolios"). The current Portfolios of the Trust are set forth
below:
Oak Value Fund
FEES: Pursuant to Article 4, in consideration of services rendered and
expenses assumed pursuant to this Agreement, the Trust will pay
the Administrator on the first business day of each month, or at
such time(s) as the Administrator shall request and the parties
hereto agree, a fee computed daily at annual rate of:
4 one-hundredths of one percent (.04%) of the
Trust's average daily net assets up to $500
million;
2.8 one-hundredths of one percent (.028%) of the
Trust's average daily net assets in excess of $500
million up to $1 billion; and
1.4 one-hundredths of one percent (.014%) of the
Trust's average daily net assets in excess of $1
billion.
The Administrator shall be entitled to receive an additional
annual fee of $10,000 for each new class of shares that is added
following the effective date of this Agreement.
The Administrator shall be entitled to receive an additional
annual fee of $30,000 for each new Portfolio that is added
following the effective date of this Agreement.
A-1
<PAGE>
TERM:
(a) The term of this Agreement shall commence on
____________________, 1999 and shall continue in effect,
unless earlier terminated by either party hereto as provided
hereunder, until ___________________, 2002 (the "Initial
Term"). Thereafter, unless otherwise terminated as provided
herein, this Agreement shall be renewed automatically for
successive one-year periods ("Rollover Periods").
(b) This Agreement may be terminated without penalty: (i) by
provision of a notice of nonrenewal in the matter as set
forth below, (ii) by mutual agreement of the parties, (iii)
in the event of a Change of Control (as defined herein), in
accordance with the procedures outlined below or (iv) for
"cause" (as defined herein) upon the provision of sixty (60)
days advance written notice by the party alleging cause.
Written notice of nonrenewal must be provided at least sixty
(60) days prior to the end of the Initial Term or any
Rollover Period as the case may be.
(c) For purposes of this Agreement, "cause" shall mean: (i) a
material breach of this Agreement that has not been remedied
within thirty (30) days following written notice of such
breach from the non-breaching party, (ii) a series of
negligent acts or omissions or breaches of this Agreement
which, in the aggregate, constitute in the reasonable
judgment of the Trust, a serious failure to perform
satisfactorily the Administrator's obligations hereunder;
(iii) a final, unappealable judicial, regulatory or
administrative ruling or order in which the party to be
terminated has been found guilty of criminal or unethical
behavior in the conduct of its business; or (iv) financial
difficulties on the part of the party to be terminated which
are evidenced by the authorization or commencement of, or
involvement by way of pleading, answer, consent or
acquiescence in, a voluntary or involuntary case under Title
11 of the United States Code, as from time to time is in
effect, or any applicable law, other than said Title 11, of
any jurisdiction relating to the liquidation or
reorganization of debtors or the modification or alteration
of the rights of creditors.
(d) In the event of a change of "control" (as such term is
defined in the 1940 Act) with respect to the Administrator
(a "Change of Control"), the Trust may conduct an interim
evaluation of the Administrator's performance under this
Agreement (a "Performance Evaluation"). The Performance
Evaluation shall be conducted within 120 days following the
later of: (i) a Change of Control, or (ii) the date the
Trust receives actual notice of a Change of Control from the
Administrator. If, in the reasonable judgment of the Trust,
the Performance Evaluation indicates that the quality level
of services being provided by the Administrator has
diminished materially (even though such diminution does not
constitute a material breach), the Trust shall, within
thirty (30) days (or such longer period of time as is agreed
upon by the parties) following the Performance Evaluation,
provide written notice
A-2
<PAGE>
to the Administrator specifying the areas in which the Trust
believes the quality level of service has materially
diminished.
The Administrator shall have a period of thirty (30) days
(or such longer period of time as is agreed upon by the
parties) from the receipt of such written notice within
which to restore to the reasonable satisfaction of the Trust
the quality level of services. If, at the end of such thirty
(30) day period (or such longer period of time as is agreed
upon by the parties), the Administrator has not, to the
reasonable satisfaction of the Trust, restored the quality
level of services, the Trust may terminate this Agreement
upon the provision of thirty (30) days (or such longer
period of time as is agreed upon by the parties) advance
written notice to the Administrator.
(e) Notwithstanding the foregoing, after such termination for so
long as the Administrator, with the written consent of the
Trust, in fact continues to perform any one or more of the
services contemplated by this Agreement or any schedule or
exhibit hereto, the provisions of this Agreement, including
without limitation the provisions dealing with
indemnification, shall continue in full force and effect.
Compensation due the Administrator and unpaid by the Trust
upon such termination shall be immediately due and payable
upon and notwithstanding such termination. The Administrator
shall be entitled to collect from the Trust, in addition to
the compensation described in this Schedule A, the amount of
all of the Administrator's cash disbursements for services
in connection with the Administrator's activities in
effecting such termination, including without limitation,
the delivery to the Trust and/or its designees of the
Trust's property, records, instruments and documents.
<PAGE>
TRANSFER AGENCY AGREEMENT
AGREEMENT made this _____ day of __________________, 1999, between THE
TUSCARORA INVESTMENT TRUST (the "Trust"), a Massachusetts business trust having
its principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219, and
BISYS FUND SERVICES OHIO, INC. ("BISYS"), an Ohio corporation having its
principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Trust desires that BISYS perform certain services for each
series of the Trust listed on Schedule D attached hereto and made a party of
this Agreement, as such Schedule D may be amended from time to time
(individually referred to herein as a "Portfolio" and collectively as the
"Portfolios"); and
WHEREAS, BISYS is willing to perform such services on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. SERVICES.
BISYS shall effect a conversion of shareholder accounts, historical
records and other agreed upon information to its transfer agency system prior to
December 1, 1999 and shall perform for the Trust the transfer agent services set
forth in Schedule A hereto. BISYS also agrees to perform for the Trust such
special services incidental to the performance of the services enumerated herein
as agreed to by the parties from time to time. BISYS shall perform such
additional services as are provided on an amendment to Schedule A hereof, in
consideration of such fees as the parties hereto may agree.
BISYS may, in its discretion and upon written notice to the Trust,
appoint in writing other parties qualified to perform transfer agency services
reasonably acceptable to the Trust (individually, a "Sub-transfer Agent") to
carry out some or all of its responsibilities under this Agreement with respect
to a Portfolio; provided, however, that the Sub-transfer Agent shall be the
agent of BISYS and not the agent of the Trust or such Portfolio, and that BISYS
shall be fully responsible for the acts of such Sub-transfer Agent and shall not
be relieved of any of its responsibilities hereunder by the appointment of such
Sub-transfer Agent.
2. FEES.
The Trust shall pay BISYS for the services to be provided by BISYS
under this Agreement in accordance with, and in the manner set forth in,
Schedule B hereto. Fees for any additional services to be provided by BISYS
pursuant to an amendment to Schedule A hereto shall be subject to mutual
agreement at the time such amendment to Schedule A is proposed.
<PAGE>
3. REIMBURSEMENT OF EXPENSES.
In addition to paying BISYS the fees described in Section 2 hereof,
the Trust agrees to reimburse BISYS for BISYS' reasonable out-of-pocket expenses
in providing services hereunder, including without limitation, the following:
(a) All freight and other delivery and bonding charges incurred by
BISYS in delivering materials to and from the Trust and in
delivering all materials to shareholders;
(b) All direct telephone, telephone transmission and telecopy or
other electronic transmission expenses incurred by BISYS in
communication with the Trust, the Trust's investment adviser
or custodian, dealers, shareholders or others as required for
BISYS to perform the services to be provided hereunder;
(c) Costs of postage, couriers, stock computer paper, statements,
labels, envelopes, checks, reports, letters, tax forms,
proxies, notices or other forms of printed material which
shall be required by BISYS for the performance of the services
to be provided hereunder;
(d) All expenses incurred in connection with any custom
programming or systems modifications required to provide any
special reports or services agreed upon pursuant to Item 13
of Schedule C attached hereto, the amount of which shall be
agreed upon between the parties; and
(e) Any expenses BISYS shall incur at the written direction of an
officer of the Trust thereunto duly authorized (other than an
employee or other affiliated person of BISYS who may otherwise
be named as an authorized representative of the Trust for
certain purposes).
4. EFFECTIVE DATE.
This Agreement shall become effective as of the date first written
above (the "Effective Date").
5. TERM.
(a) The term of this Agreement shall commence on ____________________,
1999 and shall continue in effect, unless earlier terminated by either party
hereto as provided hereunder, until ______________________, 2002 (the "Initial
Term"). Thereafter, unless otherwise terminated as provided herein, this
Agreement shall be renewed automatically for successive one-year periods
("Rollover Periods").
2
<PAGE>
(b) This Agreement may be terminated without penalty: (i) by provision
of a notice of nonrenewal in the matter as set forth below, (ii) by mutual
agreement of the parties, (iii) in the event of a Change of Control (as defined
herein), in accordance the procedures outlined below or (iv) for "cause" (as
defined herein) upon the provision of sixty (60) days advance written notice by
the party alleging cause. Written notice of nonrenewal must be provided within
sixty (60) days of the end of the Initial Term or any Rollover Period, as the
case may be.
(c) For purposes of this Agreement, "cause" shall mean: (i) a material
reach of this Agreement that has not been remedied within thirty (30) days
following written notice of such breach from the non-breaching party, (ii) a
series of negligent acts or omissions or breaches of this Agreement which, in
the aggregate, constitute in the reasonable judgment of the Trust, a serious
failure to perform satisfactorily BISYS's obligations hereunder; (iii) a final,
unappealable judicial, regulatory or administrative ruling or order in which the
party to be terminated has been found guilty of criminal or unethical behavior
in the conduct of its business; or (iv) financial difficulties on the part of
the party to be terminated which are evidenced by the authorization or
commencement of, or involvement by way of pleading, answer, consent or
acquiescence in, a voluntary or involuntary case under Title 11 of the United
States Code, as from time to time is in effect, or any applicable law, other
than said Title 11, of any jurisdiction relating to the liquidation or
reorganization of debtors or the modification or alteration of the rights of
creditors.
(d) In the event of a change of "control" (as such term is defined in
the 1940 Act) with respect to BISYS (a "Change of Control"), the Trust may
conduct an interim evaluation of BISYS's performance under this Agreement (a
"Performance Evaluation"). The Performance Evaluation shall be conducted within
120 days following the later of: (i) a Change of Control, or (ii) the date the
Trust receives actual notice of a Change of Control from BISYS. If, in the
reasonable judgment of the Trust, the Performance Evaluation indicates that the
quality level of services being provided by BISYS has diminished materially
(even though such diminution does not constitute a material breach), the Trust
shall, within thirty (30) days (or such longer period of time as is agreed upon
by the parties) following the Performance Evaluation, provide written notice
Administrator specifying the areas in which the Trust believes the quality level
of service has materially diminished.
BISYS shall have a period of thirty (30) days (or such longer period
of time as is agreed upon by the parties) from the receipt of such written
notice within which to restore to the reasonable satisfaction of the Trust the
quality level of services. If, at the end of such thirty (30) day period (or
such longer period of time as is agreed upon by the parties), BISYS has not, to
the reasonable satisfaction of the Trust, restored the quality level of
services, the Trust may terminate this Agreement upon the provision of thirty
(30) days (or such longer period of time as is agreed upon by the parties)
advance written notice to BISYS.
(e) Notwithstanding the foregoing, after such termination for so long as
BISYS, with the written consent of the Trust, in fact continues to perform any
one or more of the services contemplated by this Agreement or any schedule or
exhibit hereto, the provisions of this
3
<PAGE>
Agreement, including without limitation the provisions dealing with
indemnification, shall continue in full force and effect. Compensation due
BISYS and unpaid by the Trust upon such termination shall be immediately due and
payable upon and notwithstanding such termination. BISYS shall be entitled to
collect from the Trust, in addition to the compensation described in this
Schedule A, the amount of all of BISYS's cash disbursements for services in
connection with BISYS's activities in effecting such termination, including
without limitation, the delivery to the Trust an/or its designees of the Trust's
property, records, instruments and documents.
6. YEAR 2000 READINESS DISCLOSURE.
BISYS (a) has reviewed its business and operations as they relate to the
services provided hereunder, (b) has developed or is developing a program to
remediate or replace computer applications and systems, and (c) has developed a
testing plan to test the remediation or replacement of computer
applications/systems, in each case, to address on a timely basis the risk that
certain computer applications/systems used by BISYS may be unable to recognize
and perform properly date sensitive functions involving dates prior to,
including and after December 31, 1999, including dates such as February 29, 2000
(the "Year 2000 Challenge"). BISYS
4
<PAGE>
represents and warrants that to the best of its knowledge and belief, the
reasonably foreseeable consequences of the Year 2000 Challenge will not
adversely effect BISYS's ability to perform its duties and obligations under
this Agreement.
7. DISASTER RECOVERY.
BISYS shall enter into and shall maintain in effect with appropriate
parties one or more agreements making reasonable provisions for emergency use of
electronic data processing equipment to the extent appropriate equipment is
available. In the event of equipment failures, BISYS shall, at no additional
expense to the Trust, take reasonable steps to minimize service interruptions.
8. UNCONTROLLABLE EVENTS.
Subject to Section 7 hereunder, BISYS assumes no responsibility
hereunder, and shall not be liable for any damage, loss of data, delay or any
other loss whatsoever caused by events beyond its reasonable control, including
acts of civil or military authority, national emergencies, fire, flood,
catastrophe, acts of God, insurrection, war, riots or failure of the mails,
transportation, communication or power supply.
9. LEGAL ADVICE.
BISYS shall notify the Trust at any time BISYS believes that it is in
need of the advice of counsel (other than counsel in the regular employ of BISYS
or any affiliated companies) with regard to BISYS' responsibilities and duties
pursuant to this Agreement; and after so notifying the Trust, BISYS, at its
discretion, shall be entitled to seek, receive and act upon advice of legal
counsel of its choosing, such advice to be at the expense of BISYS. BISYS shall
in no event be liable to the Trust or any Portfolio for any action reasonably
taken pursuant to such reasonable advice of counsel.
10. INSTRUCTIONS.
Whenever BISYS is requested or authorized to take action hereunder
pursuant to instructions from a shareholder, or a properly authorized agent of a
shareholder ("shareholder's agent"), concerning an account in a Portfolio, BISYS
shall be entitled to rely upon any certificate, letter or other instrument or
communication reasonably believed by BISYS to be genuine and to have been
properly made, signed or authorized by an officer or other authorized agent of
the Trust or by the shareholder or shareholder's agent, as the case may be, and
shall be entitled to receive as conclusive proof of any fact or matter required
to be ascertained by it hereunder a certificate signed by an officer of the
Trust or any other person authorized by the Trust's Board of Trustees (hereafter
referred to as the "Trustees") or by the shareholder or shareholder's agent, as
the case may be.
As to the services to be provided hereunder, BISYS may rely
conclusively upon the terms of the then-current Prospectus(es) and Statement of
Additional Information of the Trust
5
<PAGE>
relating to the Portfolios to the extent that such services are described
therein unless BISYS receives written instructions to the contrary in a timely
manner from the Trust.
11. STANDARD OF CARE; INDEMNIFICATION.
BISYS shall be obligated to exercise care and diligence in the
performance of its duties hereunder and to act in good faith in performing the
services provided for under this Agreement. BISYS shall be liable for any
damages arising directly or indirectly out of the BISYS's failure to perform its
duties under this Agreement to the extent such damages arise directly or
indirectly out of BISYS's willful misfeasance, bad faith, negligence in the
performance of its duties, or reckless disregard of its obligations and duties
hereunder. (As used in this section 11, the term "BISYS" shall include
directors, officers, employees and other agents of BISYS as well as BISYS
itself.)
Without limiting the generality of the foregoing or of any other
provision of this Agreement, (i) BISYS shall not be liable for losses beyond its
reasonable control, provided that BISYS has acted in accordance with the
standard of care set forth above; and (ii) BISYS shall not be liable for the
validity or invalidity or authority or lack thereof of any instruction, notice
or other instrument that BISYS reasonably believes to be genuine and to have
been signed or presented by a duly authorized representative of the Trust (other
than an employee or other affiliated person of BISYS who may otherwise be named
as an authorized representative of the Trust for certain purposes).
(collectively "Losses")
The Trust agrees to indemnify and hold harmless BISYS from and
against any and all actions, suits, claims, losses, damages, costs, charges,
reasonable counsel fees and disbursements, payments, expenses and liabilities
(including reasonable investigation expenses) (collectively "Losses") arising
directly or indirectly out of any action or omission to act which BISYS takes
(i) at the request or on the direction of or in reliance on the reasonable
advice of the Trust or (ii) upon any instruction, notice or other instrument
that BISYS reasonably believes to be genuine and to have been signed or
presented by a duly authorized representative of the Trust (other than an
employee or other affiliated person of BISYS who may otherwise be named as an
authorized representative of the Trust for certain purposes) or (iii) on its own
initiative, in good faith and in accordance with the standard of care set forth
herein, in connection with the performance of its duties or obligations
hereunder; provided, however, that the Trust shall have no obligation to
indemnify or reimburse BISYS under this Section 11 to the extent that BISYS is
entitled to reimbursement or indemnification for such Losses under any liability
insurance policy described in this Agreement or otherwise.
BISYS shall not be indemnified against or held harmless from any
Losses arising directly or indirectly out of BISYS's own willful misfeasance,
bad faith, negligence in the performance of its duties, or reckless disregard of
its obligations and duties hereunder.
12. RECORD RETENTION AND CONFIDENTIALITY.
6
<PAGE>
BISYS shall keep and maintain on behalf of the Trust all books and
records which the Trust or BISYS is, or may be, required to keep and maintain
pursuant to any applicable statutes, rules and regulations, including without
limitation Rules 31a-1 and 31a-2 under the Investment Trust Act of 1940, as
amended (the "1940 Act"), relating to the maintenance of books and records in
connection with the services to be provided hereunder. BISYS further agrees
that all such books and records shall be the property of the Trust and to make
such books and records available for inspection by the Trust or by the
Securities and Exchange Commission (the "Commission") at reasonable times and
otherwise to keep confidential all books and records and other information
relative to the Trust and its shareholders, except when requested to divulge
such information by duly-constituted authorities or court process, or requested
by a shareholder or shareholder's agent with respect to information concerning
an account as to which such shareholder has either a legal or beneficial
interest or when requested by the Trust, the shareholder, or shareholder's
agent, or the dealer of record as to such account.
13. REPORTS.
BISYS will furnish to the Trust and to its properly-authorized
auditors, investment advisers, examiners, distributors, dealers, underwriters,
salesmen, insurance companies and others designated by the Trust in writing,
such reports at such times as are prescribed in Schedule C attached hereto, or
as subsequently agreed upon by the parties pursuant to an amendment to
Schedule C. The Trust agrees to examine each such report or copy promptly and
will report or cause to be reported any errors or discrepancies therein.
14. RIGHTS OF OWNERSHIP.
All computer programs and procedures developed to perform services
required to be provided by BISYS under this Agreement are the property of BISYS.
All records and other data except such computer programs and procedures are the
exclusive property of the Trust and all such other records and data will be
furnished to the Trust in appropriate form as soon as practicable after
termination of this Agreement for any reason.
15. RETURN OF RECORDS.
BISYS may at its option at any time, and shall promptly upon the
Trust's demand, turn over to the Trust and cease to retain BISYS' files, records
and documents created and maintained by BISYS pursuant to this Agreement which
are no longer needed by BISYS in the performance of its services or for its
legal protection. If not so turned over to the Trust, such documents and
records will be retained by BISYS for six years from the year of creation. At
the end of such six-year period, such records and documents will be turned over
to the Trust unless the Trust authorizes in writing the destruction of such
records and documents.
16. BANK ACCOUNTS.
7
<PAGE>
The Trust and the Portfolios shall establish and maintain such bank
accounts with such bank or banks as are selected by the Trust, as are necessary
in order that BISYS may perform the services required to be performed hereunder.
To the extent that the performance of such services shall require BISYS directly
to disburse amounts for payment of dividends, redemption proceeds or other
purposes, the Trust and Portfolios shall provide such bank or banks with all
instructions and authorizations necessary for BISYS to effect such
disbursements.
17. REPRESENTATIONS OF THE TRUST.
The Trust certifies to BISYS that: (a) as of the close of business
on the Effective Date, each Portfolio which is in existence as of the Effective
Date has authorized unlimited shares, and (b) by virtue of its Declaration of
Trust or Articles of Incorporation, shares of each Portfolio which are redeemed
by the Trust may be sold by the Trust from its treasury, and (c) this Agreement
has been duly authorized by the Trust and, when executed and delivered by the
Trust, will constitute a legal, valid and binding obligation of the Trust,
enforceable against the Trust in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured parties.
18. REPRESENTATIONS OF BISYS.
BISYS represents and warrants that: (a) BISYS has been in, and shall
continue to be in, substantial compliance with all provisions of law, including
Section 17A(c) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), required in connection with the performance of its duties under this
Agreement; and (b) the various procedures and systems which BISYS has
implemented with regard to safekeeping from loss or damage attributable to fire,
theft or any other cause of the blank checks, records, and other data of the
Trust and BISYS' records, data, equipment, facilities and other property used in
the performance of its obligations hereunder are adequate and that it will make
such changes therein from time to time as are required for the secure
performance of its obligations hereunder.
19. INSURANCE.
BISYS shall furnish the Trust with pertinent information concerning
the fidelity bond and professional liability insurance coverage that it
maintains. Such information shall include the identity of the insurance
carrier(s), coverage levels and deductible amounts. BISYS shall notify the Trust
should its insurance coverage with respect to professional liability or errors
and omissions coverage be canceled or reduced. Such notification shall include
the date of change and the reasons therefor. BISYS shall notify the Trust of
any material claims against it with respect to services performed under this
Agreement, whether or not they may be covered by insurance, and shall notify the
Trust from time to time as may be appropriate of the total outstanding claims
made by BISYS under its insurance coverage.
20. INFORMATION TO BE FURNISHED BY THE TRUST AND PORTFOLIOS.
8
<PAGE>
The Trust has furnished to BISYS the following:
(a) Copies of the Declaration of Trust or Articles of
Incorporation of the Trust and of any amendments thereto,
certified by the proper official of the state in which such
Declaration or Articles has been filed.
(b) Copies of the following documents:
1. The Trust's Bylaws and any amendments thereto;
2. Certified copies of resolutions of the Trustees covering
the following matters:
A. Approval of this Agreement and authorization of a
specified officer of the Trust to execute and
deliver this Agreement and authorization for
specified officers of the Trust to instruct BISYS
hereunder; and
B. Authorization of BISYS to act as Transfer Agent
for the Trust on behalf of the Portfolios.
(c) A list of all officers of the Trust, together with specimen
signatures of those officers, who are authorized to instruct
BISYS in all matters.
(d) Two copies of the following (if such documents are employed by
the Trust):
1. Prospectuses and Statement of Additional Information;
2. Distribution Agreement; and
3. All other forms commonly used by the Trust or its
Distributor with regard to their relationships and
transactions with shareholders of the Portfolios.
(e) A certificate as to shares of beneficial interest or common
stock of the Trust authorized, issued, and outstanding as of
the Effective Date of BISYS' appointment as Transfer Agent (or
as of the date on which BISYS' services are commenced,
whichever is the later date) and as to receipt of full
consideration by the Trust for all shares outstanding, such
statement to be certified by the Treasurer of the Trust.
21. INFORMATION FURNISHED BY BISYS.
BISYS has furnished to the Trust the following:
9
<PAGE>
(a) BISYS' Articles of Incorporation.
(b) BISYS' Bylaws and any amendments thereto.
(c) Certified copies of actions of BISYS covering the following
matters:
1. Approval of this Agreement, and authorization of a
specified officer of BISYS to execute and deliver this
Agreement;
2. Authorization of BISYS to act as Transfer Agent for the
Trust.
(d) A copy of the most recent independent accountants' report
relating to internal accounting control systems as filed with
the Commission pursuant to Rule 17Ad-13 under the Exchange
Act.
22. AMENDMENTS TO DOCUMENTS; AMENDMENTS TO AGREEMENT.
The Trust shall furnish BISYS written copies of any amendments to,
or changes in, any of the items referred to in Section 20 hereof forthwith upon
such amendments or changes becoming effective. In addition, the Trust agrees
that no amendments will be made to the Prospectuses or Statement of Additional
Information of the Trust which might have the effect of changing the procedures
employed by BISYS in providing the services agreed to hereunder or which
amendment might affect the duties of BISYS hereunder unless the Trust first
provides BISYS with notice of such amendments or changes.
This Agreement, or any term thereof, may be changed or waived only
by written amendment, signed by the party against whom enforcement of such
change or waiver is sought.
23. RELIANCE ON AMENDMENTS.
BISYS may rely on any amendments to or changes in any of the
documents and other items to be provided by the Trust pursuant to Sections 20
and 22 of this Agreement and the Trust hereby agrees to indemnify and hold BISYS
harmless from and against any and all claims, demands, actions, suits,
judgments, liabilities, losses, damages, costs, charges, reasonable counsel fees
and other expenses arising directly or indirectly out of actions or omissions on
the part of BISYS in reasonable reliance upon such amendments and/or changes.
Although BISYS is authorized to rely on the above-mentioned amendments to and
changes in the documents and other items to be provided pursuant to Sections 20
and 22 hereof, BISYS shall be under no duty to comply with or take any action as
a result of any of such amendments or changes unless the Trust first provides
BISYS with notice of such amendments or changes.
24. COMPLIANCE WITH LAW.
Except for the obligations of BISYS set forth in Section 12 hereof,
the Trust assumes full responsibility for the preparation, contents, and
distribution of each prospectus of
10
<PAGE>
the Trust as to compliance with all applicable requirements of the Securities
Act of 1933, as amended (the "1933 Act"), the 1940 Act, and any other laws,
rules and regulations of governmental authorities having jurisdiction. The
Trust represents and warrants that no shares of the Trust will be offered to the
public until the Trust's registration statement under the 1933 Act and the 1940
Act has been declared or becomes effective.
25. NOTICES.
Any notice provided hereunder shall be sufficiently given when sent
by registered or certified mail to the party required to be served with such
notice at the following address: if to the Trust, at 3100 Tower Boulevard, Suite
700, Durham, North Carolina 27707 attn: _____________________; and if to BISYS,
at 3435 Stelzer Road, Columbus, Ohio 43219, Attn: William J. Tomko, or at such
other address as such party may from time to time specify in writing to the
other party pursuant to this Section.
26. HEADINGS.
Paragraph headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
27. ASSIGNMENT.
This Agreement and the rights and duties hereunder shall not be
assignable by either of the parties hereto except by the specific written
consent of the other party. This Section 27 shall not limit or in any way
affect BISYS' right to appoint a Sub-transfer Agent pursuant to Section 1
hereof. This Agreement shall be binding upon, and shall inure to the benefit
of, the parties hereto and their respective successors and permitted assigns.
28. GOVERNING LAW.
This Agreement shall be governed by and provisions shall be
construed in accordance with the laws of the State of Ohio.
29. LIMITATION OF LIABILITY.
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of the Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Board of Trustees of the Trust as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees, officers or shareholders individually but
are binding only upon the assets and property of the Trust (or if the matter
relates only to a particular Portfolio, that Portfolio), and BISYS shall look
only to the assets of the Trust, or the particular Portfolio, for the
satisfaction of such obligations.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
11
<PAGE>
THE TUSCARORA INVESTMENT
TRUST
By:
----------------------------------
Title:
-------------------------------
BISYS FUND SERVICES OHIO, INC.
By:
----------------------------------
Title:
-------------------------------
12
<PAGE>
SCHEDULE A
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
THE TUSCARORA INVESTMENT TRUST
AND
BISYS FUND SERVICES OHIO, INC.
TRANSFER AGENCY SERVICES
1. SHAREHOLDER TRANSACTIONS
a. Process shareholder purchase and redemption orders.
b. Set up account information, including address, dividend option,
taxpayer identification numbers and wire instructions.
c. Issue confirmations in compliance with Rule 10b-10 under the
Securities Exchange Act of 1934, as amended.
d. Issue periodic statements for shareholders.
e. Process transfers and exchanges.
f. Process dividend payments, including the purchase of new shares,
through dividend reimbursement.
2. SHAREHOLDER INFORMATION SERVICES
a. Make information available to shareholder servicing unit and other
remote access units regarding trade date, share price, current
holdings, yields, and dividend information.
b. Produce detailed history of transactions through duplicate or
special order statements upon request.
c. Provide mailing labels for distribution of financial reports,
prospectuses, proxy statements or marketing material to current
shareholders.
13
<PAGE>
3. COMPLIANCE REPORTING
a. Provide reports to the Securities and Exchange Commission, the
National Association of Securities Dealers and the States in which
the Portfolio is registered.
b. Prepare and distribute appropriate Internal Revenue Service forms
for corresponding Portfolio and shareholder income and capital
gains.
c. Issue tax withholding reports to the Internal Revenue Service.
4. DEALER/LOAD PROCESSING (IF APPLICABLE)
a. Provide reports for tracking rights of accumulation and purchases
made under a Letter of Intent.
b. Account for separation of shareholder investments from transaction
sale charges for purchase of Portfolio shares.
c. Calculate fees due under 12b-1 plans for distribution and marketing
expenses.
d. Track sales and commission statistics by dealer and provide for
payment of commissions on direct shareholder purchases in a load
Portfolio.
5. SHAREHOLDER ACCOUNT MAINTENANCE
a. Maintain all shareholder records for each account in the Trust.
b. Issue customer statements on scheduled cycle, providing duplicate
second and third party copies if required.
c. Record shareholder account information changes.
d. Maintain account documentation files for each shareholder.
14
<PAGE>
SCHEDULE B
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
THE TUSCARORA INVESTMENT TRUST
AND
BISYS FUND SERVICES OHIO, INC.
TRANSFER AGENT FEES
ANNUAL PER ACCOUNT FEE: $16.00 for each shareholder account.
ADDITIONAL FEE FOR NEW PORTFOLIOS:
BISYS shall be entitled to receive an additional annual fee of $20,000 for
each new Portfolio that is added following the effective date of this Agreement.
OUT-OF-POCKET EXPENSES:
BISYS shall be entitled to be reimbursed for the out-of-pocket expenses set
forth in Section 3 of this Agreement.
15
<PAGE>
SCHEDULE C
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
THE TUSCARORA INVESTMENT TRUST
AND
BISYS FUND SERVICES OHIO, INC.
REPORTS
1. Daily Shareholder Activity Journal
2. Daily Portfolio Activity Summary Report
a. Beginning Balance
b. Dealer Transactions
c. Shareholder Transactions
d. Reinvested Dividends
e. Exchanges
f. Adjustments
g. Ending Balance
3. Daily Wire and Check Registers
4. Monthly Dealer Processing Reports
5. Monthly Dividend Reports
6. Sales Data Reports for Blue Sky Registration
7. Annual report by independent public accountants concerning BISYS'
shareholder system and internal accounting control systems to be filed
with the Securities and Exchange Commission pursuant to Rule 17Ad-13 of
the Securities Exchange Act of 1934, as amended.
16
<PAGE>
8. Shareholder new account information in downloadable format on a monthly
basis, including, name, address, phone number, account number, dollar
amount of initial transaction (in comma-delimited or Excel format).
9. List of closed accounts.
10. Furnish performance information for the Portfolios and comparisons to S&P
500 and Lipper Equity Growth Fund Index, YTD, 1,3,5 yr and inception, on
a monthly basis.
11. Furnish documents in .pdf format (applications, prospectus, annual
report, etc.) for website purposes.
12. Provide ability to download full list of shareholder accounts with
current share balance.
13. Such special reports and additional information that the parties may
agree upon, from time to time.
17
<PAGE>
SCHEDULE D
TO THE TRANSFER AGENCY AGREEMENT BETWEEN
THE TUSCARORA INVESTMENT TRUST
AND
BISYS FUND SERVICES OHIO, INC.
FUND PORTFOLIOS
The Oak Value Fund
18
<PAGE>
FUND ACCOUNTING AGREEMENT
AGREEMENT made this __________ day of __________________________, 1999,
between THE TUSCARORA INVESTMENT TRUST (the "Trust"), a Massachusetts business
trust having its principal place of business at 3435 Stelzer Road, Columbus,
Ohio 43219, and BISYS FUND SERVICES OHIO, INC. ("Fund Accountant"), a
corporation organized under the laws of the State of Ohio and having its
principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Trust desires that Fund Accountant perform certain fund
accounting services for each series of the Trust, listed on Schedule A attached
hereto and made part of this Agreement, as such Schedule A may be amended from
time to time (individually referred to herein as the "Portfolio" and
collectively as the "Portfolios"); and
WHEREAS, Fund Accountant is willing to perform such services on the terms
and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. SERVICES AS FUND ACCOUNTANT.
(a) MAINTENANCE OF BOOKS AND RECORDS. Fund Accountant will keep
and maintain the following books and records of each Portfolio
pursuant to Rule 31a-1 under the Investment Company Act of
1940 (the "Rule"):
(i) Journals containing an itemized daily record in
detail of all purchases and sales of securities, all
receipts and disbursements of cash and all other
debits and credits, as required by subsection (b)(1)
of the Rule;
(ii) General and auxiliary ledgers reflecting all asset,
liability, reserve, capital, income and expense
accounts, including interest accrued and interest
received, as required by subsection (b)(2)(i) of the
Rule;
(iii) Separate ledger accounts required by subsection
(b)(2)(ii) and (iii) of the Rule; and
(iv) A monthly trial balance of all ledger accounts
(except shareholder accounts) as required by
subsection (b)(8) of the Rule.
(b) PERFORMANCE OF DAILY ACCOUNTING SERVICES. In addition to the
maintenance of the books and records specified above, Fund
Accountant shall perform the following accounting services
daily for each Portfolio:
<PAGE>
(i) Calculate the net asset value per share utilizing
prices obtained from the sources described in
subsection 1(b)(ii) below;
(ii) Obtain security prices from independent pricing
services, or if such quotes are unavailable, then
obtain such prices from each Portfolio's investment
adviser or its designee, as approved by the Trust's
Board of Trustees (hereafter referred to as
"Trustees");
(iii) Verify and reconcile with the Portfolios' custodian
all daily trade activity;
(iv) Compute, as appropriate, each Portfolio's net income
and capital gains, dividend payables, dividend
factors, 7-day yields, 7-day effective yields, 30-day
yields, and weighted average portfolio maturity;
(v) Review daily the net asset value calculation and
dividend factor (if any) for each Portfolio prior to
release to shareholders, check and confirm the net
asset values and dividend factors for reasonableness
and deviations, and distribute net asset values and
yields to NASDAQ;
(vi) Report to the Trust the daily market pricing of
securities in any money market Portfolios, with the
comparison to the amortized cost basis;
(vii) Determine unrealized appreciation and depreciation on
securities held in variable net asset value
Portfolios;
(viii) Amortize premiums and accrete discounts on securities
purchased at a price other than face value, if
requested by the Trust;
(ix) Update fund accounting system to reflect rate
changes, as received from a Portfolio's investment
adviser, on variable interest rate instruments;
(x) Post Portfolio transactions to appropriate
categories;
(xi) Accrue expenses of each Portfolio according to
instructions received from the Trust's Administrator;
2
<PAGE>
(xii) Determine the outstanding receivables and payables
for all (1) security trades, (2) Portfolio share
transactions and (3) income and expense accounts;
(xiii) Provide accounting reports in connection with the
Trust's regular annual audit and other audits and
examinations by regulatory agencies; and
(xiv) Provide such periodic reports as the parties shall
agree upon, as set forth in a separate schedule.
(c) SPECIAL REPORTS AND SERVICES.
(i) Fund Accountant may provide additional special
reports upon the request of the Trust or a
Portfolio's investment adviser, which may result in
an additional charge, the amount of which shall be
agreed upon between the parties.
(ii) Fund Accountant may provide such other similar
services with respect to a Portfolio as may be
reasonably requested by the Trust, which may result
in an additional charge, the amount of which shall be
agreed upon between the parties.
(d) ADDITIONAL ACCOUNTING SERVICES. Fund Accountant shall also
perform the following additional accounting services for each
Portfolio:
(i) Provide monthly a download (and hard copy thereof) of
the financial statements described below, upon
request of the Trust. The download will include the
following items:
Statement of Assets and Liabilities,
Statement of Operations,
Statement of Changes in Net Assets, and
Condensed Financial Information;
(ii) Provide accounting information for the following:
(A) federal and state income tax returns and
federal excise tax returns;
(B) the Trust's semi-annual reports with the
Securities and Exchange Commission ("SEC") on
Form N-SAR;
3
<PAGE>
(C) the Trust's annual, semi-annual and quarterly
(if any) shareholder reports;
(D) registration statements on Form N-1A and
other filings relating to the registration of
shares;
(E) Fund Accountant's monitoring of the Trust's
status as a regulated investment Trust under
Subchapter M of the Internal Revenue Code, as
amended;
(F) annual audit by the Trust's auditors; and
(G) examinations performed by the SEC.
2. SUBCONTRACTING.
Fund Accountant may, at its expense and, upon written notice to the
Trust, subcontract with any entity or person concerning the provision of the
services contemplated, hereunder; provided, however, that Fund Accountant shall
not be relieved of any of its obligations under this Agreement by the
appointment of such subcontractor and provided further, that Fund Accountant
shall be responsible, to the extent provided in Section 7 hereof, for all acts
of such subcontractor as if such acts were its own.
3. COMPENSATION.
The Trust shall pay for the services to be provided by Fund
Accountant under this Agreement in accordance with, and in the manner set forth
in, Schedule B hereto, as such Schedule may be amended from time to time.
4. REIMBURSEMENT OF EXPENSES.
In addition to paying Fund Accountant the fees described in the Fee
Agreement, the Trust agrees to reimburse Fund Accountant for its reasonable
out-of-pocket expenses in providing services hereunder, including without
limitation the following:
(a) All freight and other delivery and bonding charges incurred by Fund
Accountant in delivering materials to and from the Trust;
(b) All direct telephone, telephone transmission and telecopy or other
electronic transmission expenses incurred by Fund Accountant in
communication with the Trust, the Trust's investment adviser or
custodian, dealers or others as required for Fund Accountant to
perform the services to be provided hereunder;
(c) The cost of obtaining security market quotes pursuant to
Section l(b)(ii) above;
4
<PAGE>
(d) All expenses incurred in connection with any custom programming or
systems modifications required to provide any special reports or
services requested pursuant to Section 1(c) herein;
(e) Any expenses Fund Accountant shall incur at the written direction of
an officer of the Trust thereunto duly authorized other than an
employee or other affiliated person of Fund Accountant who may
otherwise be named as an authorized representative of the Trust for
certain purposes; and
(f) Any additional expenses reasonably incurred by Fund Accountant in
the performance of its duties and obligations under this Agreement.
5. EFFECTIVE DATE.
This Agreement shall become effective with respect to a Portfolio as
of the date first written above (or, if a particular Portfolio is not in
existence on that date, on the date such Portfolio commences operation) (the
"Effective Date").
6. TERM.
(a) The term of this Agreement shall commence on ____________________,
1999 and shall continue in effect, unless earlier terminated by either party
hereto as provided hereunder, until ______________________, 2002 (the "Initial
Term"). Thereafter, unless otherwise terminated as provided herein, this
Agreement shall be renewed automatically for successive one-year periods
("Rollover Periods").
(b) This Agreement may be terminated without penalty: (i) by provision
of a notice of nonrenewal in the matter as set forth below, (ii) by mutual
agreement of the parties, (iii) in the event of a Change of Control (as defined
herein), in accordance with the procedures outlined below or (iv) for "cause"
(as defined herein) upon the provision of sixty (60) days advance written notice
by the party alleging cause. Written notice of nonrenewal must be provided at
least sixty (60) days prior to the end of the Initial Term or any Rollover
Period, as the case may be.
(c) For purposes of this Agreement, "cause" shall mean: (i) a material
breach of this Agreement that has not been remedied within thirty (30) days
following written notice of such breach from the non-breaching party, (ii) a
series of negligent acts or omissions or breaches of this Agreement which, in
the aggregate, constitute in the reasonable judgment of the Trust, a serious
failure to perform satisfactorily Fund Accountant's obligations hereunder; (iii)
a final, unappealable judicial, regulatory or administrative ruling or order in
which the party to be terminated has been found guilty of criminal or unethical
behavior in the conduct of its business; or (iv) financial difficulties on the
part of the party to be terminated which are evidenced by the authorization or
commencement of, or involvement by way of pleading, answer, consent or
acquiescence in, a
5
<PAGE>
voluntary or involuntary case under Title 11 of the United States Code, as from
time to time is in effect, or any applicable law, other than said Title 11, of
any jurisdiction relating to the liquidation or reorganization of debtors or the
modification or alteration of the rights of creditors.
(d) In the event of a change of "control" (as such term is defined in
the 1940 Act) with respect to Fund Accountant (a "Change of Control"), the
Trust may conduct an interim evaluation of Fund Accountant's performance under
this Agreement (a "Performance Evaluation"). The Performance Evaluation shall
be conducted within 120 days following the later of: (i) a Change of Control, or
(ii) the date the Trust receives actual notice of a Change of Control from Fund
Accountant. If, in the reasonable judgment of the Trust, the Performance
Evaluation indicates that the quality level of services being provided by Fund
Accountant has diminished materially (even though such diminution does not
constitute a material breach), the Trust shall, within thirty (30) days (or such
longer period of time as is agreed upon by the parties) following the
Performance Evaluation, provide written notice to Fund Accountant specifying the
areas in which the Trust believes the quality level of service has materially
diminished.
Fund Accountant shall have a period of thirty (30) days (or such
longer period of time as is agreed upon by the parties) from the receipt of such
written notice within which to restore to the reasonable satisfaction of the
Trust the quality level of services. If, at the end of such thirty (30) day
period (or such longer period of time as is agreed upon by the parties), Fund
Accountant has not, to the reasonable satisfaction of the Trust, restored the
quality level of services, the Trust may terminate this Agreement upon the
provision of thirty (30) days (or such longer period of time as is agreed upon
by the parties) advance written notice to Fund Accountant.
(e) Notwithstanding the foregoing, after such termination for so long as
Fund Accountant, with the written consent of the Trust, in fact continues to
perform any one or more of the services contemplated by this Agreement or any
schedule or exhibit hereto, the provisions of this Agreement, including without
limitation the provisions dealing with indemnification, shall continue in full
force and effect. Compensation due Fund Accountant and unpaid by the Trust upon
such termination shall be immediately due and payable upon and notwithstanding
such termination. Fund Accountant shall be entitled to collect from the Trust,
in addition to the compensation described in this Schedule A, the amount of all
of Fund Accountant's cash disbursements for services in connection with Fund
Accountant's activities in effecting such termination, including without
limitation, the delivery to the Trust and/or its designees of the Trust's
property, records, instruments and documents.
7. STANDARD OF CARE; INDEMNIFICATION.
Fund Accountant shall be obligated to exercise care and diligence in
the performance of its duties hereunder and to act in good faith in performing
the services provided for under this Agreement. Fund Accountant shall be liable
for any damages arising directly or indirectly out of
6
<PAGE>
Fund Accountant's failure to perform its duties under this Agreement to the
extent such damages arise directly or indirectly out of Fund Accountant's
willful misfeasance, bad faith, negligence in the performance of its duties, or
reckless disregard of its obligations and duties hereunder. (As used in this
section 7, the term "Fund Accountant" shall include directors, officers,
employees and other agents of Fund Accountant as well as Fund Accountant
itself.).
Without limiting the generality of the foregoing or of any other
provision of this Agreement, (i) Fund Accountant shall not be liable for losses
beyond its reasonable control, provided that Fund Accountant has acted in
accordance with the standard of care set forth above; and (ii) Fund Accountant
shall not be liable for the validity or invalidity or authority or lack thereof
of any instruction, notice or other instrument that Fund Accountant reasonably
believes to be genuine and to have been signed or presented by a duly authorized
representative of the Trust (other than an employee or other affiliated person
of Fund Accountant who may otherwise be named as an authorized representative
of the Trust for certain purposes).
The Trust agrees to indemnify and hold harmless Fund Accountant from
and against any and all actions, suits, claims, losses, damages, costs, charges,
reasonable counsel fees and disbursements, payments, expenses and liabilities
(including reasonable investigation expenses) (collectively, "Losses") arising
directly or indirectly out of any action or omission to act which Fund
Accountant takes (i) at the request or on the direction of or in reliance on the
reasonable advice of the Trust or (ii) upon any instruction, notice or other
instrument that Fund Accountant reasonably believes to be genuine and to have
been signed or presented by a duly authorized representative of the Trust (other
than an employee or other affiliated person of Fund Accountant who may otherwise
be named as an authorized representative of the Trust for certain purposes) or
(iii) on its own initiative, in good faith and in accordance with the standard
of care set forth herein, in connection with the performance of its duties or
obligations hereunder.
Fund Accountant shall not be indemnified against or held harmless
from any Losses arising directly or indirectly out of Fund Accountant's own
willful misfeasance, bad faith, negligence in the performance of its duties, or
reckless disregard of its obligations and duties hereunder; provided, however,
that the Trust shall have no obligation to indemnify or reimburse Fund
Accountant under this Section 7 to the extend that Fund Accountant is entitled
to reimbursement or indemnification for such Losses under any liability
insurance policy described in this Agreement or otherwise.
8. RECORD RETENTION AND CONFIDENTIALITY.
Fund Accountant shall keep and maintain on behalf of the Trust all
books and records which the Trust and Fund Accountant is, or may be, required to
keep and maintain pursuant to any applicable statutes, rules and regulations,
including without limitation Rules 31a-1 and 31a-2 under the Investment Company
Act of 1940, as amended (the "1940 Act"), relating to the maintenance of books
and records in connection with the services to be provided hereunder. Fund
Accountant further
7
<PAGE>
agrees that all such books and records shall be the property of the Trust and to
make such books and records available for inspection by the Trust or by the
Securities and Exchange Commission at reasonable times and otherwise to keep
confidential all books and records and other information relative to the Trust
and its shareholders; except when requested to divulge such information by
duly-constituted authorities or court process.
9. YEAR 2000 READINESS DISCLOSURE.
Fund Accountant (a) has reviewed its business and operations as they
relate to the services provided hereunder, (b) has developed or is developing a
program to remediate or replace computer applications and systems, and (c) has
developed a testing plan to test the remediation or replacement of computer
applications/systems, in each case, to address on a timely basis the risk that
certain computer applications/systems used by Fund Accountant may be unable to
recognize and perform properly date sensitive functions involving dates prior
to, including and after December 31, 1999, including dates such as February 29,
2000 (the "Year 2000 Challenge"). Fund Accountant represents and warrants that
to the best of its knowledge and belief, the reasonably foreseeable consequences
of the Year 2000 Challenge will not adversely effect Fund Accountant's ability
to perform its duties and obligations under this Agreement.
10. DISASTER RECOVERY.
Fund Accountant shall enter into and shall maintain in effect with
appropriate parties one or more agreements making reasonable provisions for
emergency use of electronic data processing equipment to the extent appropriate
equipment is available. In the event of equipment failures, Fund Accountant
shall, at no additional expense to the Trust, take reasonable steps to minimize
service interruptions.
11. UNCONTROLLABLE EVENTS.
Subject to Section 10 hereunder, Fund Accountant assumes no
responsibility hereunder, and shall not be liable, for any damage, loss of data,
delay or any other loss whatsoever caused by events beyond its reasonable
control, including acts of civil or military authority, national emergencies,
fire, flood, catastrophe, acts of God, insurrection, war, riots or failure of
the mails, transportation, communication or power supply.
12. REPORTS.
Fund Accountant will furnish to the Trust and to its properly
authorized auditors, investment advisers, examiners, distributors, dealers,
underwriters, salesmen, insurance companies and others designated by the Trust
in writing, such reports and at such times as are prescribed pursuant to the
terms and the conditions of this Agreement to be provided or completed by Fund
8
<PAGE>
Accountant, or as subsequently agreed upon by the parties pursuant to an
amendment hereto. The Trust agrees to examine each such report or copy promptly
and will report or cause to be reported any errors or discrepancies therein.
13. RIGHTS OF OWNERSHIP.
All computer programs and procedures developed to perform services
required to be provided by Fund Accountant under this Agreement are the property
of Fund Accountant. All records and other data except such computer programs
and procedures are the exclusive property of the Trust and all such other
records and data will be furnished to the Trust in appropriate form as soon as
practicable after termination of this Agreement for any reason.
14. RETURN OF RECORDS.
Fund Accountant may at its option at any time, and shall promptly
upon the Trust's demand, turn over to the Trust and cease to retain Fund
Accountant's files, records and documents created and maintained by Fund
Accountant pursuant to this Agreement which are no longer needed by Fund
Accountant in the performance of its services or for its legal protection. If
not so turned over to the Trust, such documents and records will be retained by
Fund Accountant for six years from the year of creation. At the end of such
six-year period, such records and documents will be turned over to the Trust
unless the Trust authorizes in writing the destruction of such records and
documents.
15. REPRESENTATIONS OF THE TRUST.
The Trust certifies to Fund Accountant that: (1) as of the close of
business on the Effective Date, each Portfolio that is in existence as of the
Effective Date has authorized unlimited shares, and (2) this Agreement has been
duly authorized by the Trust and, when executed and delivered by the Trust, will
constitute a legal, valid and binding obligation of the Trust, enforceable
against the Trust in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
16. REPRESENTATIONS OF FUND ACCOUNTANT.
Fund Accountant represents and warrants that: (1) the various
procedures and systems which Fund Accountant has implemented with regard to
safeguarding from loss or damage attributable to fire, theft, or any other cause
the records, and other data of the Trust and Fund Accountant's records, data,
equipment facilities and other property used in the performance of its
obligations hereunder are adequate and that it will make such changes therein
from time to time as are required for the secure performance of its obligations
hereunder, and (2) this Agreement has been duly authorized by Fund Accountant
and, when executed and delivered by Fund Accountant, will
9
<PAGE>
constitute a legal, valid and binding obligation of Fund Accountant, enforceable
against Fund Accountant in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
17. INSURANCE.
Fund Accountant shall furnish the Trust with pertinent information
concerning the fidelity bond and professional liability insurance coverage that
it maintains. Such information shall include the identity of the insurance
carrier(s), coverage levels and deductible amounts. Fund Accountant shall
notify the Trust should any of its insurance coverage be canceled or reduced.
Such notification shall include the date of change and the reasons therefor.
Fund Accountant shall notify the Trust of any material claims against it with
respect to services performed under this Agreement, whether or not they may be
covered by insurance, and shall notify the Trust from time to time as may be
appropriate of the total outstanding claims made by Fund Accountant under its
insurance coverage.
18. INFORMATION TO BE FURNISHED BY THE TRUST AND PORTFOLIOS.
The Trust has furnished to Fund Accountant the following:
(a) Copies of the Declaration of Trust or Articles of
Incorporation of the Trust and of any amendments thereto,
certified by the proper official of the state in which such
document has been filed.
(b) Copies of the following documents:
(i) The Trust's Bylaws and any amendments thereto; and
(ii) Certified copies of resolutions of the Trustees
covering the approval of this Agreement,
authorization of a specified officer of the Trust to
execute and deliver this Agreement and authorization
for specified officers of the Trust to instruct Fund
Accountant thereunder.
(c) A list of all the officers of the Trust, together with
specimen signatures of those officers who are authorized to
instruct Fund Accountant in all matters.
(d) Two copies of the Prospectuses and Statements of Additional
Information for each Portfolio.
19. INFORMATION FURNISHED BY FUND ACCOUNTANT.
10
<PAGE>
(a) Fund Accountant has furnished to the Trust the following:
(i) Fund Accountant's Articles of Incorporation; and
(ii) Fund Accountant's Bylaws and any amendments thereto.
(b) Fund Accountant shall, upon request, furnish certified copies
of corporate actions covering the following matters:
(i) Approval of this Agreement, and authorization of a
specified officer of FUND Accountant to execute and
deliver this Agreement; and
(ii) Authorization of Fund Accountant to act as Fund
accountant for the Trust and to provide accounting
services for the Trust.
20. AMENDMENTS TO DOCUMENTS; AMENDMENTS TO AGREEMENT..
The Trust shall furnish Fund Accountant written copies of any
amendments to, or changes in, any of the items referred to in Section 18 hereof
forthwith upon such amendments or changes becoming effective. In addition, the
Trust agrees that no amendments will be made to the Prospectuses or Statements
of Additional Information of the Trust which might have the effect of changing
the procedures employed by Fund Accountant in providing the services agreed to
hereunder or which amendment might affect the duties of Fund Accountant
hereunder unless the Trust first provides Fund Accountant with notice of such
amendments or changes. This Agreement, or any term thereof, may be changed or
waived only by written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
21. COMPLIANCE WITH LAW.
Except for the obligations of FUND Accountant set forth in Section 8
hereof, the Trust assumes full responsibility for the preparation, contents and
distribution of each prospectus of the Trust as to compliance with all
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), the 1940 Act and any other laws, rules and regulations of
governmental authorities having jurisdiction. The Trust represents and warrants
that no shares of the Trust will be offered to the public until the Trust's
registration statement under the Securities Act and the 1940 Act has been
declared or becomes effective.
22. NOTICES.
Any notice provided hereunder shall be sufficiently given when sent
by registered or certified mail to the party required to be served with such
notice, at the following address: if to the Trust, at 3100 Tower Boulevard,
Suite 700, Durham, North Carolina 27707,
11
<PAGE>
Attn:____________________________________________________________; and if to
Fund Accountant, at 3435 Stelzer Road, Columbus, Ohio 43219, Attn: William J.
Tomko or at such other address as such party may from time to time specify in
writing to the other party pursuant to this Section.
23. HEADINGS.
Paragraph headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
24. ASSIGNMENT.
This Agreement and the rights and duties hereunder shall not be
assignable with respect to a Portfolio by either of the parties hereto except by
the specific written consent of the other party. This Agreement shall be
binding upon, and shall inure to the benefit of, the parties hereto and their
respective successors and permitted assigns.
25. GOVERNING LAW.
This Agreement shall be governed by and provisions shall be
construed in accordance with the laws of the State of Ohio.
26. LIMITATION OF LIABILITY.
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of the Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Board of Trustees of the Trust as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees, officers or shareholders individually but
are binding only upon the assets and property of the Trust (or if the matter
relates only to a particular Portfolio, that Portfolio), and Fund Accountant
shall look only to the assets of the Trust, or the particular Portfolio, for the
satisfaction of such obligations.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
THE TUSCARORA INVESTMENT
TRUST
By:
--------------------------------
Title:
-----------------------------
12
<PAGE>
BISYS FUND SERVICES OHIO, INC.
By:
--------------------------------
Title:
-----------------------------
SCHEDULE A
TO THE FUND ACCOUNTING AGREEMENT BETWEEN
THE TUSCARORA INVESTMENT TRUST
AND
BISYS FUND SERVICES OHIO, INC.
FUND PORTFOLIOS
The Oak Value Fund
13
<PAGE>
SCHEDULE B
TO THE FUND ACCOUNTING AGREEMENT BETWEEN
THE TUSCARORA INVESTMENT TRUST
AND
BISYS FUND SERVICES OHIO, INC.
FEES
FEES:
Fund Accountant shall be entitled to receive a fee from the Trust on the
first business day of each month, or at such time(s) as Fund Accountant shall
request and the parties hereto shall agree, a fee computed daily at the annual
rate set forth below:
2 one-hundredths of one percent (.02%) of the Trust's average
daily net assets up to $500 million;
1.5 one-hundredths of one percent (.015%) of the Trust's
average daily net assets in excess of $500 million up to
$1 billion; and
1 one-hundredth of one percent (.01%) of the Trust's average
daily net assets in excess of $1 billion.
Fund Accountant shall be entitled to receive an additional fee of $35,000
for each new Portfolio that is added following the effective date of this
Agreement.
OUT-OF-POCKET EXPENSES:
The fees set forth above shall be in addition to the payment of
out-of-pocket expenses, as provided for in Section 4 of this Agreement.
14
