Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for use of the Commission
only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under Rule 14a-12
OAK VALUE FUND
-----------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------------------------------------
(Name of person (s) filing Proxy Statement, if other than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) (4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11 (a) (2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filling.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
Please fold and detach card at perforation before mailing.
OAK VALUE FUND
SPECIAL MEETING OF SHAREHOLDERS
December 15, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoints Margaret C. Landis and John F. Splain, and each
of them, as Proxies with power of substitution and hereby authorizes each of
them to represent and to vote, as provided on the reverse side, all shares of
beneficial interest of the Oak Value Fund that the undersigned is entitled to
vote at the special meeting of shareholders to be held on December 15, 2003 or
at any adjournment thereof, as fully and with the same force and effect as the
undersigned might or could do if personally present.
The undersigned acknowledges receipt of the Notice of Special Meeting and Proxy
Statement dated November 12, 2003.
Date: _________________________________________
Note: Please sign exactly as your name appears
on this Proxy. If signing for an estate,
trust or corporation, title or capacity
should be stated. If the shares are held
jointly, both signers should sign.
Signature(s) PLEASE SIGN IN BOX ABOVE
Please fold and detach card at perforation before mailing.
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR" THE PROPOSALS DESCRIBED
HEREIN.
Please fill in box(es) as shown using black or blue ink or a number 2 pencil.
PLEASE DO NOT USE FINE POINT PENS [X]
1. With respect to approval of a new investment advisory agreement with Oak
Value Capital Management, Inc.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. With respect to the election of three Trustees:
01 Larry D. Coats, Jr. 03 Charles T. Manatt
02 Matthew F. Sauer
FOR ALL WITHHOLD ALL FOR ALL EXCEPT
[ ] [ ] [ ]
___________________________________________________________________________
To withhold authority to vote for any Nominee(s), mark "FOR ALL EXCEPT" and
write the Nominee number(s) on the line provided.
3. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting.
PLEASE MARK YOUR PROXY, DATE AND SIGN IT ON THE REVERSE SIDE, AND RETURN IT
PROMPTLY IN THE ACCOMPANYING ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES.
OAK VALUE TRUST
3100 Tower Boulevard, Suite 700
Durham, North Carolina 27707
SPECIAL MEETING OF SHAREHOLDERS
December 15, 2003
Important Voting Information Inside!
TABLE OF CONTENTS
Letter from the President ................................................. 1
Notice of Special Meeting of Shareholders ................................. 2
Proxy Statement ........................................................... 3
Proposal 1: Approval or Disapproval of New Advisory Agreement ...... 4
Proposal 2: Election of Trustees ................................... 7
Outstanding Shares and Voting Requirements .......................... 12
Oak Value Capital Management, Inc. .................................. 13
Information on the Operation of the Fund ............................ 14
Principal Shareholders .............................................. 15
Other Matters ....................................................... 15
Exhibit A: New Management Agreement ................................ 17
Exhibit B: Audit Committee Charter .................................. 23
LETTER FROM THE PRESIDENT
Oak Value Trust
3100 Tower Boulevard
Suite 700
Durham, North Carolina 27707
November 12, 2003
Dear Shareholder,
I am writing to inform you of an upcoming Special Meeting of Shareholders
of the Oak Value Fund (the "Fund") to be held on December 15, 2003. As most of
you are already aware, George W. Brumley, III was tragically killed in an
airplane crash in July 2003. Mr. Brumley was one of the Oak Value Fund's
co-portfolio managers and one of the founders of Oak Value Capital Management,
Inc. ("Oak Value"), the Fund's investment adviser. On October 14, 2003, Oak
Value purchased the shares of Oak Value owned by Mr. Brumley's estate. This
transaction resulted in a change of control at Oak Value, which in turn resulted
in the termination of the investment advisory agreement between Oak Value and
the Fund. At the Special Meeting of Shareholders, you are being asked to approve
a new advisory agreement with Oak Value under substantially the same terms as
the previous advisory agreement. NO FEE INCREASE WILL RESULT FROM APPROVING THE
NEW ADVISORY AGREEMENT.
I'm sure that you, like most people, lead a busy life and are tempted to
put this proxy aside for another day. Please don't. When shareholders do not
return their proxies, additional expenses are incurred to pay for follow-up
mailings and telephone calls. PLEASE TAKE A FEW MINUTES TO REVIEW THIS PROXY
STATEMENT AND VOTE YOUR SHARES TODAY.
The Board of Trustees of the Fund has approved the proposals described
herein and recommends a vote "FOR" each proposal. If you have any questions
regarding the issue to be voted on or need assistance in completing your proxy
card, please contact us toll free at 1-800-680-4199.
I appreciate your consideration of these important proposals. Thank you for
investing with the Oak Value Fund and for your continued support.
Sincerely,
/s/Larry D. Coats, Jr.
Larry D. Coats, Jr.
President
1
OAK VALUE TRUST
OAK VALUE FUND
- --------------------------------------------------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 15, 2003
- --------------------------------------------------------------------------------
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of the Oak
Value Fund, a series of the Oak Value Trust, will be held at the offices of
Ultimus Fund Solutions, LLC, 135 Merchant Street, Suite 230, Cincinnati, Ohio
45246, on December 15, 2003 at 11:00 a.m., Eastern time, to consider and vote on
the following matters:
1. To approve or disapprove a new investment advisory agreement with Oak
Value Capital Management, Inc. NO FEE INCREASE WILL RESULT FROM
APPROVING THIS PROPOSAL.
2. To elect three Trustees; and
3. To transact any other business, not currently contemplated, that may
properly come before the meeting in the discretion of the proxies or
their substitutes.
Shareholders of record at the close of business on October 24, 2003 are
entitled to notice of and to vote at this meeting or any adjournment thereof.
By order of the Board of Trustees,
/s/John F. Splain
John F. Splain
Assistant Secretary
November 12, 2003
- --------------------------------------------------------------------------------
PLEASE EXECUTE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE, THUS AVOIDING UNNECESSARY EXPENSE AND DELAY. NO POSTAGE IS REQUIRED IF
MAILED IN THE UNITED STATES. THE PROXY IS REVOCABLE AND WILL NOT AFFECT YOUR
RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
2
OAK VALUE TRUST
SPECIAL MEETING OF SHAREHOLDERS OF
OAK VALUE FUND
TO BE HELD ON DECEMBER 15, 2003
- --------------------------------------------------------------------------------
PROXY STATEMENT
- --------------------------------------------------------------------------------
This proxy statement is furnished in connection with the solicitation by
the Board of Trustees of the Oak Value Trust ("the Trust") of proxies for use at
the Special Meeting of Shareholders of the Oak Value Fund (the "Fund") or at any
adjournment thereof. The principal address of the Trust is 3100 Tower Boulevard,
Suite 700, Durham, North Carolina 27707. This proxy statement and form of proxy
were first mailed to shareholders on or about November 12, 2003.
The Special Meeting of Shareholders is being held for the following
purposes: (1) to consider approval of a new investment advisory agreement (the
"New Advisory Agreement") with Oak Value Capital Management, Inc. ("Oak Value");
and (2) to elect three Trustees.
A proxy, if properly executed, duly returned and not revoked, will be voted
in accordance with the specifications therein. A proxy that is properly executed
but has no voting instructions with respect to a proposal will be voted for that
proposal. A shareholder may revoke a proxy at any time prior to use by filing
with the Secretary of the Trust an instrument revoking the proxy, by submitting
a proxy bearing a later date, or by attending and voting at the meeting.
The cost of the solicitation, including the printing and mailing of the
proxy materials, will be borne by the Fund and the Adviser in equal amounts. In
addition to solicitation through the mail, proxies may be solicited by officers,
employees and agents of the Fund without cost to the Fund. Such solicitation may
be by telephone, facsimile or otherwise. The Fund and/or the Adviser will
reimburse brokers, custodians, nominees and fiduciaries for the reasonable
expenses incurred by them in connection with forwarding solicitation material to
the beneficial owners of shares held of record by such persons.
3
PROPOSAL 1
APPROVAL OR DISAPPROVAL OF NEW ADVISORY AGREEMENT
BACKGROUND
In July 2003, George W. Brumley, III, co-portfolio manager to the Fund and
a founding member and controlling shareholder of Oak Value, was tragically
killed in an airplane crash. Oak Value, under the leadership of David Carr, Jr.
(co-portfolio manager of the Fund and the other founding member of Oak Value),
appointed Larry D. Coats, Jr. and Matthew F. Sauer to serve with Mr. Carr as
co-portfolio managers to the Fund. Messrs. Coats and Sauer have each been with
Oak Value in excess of 8 years and serve on Oak Value's investment committee.
On October 14, 2003, Oak Value repurchased the shares of Oak Value owned by
the Estate of George W. Brumley, III (the "Transaction"). The Investment Company
Act of 1940 (the "1940 Act") provides in part that an owner of 25% or more of
the outstanding voting securities of an entity is presumed to have a controlling
interest in that entity. Because Mr. Brumley's ownership in Oak Value was in
excess of 25%, the Transaction resulted in a change of control of Oak Value and,
pursuant to relevant provisions of the 1940 Act, effectively terminated the
investment advisory agreement between the Trust and Oak Value. Therefore,
shareholders of the Fund are being asked to approve the New Advisory Agreement
in order for Oak Value to continue as the Fund's investment adviser. There may,
from time to time, be additional repurchases that change the relative ownership
of the remaining shareholders of Oak Value, however, these repurchases are not
expected to result in an "assignment" and automatic termination of the New
Advisory Agreement. Messrs. Carr, Coats and Sauer will continue to serve as
co-portfolio managers for the Fund following the approval of the New Advisory
Agreement by shareholders. As discussed more fully below, the terms of the New
Advisory Agreement are substantially identical in all material respects to those
of the former advisory agreement, except that the New Advisory Agreement has a
different effective date and termination date.
THE INTERIM ADVISORY AGREEMENT
As a result of the Transaction having occurred prior to shareholder
approval of the New Advisory Agreement, the Trust does not have an investment
advisory agreement in place for the Fund that has been approved by shareholders
in accordance with the 1940 Act. In order for Oak Value to continue as the
Fund's investment manager, the Board of Trustees, including a majority of the
Trustees who are not interested persons of the Trust (the "Independent
Trustees"), at meeting held on October 22, 2003, approved an interim advisory
agreement (the "Interim Advisory Agreement") with Oak Value. The Interim
Advisory Agreement was approved within 10 days of the termination of the former
advisory agreement as required by Rule 15a-4 under the 1940 Act. The Interim
Advisory Agreement is dated October 14, 2003, the date of the Transaction, and
replaced the former advisory agreement as of such date. The Interim Advisory
Agreement will terminate upon shareholder approval of the New Advisory
Agreement, unless it sooner terminates according to its terms, as described
below.
4
The Interim Advisory Agreement is substantially identical in all material
respects to the former advisory agreement and the New Advisory Agreement, except
that it has a maximum term of 150 days as required by Rule 15a-4 under the 1940
Act. The Interim Advisory Agreement provides for the same level of compensation
to Oak Value as the former advisory agreement.
THE NEW ADVISORY AGREEMENT
The terms of the New Advisory Agreement are substantially identical in all
material respects to those of the former advisory agreement, except that the New
Advisory Agreement has a different effective date and termination date. The New
Advisory Agreement, if approved by shareholders, will replace the Interim
Advisory Agreement. Under the New Advisory Agreement, Oak Value will continue to
be responsible for selecting portfolio securities and for providing a continuous
investment program for the Fund, including providing investment research and
management and purchasing, retaining and selling securities for the Fund and
placing orders for the execution of the Fund's portfolio transactions, all in
accordance with the 1940 Act and any rules thereunder, the supervision and
control of the Board of Trustees, and the investment objective, policies and
restrictions of the Fund. Oak Value will continue to pay all expenses incurred
by it in connection with its investment advisory services pertaining to the
Fund. The Fund will continue to pay all of the expenses relating to its own
operations, including brokerage fees and commissions, taxes, interest charges,
the fees of Oak Value and the fees and expenses of the Fund's administrator,
transfer agent, fund accounting agent and custodian, audit and legal expenses,
costs of Trustees' and shareholders' meetings, costs of maintaining the Trust's
existence as a legal entity, federal and state registration or qualification
fees and expenses, costs of printing and mailing Prospectuses and shareholder
reports to existing shareholders, fees and expenses of the Independent Trustees
and extraordinary expenses.
Fees paid to Oak Value under the New Advisory Agreement will be calculated
at the same rate as the fees previously charged under the former advisory
agreement and those presently charged under the Interim Advisory Agreement. The
advisory fee paid by the Fund is equal to the annual rate of 0.90% of the Fund's
average daily net assets.
The New Advisory Agreement, if approved by shareholders, will continue in
effect for an initial period of two years from the date of such approval, and
from year to year thereafter, provided that its continuance is specifically
approved (1) by the Board of Trustees or (2) by a vote of a majority (as defined
in the 1940 Act) of the outstanding shares of the Fund.
The New Advisory Agreement may be terminated at any time upon 60 days'
written notice, without payment of any penalty (1) by the Board of Trustees, (2)
by a vote of the majority of the outstanding voting securities of the Fund, or
(3) by Oak Value. The New Advisory Agreement will automatically terminate in the
event of its assignment (as that term is defined in the 1940 Act).
The New Advisory Agreement, like the Interim Advisory Agreement and the
former advisory agreement, provides that Oak Value will not be liable for any
error of judgment, mistake of law or for any other loss suffered by the Fund in
connection with the services that
5
Oak Value provides to the Fund and further that Oak Value will be indemnified
against a loss related to or resulting from the services it provides to the
Fund, except, in each case, a loss resulting from a breach of fiduciary duty
with respect to the receipt of compensation for services or a loss resulting
from Oak Value's willful misfeasance, bad faith or gross negligence, or from
reckless disregard by Oak Value of its obligations and duties under the New
Advisory Agreement.
The description of the New Advisory Agreement in this Proxy Statement is
only a summary. The form of the New Advisory Agreement is attached hereto as
Exhibit A. You should read the New Advisory Agreement.
If the shareholders of the Fund do not approve the New Advisory Agreement
within 150 days of the effective date of the Interim Advisory Agreement, the
Trustees will consider other appropriate actions in accordance with the 1940
Act.
EVALUATION BY THE BOARD OF TRUSTEES
On November 11, 2003, the Board of Trustees, including the Independent
Trustees, unanimously approved, subject to the required shareholder approval
described herein, the New Advisory Agreement.
In making the determination to recommend approval of the New Advisory
Agreement to shareholders of the Fund, the Board of Trustees carefully evaluated
information the Trustees deemed necessary to enable them to determine that the
New Advisory Agreement would be in the best interests of the Fund and its
shareholders. The Board of Trustees gave substantial weight to the Adviser's
representations that: (i) the responsibilities of Oak Value under the New
Advisory Agreement are the same in all material respects as under the former
advisory agreement and the Interim Advisory Agreement; (ii) the operations of
Oak Value and the level or quality of advisory services provided to the Fund
will not be materially affected as a result of the New Advisory Agreement; (iii)
the same personnel of Oak Value who currently provide investment advisory
services to the Fund will continue to do so upon approval of the New Advisory
Agreement; (iv) the overall management fees payable by the Fund will be at the
same rate as the compensation now payable by the Fund; and (v) the overall
financial condition of Oak Value remains strong following the Transaction. The
Board of Trustees believes that the Fund should receive investment management
services under the New Advisory Agreement at least equal to those currently
received by the Fund, with no change in the overall management fees payable by
the Fund. The Board of Trustees therefore unanimously recommends approval of the
New Advisory Agreement by shareholders of the Fund.
In addition, the Trustees considered a wide range of information of the
type they would regularly consider when determining to continue a fund's
management agreement as in effect from year to year. The Trustees considered
information about, among other things:
o Oak Value and its personnel (including particularly those personnel
with responsibilities for providing services to the Fund), resources
and investment process;
6
o the terms of the New Advisory Agreement;
o the scope and quality of the services that Oak Value has been
providing to the Fund;
o the investment performance of the Fund compared to similar funds
managed by other investment advisers over various periods;
o the management fee rates payable by the Fund compared to similar funds
managed by other investment advisers; and
o the total expense ratio of the Fund compared to similar funds managed
by other investment advisers.
After carefully considering the information described above, the Trustees,
including the Independent Trustees, unanimously voted to approve the New
Advisory Agreement and to recommend that the Fund's shareholders vote to approve
the New Advisory Agreement.
THE BOARD OF TRUSTEES, INCLUDING THE INDEPENDENT TRUSTEES, UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE NEW ADVISORY AGREEMENT.
PROPOSAL 2:
ELECTION OF TRUSTEES
The Board of Trustees of the Trust is proposing that three individuals (the
"Nominees") be elected by shareholders to the Board at the Special Meeting of
Shareholders. It is intended that the enclosed Proxy will be voted FOR the
election of the three Nominees named below as Trustees, unless such authority
has been withheld in the Proxy. Each person elected as Trustee shall serve for
an indefinite term, until his resignation, retirement or removal. Information
regarding each Nominee is set forth below. Each Nominee has consented to serve,
or to continue to serve, as a Trustee if elected.
Shareholders are being asked to elect the three Nominees to serve on the
Board of Trustees of the Trust in order to ensure that at least two-thirds of
the members of the Board have been elected by the shareholders of the Trust as
required by the 1940 Act. Currently, the Board consists of five Trustees
(Matthew F. Sauer, C. Russell Bryan, John M. Day, Joseph T. Jordan, Jr. and
Charles T. Manatt), of which three (Messrs. Bryan, Day and Jordan) were elected
previously by shareholders of the Fund. The Board of Trustees has nominated a
sixth individual, Larry D. Coats, Jr., an interested person of the Trust, to
fill the vacancy created by the death of George W. Brumley, III. The 1940 Act
provides, however, that vacancies on the Board of Trustees may not be filled by
Trustees unless thereafter at least two-thirds of the Trustees shall have been
elected by shareholders. To ensure compliance with the 1940 Act, shareholders
are
7
being asked at the Special Meeting to elect Messrs. Sauer and Manatt, who are
both currently Trustees but who have not previously been elected by
shareholders, and to elect Mr. Coats as a new member of the Board. Consistent
with the Trust's Bylaws, and as permitted by Massachusetts law, the Trust does
not anticipate holding annual shareholder meetings unless required by the 1940
Act. Thus, the Trustees will effectively be elected for indefinite terms,
subject to retirement, resignation or removal. Each Nominee has indicated a
willingness to serve as a member of the Board of Trustees if elected. If any of
the Nominees should not be available for election at the time of the Special
Meeting, the persons named as proxies (or their substitutes) may vote for other
persons in their discretion. However, management has no reason to believe that
any Nominee will be unavailable for election. In evaluating the Nominees, the
Trustees took into account their background and experience, including their
familiarity with the issues relating to the Fund and its underlying investments
as well as their careers in business, finance, politics, law and other areas.
The Trustees also considered the prior experience of certain of the Nominees as
Trustees of the Trust.
THE BOARD OF TRUSTEES GENERALLY
The Board of Trustees oversees the management of the Trust and generally
meets at least quarterly to review reports about Fund operations. The Board has
the authority to manage the business of the Trust on behalf of its investors,
and it has all powers necessary or convenient to carry out that responsibility.
Consequently, the Trustees may adopt Bylaws providing for the regulation and
management of the affairs of the Trust and may amend and repeal them to the
extent that such Bylaws do not reserve that right to the Fund's investors.
Subject to the 1940 Act and applicable Massachusetts law, they may fill
vacancies on the Board or reduce the number of Board members, and may elect and
remove such officers and appoint and terminate such agents as they consider
appropriate. They may appoint from their own number and establish and terminate
one or more committees consisting of two or more Trustees who may exercise the
powers and authority of the Board to the extent that the Trustees determine.
They may, in general, delegate such authority as they consider desirable to any
officer of the Trust, to any Committee of the Board and to any agent or employee
of the Trust. Any determination as to what is in the interests of the Trust made
by the Trustees in good faith shall be conclusive.
INFORMATION REGARDING THE TRUST'S TRUSTEES, NOMINEES AND OFFICERS
The following is a list of the Trustees and Nominees and the Executive
Officers of the Trust. Each Trustee who is an "interested person" of the Trust,
as defined by the 1940 Act, is indicated by an asterisk. The other Trustees
and/or Nominees are independent; that is, among other things, they are not
employees or officers of the Trust and they have no financial interest in Oak
Value or any of the Trust's other service providers. During the most recent
fiscal year, the Board of Trustees met five times. Each Trustee attended over
75% of the meetings of the Board of Trustees, and each member of the Trust's
Audit Committee (as discussed below) attended over 75% of the meetings of the
Audit Committee.
INTERESTED TRUSTEES AND OFFICERS. The table below sets forth certain
information about each of the Trust's Trustees/Nominees and Executive Officers.
8
- -------------------------------------------------------------------------------------------------------------------
NUMBER OF
TERM OF PORTFOLIOS OTHER
POSITION(S) OFFICE AND IN FUND DIRECTORSHIPS1
HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) COMPLEX HELD BY
NAME, ADDRESS, AND AGE TRUST TIME SERVED DURING PAST 5 YEARS OVERSEEN TRUSTEE
- -------------------------------------------------------------------------------------------------------------------
Larry D. Coats, Jr.* President and Indefinite; President, Chief 1 None
3100 Tower Boulevard Nominee Since: Executive Officer and
Suite 700 July 2003 Portfolio Manager with
Durham, NC 27707 Oak Value Capital
Age: 43 Management, Inc.; prior
Date of Birth: 05/21/60 to July 2003, Executive
Vice President and
Portfolio Manager with
Oak Value Capital
Management, Inc.
- -------------------------------------------------------------------------------------------------------------------
Matthew F. Sauer* Trustee, Indefinite; For more than the past 1 None
3100 Tower Boulevard Nominee and Since: five years, Mr. Sauer has
Suite 700 Vice President February 2002 been Senior Vice
Durham, NC 27707 President, Director of
Age: 42 Research and Portfolio
Date of Birth: 10/20/61 Manager with Oak Value
Capital Management, Inc.
- -------------------------------------------------------------------------------------------------------------------
Robert G. Dorsey Vice President Indefinite; Managing Director of
135 Merchant Street Since: Ultimus Fund Solutions,
Suite 230 June 2003 LLC and Ultimus Fund
Cincinnati, OH 45246 Distributors, LLC;
Age: 46 prior to March 1999,
Date of Birth: 04/08/57 President of Countrywide
Fund Services, Inc. (a
mutual fund services company).
- -------------------------------------------------------------------------------------------------------------------
Mark J. Seger Treasurer Indefinite; Managing Director of
135 Merchant Street Since: Ultimus Fund Solutions,
Suite 230 June 2003 LLC and Ultimus Fund
Cincinnati, OH 45246 Distributors, LLC;
Age: 41 prior to March 1999,
Date of Birth: 01/04/62 First Vice President of
Countrywide Fund
Services, Inc.
- -------------------------------------------------------------------------------------------------------------------
John F. Splain Secretary Indefinite; Managing Director of
135 Merchant Street Since: Ultimus Fund Solutions,
Suite 230 June 2003 LLC and Ultimus Fund
Cincinnati, OH 45246 Distributors, LLC;
Age: 47 prior to March 1999,
Date of Birth: 09/07/56 First Vice
President/Secretary of
Countrywide Fund
Services, Inc. and
affiliated companies.
- -------------------------------------------------------------------------------------------------------------------
* Messrs. Coats and Sauer may each be deemed to be an "interested person," as
defined by the 1940 Act, because of his employment with Oak Value Capital
Management, Inc., the investment adviser to the Trust.
1 Represents directorships held in (1) any other investment companies
registered under the 1940 Act, (2) any company with a class of securities
registered pursuant to Section 12 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") or (3) any company subject to the
requirements of Section 15(d) of the Exchange Act.
9
INDEPENDENT TRUSTEES. The following table sets forth certain information
about the Trust's Independent Trustees.
- -------------------------------------------------------------------------------------------------------------------
NUMBER OF
TERM OF PORTFOLIOS OTHER
POSITION(S) OFFICE AND PRINCIPAL IN FUND DIRECTORSHIPS1
HELD WITH LENGTH OF OCCUPATION(S) COMPLEX HELD BY
NAME, ADDRESS, AND AGE TRUST TIME SERVED DURING PAST 5 YEARS OVERSEEN TRUSTEE
- -------------------------------------------------------------------------------------------------------------------
C. Russell Bryan Trustee Indefinite; Managing Director of 1 None
112 Tryon Plaza Since: Brookwood Associates,
Suite 1500 May 1995 LLC (an investment
Charlotte, NC 28284 banking firm); prior to
Age: 43 April 1999, Principal
Date of Birth: 06/13/60 with NationsBanc
Montgomery Securities,
Inc. (an investment
banking firm).
- -------------------------------------------------------------------------------------------------------------------
John M. Day Trustee Indefinite; For more than the 1 None
5151 Glenwood Avenue Since: past five years, Mr.
Raleigh, NC 27612 May 1995 Day has been Managing
Age: 49 Partner of Maynard
Date of Birth: 04/28/54 Capital Partners (an
investment firm).
- -------------------------------------------------------------------------------------------------------------------
Joseph T. Jordan, Jr. Trustee Indefinite; For more than the 1 None
1816 Front Street Since: past five years, Mr.
Suite 320 May 1995 Jordan has served as
Durham, NC 27705 the President of
Age: 57 Practice Management
Date of Birth: 04/17/46 Services, Inc. (a
medical practice
management firm).
- -------------------------------------------------------------------------------------------------------------------
Charles T. Manatt, Esq. Trustee and Indefinite; Founder of Manatt, 1 None
1501 M Street, NW Nominee Since: Phelps & Phillips,
Suite 700 February 2002 L.L.P. (a law firm);
Washington, D.C. 20005 from 1999 to 2001,
Age: 67 U.S. Ambassador to
Date of Birth: 06/9/36 the Dominican
Republic.
- -------------------------------------------------------------------------------------------------------------------
1 Directorships held in (1) any other investment companies registered under the
1940 Act, (2) any company with a class of securities registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") or (3) any company subject to the requirements of Section 15(d) of the
Exchange Act.
AUDIT COMMITTEE. Messrs. Bryan, Day, Jordan and Manatt 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 Audit Committee has adopted an Audit Committee
Charter which serves as a guideline in carrying out the above stated duties and
responsibilities. See Exhibit B for a copy the Trust's Audit Committee Charter.
The Trustees have not appointed a compensation committee or a nominating
committee. The Audit Committee meets periodically, as necessary, and met two
times during the most recently completed fiscal year.
10
OTHER COMMITTEES. The Trust does not have a compensation committee or other
committees performing similar functions. While the Trust does not have a
standing nominating committee, the selection and nomination of the Trustees who
are not interested persons of the Trust are committed to the discretion of the
Independent Trustees.
TRUSTEE/NOMINEE OWNERSHIP OF SHARES OF OAK VALUE FUND AS OF SEPTEMBER 30, 2003*
============================================================================================
(1) (2) (3)
============================================================================================
NAME OF TRUSTEE DOLLAR RANGE OF AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES
OR OFFICER EQUITY SECURITIES AND/OR SHARES IN ALL REGISTERED INVESTMENT
AND/OR SHARES IN COMPANIES OVERSEEN BY TRUSTEE IN FAMILY OF
THE FUND INVESTMENT COMPANIES
============================================================================================
C. Russell Bryan $10,001--$50,000 $10,001--$50,000
============================================================================================
John M. Day $1--$10,000 $1--$10,000
============================================================================================
Joseph T. Jordan, Jr. Over $100,000 Over $100,000
============================================================================================
Charles T. Manatt, Esq. $50,001--$100,000 $50,001--$100,000
============================================================================================
Larry D. Coats, Jr. Over $100,000 Over $100,000
============================================================================================
Matthew F. Sauer Over $100,000 Over $100,000
============================================================================================
* Each Trustee and/or Nominee owns less than 1% of the Fund's outstanding
shares. All Trustees, Nominees and officers as a group owned of record or
beneficially less than 1% of the Fund's outstanding shares on the Record
Date.
BOARD COMPENSATION. Trustees of the Trust who are not directors, officers
or employees of Oak Value or the Distributor receive from the Trust an annual
retainer of $12,000 and a fee of $2,500 for each Board of Trustees meeting of
the Trust attended, and are reimbursed for all out-of-pocket expenses related to
attendance at such meetings. Trustees who are directors, officers or employees
of Oak Value or the Distributor do not receive compensation from the Trust. The
table below sets forth the compensation received by each Independent Trustee
from the Trust during the fiscal year ended June 30, 2003.
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL
COMPENSATION
PENSION OR PAID FROM
RETIREMENT FUND AND
AGGREGATE BENEFITS ACCRUED ESTIMATED FUND
COMPENSATION AS A PART OF ANNUAL BENEFITS COMPLEX TO
NAME OF TRUSTEE FROM FUND FUND EXPENSES UPON RETIREMENT TRUSTEES
- ---------------------------------------------------------------------------------------------------------------------------
C. Russell Bryan $22,000 -0- -0- $22,000
- ---------------------------------------------------------------------------------------------------------------------------
John M. Day $19,500 -0- -0- $19,500
- ---------------------------------------------------------------------------------------------------------------------------
11
- --------------------------------------------------------------------------------------------------------------------------
Joseph T. Jordan, Jr. $22,000 -0- -0- $22,000
- ---------------------------------------------------------------------------------------------------------------------------
Charles T. Manatt, Esq. $22,000 -0- -0- $22,000
- ---------------------------------------------------------------------------------------------------------------------------
OWNERSHIP IN THE FUND'S INVESTMENT ADVISER1 OR DISTRIBUTOR2, OR ANY ENTITY
DIRECTLY OR INDIRECTLY CONTROLLING, CONTROLLED BY, OR UNDER COMMON CONTROL WITH
THE FUND, BY TRUSTEES WHO ARE NOT INTERESTED PERSONS (AS DEFINED IN THE 1940
ACT) OF THE FUND AS OF SEPTEMBER 30, 2003
=========================================================================================================================
(1) (2) (3) (4) (5) (6)
=========================================================================================================================
NAME OF TRUSTEE NAME OF OWNERS AND NAME OF COMPANY TITLE OF CLASS OF VALUE OF PERCENT OF CLASS
RELATIONSHIPS TO SECURITY SECURITIES
TRUSTEE
=========================================================================================================================
C. Russell Bryan N/A N/A N/A None N/A
=========================================================================================================================
John M. Day N/A N/A N/A None N/A
=========================================================================================================================
Joseph T. Jordan, Jr. N/A N/A N/A None N/A
=========================================================================================================================
Charles T. Manatt, Esq. N/A N/A N/A None N/A
=========================================================================================================================
1 Oak Value Capital Management, Inc.
2 Ultimus Fund Distributors, LLC
THE BOARD OF TRUSTEES, INCLUDING THE INDEPENDENT TRUSTEES, UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" EACH OF THE NOMINEES.
OUTSTANDING SHARES AND VOTING REQUIREMENTS
The Board of Trustees has fixed the close of business on October 24, 2003
as the Record Date for the determination of shareholders entitled to notice of
and to vote at the Special Meeting of Shareholders of any adjournment thereof.
As of the Record Date, there were 9,193,016.91 shares of beneficial interest, no
par value, of the Fund outstanding. All full shares of the Fund are entitled to
one vote, with proportionate voting for fractional shares.
The vote of a majority of the outstanding shares of the Fund is required
for approval of the New Advisory Agreement (Proposal 1). The vote of a majority
of the outstanding shares for purposes of Proposal 1 means the vote of the
lesser of (1) 67% or more of the shares present or represented by proxy at the
meeting, if the holders of more than 50% of the outstanding shares are present
or represented by proxy, or (2) more than 50% of the outstanding shares. With
respect to the election of Trustees (Proposal 2), the three Nominees receiving
the highest number
12
of affirmative votes cast at the meeting will be elected, so long as the votes
FOR each Nominee exceed the votes AGAINST the Nominee.
A quorum is the number of shares legally required to be at a meeting in
order to conduct business. The presence, in person or by proxy, of more than 50%
of the Fund's outstanding shares is necessary to constitute a quorum at the
meeting. If the meeting is called to order but a quorum is not represented at
the meeting, the persons named as proxies may vote those proxies that have been
received to adjourn the meeting to a later date. If a quorum is present at the
meeting but sufficient votes to approve the proposal described herein are not
received, the persons named as proxies may propose one or more adjournments of
the meeting to permit further solicitation of proxies. Any such adjournment will
require the affirmative vote of a majority of those shares represented at the
meeting in person or by proxy. The persons named as proxies will vote those
proxies received that voted in favor of a proposal in favor of such adjournment
and will vote those proxies received which voted against a proposal against any
such adjournment.
Abstentions and "broker non-voters" are counted for purposes of determining
whether a quorum is present but do not represent votes cast with respect to a
proposal. "Broker non-votes" are shares held by a broker or nominee for which an
executed proxy is received by the Fund, but are not voted as to one or more
proposals because instructions have not been received from the beneficial owners
or persons entitled to vote and the broker or nominee does not have
discretionary voting power. Accordingly, "broker non-votes" and abstentions on
any of the Proposals effectively will be a vote against that Proposal.
The Trustees of the Trust intend to vote all of their shares in favor of
each of the proposals described herein.
OAK VALUE CAPITAL MANAGEMENT, INC.
Oak Value is a North Carolina corporation organized in 1992. In addition to
serving as investment adviser to the Fund, Oak Value provides investment
advisory services to individuals, pension and profit sharing plans, other pooled
investment vehicles, charitable organizations and corporations. Oak Value
manages more than $1.3 billion in assets. Oak Value is located at 3100 Tower
Boulevard, Suite 700, Durham, North Carolina 27707.
During the fiscal year ended June 30, 2003, the Fund paid investment
advisory fees of $2,078,807 to Oak Value. The former advisory agreement between
Oak Value and the Trust (which terminated on October 14, 2003, as discussed in
Proposal 1 above) was last submitted and approved by the Board of Trustees on
May 13, 2003 and by shareholders of the Fund on May 22, 1995.
The controlling shareholders (shareholders owning 25% or more of Oak Value)
of Oak Value are David R. Carr, Jr. and Larry D. Coats, Jr. The directors of Oak
Value are David R. Carr, Jr., Larry D. Coats, Jr., Matthew F. Sauer and Margaret
C. Landis. The address and principal occupation of each principal executive
officer and director of Oak Value are set forth in the table below.
13
NAME AND ADDRESS PRINCIPAL OCCUPATION
- --------------------------------------------------------------------------------
David R. Carr, Jr. Chairman, Chief Investment Officer, Portfolio
3100 Tower Boulevard Manager and Director of Oak Value
Suite 700
Durham, NC 27707
Larry D. Coats, Jr. President, Chief Executive Officer, Portfolio
3100 Tower Boulevard Manager and Director of Oak Value
Suite 700
Durham, NC 27707
Matthew F. Sauer Senior Vice President, Director of Research,
3100 Tower Boulevard Portfolio Manager, Assistant Treasurer and
Suite 700 Director of Oak Value
Durham, NC 27707
Margaret C. Landis Vice President, Director of Compliance,
3100 Tower Boulevard Secretary, Treasurer and Director
Suite 700 of Oak Value
Durham, NC 27707
Each of the following persons is both a Trustee or officer of the Trust and
a director, officer or employee of Oak Value:
Position with
Name Position with Oak Value the Trust
------------------------- -------------------------- ----------------------
Larry D. Coats, Jr. * President, Chief Executive Officer, President
Portfolio Manager and Director
Matthew F. Sauer** Senior Vice President, Director Trustee/Vice President
of Research, Portfolio Manager,
Assistant Treasurer and Director
Margaret C. Landis Vice President, Director of Assistant Secretary
Compliance, Secretary, Treasurer
and Director
* Larry D. Coats, Jr. is currently a Nominee for election as a Trustee at the
Special Meeting of Shareholders.
** Matthew F. Sauer currently serves as a Trustee. He is also a Nominee for
election at the Special Meeting of Shareholders.
INFORMATION ON THE OPERATION OF THE FUND
DISTRIBUTION OF SHARES
Ultimus Fund Distributors, LLC (the "Distributor"), 135 Merchant Street,
Cincinnati, Ohio 45246, serves as the Fund's principal underwriter. The
Distributor is a wholly-owned subsidiary of Ultimus Fund Solutions, LLC
("Ultimus"), the Fund's administrator, transfer agent and fund accountant.
14
ADMINISTRATION AND OTHER SERVICES
The Fund has entered into agreements with Ultimus, 135 Merchant Street,
Suite 230, Cincinnati, Ohio 45246, whereby Ultimus is responsible for the
provision of administration, fund accounting and transfer agent and shareholder
services to the Fund. For providing administration services to the Fund, the
Fund pays Ultimus a fee at the annual rate of .10% of the average value of its
daily net assets up to $50 million, .075% of such assets from $50 million to
$200 million, .050% of such assets in excess of $200 million, provided, however,
that the minimum fee is $2,000 per month.
ANNUAL AND SEMIANNUAL REPORTS
The Fund will furnish, without charge, a copy of its most recent annual report
and semi-annual report upon request. To request these documents, please call us
toll free at 1-800-622-2474, or write to John F. Splain, Secretary, Oak Value
Fund, P.O. Box 46707, Cincinnati, Ohio 45246-0707.
PRINCIPAL SHAREHOLDERS
As of the Record Date, the following were five percent or greater
shareholders of the Fund:
- --------------------------------------------------------------------------------
SHARE BALANCE PERCENTAGE
- --------------------------------------------------------------------------------
Charles Schwab & Co., Inc. 3,573,896.17 38.88%
101 Montgomery Street
San Francisco, California 94104
- --------------------------------------------------------------------------------
National Financial Services LLC 1,278,727.30 13.91%
1 World Financial Center
New York, New York 10281
- --------------------------------------------------------------------------------
OTHER MATTERS
The proxy holders have no present intention of bringing any other matter
before the meeting other than those specifically referred to above or matters in
connection with or for the purpose of effecting the same. Neither the proxy
holders nor the Board of Trustees are aware of any matters which may be
presented by others. If any other business shall properly come before the
meeting, the proxy holders intend to vote thereon in accordance with their best
judgment.
The Trust has not received any shareholder proposals to be considered for
presentation at the Meeting. Under the proxy rules of the Securities and
Exchange Commission, shareholder proposals may, under certain conditions, be
included in the Trust's proxy statement and proxy for a particular meeting.
Under these rules, proposals submitted for inclusion in the Trust's proxy
materials must be received by the Trust within a reasonable time before the
solicitation is made. The fact that the Trust receives a shareholder proposal in
a timely manner does not insure its inclusion in its proxy materials, because
there are other requirements in the proxy rules relating to such inclusion. You
should be aware that annual meetings of shareholders of the Fund are not
required as long as there is no particular requirement under the 1940 Act, which
must be met by
15
convening such a shareholder meeting. Any shareholder proposal should be sent to
Margaret C. Landis, Assistant Secretary of the Trust, 3100 Tower Boulevard,
Suite 700, Durham, North Carolina 27707.
By Order of the Board of Trustees,
/s/ John F. Splain
John F. Splain
Secretary
Date: November 12, 2003
Please complete, date and sign the enclosed Proxy and return it promptly in the
enclosed reply envelope. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
16
EXHIBIT A
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, entered into as of the ____ day of _______, 2003, by and between
OAK VALUE TRUST, a Massachusetts business trust, on behalf of its OAK VALUE FUND
series (the "Fund"), and OAK VALUE CAPITAL MANAGEMENT, INC. (the "Advisor"), a
North Carolina corporation registered as an investment advisor under the
Investment Advisers Act of 1940, as amended.
WHEREAS, the Trust is registered as a diversified, open-end management
investment company of the series type under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, the Trust desires to retain the Advisor to furnish investment advisory
and administrative services to the Fund, and the Advisor is willing to so
furnish such services;
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Trust hereby appoints the Advisor to act as investment
advisor to the Fund for the period and on the terms set forth in this
Agreement. The Advisor accepts such appointment and agrees to furnish the
services herein set forth, for the compensation herein provided.
2. DELIVERY OF DOCUMENTS. The Trust has furnished the Advisor with copies
properly certified or authenticated of each of the following:
(a) The Trust's Declaration of Trust, as filed with The Commonwealth of
Massachusetts (such Declaration, as presently in effect and as it
shall from time to time be amended, is herein called the
"Declaration");
(b) The Trust's Bylaws (such Bylaws, as presently in effect and as they
shall from time to time be amended, are herein called the "Bylaws");
(c) Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Advisor and approving this Agreement;
(d) The Trust's Registration Statement on Form N-1A under the 1940 Act and
under the Securities Act of 1933, as amended, relating to shares of
beneficial interest of the Fund (herein called the "Shares") as filed
with the Securities and Exchange Commission ("SEC") and all amendments
thereto; and
(e) The Fund's Prospectus and Statement of Additional Information (such
Prospectus and Statement of Additional Information, as presently in
effect and all amendments and supplements thereto are herein called
the "Prospectus").
17
The Trust will furnish the Advisor from time to time with copies,
properly certified or authenticated, of all amendments of or
supplements to the foregoing at the same time as such documents are
required to be filed with the SEC.
3. MANAGEMENT. Subject to the supervision of the Trust's Board of
Trustees, the Advisor will provide a continuous investment program
for the Fund, including investment research and management with
respect to all securities, investments, cash and cash equivalents of
the Fund. The Advisor will determine from time to time what
securities and other investments will be purchased, retained or sold
by the Fund. The Advisor will provide the services under this
Agreement in accordance with the Fund's investment objectives,
policies and restrictions as stated in its Prospectus. The Advisor
further agrees that it:
(a) Will conform its activities to all applicable rules and
regulations of the SEC and will, in addition, conduct its
activities under this Agreement in accordance with regulations of
any other federal and state agencies which may now or in the
future have jurisdiction over its activities under this
Agreement;
(b) Will place orders pursuant to its investment determinations for
the Fund either directly with the issuer or with any broker or
dealer. In placing orders with brokers or dealers, the Advisor
will attempt to obtain the best net price and the most favorable
execution of its orders. Consistent with this obligation, the
Advisor may consider the financial responsibility, research and
investment information and other services provided by brokers. It
is understood that research and investment information provided
by such brokers may be useful to the Advisor in connection with
its services to other clients;
(c) Will provide certain executive personnel for the Trust as may be
mutually agreed upon from time to time with the Board of
Trustees, the salaries and expenses of such personnel to be borne
by the Advisor unless otherwise mutually agreed upon; and
(d) Will provide, at its own cost, all office space, facilities and
equipment necessary for the conduct of its advisory activities on
behalf of the Fund.
4. SERVICES NOT EXCLUSIVE. The advisory services furnished by the
Advisor hereunder are not to be deemed exclusive, and the Advisor
shall be free to furnish similar services to others so long as its
services under this Agreement are not impaired thereby provided,
however, that without the written consent of the Trustees, the
Advisor will not serve as investment advisor to any other investment
company having a similar investment objective to that of the Fund.
5. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Advisor hereby agrees that all records which
it maintains for the benefit of the Fund are the property of the
Trust and further agrees to surrender promptly to the Trust any of
such records upon the Trust's request. The Advisor further
18
agrees to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act the records required to be maintained by it pursuant to Rule
31a-1 under the 1940 Act that are not maintained by others on behalf
of the Fund.
6. EXPENSES. During the term of this Agreement, the Advisor will pay all
expenses incurred by it in connection with its investment advisory
services pertaining to the Fund. In the event that there is no
distribution plan under Rule 12b-1 of the 1940 Act in effect for the
Fund, the Advisor will pay the entire cost of the promotion and sale
of Fund shares.
Notwithstanding the foregoing, the Fund shall pay the expenses and
costs of the following:
(a) Taxes, interest charges and extraordinary expenses;
(b) Brokerage fees and commissions with regard to portfolio
transactions of the Fund;
(c) Fees and expenses of the custodian of the Fund's portfolio
securities;
(d) Fees and expenses of the Fund's administrator, transfer and
dividend disbursing agent and the Fund's fund accounting agent
or, if the Trust performs any such services without an agent, the
costs of the same;
(e) Auditing and legal expenses;
(f) Cost of maintenance of the Trust's existence as a legal entity;
(g) Compensation of Trustees who are not interested persons of the
Advisor as that term is defined by law;
(h) Costs of Trustees' and shareholders' meetings;
(i) Federal and state registration or qualification fees and
expenses;
(j) Costs of setting in type, printing and mailing Prospectuses,
reports and notices to existing shareholders;
(k) The investment advisory fee payable to the Advisor, as provided
in paragraph 7 herein; and
(l) Distribution expenses, but only in accordance with a Plan of
Distribution as approved by the shareholders of the Fund in
accordance with Rule 12b-1 under the 1940 Act.
It is understood that the Trust may desire to register the Fund's
shares for sale in certain states which impose expense limitations on
mutual funds. The Trust agrees that it will register the Fund's
shares in such states only with the prior written consent of the
Advisor.
7. COMPENSATION. The Trust will pay the Advisor and the Advisor will
accept as full compensation an investment advisory fee, based upon
the average daily net assets of the Fund, computed at the end of each
month and payable within five (5) business days thereafter, at the
annual rate of nine tenths of one percent (0.9%) of such assets.
8.(a) LIMITATION OF LIABILITY. The Advisor shall not be liable for any
error of judgment, mistake of law or for any other loss whatsoever
suffered by the Fund in
19
connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt
of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Advisor
in the performance of its duties or from reckless disregard by it of
its obligations and duties under this Agreement.
(b) INDEMNIFICATION OF ADVISOR. Subject to the limitations set forth in
this Subsection 8(b), the Trust shall indemnify, defend and hold
harmless (from the assets of the Fund) the Advisor against all loss,
damage and liability, including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines and penalties,
and expenses, including reasonable accountants' and counsel fees,
incurred by the Advisor in connection with the defense or disposition
of any action, suit or other proceeding, whether civil or criminal,
before any court or administrative or legislative body, related to or
resulting from this Agreement or the performance of services
hereunder, except with respect to any matter as to which it has been
determined that the loss, damage or liability is a direct result of
(i) a breach of fiduciary duty with respect to the receipt of
compensation for services; or (ii) willful misfeasance, bad faith or
gross negligence on the part of the Advisor in the performance of its
duties or from reckless disregard by it of its duties under this
Agreement (either and both of the conduct described in clauses (i) and
(ii) above being referred to hereinafter as "Disabling Conduct"). A
determination that the Advisor is entitled to indemnification may be
made by (i) a final decision on the merits by a court or other body
before whom the proceeding was brought that the Advisor was not liable
by reason of Disabling Conduct, (ii) dismissal of a court action or an
administrative proceeding against the Advisor for insufficiency of
evidence of Disabling Conduct, or (iii) a reasonable determination,
based upon a review of the facts, that the Advisor was not liable by
reason of Disabling Conduct by (a) vote of a majority of a quorum of
Trustees who are neither "interested persons" of the Trust as the
quoted phrase is defined in Section 2(a)(19) of the 1940 Act nor
parties to the action, suit or other proceeding on the same or similar
grounds that is then or has been pending or threatened (such quorum of
such Trustees being referred to hereinafter as the "Independent
Trustees"), or (b) an independent legal counsel in a written opinion.
Expenses, including accountants' and counsel fees so incurred by the
Advisor (but excluding amounts paid in satisfaction of judgments, in
compromise or as fines or penalties), may be paid from time to time by
the Fund in advance of the final disposition of any such action, suit
or proceeding; provided, that the Advisor shall have undertaken to
repay the amounts so paid if it is ultimately determined that
indemnification of such expenses is not authorized under this
Subsection 8(b) and if (i) the Advisor shall have provided security
for such undertaking, (ii) the Trust shall be insured against losses
arising by reason of any lawful advances, or (iii) a majority of the
Independent Trustees, or an independent legal counsel in a written
opinion, shall have determined, based on a review of readily available
facts (as opposed to a full trial-type inquiry), that there is reason
to believe that the Advisor ultimately will be entitled to
indemnification hereunder.
As to any matter disposed of by a compromise payment by the Advisor
referred to in this Subsection 8(b), pursuant to a consent decree or
otherwise, no such indemnification
20
either for said payment or for any other expenses shall be provided
unless such indemnification shall be approved (i) by a majority of the
Independent Trustees or (ii) by an independent legal counsel in a
written opinion. Approval by the Independent Trustees pursuant to
clause (i) shall not prevent the recovery from the Advisor of any
amount paid to the Advisor in accordance with either of such clauses
as indemnification if the Advisor is subsequently adjudicated by a
court of competent jurisdiction not to have acted in good faith in the
reasonable belief that the Advisor's action was in or not opposed to
the best interests of the Fund or to have been liable to the Fund or
its Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in its conduct
under this Agreement.
The right of indemnification provided by this Subsection 8(b) shall
not be exclusive of or affect any of the rights to which the Advisor
may be entitled. Nothing contained in this Subsection 8(b) shall
affect any rights to indemnification to which Trustees, officers or
other personnel of the Trust, and other persons may be entitled by
contract or otherwise under law, nor the power of the Trust to
purchase and maintain liability insurance on behalf of any such
person.
The Board of Trustees of the Trust shall take all such action as may
be necessary and appropriate to authorize the Fund hereunder to pay
the indemnification required by this Subsection 8(b) including,
without limitation, to the extent needed, to determine whether the
Advisor is entitled to indemnification hereunder and the reasonable
amount of any indemnity due it hereunder, or employ independent legal
counsel for that purpose.
(c) The provisions contained in Section 8 shall survive the expiration or
other termination of this Agreement, shall be deemed to include and
protect the Advisor and its directors, officers, employees and agents
and shall inure to the benefit of its/their respective successors,
assigns and personal representatives.
9. DURATION AND TERMINATION. This Agreement shall become effective on
the date hereof and, unless sooner terminated as provided herein,
shall continue in effect for two years. Thereafter, this Agreement
shall be renewable for successive periods of one year each, provided
such continuance is specifically approved annually:
(a) By the vote of a majority of those members of the Board of
Trustees who are not parties to this Agreement or interested
persons of any such party (as that term is defined in the 1940
Act), cast in person at a meeting called for the purpose of
voting on such approval; and
(b) By vote of either the Board of Trustees or a majority (as that
term is defined in the 1940 Act) of the outstanding voting
securities of the Fund.
Notwithstanding the foregoing, this Agreement may be terminated by
the Trust or by the Advisor at any time on sixty (60) days' written
notice, without the payment of any penalty, provided that termination
of the Trust must be authorized either by vote of the
21
Board of Trustees or by vote of a majority of the outstanding voting
securities of the Fund. This Agreement will automatically terminate
in the event of its assignment (as that term is defined in the 1940
Act).
10. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by a
written instrument signed by the party against which enforcement of
the change, waiver, discharge or termination is sought. No material
amendment of this Agreement shall be effective until approved by vote
of the holders of a majority of the Fund's outstanding voting
securities (as defined in the 1940 Act).
11. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of
the provisions hereof or otherwise affect their construction or
effect. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder of the Agreement shall not be affected thereby. This
Agreement shall be binding and shall insure to the benefit of the
parties hereto and their respective successors.
12. APPLICABLE LAW. This Agreement shall be construed in accordance with,
and governed by, the laws of the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
ATTEST: OAK VALUE TRUST
By: ___________________________ By: ___________________________
Title: ________________________ Title: ________________________
ATTEST: OAK VALUE CAPITAL MANAGEMENT, INC.
By: ___________________________ By: ___________________________
Title: ________________________ Title: ________________________
22
EXHIBIT B
AUDIT COMMITTEE CHARTER
Oak Value Trust
Pursuant to Article IV, Section 4.2 of the By-Laws of Oak Value Trust
(formerly the Tuscarora Investment Trust) (the "Trust"), the Board of Trustees
hereby establishes this Audit Committee Charter (the "Charter") and adopts the
following as the governing principles of the Audit Committee (the "Committee")
of the Trust.
I. MEMBERSHIP
The Committee will consist only of members of the Board of Trustees who are not
"interested persons" as that term is defined under Section 2(a)(19) of the
Investment Company Act of 1940, as amended (the "1940 Act"). The Committee shall
elect from its own members a Chairperson, who shall preside over each meeting of
the Committee.
To effectively perform his or her role, each Committee member will obtain an
understanding of the responsibilities of Committee membership as well as the
Trust's accounting, financial reporting and operational processes.
II. PURPOSES OF THE COMMITTEE
The Committee is designed to assist the full Board of Trustees in fulfilling its
oversight responsibilities with regard to the financial reporting process for
the Trust. The purposes of the Committee are: (i) to oversee the Trust's
accounting and financial reporting policies and practices, its internal controls
and the internal controls of its service providers; (ii) to oversee the quality
and objectivity of the Trust's financial statements and the independent audit
thereof; (iii) to act as liaison between the investment adviser and the
administrator (collectively, "management"), the Trust's independent auditors and
the full Board of Trustees; and (iv) to perform or oversee special
investigations, as required.
The function of the Committee is oversight. Management's responsibility is to
maintain appropriate systems for accounting, financial reporting and internal
control; the independent auditors' responsibility is to plan and carry out a
proper audit.
III. PRINCIPAL RESPONSIBILITIES
To carry out its purposes, the Committee will have the duty and power to:
A. Recommend the selection, retention and termination of the independent
auditors and, in connection therewith, to evaluate the: (i) independence of the
auditors, including the procedures followed to ensure the firm's independence
and whether the independent auditors provide any services to management or their
respective affiliates, including consulting services, or are otherwise engaged
in any relationship that may impact their objectivity and independence; (ii)
knowledge and experience in the industry and the number of other investment
companies serviced by the firm; (iii) policy regarding rotation of personnel
assigned to the engagement; (iv) nature and quality of other services offered by
the firm, (v) firm's manner of communicating weaknesses noted in the internal
control system of the Trust or its service providers; and (vi) firm's basis for
determining audit fees.
23
B. Take or recommend that the full Board of Trustees take, appropriate
action to ensure the independence of the independent auditors, including
requiring that the independent auditors discuss their independence with the
Committee and provide an annual written representation that (i) confirms that,
in the professional judgement of the independent auditors, they are independent
of the Trust, and (ii) identifies all relationships between the independent
auditors and their related entities and the Trust and management, and their
respective related entities that, in the independent auditors' professional
judgement, may reasonably be thought to bear on independence.
C. Approve (i) all audit and non-audit services that the Trust's
independent auditors provide to the Trust, and (ii) all non-audit services that
the Trust's independent auditors provide to the Trust's investment adviser and
any entity controlling, controlled by, or under common control with the
investment adviser that provides services to the Trust ("advisory affiliates"),
if the engagement relates directly to the operations and financial reporting of
the Trust. De minimis non-audit services do not require pre-approval.1
D. Meet with the independent auditors, the Treasurer of the Trust, the
internal auditors and/or management, as necessary, to:
1. consider the audit scope and plan relating to the annual audit and any
special audit(s) to ensure completeness of coverage, reduction of redundant
efforts and effective use of audit resources;
2. review the financial statements and related footnotes contained in the
prospectus and annual and other periodic reports to the shareholders;
3. review the results of any annual or special audit(s) including: (i) the
report of the independent auditors and any significant audit findings; (ii) a
discussion of significant judgments and accounting estimates required by
management in the preparation of the financial statements; (iii) the independent
auditors' views as to the adequacy of disclosures in the Trust's financial
statements in relation to generally accepted accounting principals; (iv) any
serious disputes with management encountered in the course of the audit; (v) any
restrictions on the independent auditors' scope of activities or access to
required information; (vi) significant changes to the audit plan; and (vii)
other matters related to the conduct of the audit that are to be communicated to
the Committee under generally accepted accounting standards;
4. consider the comments of the independent auditors and the internal
auditors with respect to the Trust's or the relevant service provider's
financial policies, accounting practices and internal controls and management's
responses thereto, including the status of any previous audit recommendations;
and
5. review the form of opinion the independent auditors propose to render to
the Board of Trustees and the shareholders, including any qualifications in the
independent auditors' opinion.
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1/ A non-audit service is de minimis if: (a) the total amount of the non-audit
service is not more than 5% percent of the total amount of revenues paid to the
auditor by the Trust, its investment adviser, and advisory affiliates that
provide ongoing services to the Trust for services otherwise requiring audit
committee pre-approval during the fiscal year in which the non-audit service was
provided; (b) the Trust did not recognize these services as non-audit services
at the time they were provided; and (c) these services are promptly brought to
the attention of the Committee and the Committee approves them before the audit
is complete.
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In addition to such meetings as may be held according to this provision, the
Committee will also meet in executive session with the independent auditors (and
the internal audit staff, if necessary) at least once a year outside the
presence of management representatives.
E. Consider the effect upon the Trust of any (i) changes in accounting
principles or practices proposed by management or the independent auditors; (ii)
significant tax accounting policies elected by the Trust (including matters
affecting qualification under Subchapter M of the Internal Revenue Code) and
their effect on amounts distributed and reported to shareholders for Federal tax
purposes; and (iii) legal and regulatory matters (including reports received
from regulators and litigation matters) that may have a material impact on the
Trust's financial statements and related compliance policies.
F. Review the fees charged by the independent auditors for audit and
non-audit services, including meeting with management, as appropriate, to learn
its assessment of the independent auditors and the appropriateness of the audit
fees.
G. Investigate improprieties or suspected improprieties in the Trust's
accounting, auditing or financial reporting operations.
H. In its discretion, consider from time to time any other matters that the
Committee believes are required of it in keeping with its responsibilities under
this Charter.
IV. OPERATION OF THE COMMITTEE
A. The Committee will meet on a regular basis and is empowered to hold
special meetings as circumstances require. The Committee will maintain minutes
or other records of its meetings and activities.
B. The Committee will report its activities to the full Board of Trustees
on a regular basis and make such recommendations as the Committee may deem
necessary or appropriate.
C. The Committee shall have the resources and authority appropriate to
discharge its responsibilities, including the authority to retain special
counsel and other experts or consultants at the expense of the Trust.
D. The Committee will review this Charter at least annually and recommend
any changes to the full Board of Trustees.
Revised February 25, 2003
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