<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 28, 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. 6
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 6
(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)
/X / ON OCTOBER 29,1999 PURSUANT TO PARAGRAPH (b)
/ / 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH(a)
/ / ON ______, 1999 PURSUANT TO PARAGRAPH (a) OF RULE 485
TOTAL NUMBER OF PAGES:
INDEX TO EXHIBITS ON PAGE:
<PAGE>
THE TUSCARORA INVESTMENT TRUST PROSPECTUS
OAK VALUE FUND NOVEMBER 1, 1999
INVESTMENT ADVISER
Oak Value Capital Management, Inc.
University Tower
3100 Tower Boulevard, Suite 700
Durham, North Carolina 27707
1-800-680-4199
BOARD OF TRUSTEES
George W. Brumley III
C. Russell Bryan
David R. Carr, Jr.
John M. Day
Joseph T. Jordan, Jr.
[LOGO]
- ------------------------------------
QUESTIONS?
CALL 1-800-622-2474
(8:00 A.M. - 9:00 P.M. EASTERN TIME)
OR CONTACT YOUR INVESTMENT
REPRESENTATIVE.
- ------------------------------------
TICKER SYMBOL: OAKVX THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT APPROVED OR
NO SALES CHARGES DISAPPROVED THE SHARES DESCRIBED IN
NO REDEMPTION FEES THIS PROSPECTUS OR DETERMINED WHETHER
NO 12b-1 FEES THIS PROSPECTUS IS ACCURATE OR
COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
<TABLE>
<CAPTION>
THE OAK VALUE FUND TABLE OF CONTENTS
<S> <C>
[GRAPHIC] RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------------------------------
Carefully review this important Risk/Return Summary 3
section, which summarizes the Fund's Performance Bar Chart 5
investment strategies, risks, past Fees and Expenses 6
performance, and fees.
[GRAPHIC] INVESTMENT GOAL, STRATEGIES AND RISKS
- --------------------------------------------------------------------------------------------------------
Review this section for more Main Investment Strategies 7
information on investment strategies Additional Risks of Investing in The Fund 9
and their risks. Other Information about The Fund's
Investment Techniques and Policies 9
[GRAPHIC] FUND MANAGEMENT
- --------------------------------------------------------------------------------------------------------
Review this section for details on The Investment Adviser 10
the people and organizations who Portfolio Managers 10
oversee the Fund. Commonly Asked Questions About
Oak Value 11
[GRAPHIC] SHAREHOLDER INFORMATION
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Review this section for details on Pricing of Fund Shares 12
how shares are valued, how to purchase, Purchasing and Adding to Your Shares 13
sell and exchange shares, related Selling Your Shares 15
charges and payments of dividends General Policies On Selling Shares 17
and distributions. Dividends, Distributions and Taxes 19
[GRAPHIC] FINANCIAL HIGHLIGHTS 20
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[GRAPHIC] BACK COVER
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Where to Learn More about This Fund
</TABLE>
<PAGE>
RISK/RETURN SUMMARY AND FUND EXPENSES [GRAPHIC]
RISK/RETURN SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN KEY
INFORMATION ABOUT THE OAK VALUE FUND ("FUND").
THE RISK/RETURN SUMMARY AND FUND EXPENSES
DESCRIBE THE FUND'S INVESTMENT GOAL, MAIN
INVESTMENT STRATEGIES, MAIN INVESTMENT RISKS AND
CERTAIN PERFORMANCE INFORMATION UNDER
"RISK/RETURN SUMMARY" AND THE FUND'S EXPENSES
UNDER "FEES AND EXPENSES."
INVESTMENT GOAL To seek capital appreciation.
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, Oak Value Capital
Management, Inc. ("Oak Value" or "the Adviser"),
by performing fundamental research on individual
companies, seeks to identify securities of
companies whose intrinsic values are more 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 in assessing a company's intrinsic
value. While the Fund's Adviser does not
establish market capitalization targets for the
portfolio, investors should expect the Fund to
own small, medium and/or large capitalization
stocks in the portfolio at any point in time.
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.
3
<PAGE>
RISK/RETURN SUMMARY AND FUND EXPENSES [GRAPHIC]
SELECTION RISK--This risk is the possibility
that the Adviser's investment strategies may not
work as planned, that the intrinsic values of
the securities selected may never be realized by
the market 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 have
limited product lines, markets and financial
resources and may be dependent on a relatively
small management group. Their shares may trade
less frequently and in limited volume,
negatively affecting the share price and making
them potentially more difficult to sell. For
this reason, the Fund's returns may vary from
the stock market generally.
WHO MAY WANT TO INVEST? Consider investing in the Fund if you are:
- Interested in adding 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.
4
<PAGE>
RISK/RETURN SUMMARY AND FUND EXPENSES [GRAPHIC]
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.
[CHART]
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL
RETURNS AS OF 12/31/98(1)
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 -11.73%.
<TABLE>
<S> <C> <C>
Best quarter: 4th Qtr 1998 24.41%
Worst quarter: 3rd Qtr 1998 -18.64%
</TABLE>
- -------------------------------------------------------------------------------
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>
PERFORMANCE TABLE
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ending December 31, 1998)(1)
Past Past 5 Since Inception
Year 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>
The table assumes shareholders redeem all their Fund shares at the end of the
period indicated.
- ----------
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
5
<PAGE>
RISK/RETURN SUMMARY AND FUND EXPENSES [GRAPHIC]
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.
SHAREHOLDER TRANSACTION EXPENSES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) None
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<S> <C>
Advisory Fee 0.90%
- -------------------------------------------------------------------------------
12b-1 Fees None
- -------------------------------------------------------------------------------
Other Expenses (including Administration Fee) 0.20%
- -------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.10%
- -------------------------------------------------------------------------------
</TABLE>
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 investment
- - 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 may 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 [GRAPHIC]
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 intrinsic 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. 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:
- - 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 (discounted cash flow) and qualitative characteristics such as the
company's position relative to its customers, suppliers, competitors and
substitute products; or
- - Substantial discount from asset value which is based on the sum of the
company's parts including consideration of 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.
7
<PAGE>
INVESTMENT GOAL, STRATEGIES AND RISKS [GRAPHIC]
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 INTRINSIC value of a company lies solely with the present
value of 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. 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.
MAIN INVESTMENT STRATEGIES - CONTINUED
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 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; o Dominant position in the market--The
company should exhibit an ability to control its own destiny; o 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.
8
<PAGE>
INVESTMENT GOAL, STRATEGIES AND RISKS [GRAPHIC]
ADDITIONAL RISKS OF INVESTING IN THE FUND
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. In
addition, Year 2000 issues may adversely affect companies in which the Fund
invests. To the extent these companies suffer losses as a result of year 2000
computer difficulties, the Fund and its shareholders will likely experience
losses.
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.
9
<PAGE>
FUND MANAGEMENT [GRAPHIC]
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.
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.
10
<PAGE>
FUND MANAGEMENT [GRAPHIC]
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 specific 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.
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.
11
<PAGE>
SHAREHOLDER INFORMATION [GRAPHIC]
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 (i.e., weekends and certain holidays.)
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.
- -------------------------------------------------------------------------------
12
<PAGE>
SHAREHOLDER INFORMATION [GRAPHIC]
PURCHASING AND ADDING TO YOUR SHARES
You may purchase shares of the Fund directly or through accounts with
broker-dealers or other financial intermediaries. These intermediaries 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 broker-dealer or other financial intermediary, the intermediary is responsible
for transmitting orders by close of business and may have an earlier cut-off
time for purchase and sale requests. Consult your investment representative for
specific information.
<TABLE>
<CAPTION>
MINIMUM INVESTMENT
ACCOUNT TYPE INITIAL* SUBSEQUENT*
<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 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.
** Certain broker-dealers and other financial intermediaries are authorized to
accept purchase and redemption requests for Fund shares and may also
designate other organizations to act in this capacity. Purchase and
redemption requests are normally executed at the NAV next determined after
the intermediary receives the request in good order. These broker-dealers
and other financial intermediaries may charge you transaction fees on
purchases of Fund shares and may impose other charges, restrictions or
account options that differ from those applicable to shareholders who
purchase shares directly from the Fund. These intermediaries may be the
shareholders of record for your shares. These intermediaries are responsible
for transmitting requests and delivering funds on a timely basis. The Fund
is not responsible for ensuring that the intermediaries carry out their
obligations to their customers.
13
<PAGE>
SHAREHOLDER INFORMATION [GRAPHIC]
PURCHASING AND ADDING TO YOUR SHARES - CONTINUED
INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT
If purchasing through a broker-dealer or other financial intermediary, ask your
investment representative for purchase procedures. For all other purchases,
follow the instructions below.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
<S> <C>
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 182287, Columbus,
OH 43218-2287
Subsequent Investment:
1. Use the investment slip attached to your account
statement, or, if unavailable,
2. Include the following information:
- The Oak Value Fund - Account name
- Amount invested - Account number
Include your account number on your check.
3. Mail to: The Oak Value Fund, P.O. Box 182287, Columbus,
OH 43218-2287
- -------------------------------------------------------------------------------
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 1-800-622-2474. Your account can
generally be set up for electronic purchases within 10
business days.
- -------------------------------------------------------------------------------
BY WIRE TRANSFER 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.
NOTE: YOUR BANK MAY
CHARGE A WIRE
TRANSFER FEE.
- -------------------------------------------------------------------------------
[SIDENOTE]
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). ACH transactions usually clear
within two or three days but may take up to eight business days to clear. There
is generally no fee for ACH transactions.
- -------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
SHAREHOLDER INFORMATION [GRAPHIC]
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 Plan portion on your Account Application.
Make sure you note:
- Your bank name, address and account number and ABA routing number
- The amount you wish to invest automatically (minimum $100)
- How often you want to invest (monthly, 4 times a year, twice a 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 in good order by the Fund. 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.
15
<PAGE>
SHAREHOLDER INFORMATION [GRAPHIC]
INSTRUCTIONS FOR SELLING SHARES SELLING YOUR SHARES - CONTINUED
If selling your shares through a broker-dealer or other financial intermediary,
ask your investment representative for redemption procedures. Your financial
intermediary may have transaction minimums and/or transaction times, which will
affect your redemption. For all other sales transactions, follow the
instructions below.
The request must be received by the Fund before the close of regular trading
on the NYSE, normally 4:00 p.m. Eastern time, to receive that days' NAV.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
<S> <C>
BY TELEPHONE Call 1-800-622-2474 with instructions on how you wish to
(UNLESS YOU HAVE DECLINED receive your funds, (mail, wire, electronic transfer).
TELEPHONE SALES PRIVILEGES.) (See "General Policies on Selling Shares--Verifying
Telephone Redemptions" below)
- ----------------------------------------------------------------------------------------------------
BY MAIL 1. Call 1-800-622-2474 to request redemption forms (if
(See "General Policies on your account is an IRA or another form of retirement
Selling Shares--Redemptions plan) or write a letter of instruction indicating:
in 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(s) signature
2. Mail to: The Oak Value Fund
PO Box 182287
Columbus, OH 43218-2287
- ----------------------------------------------------------------------------------------------------
BY OVERNIGHT SERVICE See instruction 1 above, The Oak Value Fund
(See "General Policies on and Send to: c/o BISYS Fund Services
Selling Shares--Redemptions Attn: T.A. Operations
in Writing Required" below) 3435 Stelzer Road
Columbus, OH 43219
- ----------------------------------------------------------------------------------------------------
WIRE TRANSFER Call 1-800-622-2474 to request a wire transfer. If you
YOU MUST ELECT THIS OPTION ON call by 4 p.m. Eastern time, your payment will normally
YOUR APPLICATION 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.
Your bank must participate in If you call by 4 p.m. Eastern time, the NAV of your
the Automated Clearing House shares will normally be determined on the same day and
(ACH) and must be a U.S. bank. the proceeds credited within 8 days.
Note:Your bank may charge for
this service.
- ----------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
SHAREHOLDER INFORMATION [GRAPHIC]
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:
- - Send a written request to Oak Value Fund, P.O. Box 182287, Columbus, OH
43218-2287, 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 address has changed via telephonic or faxed request within the
last 10 business days
- - The check is not being mailed to the address on your account
- - The check is not being made payable to the owner(s) of the account
- - The redemption proceeds are being transferred to another Fund account with a
different registration
- - The redemption proceeds are being wired to a bank account other than the
account designated on your application.
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 persons. 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.
17
<PAGE>
SHAREHOLDER INFORMATION [GRAPHIC]
GENERAL POLICIES ON SELLING SHARES - CONTINUED
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.
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 as of the
cancellation date. No interest is paid during the time the check is outstanding.
18
<PAGE>
SHAREHOLDER INFORMATION [GRAPHIC]
DIVIDENDS, DISTRIBUTIONS AND TAXES
Any income the Fund receives is paid out semi-annually, less expenses, to its
shareholders as dividends. Any net 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 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.
Distributions of net capital gains are generally taxable as long-term capital
gains. Income dividends and distributions of short-term capital gains, if any,
will be generally taxable as ordinary income. 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.
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.
- -------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
19
<PAGE>
FINANCIAL HIGHLIGHTS [GRAPHIC]
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.
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR TEN MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, AUG. 31
1999 1998 1997 1996 1995(a) 1994
---------- ---------- -------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 27.04 $ 20.63 $ 15.62 $ 12.19 $ 12.50 $ 10.96
---------- ---------- -------- -------- --------- -------
Income from investment operations:
Net investment income (loss) 0.07 0.05 (0.02) (0.04) (0.05) (0.02)
Net realized and unrealized gains
on investments 1.76 6.98 6.06 3.57 0.55 1.78
---------- ---------- -------- -------- --------- -------
Total from investment operations 1.83 7.03 6.04 3.53 0.50 1.76
---------- ---------- -------- -------- --------- -------
Less distributions:
From net investment income (0.07) (0.05) -- -- -- --
From net realized gains from
security transactions (0.81) (0.44) (1.03) (0.10) (0.81) (0.22)
In excess of net realized gains (0.03) (0.13) -- -- -- --
---------- ---------- -------- -------- --------- -------
Total distributions (0.91) (0.62) (1.03) (0.10) (0.81) (0.22)
---------- ---------- -------- -------- --------- -------
Net asset value at end of period $ 27.96 $ 27.04 $ 20.63 $ 15.62 $ 12.19 $ 12.50
---------- ---------- -------- -------- --------- -------
---------- ---------- -------- -------- --------- -------
Total return 6.80% 34.56% 39.60% 29.04% 5.78%(c) 16.07%
---------- ---------- -------- -------- --------- -------
---------- ---------- -------- -------- --------- -------
Net assets at end of period (000's) $624,773 $433,903 $82,661 $22,066 $ 10,250 $ 8,769
Ratio of net expenses to
average net assets(b) 1.10% 1.22% 1.59% 1.90% 1.89%(c) 1.89%
Ratio of net invesment income (loss)
to average net assets 0.27% 0.41% (0.16)% (0.43)% (0.53)%(c) (0.58)%
Portfolio turnover rate 38% 15% 22% 58% 103%(c) 91%
</TABLE>
- ---------------------
(a) Effective July 1, 1995, the Fund was reorganized and changed its fiscal year
end from August 31 to June 30.
(b) Absent fee waivers and/or expense reimbursements by the Adviser, the ratios
of expenses to average net assets would have been 2.15%, 2.38%(c) and 2.80%
for the periods ended June 30, 1996, June 30, 1995 and August 31, 1994,
respectively.
(c) Annualized.
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
P.O. BOX 182287
COLUMBUS, OHIO 43218-2287
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)
<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>
<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.
<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
<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
<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 is possible that
such restrictions could be imposed again. The Fund may invest in foreign issuers
directly or through the purchase of American Depository Receipts (ADRs). ADRs,
which are traded domestically, are receipts issued by a U.S. bank or trust
company evidencing ownership of securities of a foreign issuer. ADRs may be
listed on a national securities exchange or may trade in the over-the-counter
market. The prices of ADRs are denominated in U.S. dollars while the underlying
security may be denominated in a foreign currency. Direct investments in foreign
securities will generally be limited to foreign securities traded on foreign
securities exchanges.
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
<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.
<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:
<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
<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:
<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
<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.
<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 current 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
<PAGE>
Suite 400 firm);
Durham, NC 27705
Tina D. Hosking(age 31) Associate Counsel and Assist
Secretary 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
$12,000(plus $2,500 for serving on the Board's Audit Committee) and a fee of
$2,500 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
NAME OF PERSON, COMPENSATION AS A PART OF FUND ANNUAL BENEFITS
POSITION FROM FUND EXPENSES UPON 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>
<PAGE>
PRINCIPAL HOLDERS OF VOTING SECURITIES. As of October 4, 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.
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 $4,723,434, $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.
<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 August 23, 1999(the "Administration Agreement").
The Administration Agreement continues in effect until November 13, 2002, and is
renewed automatically thereafter , unless terminated , for successive one year
terms. This Agreement may be terminated at any time without penalty 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 $60,774 and administrative fees of $446,379.
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 August 23, 1999 (the "Fund Accounting Agreement").
The Fund Accounting Agreement continues in effect until November 13, 2002 and is
renewed automatically, unless terminated, for successive one year periods. The
Agreement's provisions for termination, limitation of liability and
<PAGE>
indemnification are similar to those of 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 The Bank of New York, 100 Church
St, New York NY 10286. 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, LLP, 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
<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 $608,524, $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
<PAGE>
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, 1999, the amount of brokerage transactions and
related commissions directed to brokers because of research services provided
was $100,962,427 and $103,135, respectively.
Portfolio turnover rates for the fiscal years ended June 30, 1998 and 1999
were 15% and 38%, 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
<PAGE>
signatures authorized to act on its behalf. The application must be signed by a
duly authorized officer(s) and the corporate seal affixed. No redemption fees
are charged to shareholders under this plan. Costs in conjunction with the
administration of the plan are borne by the Fund. Shareholders should be aware
that such automatic withdrawals may deplete or use up entirely their initial
investment and may result in realized long-term or short-term capital gains or
losses. The Automatic Withdrawal Plan may be terminated at any time by the Fund
upon sixty days' written notice or by a shareholder upon written notice to the
Fund. Applications and further details may be obtained by calling the Fund at
1-800-622-2474, or by writing to:
The Oak Value Fund
Shareholder Services
P.O. Box 182287
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
<PAGE>
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 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,
<PAGE>
Memorial Day, Fourth of July, Labor Day, Thanksgiving Day and Christmas. Net
asset value per share is determined by dividing the total value of all Fund
securities and other assets, less liabilities, by the total number of shares
then outstanding. Net asset value includes interest on fixed-income securities,
which is accrued daily.
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.
<PAGE>
TAX STATUS OF THE FUND'S DIVIDENDS AND DISTRIBUTIONS. Dividends paid by the
Fund derived from net investment income or net short-term capital gains are
taxable to shareholders as ordinary income, whether received in cash or
reinvested in additional shares. Distributions, if any, of long-term capital
gains are taxable to shareholders as long-term capital gains, whether received
in cash or reinvested in additional shares, regardless of how long Fund shares
have been held. For information on "backup" withholding, see "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
<PAGE>
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 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 October 4, 1999, the following were five percent or greater
shareholders of the Fund:
<TABLE>
<CAPTION>
Share Balance Percentage
<S> <C> <C>
Charles Schwab & Co., Inc. 8,461,489.904 43.97% *
101 Montgomery Street
San Francisco, CA 94104
NFSC, Attn: S Chattengoon, 3,913,784.099 20.34%
Mutual Funds/Reconciliation
FBO S Vella
200 Liberty Street 5th Floor
One World Financial Center
New York, NY 10281
</TABLE>
*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
<PAGE>
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. 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
<PAGE>
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
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
<PAGE>
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% 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.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THE PROSPECTUS, OR IN THIS STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THE SAI OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR PRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUNDS, THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT
CONSTITUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH AN
OFFERING MAY NOT LAWFULLY BE MADE.
<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 - filed
herewith.
(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) Administration Agreement with BISYS
Fund Services Ohio - filed herewith.
(h) (6) Transfer Agency Agreement with BISYS
Fund Services Ohio - filed herewith.
(h) (7) Fund Accounting Agreement with BISYS
Fund Services Ohio - filed herewith.
(i) Opinion and Consent of Morgan, Lewis &
Bockius LLP- filed herewith
(j) Consent of Arthur Andersen LLP - filed herewith
(k) None
(l) None
(m) None
(n) Financial Data Schedule - filed herewith
(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
being or having been such a Trustee or officer, except with
respect to any matter as to which it has been determined that
C-2
<PAGE>
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
Person is subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in the reasonable
belief that
C-3
<PAGE>
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 persons" of the Trust as
the quoted phrase is defined in Section 2(a)(19) of the 1940
Act nor parties to the action,
C-4
<PAGE>
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
determine whether the Adviser is entitled to indemnification
hereunder and the reasonable amount of any indemnity due it
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<PAGE>
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>
<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, Countrywide Fund Services, Inc until
November 20, 1999 located at 312 Walnut Street, Cincinnati, Ohio 45202 and BISYS
Fund Services Ohio, Inc, after November 20,1999, 3435 Stelzer Road, Columbus,
Ohio 43219.
Item 29. Management Services Not Discussed in Parts A or B
Inapplicable
Item 30. Undertakings
(a) Inapplicable
(b) Inapplicable
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<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(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed below on its behalf by the undersigned,
thereunto duly authorized, in the City of Durham and State of North Carolina on
the 28th day of October, 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.
<TABLE>
<S> <C> <C>
/s/ George W. Brumley III President October 28, 1999
- -------------------------
and Trustee
George W. Brumley III
/s/ David R. Carr, Jr.* Vice President, October 28, 1999
- -----------------------
David R. Carr, Jr. Treasurer and
Trustee
/s/ C. Russell Bryan*
- --------------------------
C. Russell Bryan Trustee October 28, 1999
/s/John M. Day*
- --------------------------
John M. Day Trustee October 28, 1999
/s/ Joseph T. Jordan, Jr.*
- --------------------------
Joseph T. Jordan, Jr. Trustee October 28, 1999
*By:/s/George W. Brumley, III
-------------------------
George W. Brumley, III
Attorney-in-Fact
October 28, 1999
</TABLE>
C-8
<PAGE>
INDEX TO EXHIBITS
(1) (g) (2) Form of Custody Agreement with Bank of New York
(2) (h) (5) Administration Agreement with BISYS Fund Services Ohio, Inc.
(3) (h) (6) Transfer Agency Agreement with BISYS Fund Services Ohio, Inc.
(4) (h) (7) Fund Accounting Agreement with BISYS Fund Services Ohio, Inc.
(5) (i) Opinion and consent of Morgan, Lewis & Bockius LLP
(6) (j) Consent of Arthur Andersen LLP
(7) (k) Financial DATA Schedule
C-9
<PAGE>
CUSTODY AGREEMENT
Agreement made as of this ____ day of August, 1999, between THE TUSCARORA
INVESTMENT TRUST, a Massachusetts business trust organized and existing under
the laws of the Commonwealth of Massachusetts, having its principal office and
place of business at 3100 Tower Boulevard, Suite 700, Durham, North Carolina
27707 (hereinafter called the "Fund"), and THE BANK OF NEW YORK, a New York
corporation authorized to do a banking business, having its principal office and
place of business at One Wall Street, New York, New York 10286 (hereinafter
called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter set forth, the
Fund and the Custodian agree as follows:
ARTICLE I.
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
1. "Authorized Persons" shall be deemed to include any person, whether
or not such person is an officer or employee of the Fund, duly authorized by the
Board of Trustees of the Fund to execute any Certificate, instruction, notice or
other instrument on behalf of the Fund and listed in the Certificate annexed
hereto as Appendix A or such other Certificate as may be received by the
Custodian from time to time.
2. "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency securities, its successor
or successors and its nominee or nominees.
3. "Call Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and payment of the
exercise price, as specified therein, to purchase from the writer thereof the
specified underlying Securities.
4. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be given to
the Custodian which is
<PAGE>
actually received by the Custodian and signed on behalf of the Fund by any two
Authorized Persons, and the term Certificate shall also include Instructions.
5. "Clearing Member" shall mean a registered broker-dealer which is a
clearing member under the rules of O.C.C. and a member of a national securities
exchange qualified to act as a custodian for an investment company, or any
broker-dealer reasonably believed by the Custodian to be such a clearing member.
6. "Collateral Account" shall mean a segregated account so denominated
which is specifically allocated to a Series and pledged to the Custodian as
security for, and in consideration of, the Custodian's issuance of (a) any Put
Option guarantee letter or similar document described in paragraph 8 of Article
V herein, or (b) any receipt described in Article V or VIII herein.
7. "Composite Currency Unit" shall mean the European Currency Unit or
any other composite unit consisting of the aggregate of specified amounts of
specified Currencies as such unit may be constituted from time to time.
8. "Covered Call Option" shall mean an exchange traded option entitling
the holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying Securities
(excluding Futures Contracts) which are owned by the writer thereof and subject
to appropriate restrictions.
9. "Currency" shall mean money denominated in a lawful currency of any
country or the European Currency Unit.
10. "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository" shall
further mean and include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or successors and its
nominee or nominees, specifically identified in a certified copy of a resolution
of the Fund's Board of Trustees specifically approving deposits therein by the
Custodian.
11. "Financial Futures Contract" shall mean the firm commitment to buy
or sell fixed income securities including, without limitation, U.S. Treasury
Bills, U.S. Treasury Notes, U.S. Treasury Bonds, domestic bank certificates of
deposit, and Eurodollar certificates of deposit, during a specified month at an
agreed upon price.
12. "Futures Contract" shall mean a Financial Futures Contract and/or
Stock Index Futures Contracts.
13. "Futures Contract Option" shall mean an option with respect to a
Futures Contract.
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<PAGE>
14. "FX Transaction" shall mean any transaction for the purchase by one
party of an agreed amount in one Currency against the sale by it to the other
party of an agreed amount in another Currency.
15. "Instructions" shall mean instructions communications transmitted
by electronic or telecommunications media including S.W.I.F.T.,
computer-to-computer interface, dedicated transmission line, facsimile
transmission signed by an Authorized Person and tested telex.
16. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in the
name of the Fund for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Fund, the Custodian and a broker, dealer, futures commission
merchant or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or money of
the Fund shall be deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time determine. Securities held
in the Book-Entry System or the Depository shall be deemed to have been
deposited in, or withdrawn from, a Margin Account upon the Custodian's effecting
an appropriate entry in its books and records.
17. "Money Market Security" shall be deemed to include, without
limitation, certain Reverse Repurchase Agreements, debt obligations issued or
guaranteed as to interest and principal by the government of the United States
or agencies or instrumentalities thereof, any tax, bond or revenue anticipation
note issued by any state or municipal government or public authority, commercial
paper, certificates of deposit and bankers' acceptances, repurchase agreements
with respect to the same and bank time deposits, where the purchase and sale of
such securities normally requires settlement in federal funds on the same day as
such purchase or sale.
18. "O.C.C." shall mean the Options Clearing Corporation, a clearing
agency registered under Section 17A of the Securities Exchange Act of 1934, its
successor or successors, and its nominee or nominees.
19. "Option" shall mean a Call Option, Covered Call Option, Stock Index
Option and/or a Put Option.
20. "Oral Instructions" shall mean verbal instructions actually received
by the Custodian from an Authorized Person or from a person reasonably believed
by the Custodian to be an Authorized Person.
21. "Put Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract
-3-
<PAGE>
Options entitling the holder, upon timely exercise and tender of the specified
underlying Securities, to sell such Securities to the writer thereof for the
exercise price.
22. "Reverse Repurchase Agreement" shall mean an agreement pursuant to
which the Fund sells Securities and agrees to repurchase such Securities at a
described or specified date and price.
23. "Security" shall be deemed to include, without limitation, Money
Market Securities, Call Options, Put Options, Stock Index Options, Stock Index
Futures Contracts, Stock Index Futures Contract Options, Financial Futures
Contracts, Financial Futures Contract Options, Reverse Repurchase Agreements,
common stocks and other securities having characteristics similar to common
stocks, preferred stocks, debt obligations issued by state or municipal
governments and by public authorities, (including, without limitation, general
obligation bonds, revenue bonds, industrial bonds and industrial development
bonds), bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights to
receive, purchase, sell or subscribe for the same, or evidencing or representing
any other rights or interest therein, or any property or assets.
24. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account in
which certain Securities and/or other assets of the Fund specifically allocated
to such Series shall be deposited and withdrawn from time to time in accordance
with Certificates received by the Custodian in connection with such transactions
as the Fund may from time to time determine.
25. "Series" shall mean the various portfolios, if any, of the Fund
listed on Appendix B hereto as amended from time to time.
26. "Shares" shall mean the shares of beneficial interest of the Fund,
each of which is, in the case of a Fund having Series, allocated to a particular
Series.
27. "Stock Index Futures Contract" shall mean a bilateral agreement
pursuant to which the parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the value
of a particular stock index at the close of the last business day of the
contract and the price at which the futures contract is originally struck.
28. "Stock Index Option" shall mean an exchange traded option entitling
the holder, upon timely exercise, to receive an amount of cash determined by
reference to the difference between the exercise price and the value of the
index on the date of exercise.
-4-
<PAGE>
ARTICLE II.
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian
of the Securities and money at any time owned by the Fund during the period of
this Agreement.
2. The Custodian hereby accepts appointment as such custodian and
agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III.
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, the Fund will deliver or cause to be delivered to the Custodian
all Securities and all money owned by it, at any time during the period of this
Agreement, and shall specify with respect to such Securities and money the
Series to which the same are specifically allocated. The Custodian shall
segregate, keep and maintain the assets of the Series separate and apart. The
Custodian will not be responsible for any Securities and money not actually
received by it. The Custodian will be entitled to reverse any credits made on
the Fund's behalf where such credits have been previously made and money is not
finally collected. The Fund shall deliver to the Custodian a certified
resolution of the Board of Trustees of the Fund, substantially in the form of
Exhibit A hereto, approving, authorizing and instructing the Custodian on a
continuous and on-going basis to deposit in the Book-Entry System all Securities
eligible for deposit therein, regardless of the Series to which the same are
specifically allocated and to utilize the Book-Entry System to the extent
possible in connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of Securities,
loans of Securities and deliveries and returns of Securities collateral. Prior
to a deposit of Securities specifically allocated to a Series in the Depository,
the Fund shall deliver to the Custodian a certified resolution of the Board of
Trustees of the Fund, substantially in the form of Exhibit B hereto, approving,
authorizing and instructing the Custodian on a continuous and ongoing basis
until instructed to the contrary by a Certificate actually received by the
Custodian to deposit in the Depository all Securities specifically allocated to
such Series eligible for deposit therein, and to utilize the Depository to the
extent possible with respect to such Securities in connection with its
performance hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of Securities, and
deliveries and returns of Securities collateral. Securities and money deposited
in either the Book-Entry System or the Depository will be represented in
accounts which include only assets held by the Custodian for customers,
including, but not limited to, accounts in which the Custodian acts in a
fiduciary or
-5-
<PAGE>
representative capacity and will be specifically allocated on the Custodian's
books to the separate account for the applicable Series. Prior to the
Custodian's accepting, utilizing and acting with respect to Clearing Member
confirmations for Options and transactions in Options for a Series as provided
in this Agreement, the Custodian shall have received a certified resolution of
the Fund's Board of Trustees, substantially in the form of Exhibit C hereto,
approving, authorizing and instructing the Custodian on a continuous and
on-going basis, until instructed to the contrary by a Certificate actually
received by the Custodian, to accept, utilize and act in accordance with such
confirmations as provided in this Agreement with respect to such Series.
2. The Custodian shall establish and maintain separate accounts, in the
name of each Series, and shall credit to the separate account for each Series
all money received by it for the account of the Fund with respect to such
Series. Money credited to a separate account for a Series shall be disbursed by
the Custodian only:
(a) as hereinafter provided;
(b) pursuant to Certificates setting forth the name and address
of the person to whom the payment is to be made, the Series account from which
payment is to be made and the purpose for which payment is to be made; or
(c) in payment of the fees and in reimbursement of the expenses
and liabilities of the Custodian attributable to such Series.
3. Promptly after the close of business on each day, the Custodian
shall furnish the Fund with confirmations and a summary, on a per Series basis,
of all transfers to or from the account of the Fund for a Series, either
hereunder or with any co-custodian or sub-custodian appointed in accordance with
this Agreement during said day. Where Securities are transferred to the account
of the Fund for a Series, the Custodian shall also by book-entry or otherwise
identify as belonging to such Series a quantity of Securities in a fungible bulk
of Securities registered in the name of the Custodian (or its nominee) or shown
on the Custodian's account on the books of the Book-Entry System or the
Depository. At least monthly and from time to time, the Custodian shall furnish
the Fund with a detailed statement, on a per Series basis, of the Securities and
money held by the Custodian for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, all Securities held by the Custodian hereunder, which are issued
or issuable only in bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the Fund, in the name
of any duly appointed registered nominee of the Custodian as the Custodian may
from time to time determine, or in the name of the Book-Entry System or the
Depository or their successor or successors, or their nominee or nominees. The
Fund agrees to furnish to the Custodian appropriate instruments to enable the
-6-
<PAGE>
Custodian to hold or deliver in proper form for transfer, or to register in the
name of its registered nominee or in the name of the Book-Entry System or the
Depository any Securities which it may hold hereunder and which may from time to
time be registered in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not held in the
Book-Entry System or in the Depository in a separate account in the name of such
Series physically segregated at all times from those of any other person or
persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry System or the Depository with respect to Securities
held hereunder and therein deposited, shall with respect to all Securities held
for the Fund hereunder in accordance with preceding paragraph 4:
(a) collect all income, dividends and distributions due or
payable;
(b) give notice to the Fund and present payment and collect the
amount payable upon such Securities which are called, but only if either (i) the
Custodian receives a written notice of such call, or (ii) notice of such call
appears in one or more of the publications listed in Appendix C annexed hereto,
which may be amended at any time by the Custodian without the prior notification
or consent of the Fund;
(c) present for payment and collect the amount payable upon all
Securities which mature;
(d) surrender Securities in temporary form for definitive
Securities;
(e) execute, as custodian, any necessary declarations or
certificates of ownership under the Federal Income Tax Laws or the laws or
regulations of any other taxing authority now or hereafter in effect;
(f) hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited, for the account of a
Series, all rights and similar securities issued with respect to any Securities
held by the Custodian for such Series hereunder; and
(g) promptly deliver to the Fund all notices, proxies, proxy
soliciting materials, consents and other written information (including, without
limitation, notices of tender offers and exchange offers, pendency of calls,
maturities of Securities and expiration of rights) relating to Securities held
pursuant to this Agreement which are actually received by the Custodian, such
proxies and other similar materials to be executed by the registered owner (if
Securities are registered otherwise than in the name of the Fund), but without
indicating the manner in which proxies or consents are to be voted.
-7-
<PAGE>
6. Upon receipt of a Certificate and not otherwise, the Custodian,
directly or through the use of the Book-Entry System or the Depository, shall:
(a) execute and deliver to such persons as may be designated in
such Certificate proxies, consents, authorizations, and any other instruments
whereby the authority of the Fund as owner of any Securities held by the
Custodian hereunder for the Series specified in such Certificate may be
exercised;
(b) deliver any Securities held by the Custodian hereunder for
the Series specified in such Certificate in exchange for other Securities or
cash issued or paid in connection with the liquidation, reorganization,
refinancing, merger, consolidation or recapitalization of any corporation, or
the exercise of any conversion privilege and receive and hold hereunder
specifically allocated to such Series any cash or other Securities received in
exchange;
(c) deliver any Securities held by the Custodian hereunder for
the Series specified in such Certificate to any protective committee,
reorganization committee or other person in connection with the reorganization,
refinancing, merger, consolidation, recapitalization or sale of assets of any
corporation, and receive and hold hereunder specifically allocated to such
Series such certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery;
(d) make such transfers or exchanges of the assets of the Series
specified in such Certificate, and take such other steps as shall be stated in
such Certificate to be for the purpose of effectuating any duly authorized plan
of liquidation, reorganization, merger, consolidation or recapitalization of the
Fund; and
(e) present for payment and collect the amount payable upon
Securities not described in preceding paragraph 5(b) of this Article which may
be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the
Custodian shall not be required to obtain possession of any instrument or
certificate representing any Futures Contract, any Option, or any Futures
Contract Option until after it shall have determined, or shall have received a
Certificate from the Fund stating, that any such instruments or certificates are
available. The Fund shall deliver to the Custodian such a Certificate no later
than the business day preceding the availability of any such instrument or
certificate. Prior to such availability, the Custodian shall comply with Section
17(f) of the Investment Company Act of 1940, as amended, in connection with the
purchase, sale, settlement, closing-out or writing of Futures Contracts,
Options, or Futures Contract Options by making payments or deliveries specified
in Certificates received by the Custodian in connection with any such purchase,
sale, writing, settlement or closing-out upon its receipt from a broker, dealer,
or futures commission merchant of a statement or confirmation reasonably
believed by the Custodian to be in the form customarily used by
-8-
<PAGE>
brokers, dealers, or futures commission merchants with respect to such Futures
Contracts, Options, or Futures Contract Options, as the case may be, confirming
that such Security is held by such broker, dealer or futures commission
merchant, in book-entry form or otherwise, in the name of the Custodian (or any
nominee of the Custodian) as custodian for the Fund, provided, however, that
notwithstanding the foregoing, payments to or deliveries from the Margin
Account, and payments with respect to Securities to which a Margin Account
relates, shall be made in accordance with the terms and conditions of the Margin
Account Agreement. Whenever any such instruments or certificates are available,
the Custodian shall, notwithstanding any provision in this Agreement to the
contrary, make payment for any Futures Contract, Option, or Futures Contract
Option for which such instruments or such certificates are available only
against the delivery to the Custodian of such instrument or such certificate,
and deliver any Futures Contract, Option or Futures Contract Option for which
such instruments or such certificates are available only against receipt by the
Custodian of payment therefor. Any such instrument or certificate delivered to
the Custodian shall be held by the Custodian hereunder in accordance with, and
subject to, the provisions of this Agreement.
ARTICLE IV.
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund, other than a
purchase of an Option, a Futures Contract, or a Futures Contract Option, the
Fund shall deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a Certificate, and (ii) with
respect to each purchase of Money Market Securities, a Certificate or Oral
Instructions, specifying with respect to each such purchase: (a) the Series to
which such Securities are to be specifically allocated; (b) the name of the
issuer and the title of the Securities; (c) the number of shares or the
principal amount purchased and accrued interest, if any; (d) the date of
purchase and settlement; (e) the purchase price per unit; (f) the total amount
payable upon such purchase; (g) the name of the person from whom or the broker
through whom the purchase was made, and the name of the clearing broker, if any;
and (h) the name of the broker to whom payment is to be made. The Custodian
shall, upon receipt of Securities purchased by or for the Fund, pay to the
broker specified in the Certificate out of the money held for the account of
such Series the total amount payable upon such purchase, provided that the same
conforms to the total amount payable as set forth in such Certificate or Oral
Instructions.
2. Promptly after each sale of Securities by the Fund, other than a
sale of any Option, Futures Contract, Futures Contract Option, or any Reverse
Repurchase Agreement, the Fund shall deliver to the Custodian (i) with respect
to each sale of Securities which are not Money Market Securities, a Certificate,
and (ii) with respect to
-9-
<PAGE>
each sale of Money Market Securities, a Certificate or Oral Instructions,
specifying with respect to each such sale: (a) the Series to which such
Securities were specifically allocated; (b) the name of the issuer and the title
of the Security; (c) the number of shares or principal amount sold, and accrued
interest, if any; (d) the date of sale; (e) the sale price per unit; (f) the
total amount payable to the Fund upon such sale; (g) the name of the broker
through whom or the person to whom the sale was made, and the name of the
clearing broker, if any; and (h) the name of the broker to whom the Securities
are to be delivered. The Custodian shall deliver the Securities specifically
allocated to such Series to the broker specified in the Certificate against
payment of the total amount payable to the Fund upon such sale, provided that
the same conforms to the total amount payable as set forth in such Certificate
or Oral Instructions.
ARTICLE V.
OPTIONS
1. Promptly after the purchase of any Option by the Fund, the Fund
shall deliver to the Custodian a Certificate specifying with respect to each
Option purchased: (a) the Series to which such Option is specifically allocated;
(b) the type of Option (put or call); (c) the name of the issuer and the title
and number of shares subject to such Option or, in the case of a Stock Index
Option, the stock index to which such Option relates and the number of Stock
Index Options purchased; (d) the expiration date; (e) the exercise price; (f)
the dates of purchase and settlement; (g) the total amount payable by the Fund
in connection with such purchase; (h) the name of the Clearing Member through
whom such Option was purchased; and (i) the name of the broker to whom payment
is to be made. The Custodian shall pay, upon receipt of a Clearing Member's
statement confirming the purchase of such Option held by such Clearing Member
for the account of the Custodian (or any duly appointed and registered nominee
of the Custodian) as custodian for the Fund, out of money held for the account
of the Series to which such Option is to be specifically allocated, the total
amount payable upon such purchase to the Clearing Member through whom the
purchase was made, provided that the same conforms to the total amount payable
as set forth in such Certificate.
2. Promptly after the sale of any Option purchased by the Fund pursuant
to paragraph 1 hereof, the Fund shall deliver to the Custodian a Certificate
specifying with respect to each such sale: (a) the Series to which such Option
was specifically allocated; (b) the type of Option (put or call); (c) the name
of the issuer and the title and number of shares subject to such Option or, in
the case of a Stock Index Option, the stock index to which such Option relates
and the number of Stock Index Options sold; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the Clearing Member through whom the sale was
made. The Custodian shall consent to the delivery of the Option sold by the
Clearing Member which previously supplied the confirmation described in
preceding paragraph 1
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of this Article with respect to such Option against payment to the Custodian of
the total amount payable to the Fund, provided that the same conforms to the
total amount payable as set forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Call Option: (a) the
Series to which such Call Option was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Call Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid by the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Call Option was exercised.
The Custodian shall, upon receipt of the Securities underlying the Call Option
which was exercised, pay out of the money held for the account of the Series to
which such Call Option was specifically allocated the total amount payable to
the Clearing Member through whom the Call Option was exercised, provided that
the same conforms to the total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Put Option: (a) the
Series to which such Put Option was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Put Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid to the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Put Option was exercised.
The Custodian shall, upon receipt of the amount payable upon the exercise of the
Put Option, deliver or direct the Depository to deliver the Securities
specifically allocated to such Series, provided the same conforms to the amount
payable to the Fund as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Stock Index Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to such Stock Index Option:
(a) the Series to which such Stock Index Option was specifically allocated; (b)
the type of Stock Index Option (put or call); (c) the number of Options being
exercised; (d) the stock index to which such Option relates; (e) the expiration
date; (f) the exercise price; (g) the total amount to be received by the Fund in
connection with such exercise; and (h) the Clearing Member from whom such
payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Covered Call Option: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares for which
the Covered Call Option was written and which underlie the same; (c) the
expiration date; (d) the exercise price; (e) the premium to be received by the
Fund; (f) the date such Covered Call Option was written;
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and (g) the name of the Clearing Member through whom the premium is to be
received. The Custodian shall deliver or cause to be delivered, in exchange for
receipt of the premium specified in the Certificate with respect to such Covered
Call Option, such receipts as are required in accordance with the customs
prevailing among Clearing Members dealing in Covered Call Options and shall
impose, or direct the Depository to impose, upon the underlying Securities
specified in the Certificate specifically allocated to such Series such
restrictions as may be required by such receipts. Notwithstanding the foregoing,
the Custodian has the right, upon prior written notification to the Fund, at any
time to refuse to issue any receipts for Securities in the possession of the
Custodian and not deposited with the Depository underlying a Covered Call
Option.
7. Whenever a Covered Call Option written by the Fund and described in
the preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate instructing the Custodian to deliver, or
to direct the Depository to deliver, the Securities subject to such Covered Call
Option and specifying: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares subject
to the Covered Call Option; (c) the Clearing Member to whom the underlying
Securities are to be delivered; and (d) the total amount payable to the Fund
upon such delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Custodian shall deliver,
or direct the Depository to deliver, the underlying Securities as specified in
the Certificate against payment of the amount to be received as set forth in
such Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Put
Option: (a) the Series for which such Put Option was written; (b) the name of
the issuer and the title and number of shares for which the Put Option is
written and which underlie the same; (c) the expiration date; (d) the exercise
price; (e) the premium to be received by the Fund; (f) the date such Put Option
is written; (g) the name of the Clearing Member through whom the premium is to
be received and to whom a Put Option guarantee letter is to be delivered; (h)
the amount of cash, and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the Senior Security
Account for such Series; and (i) the amount of cash and/or the amount and kind
of Securities specifically allocated to such Series to be deposited into the
Collateral Account for such Series. The Custodian shall, after making the
deposits into the Collateral Account specified in the Certificate, issue a Put
Option guarantee letter substantially in the form utilized by the Custodian on
the date hereof, and deliver the same to the Clearing Member specified in the
Certificate against receipt of the premium specified in said Certificate.
Notwithstanding the foregoing, the Custodian shall be under no obligation to
issue any Put Option guarantee letter or similar document if it is unable to
make any of the representations contained therein.
9. Whenever a Put Option written by the Fund and described in the
preceding paragraph is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Put Option was
written; (b) the name of the
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issuer and title and number of shares subject to the Put Option; (c) the
Clearing Member from whom the underlying Securities are to be received; (d) the
total amount payable by the Fund upon such delivery; (e) the amount of cash
and/or the amount and kind of Securities specifically allocated to such Series
to be withdrawn from the Collateral Account for such Series and (f) the amount
of cash and/or the amount and kind of Securities, specifically allocated to such
Series, if any, to be withdrawn from the Senior Security Account. Upon the
return and/or cancellation of any Put Option guarantee letter or similar
document issued by the Custodian in connection with such Put Option, the
Custodian shall pay out of the money held for the account of the Series to which
such Put Option was specifically allocated the total amount payable to the
Clearing Member specified in the Certificate as set forth in such Certificate
against delivery of such Securities, and shall make the withdrawals specified in
such Certificate.
10. Whenever the Fund writes a Stock Index Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Stock Index Option: (a) the Series for which such Stock Index Option was
written; (b) whether such Stock Index Option is a put or a call; (c) the number
of options written; (d) the stock index to which such Option relates; (e) the
expiration date; (f) the exercise price; (g) the Clearing Member through whom
such Option was written; (h) the premium to be received by the Fund; (i) the
amount of cash and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in the Senior Security Account for such
Series; (j) the amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the Collateral Account
for such Series; and (k) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be deposited in a
Margin Account, and the name in which such account is to be or has been
established. The Custodian shall, upon receipt of the premium specified in the
Certificate, make the deposits, if any, into the Senior Security Account
specified in the Certificate, and either (1) deliver such receipts, if any,
which the Custodian has specifically agreed to issue, which are in accordance
with the customs prevailing among Clearing Members in Stock Index Options and
make the deposits into the Collateral Account specified in the Certificate, or
(2) make the deposits into the Margin Account specified in the Certificate.
11. Whenever a Stock Index Option written by the Fund and described in
the preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Stock
Index Option: (a) the Series for which such Stock Index Option was written; (b)
such information as may be necessary to identify the Stock Index Option being
exercised; (c) the Clearing Member through whom such Stock Index Option is being
exercised; (d) the total amount payable upon such exercise, and whether such
amount is to be paid by or to the Fund; (e) the amount of cash and/or amount and
kind of Securities, if any, to be withdrawn from the Margin Account; and (f) the
amount of cash and/or amount and kind of Securities, if any, to be withdrawn
from the Senior Security Account for such Series; and the amount of cash and/or
the amount and kind of Securities, if any, to be withdrawn from the Collateral
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Account for such Series. Upon the return and/or cancellation of the receipt, if
any, delivered pursuant to the preceding paragraph of this Article, the
Custodian shall pay out of the money held for the account of the Series to which
such Stock Index Option was specifically allocated to the Clearing Member
specified in the Certificate the total amount payable, if any, as specified
therein.
12. Whenever the Fund purchases any Option identical to a previously
written Option described in paragraphs, 6, 8 or 10 of this Article in a
transaction expressly designated as a "Closing Purchase Transaction" in order to
liquidate its position as a writer of an Option, the Fund shall promptly deliver
to the Custodian a Certificate specifying with respect to the Option being
purchased: (a) that the transaction is a Closing Purchase Transaction; (b) the
Series for which the Option was written; (c) the name of the issuer and the
title and number of shares subject to the Option, or, in the case of a Stock
Index Option, the stock index to which such Option relates and the number of
Options held; (d) the exercise price; (e) the premium to be paid by the Fund;
(f) the expiration date; (g) the type of Option (put or call); (h) the date of
such purchase; (i) the name of the Clearing Member to whom the premium is to be
paid; and (j) the amount of cash and/or the amount and kind of Securities, if
any, to be withdrawn from the Collateral Account, a specified Margin Account, or
the Senior Security Account for such Series. Upon the Custodian's payment of the
premium and the return and/or cancellation of any receipt issued pursuant to
paragraphs 6, 8 or 10 of this Article with respect to the Option being
liquidated through the Closing Purchase Transaction, the Custodian shall remove,
or direct the Depository to remove, the previously imposed restrictions on the
Securities underlying the Call Option.
13. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Fund and
described in this Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 of Article III herein,
and upon the return and/or cancellation of any receipts issued by the Custodian,
shall make such withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified in a Certificate received
in connection with such expiration, exercise, or consummation.
ARTICLE VI.
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund
shall deliver to the Custodian a Certificate specifying with respect to such
Futures Contract, (or with respect to any number of identical Futures
Contract(s)): (a) the Series for which the Futures Contract is being entered;
(b) the category of Futures Contract (the name of the underlying stock index or
financial instrument); (c) the number of identical Futures Contracts entered
into; (d) the delivery or settlement date of the Futures Contract(s); (e)
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the date the Futures Contract(s) was (were) entered into and the maturity date;
(f) whether the Fund is buying (going long) or selling (going short) on such
Futures Contract(s); (g) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security Account for such
Series; (h) the name of the broker, dealer, or futures commission merchant
through whom the Futures Contract was entered into; and (i) the amount of fee or
commission, if any, to be paid and the name of the broker, dealer, or futures
commission merchant to whom such amount is to be paid. The Custodian shall make
the deposits, if any, to the Margin Account in accordance with the terms and
conditions of the Margin Account Agreement. The Custodian shall make payment out
of the money specifically allocated to such Series of the fee or commission, if
any, specified in the Certificate and deposit in the Senior Security Account for
such Series the amount of cash and/or the amount and kind of Securities
specified in said Certificate.
2. (a) Any variation margin payment or similar payment required to
be made by the Fund to a broker, dealer, or futures commission merchant with
respect to an outstanding Futures Contract, shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a
broker, dealer, or futures commission merchant to the Fund with respect to an
outstanding Futures Contract, shall be received and dealt with by the Custodian
in accordance with the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is
retained by the Fund until delivery or settlement is made on such Futures
Contract, the Fund shall deliver to the Custodian a Certificate specifying: (a)
the Futures Contract and the Series to which the same relates; (b) with respect
to a Stock Index Futures Contract, the total cash settlement amount to be paid
or received, and with respect to a Financial Futures Contract, the Securities
and/or amount of cash to be delivered or received; (c) the broker, dealer, or
futures commission merchant to or from whom payment or delivery is to be made or
received; and (d) the amount of cash and/or Securities to be withdrawn from the
Senior Security Account for such Series. The Custodian shall make the payment or
delivery specified in the Certificate, and delete such Futures Contract from the
statements delivered to the Fund pursuant to paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to offset a
Futures Contract held by the Custodian hereunder, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b) the Futures
Contract being offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3 of Article III
herein, and make such withdrawals from the Senior Security Account for such
Series as may be specified in such Certificate. The withdrawals, if any, to be
made from the
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Margin Account shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
5. Notwithstanding any other provision in this Agreement to the
contrary, the Custodian shall deliver cash and Securities to a futures
commission merchant upon receipt of a Certificate from the Fund specifying: (a)
the name of the futures commission merchant; (b) the specific cash and
Securities to be delivered; (c) the date of such delivery; and (d) the date of
the agreement between the Fund and such futures commission merchant entered
pursuant to Rule 17f-6 under the Investment Company Act 1940, as amended ("FCM
Agreement"). Each delivery of such a Certificate by the Fund shall constitute
(x) a representation and warranty by the Fund that the FCM Agreement has been
duly authorized, executed and delivered by the Fund and the futures commission
merchant and complies with Rule 17f-6, and (y) an agreement by the Fund that the
Custodian shall not be liable for the acts or omissions of any such futures
commission merchant.
ARTICLE VII.
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract Option by the
Fund, the Fund shall promptly deliver to the Custodian a Certificate specifying
with respect to such Futures Contract Option: (a) the Series to which such
Option is specifically allocated; (b) the type of Futures Contract Option (put
or call); (c) the type of Futures Contract and such other information as may be
necessary to identify the Futures Contract underlying the Futures Contract
Option purchased; (d) the expiration date; (e) the exercise price; (f) the dates
of purchase and settlement; (g) the amount of premium to be paid by the Fund
upon such purchase; (h) the name of the broker or futures commission merchant
through whom such option was purchased; and (i) the name of the broker, or
futures commission merchant, to whom payment is to be made. The Custodian shall
pay out of the money specifically allocated to such Series, the total amount to
be paid upon such purchase to the broker or futures commissions merchant through
whom the purchase was made, provided that the same conforms to the amount set
forth in such Certificate.
2. Promptly after the sale of any Futures Contract Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to each such sale: (a) Series to
which such Futures Contract Option was specifically allocated; (b) the type of
Futures Contract Option (put or call); (c) the type of Futures Contract and such
other information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the broker or futures commission merchant through
whom the sale was made. The Custodian shall consent to the cancellation of the
Futures
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Contract Option being closed against payment to the Custodian of the total
amount payable to the Fund, provided the same conforms to the total amount
payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund pursuant to
paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Futures
Contract Option was specifically allocated; (b) the particular Futures Contract
Option (put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise; (e) the name
of the broker or futures commission merchant through whom the Futures Contract
Option is exercised; (f) the net total amount, if any, payable by the Fund; (g)
the amount, if any, to be received by the Fund; and (h) the amount of cash
and/or the amount and kind of Securities to be deposited in the Senior Security
Account for such Series. The Custodian shall make, out of the money and
Securities specifically allocated to such Series, the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series for which such Futures Contract Option
was written; (b) the type of Futures Contract Option (put or call); (c) the type
of Futures Contract and such other information as may be necessary to identify
the Futures Contract underlying the Futures Contract Option; (d) the expiration
date; (e) the exercise price; (f) the premium to be received by the Fund; (g)
the name of the broker or futures commission merchant through whom the premium
is to be received; and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security Account for such
Series. The Custodian shall, upon receipt of the premium specified in the
Certificate, make out of the money and Securities specifically allocated to such
Series the deposits into the Senior Security Account, if any, as specified in
the Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which is a
call is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract Option; (d) the
name of the broker or futures commission merchant through whom such Futures
Contract Option was exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by the Fund
upon such exercise; and (g) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account for such Series. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in such
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Certificate make the payments, if any, and the deposits, if any, into the Senior
Security Account as specified in the Certificate. The deposits, if any, to be
made to the Margin Account shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
6. Whenever a Futures Contract Option which is written by the Fund and
which is a put is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Option was specifically
allocated; (b) the particular Futures Contract Option exercised; (c) the type of
Futures Contract underlying such Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Futures Contract Option
is exercised; (e) the net total amount, if any, payable to the Fund upon such
exercise; (f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount and kind of Securities and/or cash to be withdrawn
from or deposited in, the Senior Security Account for such Series, if any. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in the Certificate, make out of the money and Securities
specifically allocated to such Series, the payments, if any, and the deposits,
if any, into the Senior Security Account as specified in the Certificate. The
deposits to and/or withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
7. Whenever the Fund purchases any Futures Contract Option identical to
a previously written Futures Contract Option described in this Article in order
to liquidate its position as a writer of such Futures Contract Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying with respect to
the Futures Contract Option being purchased: (a) the Series to which such Option
is specifically allocated; (b) that the transaction is a closing transaction;
(c) the type of Futures Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Option Contract; (d) the
exercise price; (e) the premium to be paid by the Fund; (f) the expiration date;
(g) the name of the broker or futures commission merchant to whom the premium is
to be paid; and (h) the amount of cash and/or the amount and kind of Securities,
if any, to be withdrawn from the Senior Security Account for such Series. The
Custodian shall effect the withdrawals from the Senior Security Account
specified in the Certificate. The withdrawals, if any, to be made from the
Margin Account shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to, any Futures Contract Option written or purchased by
the Fund and described in this Article, the Custodian shall (a) delete such
Futures Contract Option from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein and, (b) make such withdrawals from and/or in
the case of an exercise such deposits into the Senior Security Account as may be
specified in a Certificate. The deposits to and/or
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withdrawals from the Margin Account, if any, shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise of a
Futures Contract Option described in this Article shall be subject to Article VI
hereof.
10. Notwithstanding any other provision in this Agreement to the
contrary, the Custodian shall deliver cash and Securities to a futures
commission merchant upon receipt of a Certificate from the Fund specifying: (a)
the name of the futures commission merchant; (b) the specific cash and
Securities to be delivered; (c) the date of such delivery; and (d) the date of
the FCM Agreement. Each delivery of such a Certificate by the Fund shall
constitute (x) a representation and warranty by the Fund that the FCM Agreement
has been duly authorized, executed and delivered by the Fund and the futures
commission merchant and complies with Rule 17f-6, and (y) an agreement by the
Fund that the Custodian shall not be liable for the acts or omissions of any
such futures commission merchant.
ARTICLE VIII.
SHORT SALES
1. Promptly after any short sales by any Series of the Fund, the Fund
shall promptly deliver to the Custodian a Certificate specifying: (a) the Series
for which such short sale was made; (b) the name of the issuer and the title of
the Security; (c) the number of shares or principal amount sold, and accrued
interest or dividends, if any; (d) the dates of the sale and settlement; (e) the
sale price per unit; (f) the total amount credited to the Fund upon such sale,
if any, (g) the amount of cash and/or the amount and kind of Securities, if any,
which are to be deposited in a Margin Account and the name in which such Margin
Account has been or is to be established; (h) the amount of cash and/or the
amount and kind of Securities, if any, to be deposited in a Senior Security
Account, and (i) the name of the broker through whom such short sale was made.
The Custodian shall upon its receipt of a statement from such broker confirming
such sale and that the total amount credited to the Fund upon such sale, if any,
as specified in the Certificate is held by such broker for the account of the
Custodian (or any nominee of the Custodian) as custodian of the Fund, issue a
receipt or make the deposits into the Margin Account and the Senior Security
Account specified in the Certificate.
2. In connection with the closing-out of any short sale, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to each
such closing-out: (a) the Series for which such transaction is being made; (b)
the name of the issuer and the title of the Security; (c) the number of shares
or the principal amount, and accrued interest or dividends, if any, required to
effect such closing-out to be delivered to the broker; (d) the dates of
closing-out and settlement; (e) the purchase price per unit; (f)
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the net total amount payable to the Fund upon such closing-out; (g) the net
total amount payable to the broker upon such closing-out; (h) the amount of cash
and the amount and kind of Securities to be withdrawn, if any, from the Margin
Account; (i) the amount of cash and/or the amount and kind of Securities, if
any, to be withdrawn from the Senior Security Account; and (j) the name of the
broker through whom the Fund is effecting such closing-out. The Custodian shall,
upon receipt of the net total amount payable to the Fund upon such closing-out,
and the return and/or cancellation of the receipts, if any, issued by the
Custodian with respect to the short sale being closed-out, pay out of the money
held for the account of the Fund to the broker the net total amount payable to
the broker, and make the withdrawals from the Margin Account and the Senior
Security Account, as the same are specified in the Certificate.
ARTICLE IX.
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase Agreement with
respect to Securities and money held by the Custodian hereunder, the Fund shall
deliver to the Custodian a Certificate, or in the event such Reverse Repurchase
Agreement is a Money Market Security, a Certificate or Oral Instructions
specifying: (a) the Series for which the Reverse Repurchase Agreement is
entered; (b) the total amount payable to the Fund in connection with such
Reverse Repurchase Agreement and specifically allocated to such Series; (c) the
broker or dealer through or with whom the Reverse Repurchase Agreement is
entered; (d) the amount and kind of Securities to be delivered by the Fund to
such broker or dealer; (e) the date of such Reverse Repurchase Agreement; and
(f) the amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in a Senior Security
Account for such Series in connection with such Reverse Repurchase Agreement.
The Custodian shall, upon receipt of the total amount payable to the Fund
specified in the Certificate or Oral Instructions make the delivery to the
broker or dealer, and the deposits, if any, to the Senior Security Account,
specified in such Certificate or Oral Instructions.
2. Upon the termination of a Reverse Repurchase Agreement described in
preceding paragraph 1 of this Article, the Fund shall promptly deliver a
Certificate or, in the event such Reverse Repurchase Agreement is a Money Market
Security, a Certificate or Oral Instructions to the Custodian specifying: (a)
the Reverse Repurchase Agreement being terminated and the Series for which same
was entered; (b) the total amount payable by the Fund in connection with such
termination; (c) the amount and kind of Securities to be received by the Fund
and specifically allocated to such Series in connection with such termination;
(d) the date of termination; (e) the name of the broker or dealer with or
through whom the Reverse Repurchase Agreement is to be terminated; and (f) the
amount of cash and/or the amount and kind of Securities to be withdrawn from
the Senior Securities Account for such Series. The Custodian shall, upon
receipt of the amount and
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kind of Securities to be received by the Fund specified in the Certificate or
Oral Instructions, make the payment to the broker or dealer, and the
withdrawals, if any, from the Senior Security Account, specified in such
Certificate or Oral Instructions.
ARTICLE X.
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically
allocated to a Series held by the Custodian hereunder, the Fund shall deliver or
cause to be delivered to the Custodian a Certificate specifying with respect to
each such loan: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities, (c) the
number of shares or the principal amount loaned, (d) the date of loan and
delivery, (e) the total amount to be delivered to the Custodian against the loan
of the Securities, including the amount of cash collateral and the premium, if
any, separately identified, and (f) the name of the broker, dealer, or financial
institution to which the loan was made. The Custodian shall deliver the
Securities thus designated to the broker, dealer or financial institution to
which the loan was made upon receipt of the total amount designated as to be
delivered against the loan of Securities. The Custodian may accept payment in
connection with a delivery otherwise than through the Book-Entry System or
Depository only in the form of a certified or bank cashier's check payable to
the order of the Fund or the Custodian drawn on New York Clearing House funds
and may deliver Securities in accordance with the customs prevailing among
dealers in securities.
2. Promptly after each termination of the loan of Securities by the
Fund, the Fund shall deliver or cause to be delivered to the Custodian a
Certificate specifying with respect to each such loan termination and return of
Securities: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities to be
returned, (c) the number of shares or the principal amount to be returned, (d)
the date of termination, (e) the total amount to be delivered by the Custodian
(including the cash collateral for such Securities minus any offsetting credits
as described in said Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be returned. The Custodian
shall receive all Securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt thereof shall
pay, out of the money held for the account of the Fund, the total amount payable
upon such return of Securities as set forth in the Certificate.
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ARTICLE XI.
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits to, or
withdrawals from, a Senior Security Account as specified in a Certificate
received by the Custodian. Such Certificate shall specify the Series for which
such deposit or withdrawal is to be made and the amount of cash and/or the
amount and kind of Securities specifically allocated to such Series to be
deposited in, or withdrawn from, such Senior Security Account for such Series.
In the event that the Fund fails to specify in a Certificate the Series, the
name of the issuer, the title and the number of shares or the principal amount
of any particular Securities to be deposited by the Custodian into, or withdrawn
from, a Senior Securities Account, the Custodian shall be under no obligation to
make any such deposit or withdrawal and shall so notify the Fund.
2. The Custodian shall make deliveries or payments from a Margin
Account to the broker, dealer, futures commission merchant or Clearing Member in
whose name, or for whose benefit, the account was established as specified in
the Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions with
respect to Securities deposited in any Margin Account shall be dealt with in
accordance with the terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security interest in
and to any property at any time held by the Custodian in any Collateral Account
described herein. In accordance with applicable law the Custodian may enforce
its lien and realize on any such property whenever the Custodian has made
payment or delivery pursuant to any Put Option guarantee letter or similar
document or any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed the Custodian by
the Fund within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Fund with a
statement with respect to each Margin Account in which money or Securities are
held specifying as of the close of business on the previous business day: (a)
the name of the Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The Custodian shall make
available upon request to any broker, dealer, or futures commission merchant
specified in the name of a Margin Account a copy of the statement furnished the
Fund with respect to such Margin Account.
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6. Promptly after the close of business on each business day in which
cash and/or Securities are maintained in a Collateral Account for any Series,
the Custodian shall furnish the Fund with a statement with respect to such
Collateral Account specifying the amount of cash and/or the amount and kind of
Securities held therein. No later than the close of business next succeeding the
delivery to the Fund of such statement, the Fund shall furnish to the Custodian
a Certificate specifying the then market value of the Securities described in
such statement. In the event such then market value is indicated to be less than
the Custodian's obligation with respect to any outstanding Put Option guarantee
letter or similar document, the Fund shall promptly specify in a Certificate the
additional cash and/or Securities to be deposited in such Collateral Account to
eliminate such deficiency.
ARTICLE XII.
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the resolution of
the Board of Trustees of the Fund, certified by the Secretary or any Assistant
Secretary, either (i) setting forth with respect to the Series specified therein
the date of the declaration of a dividend or distribution, the date of payment
thereof, the record date as of which shareholders entitled to payment shall be
determined, the amount payable per Share of such Series to the shareholders of
record as of that date and the total amount payable to the Dividend Agent and
any sub-dividend agent or co-dividend agent of the Fund on the payment date, or
(ii) authorizing with respect to the Series specified therein the declaration of
dividends and distributions on a daily basis and authorizing the Custodian to
rely on Oral Instructions or a Certificate setting forth the date of the
declaration of such dividend or distribution, the date of payment thereof, the
record date as of which shareholders entitled to payment shall be determined,
the amount payable per Share of such Series to the shareholders of record as of
that date and the total amount payable to the Dividend Agent on the payment
date.
2. Upon the payment date specified in such resolution, Oral
Instructions or Certificate, as the case may be, the Custodian shall pay out of
the money held for the account of each Series the total amount payable to the
Dividend Agent and any sub-dividend agent or co-dividend agent of the Fund with
respect to such Series.
ARTICLE XIII.
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver to the
Custodian a Certificate duly specifying:
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(a) the Series, the number of Shares sold, trade date, and
price; and
(b) the amount of money to be received by the Custodian for the
sale of such Shares and specifically allocated to the separate account in the
name of such Series.
2. Upon receipt of such money from the Transfer Agent, the Custodian
shall credit such money to the separate account in the name of the Series for
which such money was received.
3. Upon issuance of any Shares of any Series described in the foregoing
provisions of this Article, the Custodian shall pay, out of the money held for
the account of such Series, all original issue or other taxes required to be
paid by the Fund in connection with such issuance upon the receipt of a
Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the
Custodian to make payment out of the money held by the Custodian hereunder in
connection with a redemption of any Shares, it shall furnish to the Custodian a
Certificate specifying:
(a) the number and Series of Shares redeemed; and
(b) the amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting forth the
Series and number of Shares received by the Transfer Agent for redemption and
that such Shares are in good form for redemption, the Custodian shall make
payment to the Transfer Agent out of the money held in the separate account in
the name of the Series the total amount specified in the Certificate issued
pursuant to the foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the redemption of any
Shares, whenever any Shares are redeemed pursuant to any check redemption
privilege which may from time to time be offered by the Fund, the Custodian,
unless otherwise instructed by a Certificate, shall, upon receipt of an advice
from the Fund or its agent setting forth that the redemption is in good form for
redemption in accordance with the check redemption procedure, honor the check
presented as part of such check redemption privilege out of the money held in
the separate account of the Series of the Shares being redeemed.
ARTICLE XIV.
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian should in its sole discretion advance funds on
behalf of
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any Series which results in an overdraft because the money held by the Custodian
in the separate account for such Series shall be insufficient to pay the total
amount payable upon a purchase of Securities specifically allocated to such
Series, as set forth in a Certificate or Oral Instructions, or which results in
an overdraft in the separate account of such Series for some other reason, or if
the Fund is for any other reason indebted to the Custodian with respect to a
Series, including any indebtedness to The Bank of New York under the Fund's Cash
Management and Related Services Agreement (except a borrowing for investment or
for temporary or emergency purposes using Securities as collateral pursuant to a
separate agreement and subject to the provisions of paragraph 2 of this
Article), such overdraft or indebtedness shall be deemed to be a loan made by
the Custodian to the Fund for such Series payable on demand and shall bear
interest from the date incurred at a rate per annum (based on a 360-day year for
the actual number of days involved) equal to 1/2% over Custodian's prime
commercial lending rate in effect from time to time, such rate to be adjusted on
the effective date of any change in such prime commercial lending rate but in no
event to be less than 6% per annum. In addition, the Fund hereby agrees that the
Custodian shall have a continuing lien, security interest, and security
entitlement in and to any property including any investment property or any
financial asset specifically allocated to such Series at any time held by it for
the benefit of such Series or in which the Fund may have an interest which is
then in the Custodian's possession or control or in possession or control of any
third party acting in the Custodian's behalf. The Fund authorizes the Custodian,
in its sole discretion, at any time to charge any such overdraft or indebtedness
together with interest due thereon against any balance of account standing to
such Series' credit on the Custodian's books. In addition, the Fund hereby
covenants that on each Business Day on which either it intends to enter a
Reverse Repurchase Agreement and/or otherwise borrow from a third party, or
which next succeeds a Business Day on which at the close of business the Fund
had outstanding a Reverse Repurchase Agreement or such a borrowing, it shall
prior to 9 a.m., New York City time, advise the Custodian, in writing, of each
such borrowing, shall specify the Series to which the same relates, and shall
not incur any indebtedness not so specified other than from the Custodian.
2. The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the Custodian)
from which it borrows money for investment or for temporary or emergency
purposes using Securities held by the Custodian hereunder as collateral for such
borrowings, a notice or undertaking in the form currently employed by any such
bank setting forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to each such borrowing: (a)
the Series to which such borrowing relates; (b) the name of the bank, (c) the
amount and terms of the borrowing, which may be set forth by incorporating by
reference an attached promissory note, duly endorsed by the Fund, or other loan
agreement, (d) the time and date, if known, on which the loan is to be entered
into, (e) the date on which the loan becomes due and payable, (f) the total
amount payable to the Fund on the borrowing date, (g) the market value of
Securities to be delivered as collateral for
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such loan, including the name of the issuer, the title and the number of shares
or the principal amount of any particular Securities, and (h) a statement
specifying whether such loan is for investment purposes or for temporary or
emergency purposes and that such loan is in conformance with the Investment
Company Act of 1940 and the Fund's prospectus. The Custodian shall deliver on
the borrowing date specified in a Certificate the specified collateral and the
executed promissory note, if any, against delivery by the lending bank of the
total amount of the loan payable, provided that the same conforms to the total
amount payable as set forth in the Certificate. The Custodian may, at the option
of the lending bank, keep such collateral in its possession, but such collateral
shall be subject to all rights therein given the lending bank by virtue of any
promissory note or loan agreement. The Custodian shall deliver such Securities
as additional collateral as may be specified in a Certificate to collateralize
further any transaction described in this paragraph. The Fund shall cause all
Securities released from collateral status to be returned directly to the
Custodian, and the Custodian shall receive from time to time such return of
collateral as may be tendered to it. In the event that the Fund fails to specify
in a Certificate the Series, the name of the issuer, the title and number of
shares or the principal amount of any particular Securities to be delivered as
collateral by the Custodian, the Custodian shall not be under any obligation to
deliver any Securities.
ARTICLE XV.
INSTRUCTIONS
1. With respect to any software provided by the Custodian to a Fund in
order for the Fund to transmit Instructions to the Custodian (the "Software"),
the Custodian grants to such Fund a personal, nontransferable and nonexclusive
license to use the Software solely for the purpose of transmitting Instructions
to, and receiving communications from, the Custodian in connection with its
account(s). The Fund shall use the Software solely for its own internal and
proper business purposes, and not in the operation of a service bureau, and
agrees not to sell, reproduce, lease or otherwise provide, directly or
indirectly, the Software or any portion thereof to any third party without the
prior written consent of the Custodian. The Fund acknowledges that the Custodian
and its suppliers have title and exclusive proprietary rights to the Software,
including any trade secrets or other ideas, concepts, know how, methodologies,
or information incorporated therein and the exclusive rights to any copyrights,
trademarks and patents (including registrations and applications for
registration of either) or statutory or legal protections available with respect
thereof. The Fund further acknowledges that all or a part of the Software may be
copyrighted or trademarked (or a registration or claim made therefor) by the
Custodian or its suppliers. The Fund shall not take any action with respect to
the Software inconsistent with the foregoing acknowledgments, nor shall the Fund
attempt to decompile, reverse engineer or modify the Software. The Fund may not
copy, sell, lease or provide, directly or indirectly, any of the Software or any
portion thereof to any other person or entity without the Custodian's prior
written consent. The
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Fund may not remove any statutory copyright notice, or other notice
including the software or on any media containing the Software. The Fund shall
reproduce any such notice on any reproduction of the Software and shall add
statutory copyright notice or other notice to the Software or media upon the
Bank's request. Custodian agrees to provide reasonable training, instruction
manuals and access to Custodian's "help desk" in connection with the Fund's user
support necessary to use of the Software. At the Fund's request, Custodian
agrees to permit reasonable testing of the Software by the Fund.
2. The Fund shall obtain and maintain at its own cost and expense all
equipment and services, including but not limited to communications services,
necessary for it to utilize the Software and transmit Instructions to the
Custodian. The Custodian shall not be responsible for the reliability,
compatibility with the Software or availability of any such equipment or
services or the performance or nonperformance by any nonparty to this Custody
Agreement.
3. The Fund acknowledges that the Software, all data bases made
available to the Fund by utilizing the Software (other than data bases relating
solely to the assets of the Fund and transactions with respect thereto), and any
proprietary data, processes, information and documentation (other than which are
or become part of the public domain or are legally required to be made available
to the public) (collectively, the "Information"), are the exclusive and
confidential property of the Custodian. The Fund shall keep the Information
confidential by using the same care and discretion that the Fund uses with
respect to its own confidential property and trade secrets and shall neither
make nor permit any disclosure without the prior written consent of the
Custodian. Upon termination of this Agreement or the Software license granted
hereunder for any reason, the Fund shall return to the Custodian all copies of
the Information which are in its possession or under its control or which the
Fund distributed to third parties. The provisions of this Article shall not
affect the copyright status of any of the Information which may be copyrighted
and shall apply to all Information whether or not copyrighted.
4. The Custodian reserves the right to modify, at its own expense, the
Software from time to time without prior notice and the Fund shall install new
releases of the Software as the Custodian may direct. The Fund agrees not to
modify or attempt to modify the Software without the Custodian's prior written
consent. The Fund acknowledges that any modifications to the Software, whether
by the Fund or the Custodian and whether with or without the Custodian's
consent, shall become the property of the Custodian.
5. THE CUSTODIAN AND ITS MANUFACTURERS AND SUPPLIERS MAKE NO WARRANTIES
OR REPRESENTATIONS OF ANY KIND WITH REGARD TO THE SOFTWARE OR THE METHOD(S) BY
WHICH THE FUND MAY TRANSMIT INSTRUCTIONS TO THE CUSTODIAN, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
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6. EXPORT RESTRICTIONS. EXPORT OF THE SOFTWARE IS PROHIBITED BY UNITED
STATES LAW. THE FUND AGREES THAT IT WILL NOT UNDER ANY CIRCUMSTANCES RESELL,
DIVERT, TRANSFER, TRANSSHIP OR OTHERWISE DISPOSE OF THE SOFTWARE (IN ANY FORM)
IN OR TO ANY OTHER COUNTRY. IF THE CUSTODIAN DELIVERS THE SOFTWARE TO THE FUND
OUTSIDE THE UNITED STATES, THE SOFTWARE WAS EXPORTED FROM THE UNITED STATES IN
ACCORDANCE WITH EXPORT ADMINISTRATIVE REGULATIONS. DIVERSION CONTRARY TO U.S.
LAWS PROHIBITED. The Fund hereby authorizes Custodian to report its name and
address to government agencies to which Custodian is required to provide such
information by law.
7. Where the method for transmitting Instructions by the Fund involves
an automatic systems acknowledgment by the Custodian of its receipt of such
Instructions, then in the absence of such acknowledgment the Custodian shall not
be liable for any failure to act pursuant to such Instructions, the Fund may not
claim that such Instructions were received by the Custodian, and the Fund shall
deliver a Certificate by some other means.
8. (a) The Fund agrees that where it delivers to the Custodian
Instructions hereunder, it shall be the Fund's sole responsibility to ensure
that only persons duly authorized by the Fund transmit such Instructions to the
Custodian. The Fund will cause all persons transmitting Instructions to the
Custodian to treat applicable user and authorization codes, passwords and
authentication keys with extreme care, and irrevocably authorizes the Custodian
to act in accordance with and rely upon Instructions received by it pursuant
hereto.
(b) The Fund hereby represents, acknowledges and agrees that it
is fully informed of the protections and risks associated with the various
methods of transmitting Instructions to the Custodian and that there may be more
secure methods of transmitting instructions to the Custodian than the method(s)
selected by the Fund. The Fund hereby agrees that the security procedures (if
any) to be followed in connection with the Fund's transmission of Instructions
provide to it a commercially reasonable degree of protection in light of its
particular needs and circumstances.
9. The Fund hereby represents, warrants and covenants to the Custodian
that this Agreement has been duly approved by a resolution of its Board of
Trustees, and that its transmission of Instructions pursuant hereto shall at all
times comply with the Investment Company Act.
10. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, its ability to send
Instructions as promptly as practicable, and in any event within 24 hours after
the earliest of (i) discovery thereof, (ii) the Business Day on which discovery
should have occurred through the exercise of
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reasonable care and (iii) in the case of any error, the date of actual receipt
of the earliest notice which reflects such error, it being agreed that discovery
and receipt of notice may only occur on a business day. The Custodian shall
promptly advise the Fund whenever the Custodian learns of any errors, omissions
or interruption in, or delay or unavailability of, the Fund's ability to send
Instructions.
11. Custodian will indemnify and hold harmless the Fund with respect to
any liability, damages, loss or claim incurred by or brought against Fund by
reason any claim or infringement against any patent, copyright, license or other
property right arising out or by reason of the Fund's use of the Software in the
form provided under this Section. Custodian at its own expense will defend such
action or claim brought against Fund to the extent that it is based on a claim
that the Software in the form provided by Custodian infringes any patents,
copyrights, license or other property right, provided that Custodian is provided
with reasonable written notice of such claim, provided that the Fund has not
settled, compromised or confessed any such claim without the Custodian's written
consent, in which event Custodian shall have no liability or obligation
hereunder, and provided Fund cooperates with and assists Custodian in the
defense of such claim. Custodian shall have the right to control the defense of
all such claims, lawsuits and other proceedings. If, as a result of any claim of
infringement against any patent, copyright, license or other property right,
Custodian is enjoined from using the Software, or if Custodian believes that the
System is likely to become the subject of a claim of infringement, Custodian at
its option may in its sole discretion either (a) at its expenses procure the
right for the Fund to continue to use the Software, or (b), replace or modify
the Software so as to make it non-infringing, or (c) may discontinue the license
granted herein upon written notice to Fund.
ARTICLE XVI.
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to employ, as
sub-custodian for each Series' Securities for which the primary market is
outside the United States ("Foreign Securities") and other assets, the foreign
banking institutions and foreign securities depositories and clearing agencies
designated on Schedule I hereto ("Foreign Sub-Custodians"). The Fund may
designate any additional foreign sub-custodian with which the Custodian has an
agreement for such entity to act as the Custodian's agent, as its sub-custodian
and any such additional foreign sub-custodian shall be deemed added to Schedule
I. Upon receipt of a Certificate from the Fund, the Custodian shall cease the
employment of any one or more Foreign Sub-Custodians for maintaining custody of
the Fund's assets and such Foreign Sub-Custodian shall be deemed deleted from
Schedule I.
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2. Each delivery of a Certificate to the Custodian in connection with a
transaction involving the use of a Foreign Sub-Custodian shall constitute a
representation and warranty by the Fund that its Board of Trustees, or its third
party foreign custody manager as defined in Rule 17f-5 under the Investment
Company Act of 1940, as amended, if any, has determined that use of such Foreign
Sub-Custodian satisfies the requirements of such Investment Company Act of 1940
and such Rule 17f-5 thereunder.
3. The Custodian shall identify on its books as belonging to each
Series of the Fund the Foreign Securities of such Series held by each Foreign
Sub-Custodian. At the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any claims by the Fund
or any Series against a Foreign Sub-Custodian as a consequence of any loss,
damage, cost, expense, liability or claim sustained or incurred by the Fund or
any Series if and to the extent that the Fund or such Series has not been made
whole for any such loss, damage, cost, expense, liability or claim.
4. Upon request of the Fund, the Custodian will, consistent with the
terms of the applicable Foreign Sub-Custodian agreement, use reasonable efforts
to arrange for the independent accountants of the Fund to be afforded access to
the books and records of any Foreign Sub-Custodian insofar as such books and
records relate to the performance of such Foreign Sub-Custodian under its
agreement with the Custodian on behalf of the Fund.
5. The Custodian will supply to the Fund from time to time, as mutually
agreed upon, statements in respect of the securities and other assets of each
Series held by Foreign Sub-Custodians, including but not limited to an
identification of entities having possession of each Series' Foreign Securities
and other assets, and advices or notifications of any transfers of Foreign
Securities to or from each custodial account maintained by a Foreign
Sub-Custodian for the Custodian on behalf of the Series.
6. The Custodian shall transmit promptly to the Fund all notices,
reports or other written information received pertaining to the Fund's Foreign
Securities, including without limitation, notices of corporate action, proxies
and proxy solicitation materials.
7. Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for securities received for the account of any Series and
delivery of securities maintained for the account of such Series may be effected
in accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of securities to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser or
dealer) against a receipt with the expectation of receiving later payment for
such securities from such purchaser or dealer.
8. Notwithstanding any other provision in this Agreement to the
contrary, with respect to any losses or damages arising out of or relating to
any actions or
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omissions of any Foreign Sub-Custodian the sole responsibility and liability of
the Custodian shall be to take appropriate action at the Fund's expense to
recover such loss or damage from the Foreign Sub-Custodian. It is expressly
understood and agreed that the Custodian's sole responsibility and liability
shall be limited to amounts so recovered from the Foreign Sub-Custodian.
ARTICLE XVII.
FX TRANSACTIONS
1. Whenever the Fund shall enter into an FX Transaction, the Fund shall
promptly deliver to the Custodian a Certificate or Oral Instructions specifying
with respect to such FX Transaction: (a) the Series to which such FX Transaction
is specifically allocated; (b) the type and amount of Currency to be purchased
by the Fund; (c) the type and amount of Currency to be sold by the Fund; (d) the
date on which the Currency to be purchased is to be delivered; (e) the date on
which the Currency to be sold is to be delivered; and (f) the name of the person
from whom or through whom such currencies are to be purchased and sold. Unless
otherwise instructed by a Certificate or Oral Instructions, the Custodian shall
deliver, or shall instruct a Foreign Sub-Custodian to deliver, the Currency to
be sold on the date on which such delivery is to be made, as set forth in the
Certificate, and shall receive, or instruct a Foreign Sub-Custodian to receive,
the Currency to be purchased on the date as set forth in the Certificate.
2. Where the Currency to be sold is to be delivered on the same day as
the Currency to be purchased, as specified in the Certificate or Oral
Instructions, the Custodian or a Foreign Sub-Custodian may arrange for such
deliveries and receipts to be made in accordance with the customs prevailing
from time to time among brokers or dealers in Currencies, and such receipt and
delivery may not be completed simultaneously. The Fund assumes all
responsibility and liability for all credit risks involved in connection with
such receipts and deliveries, which responsibility and liability shall continue
until the Currency to be received by the Fund has been received in full.
3. Any FX Transaction effected by the Custodian in connection with this
Agreement may be entered with the Custodian, any office, branch or subsidiary of
The Bank of New York Company, Inc., or any Foreign Sub-Custodian acting as
principal or otherwise through customary banking channels. The Fund may issue a
standing Certificate with respect to FX Transaction but the Custodian may
establish rules or limitations concerning any foreign exchange facility made
available to the Fund. The Fund shall bear all risks of investing in Securities
or holding Currency. Without limiting the foregoing, the Fund shall bear the
risks that rules or procedures imposed by a Foreign Sub-Custodian or foreign
depositories, exchange controls, asset freezes or other laws, rules, regulations
or orders shall prohibit or impose burdens or costs on the transfer to, by
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<PAGE>
or for the account of the Fund of Securities or any cash held outside the Fund's
jurisdiction or denominated in Currency other than its home jurisdiction or the
conversion of cash from one Currency into another currency. The Custodian shall
not be obligated to substitute another Currency for a Currency (including a
Currency that is a component of a Composite Currency Unit) whose
transferability, convertibility or availability has been affected by such law,
regulation, rule or procedure. Neither the Custodian nor any Foreign
Sub-Custodian shall be liable to the Fund for any loss resulting from any of the
foregoing events.
ARTICLE XVIII.
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in Article XVI,
neither the Custodian nor its nominee shall be liable for any loss or damage,
including counsel fees, resulting from its action or omission to act or
otherwise, either hereunder or under any Margin Account Agreement, except for
any such loss or damage arising out of its own negligence or willful misconduct.
In no event shall the Custodian be liable to the Fund or any third party for
special, indirect or consequential damages or lost profits or loss of business,
arising under or in connection with this Agreement, even if previously informed
of the possibility of such damages and regardless of the form of action. The
Custodian may, with respect to questions of law arising hereunder or under any
Margin Account Agreement, apply for and obtain the advice and opinion of counsel
to the Fund, at the expense of the Fund or of its own counsel at its own
expense, and shall be fully protected with respect to anything done or omitted
by it in good faith in conformity with such advice or opinion. The Custodian
shall be liable to the Fund for any loss or damage constituting direct money
damages resulting from the use of the Book-Entry System or any Depository
arising by reason of any negligence or willful misconduct on the part of the
Custodian or any of its officers, employees or agents.
2. Without limiting the generality of the foregoing, the Custodian
shall be under no obligation to inquire into, and shall not be liable for:
(a) the validity of the issue of any Securities purchased, sold,
or written by or for the Fund, the legality of the purchase, sale or writing
thereof, or the propriety of the amount paid or received therefor;
(b) the legality of the sale or redemption of any Shares, or the
propriety of the amount to be received or paid therefor;
(c) the legality of the declaration or payment of any dividend by
the Fund;
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<PAGE>
(d) the legality of any borrowing by the Fund using Securities as
collateral;
(e) the legality of any loan of portfolio Securities, nor shall
the Custodian be under any duty or obligation to see to it that any cash
collateral delivered to it by a broker, dealer, or financial institution or held
by it at any time as a result of such loan of portfolio Securities of the Fund
is adequate collateral for the Fund against any loss it might sustain as a
result of such loan. The Custodian specifically, but not by way of limitation,
shall not be under any duty or obligation periodically to check or notify the
Fund that the amount of such cash collateral held by it for the Fund is
sufficient collateral for the Fund, but such duty or obligation shall be the
sole responsibility of the Fund. In addition, the Custodian shall be under no
duty or obligation to see that any broker, dealer or financial institution to
which portfolio Securities of the Fund are lent pursuant to Article X of this
Agreement makes payment to it of any dividends or interest which are payable to
or for the account of the Fund during the period of such loan or at the
termination of such loan, provided, however, that the Custodian shall promptly
notify the Fund in the event that such dividends or interest are not paid and
received when due; or
(f) the sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or Collateral
Account in connection with transactions by the Fund. In addition, the Custodian
shall be under no duty or obligation to see that any broker, dealer, futures
commission merchant or Clearing Member makes payment to the Fund of any
variation margin payment or similar payment which the Fund may be entitled to
receive from such broker, dealer, futures commission merchant or Clearing
Member, to see that any payment received by the Custodian from any broker,
dealer, futures commission merchant or Clearing Member is the amount the Fund is
entitled to receive, or to notify the Fund of the Custodian's receipt or
non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the
Custodian of, any money, whether or not represented by any check, draft, or
other instrument for the payment of money, received by it on behalf of the Fund
until the Custodian actually receives and collects such money directly or by the
final crediting of the account representing the Fund's interest at the
Book-Entry System or the Depository.
4. The Custodian shall have no responsibility and shall not be liable
for ascertaining or acting upon any calls, conversions, exchange offers,
tenders, interest rate changes or similar matters relating to Securities held in
the Depository, unless the Custodian shall have actually received timely notice
from the Depository. In no event shall the Custodian have any responsibility or
liability for the failure of the Depository to collect, or for the late
collection or late crediting by the Depository of any amount payable upon
Securities deposited in the Depository which may mature or be redeemed, retired,
called or otherwise become payable. However, upon receipt of a Certificate from
the Fund of an overdue amount on Securities held in the Depository the Custodian
shall make
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<PAGE>
a claim against the Depository on behalf of the Fund, except that the Custodian
shall not be under any obligation to appear in, prosecute or defend any action,
suit or proceeding in respect to any Securities held by the Depository which in
its opinion may involve it in expense or liability, unless indemnity
satisfactory to it against all expense and liability be furnished as often as
may be required.
5. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount due to the Fund from the Transfer
Agent of the Fund nor to take any action to effect payment or distribution by
the Transfer Agent of the Fund of any amount paid by the Custodian to the
Transfer Agent of the Fund in accordance with this Agreement. However, the
Custodian will notify the Fund of any such amount due to the Fund from the
Transfer Agent of the Fund.
6. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount if the Securities upon which such
amount is payable are in default, or if payment is refused after due demand or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action.
7. The Custodian may in addition to the employment of Foreign
Sub-Custodians pursuant to Article XVI appoint one or more banking institutions
as Depository or Depositories, as Sub-Custodian or Sub-Custodians, or as
Co-Custodian or Co-Custodians including, but not limited to, banking
institutions located in foreign countries, of Securities and money at any time
owned by the Fund, upon such terms and conditions as may be approved in a
Certificate or contained in an agreement executed by the Custodian, the Fund and
the appointed institution.
8. The Custodian shall not be under any duty or obligation (a) to
ascertain whether any Securities at any time delivered to, or held by it or by
any Foreign Sub-Custodian, for the account of the Fund and specifically
allocated to a Series are such as properly may be held by the Fund or such
Series under the provisions of its then current prospectus, or (b) to ascertain
whether any transactions by the Fund, whether or not involving the Custodian,
are such transactions as may properly be engaged in by the Fund.
9. The Custodian shall be entitled to receive and the Fund agrees to
pay to the Custodian all reasonable out-of-pocket expenses and such compensation
as may be agreed upon from time to time between the Custodian and the Fund. The
Custodian may charge such compensation and any expenses with respect to a Series
incurred by the Custodian in the performance of its duties pursuant to such
agreement against any money specifically allocated to such Series. Unless and
until the Fund instructs the Custodian by a Certificate to apportion any loss,
damage, liability or expense among the Series in a specified manner, the
Custodian shall also be entitled to charge against any money held
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<PAGE>
by it for the account of a Series such Series' pro rata share (based on such
Series, net asset value at the time of the charge to the aggregate net asset
value of all Series at that time) of the amount of any loss, damage, liability
or expense, including reasonable counsel fees, for which it shall be entitled to
reimbursement under the provisions of this Agreement. The expenses for which the
Custodian shall be entitled to reimbursement hereunder shall include, but are
not limited to, the expenses of sub-custodians and foreign branches of the
Custodian incurred in settling outside of New York City transactions involving
the purchase and sale of Securities of the Fund.
10. The Custodian shall be entitled to rely upon any Certificate, notice
or other instrument in writing received by the Custodian and reasonably believed
by the Custodian to be a Certificate. The Custodian shall be entitled to rely
upon any Oral Instructions actually received by the Custodian hereinabove
provided for. The Fund agrees to forward to the Custodian a Certificate or
facsimile thereof confirming such Oral Instructions in such manner so that such
Certificate or facsimile thereof is received by the Custodian, whether by hand
delivery, telecopier, electronic communication or other similar device, or
otherwise, by the close of business of the same day that such Oral Instructions
are given to the Custodian. The Fund agrees that the fact that such confirming
instructions are not received, or that contrary instructions are received, by
the Custodian shall in no way affect the validity of the transactions or
enforceability of the transactions hereby authorized by the Fund. The Fund
agrees that the Custodian shall incur no liability to the Fund in acting upon
Oral Instructions given to the Custodian hereunder concerning such transactions
provided such instructions reasonably appear to have been received from an
Authorized Person.
11. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by the
Custodian to be given in accordance with the terms and conditions of any Margin
Account Agreement. Without limiting the generality of the foregoing, the
Custodian shall be under no duty to inquire into, and shall not be liable for,
the accuracy of any statements or representations contained in any such
instrument or other notice including, without limitation, any specification of
any amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member.
12. The books and records pertaining to the Fund which are in the
possession of the Custodian shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the Investment Company
Act of 1940, as amended, and other applicable securities laws and rules and
regulations. The Fund, or the Fund's authorized representatives, shall have
access to such books and records during the Custodian's normal business hours.
Upon the reasonable request of the Fund, copies of any such books and records
shall be provided by the Custodian to the Fund or the Fund's authorized
representative, and the Fund shall reimburse the Custodian its expenses of
providing such copies. Upon reasonable request of the Fund, the Custodian shall
provide in hard copy or on micro-film, whichever the Custodian elects, any
records included in
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<PAGE>
any such delivery which are maintained by the Custodian on a computer disc, or
are similarly maintained, and the Fund shall reimburse the Custodian for its
expenses of providing such hard copy or micro-film.
13. The Custodian shall provide the Fund with any report obtained by the
Custodian on the system of internal accounting control of the Book-Entry System,
the Depository or O.C.C., and with such reports on its own systems of internal
accounting control as the Fund may reasonably request from time to time.
14. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands whatsoever,
including reasonable attorney's fees, howsoever arising or incurred because of
or in connection with this Agreement, including the Custodian's payment or
non-payment of checks pursuant to paragraph 6 of Article XIII as part of any
check redemption privilege program of the Fund, except for any such liability,
claim, loss and demand arising out of the Custodian's negligence or willful
misconduct.
15. Subject to the foregoing provisions of this Agreement, including,
without limitation, those contained in Article XVI and XVII the Custodian may
deliver and receive Securities, and receipts with respect to such Securities,
and arrange for payments to be made and received by the Custodian in accordance
with the customs prevailing from time to time among brokers or dealers in such
Securities. When the Custodian is instructed to deliver Securities against
payment, delivery of such Securities and receipt of payment therefor may not be
completed simultaneously. The Fund assumes all responsibility and liability for
all credit risks involved in connection with the Custodian's delivery of
Securities pursuant to instructions of the Fund, which responsibility and
liability shall continue until final payment in full has been received by the
Custodian.
16. The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
ARTICLE XIX.
TERMINATION
1. Either of the parties hereto may terminate this Agreement by giving
to the other party a notice in writing specifying the date of such termination,
which shall be not less than sixty (60) days after the date of giving of such
notice. In the event such notice is given by the Fund, it shall be accompanied
by a copy of a resolution of the Board of Trustees of the Fund, certified by the
Secretary or any Assistant Secretary, electing to terminate this Agreement and
designating a successor custodian or custodians, each of which shall be a bank
or trust company having not less than $2,000,000 aggregate capital, surplus and
undivided profits. In the event such notice is given by the Custodian, the
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<PAGE>
Fund shall, on or before the termination date, deliver to the Custodian a copy
of a resolution of the Board of Trustees of the Fund, certified by the Secretary
or any Assistant Secretary, designating a successor custodian or custodians. In
the absence of such designation by the Fund, the Custodian may designate a
successor custodian which shall be a bank or trust company having not less than
$2,000,000 aggregate capital, surplus and undivided profits. Upon the date set
forth in such notice this Agreement shall terminate, and the Custodian shall
upon receipt of a notice of acceptance by the successor custodian on that date
deliver directly to the successor custodian all Securities and money then owned
by the Fund and held by it as Custodian, after deducting all fees, expenses and
other amounts for the payment or reimbursement of which it shall then be
entitled.
2. If a successor custodian is not designated by the Fund or the
Custodian in accordance with the preceding paragraph, the Fund shall upon the
date specified in the notice of termination of this Agreement and upon the
delivery by the Custodian of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and money then owned by
the Fund be deemed to be its own custodian and the Custodian shall thereby be
relieved of all duties and responsibilities pursuant to this Agreement, other
than the duty with respect to Securities held in the Book Entry System which
cannot be delivered to the Fund to hold such Securities hereunder in accordance
with this Agreement.
ARTICLE XX.
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the
present Authorized Persons of the Fund under its seal, setting forth the names
and the signatures of the present Authorized Persons. The Fund agrees to furnish
to the Custodian a new Certificate in similar form in the event that any such
present Authorized Person ceases to be an Authorized Person or in the event that
other or additional Authorized Persons are elected or appointed. Until such new
Certificate shall be received, the Custodian shall be fully protected in acting
under the provisions of this Agreement upon Oral Instructions or signatures of
the Authorized Persons as set forth in the last delivered Certificate.
2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at 90
Washington Street, New York, New York 10286, or at such other place as the
Custodian may from time to time designate in writing.
3. (a) The Custodian warrants that it has used and will continue to
use commercially reasonable efforts to ensure that the computer software and
hardware
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<PAGE>
systems ("Systems") that are owned by the Custodian and used to provide the
services described in this Agreement ("Services") are 2000 Compliant or will be
made 2000 Compliant before December 31, 1999. With respect to software that the
Custodian licenses from third parties and uses in providing the Services ("Third
Party Software"), the Custodian warrants that it has used or will use
commercially reasonable efforts to test the same by September 30, 1999 to
certify, in accordance with the Custodian's standard practices, that the Third
Party Software is 2000 Compliant. If the Custodian cannot certify any Third
Party Software as 2000 Compliant, the Custodian will use commercially reasonable
efforts to replace such Third Party Software with software that is warranted or
certified by its vendor as 2000 Compliant, if such replacement is available,
compatible with the Custodian's Systems an deemed by the Custodian as
appropriate under the circumstances. In the event that the Custodian uses third
party service providers to provide the Services or any portion thereof ("Third
Party Services"), the Custodian warrants that it has in place a program under
which it will use commercially reasonable efforts to contact such service
providers and obtain from them assurances that the Systems that they use in
providing Services are 2000 Compliant. As used herein, the term "2000 Compliant"
means that the Systems will function without material error caused by the
introduction of dates falling on or after January 1, 2000. Notwithstanding the
foregoing, the Fund acknowledges and agrees that the Custodian cannot and does
not warrant that the Systems, Third Party Software or Third Party Services will
continue to interface with the hardware, firmware, software (including operating
systems), records or data used by the Fund or third parties, nor does the
Custodian make any warranties hereunder with respect to any public utility,
communications service provider, correspondent bank, securities or commodities
exchange, or funds transfer network.
(b) The Fund hereby makes the same warranty with respect to the
computer hardware systems it owns that the Custodian has made in (a).
4. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund may from time to
time designate in writing.
5. This Agreement may not be amended or modified in any manner except
by a written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Trustees of the Fund.
6. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian, or by the Custodian without the written consent of the Fund,
authorized or approved by a resolution of the Fund's Board of Trustees.
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<PAGE>
7. This Agreement shall be construed in accordance with the laws of the
State of New York without giving effect to conflict of laws principles thereof.
Each party hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder and hereby waives its right to trial by jury.
8. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
9. A copy of the Declaration of Trust of the Fund 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 Fund 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 Fund; provided, however,
that the Declaration of Trust of the Fund provides that the assets of a
particular Series of the Fund shall under no circumstances be charged with
liabilities attributable to any other Series of the Fund and that all persons
extending credit to, or contracting with or having any claim against a
particular Series of the Fund shall look only to the assets of that particular
Series for payment of such credit, contract or claim.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
THE TUSCARORA INVESTMENT
TRUST
[SEAL] By:
----------------------
Attest:
- -----------------------
THE BANK OF NEW YORK
[SEAL] By:
----------------------
Name:
Title:
Attest:
- -----------------------
<PAGE>
APPENDIX A
I, , President and I, , of
THE TUSCARORA INVESTMENT TRUST, a Massachusetts business trust (the "Fund"), do
hereby certify that:
The following persons have been duly authorized in conformity with the
Fund's Declaration of Trust and By-Laws to execute any Certificate, instruction,
notice or other instrument on behalf of the Fund, and the signatures set forth
opposite their respective names are their true and correct signatures:
Name Position Signature
- --------------- --------------- ----------------
<PAGE>
APPENDIX B
SERIES
<PAGE>
APPENDIX C
I, _________________, a Vice President with THE BANK OF NEW YORK do hereby
designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies that he or she
is the duly elected and acting of THE TUSCARORA INVESTMENT TRUST, a
Massachusetts business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on , 1999, at which a quorum was at all
times present and that such resolution has not been modified or rescinded and is
in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1999, (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis to deposit in the Book-Entry
System, as defined in the Custody Agreement, all securities eligible for
deposit therein, regardless of the Series to which the same are
specifically allocated, and to utilize the Book-Entry System to the extent
possible in connection with its performance thereunder, including, without
limitation, in connection with settlements of purchases and sales of
securities, loans of securities, and deliveries and returns of securities
collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of THE
TUSCARORA INVESTMENT TRUST, as of the day of , 1999.
---------------------------
[SEAL]
<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned, , hereby certifies that he or she
is the duly elected and acting of THE TUSCARORA INVESTMENT TRUST, a
Massachusetts business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on , 1999, at which a quorum was at
all times present and that such resolution has not been modified or rescinded
and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1999, (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agreement, to the
contrary to deposit in the Depository, as defined in the Custody
Agreement, all securities eligible for deposit therein, regardless of the
Series to which the same are specifically allocated, and to utilize the
Depository to the extent possible in connection with its performance
thereunder, including, without limitation, in connection with settlements
of purchases and sales of securities, loans of securities, and deliveries
and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of THE
TUSCARORA INVESTMENT TRUST, as of the day of , 1999.
---------------------------
[SEAL]
<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby certifies that he or she
is the duly elected and acting of THE TUSCARORA INVESTMENT TRUST, a
Massachusetts business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on , 1999, at which a quorum was at all
times present and that such resolution has not been modified or rescinded and is
in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1999, (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agreement, to the
contrary to deposit in the Participants Trust Company as Depository, as
defined in the Custody Agreement, all securities eligible for deposit
therein, regardless of the Series to which the same are specifically
allocated, and to utilize the Participants Trust Company to the extent
possible in connection with its performance thereunder, including, without
limitation, in connection with settlements of purchases and sales of
securities, loans of securities, and deliveries and returns of securities
collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of THE
TUSCARORA INVESTMENT TRUST, as of the day of , 1999.
---------------------------
[SEAL]
<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, , hereby certifies that he or she
is the duly elected and acting of THE TUSCARORA INVESTMENT
TRUST, a Massachusetts business trust (the "Fund"), and further certifies that
the following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on , 1999, at which a quorum was at all
times present and that such resolution has not been modified or rescinded and is
in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1999, (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agreement, to the
contrary, to accept, utilize and act with respect to Clearing Member
confirmations for Options and transaction in Options, regardless of the
Series to which the same are specifically allocated, as such terms are
defined in the Custody Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of THE
TUSCARORA INVESTMENT TRUST, as of the day of , 1999.
---------------------------
[SEAL]
<PAGE>
EXHIBIT D
The undersigned, , hereby certifies that he or she
is the duly elected and acting of THE TUSCARORA INVESTMENT
TRUST, a Massachusetts business trust (the "Fund"), further certifies that the
following resolutions were adopted by the Board of Trustees of the Fund at a
meeting duly held on , 1999, at which a quorum was at all
times present and that such resolutions have not been modified or rescinded and
are in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to the
Custody Agreement between The Bank of New York and the Fund dated as of
, 1999 (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis to act in accordance with,
and to rely on Instructions (as defined in the Custody Agreement).
RESOLVED, that the Fund shall establish access codes and grant use
of such access codes only to Authorized Persons of the Fund as defined in
the Custody Agreement, shall establish internal safekeeping procedures to
safeguard and protect the confidentiality and availability of user and
access codes, passwords and authentication keys, and shall use
Instructions only in a manner that does not contravene the Investment
Company Act of 1940, as amended, or the rules and regulations thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of THE
TUSCARORA INVESTMENT TRUST, as of the day of , 1999.
---------------------------
[SEAL]
<PAGE>
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of this 23rd day of August, 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;
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<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
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<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.
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<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
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<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
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<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.
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<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: /s/ George Brumley
----------------------------------------------
Title: Executive Vice President
-------------------------------------------
BISYS FUND SERVICES OHIO, INC.
By: /s/ William J. Tomko
----------------------------------------------
Title: Executive Vice President
-------------------------------------------
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<PAGE>
SCHEDULE A
TO THE ADMINISTRATION AGREEMENT
DATED AS OF AUGUST 23, 1999
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 November 13,
1999, or such later date as the conversion referred to in
Article 2 of this Agreement is effected (such later date
to be specified in writing by the parties); provided,
however, that such later date shall be prior to December
1, 1999, and shall continue in effect, unless earlier
terminated by either party hereto as provided hereunder,
for a period of three years (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 23rd day of August, 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 November 13, 1999, or
such later date as the conversion referred to in Section 1 of this Agreement
is effected (such later date to be specified in writing by the parties);
provided, however, that such later date shall be prior to December 1, 1999,
and shall continue in effect, unless earlier terminated by either party
hereto as provided hereunder, for a period of three years (the "Initial
Term"). Thereafter, unless otherwise terminated as provided herein, this
Agreement shall be renewed automatically for successive one-year periods
("Rollover Periods").
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<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
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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
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<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
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<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.
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<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.
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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.
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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:
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(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
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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: George W. Brumley; 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.
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THE TUSCARORA INVESTMENT
TRUST
By: /s/ George Brumley
----------------------------------
Title:
-------------------------------
BISYS FUND SERVICES OHIO, INC.
By: /s/ Williams J. Tomko
----------------------------------
Title: Executive Vice President
-------------------------------
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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.
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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.
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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 for each new
Portfolio that is added following the effective date of this Agreement. Such
fee shall be equal to the greater of (i) the applicable annual per account
fee, which shall be calculated by multiplying the annual per account fee set
forth above by the number of shareholder accounts holding shares of each such
new Portfolio, or (ii) $11,766.
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.
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<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.
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<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.
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<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
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<PAGE>
FUND ACCOUNTING AGREEMENT
AGREEMENT made this 23rd day of August, 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;
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<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 November 13, 1999, or
such later date as the fund accounting conversion is effected (such later
date to be specified in writing by the parties); provided, however, that such
later date shall be prior to December 1, 1999, and shall continue in effect,
unless earlier terminated by either party hereto as provided hereunder, for a
period of three years (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.
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<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: George W. Brumley; 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: /s/ George Brumley
--------------------------------
Title:
-----------------------------
12
<PAGE>
BISYS FUND SERVICES OHIO, INC.
By: /s/ William J. Tomko
--------------------------------
Title: Executive Vice President
-----------------------------
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 annual fee
for each new Portfolio that is added following the effective date of this
Agreement. Such fee shall be equal to the greater of (i) the applicable
asset-based fee, which shall be calculated by applying the percentages set
forth in the above-referenced asset-based fee schedule to the assets of each
such new Portfolio, or (ii) $20,588.
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
<PAGE>
October 28, 1999
The Tuscarora Investment Trust
3100 Tower Boulevard
Suite 700
Durham, N.C. 27707
Re: Opinion of Counsel regarding Post-Effective Amendment No. 6 to the
Registration Statement filed on Form N-1A under the Securities Act of 1933
(File No. 33-90358).
---------------------------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to The Tuscarora Investment Trust, a Massachusetts
business trust (the "Trust"), in connection with the above-referenced
registration statement (as amended, the "Registration Statement") which relates
to the Trust's units of beneficial interest, having no par value (collectively,
the "Shares") of the Oak Value Fund (the "Fund"). This opinion is being
delivered to you in connection with the Trust's filing of Post-Effective
Amendment No. 6 to the Registration Statement (the "Amendment") to be filed with
the Securities and Exchange Commission pursuant to Rule 485(b) of the Securities
Act of 1933 (the "1933 Act"). With your permission, all assumptions and
statements of reliance herein have been made without any independent
investigation or verification on our part except to the extent otherwise
expressly stated, and we express no opinion with respect to the subject matter
or accuracy of such assumptions or items relied upon.
In connection with this opinion, we have reviewed, among other things,
executed copies of the following documents:
(a) a certificate of the Commonwealth of Massachusetts as to the existence
and good standing of the Trust;
(b) the Agreement and Declaration of Trust for the Trust and all
amendments and supplements thereto (the "Declaration of Trust");
(c) a certificate executed by Tina D. Hosking, the Secretary of the Trust,
<PAGE>
certifying as to, and attaching copies of, the Trust's Declaration of
Trust and By-Laws (the "By-Laws"), and certain resolutions adopted by
the Board of Trustees of the Trust authorizing the issuance of the
Shares; and
(d) a printer's proof of the Amendment.
In our capacity as counsel to the Trust, we have examined the originals, or
certified, conformed or reproduced copies, of all records, agreements,
instruments and documents as we have deemed relevant or necessary as the basis
for the opinion hereinafter expressed. In all such examinations, we have assumed
the legal capacity of all natural persons executing documents, the genuineness
of all signatures, the authenticity of all original or certified copies, and the
conformity to original or certified copies of all copies submitted to us as
conformed or reproduced copies. As to various questions of fact relevant to such
opinion, we have relied upon, and assume the accuracy of, certificates and oral
or written statements of public officials and officers or representatives of the
Trust. We have assumed that the Amendment, as filed with the Securities and
Exchange Commission, will be in substantially the form of the printer's proof
referred to in paragraph (d) above.
Based upon, and subject to, the limitations set forth herein, we are of the
opinion that the Shares, when issued and sold in accordance with the Declaration
of Trust and By-Laws, and for the consideration described in the Registration
Statement, are legally issued, fully paid and nonassessable, except that, as set
forth in the Registration Statement, shareholders of the Shares of the Trust
may, under certain circumstances, be held personally liable for its obligations.
The opinion expressed herein is limited to the laws of the Commonwealth of
Massachusetts.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not concede that we are in
the category of persons whose consent is required under Section 7 of the 1933
Act.
Very truly yours,
/s/ Morgan, Lewis & Bockius LLP
Morgan, Lewis & Bockius LLP
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use of our report
dated July 16, 1999 and to all references to our Firm included in or made a
part of this Post-Effective Amendment No. 5.
/s/ Arthur Andersen LLP
------------------------------
ARTHUR ANDERSEN LLP
Cincinnati, Ohio,
October 26, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000941722
<NAME> OAK VALUE FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<INVESTMENTS-AT-COST> 548,865,017
<INVESTMENTS-AT-VALUE> 640,488,124
<RECEIVABLES> 1,482,760
<ASSETS-OTHER> 569
<OTHER-ITEMS-ASSETS> 66,303
<TOTAL-ASSETS> 642,037,756
<PAYABLE-FOR-SECURITIES> 15,190,513
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,074,588
<TOTAL-LIABILITIES> 17,265,101
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 533,904,497
<SHARES-COMMON-STOCK> 22,342,135
<SHARES-COMMON-PRIOR> 16,046,945
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 754,949
<ACCUM-APPREC-OR-DEPREC> 91,623,107
<NET-ASSETS> 624,772,655
<DIVIDEND-INCOME> 4,997,494
<INTEREST-INCOME> 2,218,708
<OTHER-INCOME> 0
<EXPENSES-NET> 5,773,102
<NET-INVESTMENT-INCOME> 1,443,100
<REALIZED-GAINS-CURRENT> 18,511,197
<APPREC-INCREASE-CURRENT> 23,144,708
<NET-CHANGE-FROM-OPS> 43,099,005
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,463,037
<DISTRIBUTIONS-OF-GAINS> 18,252,994
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18,644,142
<NUMBER-OF-SHARES-REDEEMED> 13,015,998
<SHARES-REINVESTED> 667,046
<NET-CHANGE-IN-ASSETS> 190,869,640
<ACCUMULATED-NII-PRIOR> 19,937
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<PER-SHARE-GAIN-APPREC> 1.76
<PER-SHARE-DIVIDEND> .07
<PER-SHARE-DISTRIBUTIONS> .84
<RETURNS-OF-CAPITAL> 0
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<EXPENSE-RATIO> 1.10
</TABLE>
