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OMB Number: 3235-0570
Expires: October 31, 2006
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hours per response: 19.3
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-09000
---------------------------------------------
Oak Value Trust
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
3100 Tower Boulevard, Suite 700 Durham, North Carolina 27707
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Larry D. Coats, Jr.
Oak Value Capital Management, Inc. 3100 Tower Blvd., Suite 700 Durham, NC 27707
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (919) 419-1900
----------------------------
Date of fiscal year end: June 30, 2004
-----------------------------
Date of reporting period: December 31, 2003
-----------------------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
SEMI-ANNUAL REPORT
DECEMBER 31, 2003
(UNAUDITED)
[GRAPHIC OMITTED]
OAK VALUE FUND
WWW.OAKVALUEFUND.COM
LETTER TO SHAREHOLDERS February 2004
- --------------------------------------------------------------------------------
Dear Fellow Oak Value Fund Shareholders:
We have in the past used pages within this space of the Oak Value Fund Annual
and Semi-Annual Reports to shareholders to provide a communication forum about
the Oak Value Fund's investment philosophy, process, implementation and outcomes
that we believe superceded mandated reporting requirements and industry practice
for investment companies. While we take pride in our reputation and achievements
in this context, from time to time, we evaluate our shareholder communications
in light of our duty to communicate about the Oak Value Fund ("Fund") assets
entrusted to us, a responsibility we take seriously.
In an important development, new regulations related to the Sarbanes-Oxley Act
of 2002 require a mutual fund's principal executive and financial officers to
certify the entire contents of required shareholder reports in a filing with the
Securities and Exchange Commission. This certification covers a fund's financial
statements, and includes the investment advisers' comments and subjective
opinions if they are attached to or are a part of the financial statements. We
continue to believe that shareholders will be better informed if they are
provided comments that go beyond objective information and include the
presentation of the investment advisers' insight. However, we find our past
practice in this regard impractical with respect to consistency with the new
certification requirements.
In our view, we can best continue our established pattern of in depth
communications about the Fund's periodic investment context and performance, and
our portfolio review and outlook in a format that is separate from
communications designed to fulfill legal and regulatory compliance obligations.
We will continue of course to provide all required shareholder communications.
As such, the selected financial information which follows below, and in future
Annual and Semi-Annual Reports, will be focused on providing relevant objective
facts and associated comments, including and largely limited to those that are
proscribed by industry regulations.
We take pride in our reputation and achievements in the realm of shareholder
communications. Therefore, we invite you to review the inaugural issue of the
Oak Value Fund "Investment Adviser's Review," available on the Fund's website at
www.oakvaluefund.com. We plan in this new format to continue to work toward the
goal of providing meaningful comments that go beyond purely objective
information and which include the presentation of the investment advisers'
opinions and insights, presented in a thoughtful format designed to inform,
educate, and occasionally entertain. We note that the content in Investment
Adviser's Reviews are not certified by the Fund's President or other principal
officers.
We plan to produce Oak Value Fund Investment Adviser's Reviews on a periodic
basis (at least semi-annually) and to make them available to shareholders via
the Fund's website (www.oakvaluefund.com), via email, or in hardcopy format
1
within the same general time frame as we have historically delivered the
Semi-Annual and Annual Reports. To receive email notifications of website
postings, please sign up for Oak Value Fund email at
www.oakvaluefund.com/mail.htm which will help ensure your earliest notification
and access to future Investment Advisers' Reviews. Hard copies of Fund
communications are also available upon request by contacting us at 800-680-4199
or info@oakvalue.com. We trust that you understand our motivations for the
communication changes, appreciate the enhancements, and that you find the
outcome interesting and informative. We welcome your feedback and thank you for
your continued support.
Sincerely yours,
/s/ David R. Carr /s/ Larry D. Coats, Jr. /s/ Matthew F. Sauer
David R. Carr Larry D. Coats, Jr. Matthew F. Sauer
Jr., Co-Manager Co-Manager Co-Manager
==================================================================================================
TOP TEN HOLDINGS
As of December 31, 2003
==================================================================================================
COMPANY PRIMARY BUSINESS SECTOR CLASSIFICATION
- --------------------------------------------------------------------------------------------------
Ambac Financial Group Financial Guarantee Insurance Financials
- --------------------------------------------------------------------------------------------------
Berkshire Hathaway Reinsurance & Capital Allocation Financials
- --------------------------------------------------------------------------------------------------
Cendant Travel, Hospitality & Mortgage Finance Industrials
- --------------------------------------------------------------------------------------------------
Comcast Entertainment & Information Services Consumer Discretionary
- --------------------------------------------------------------------------------------------------
Constellation Brands Wine, Beer & Spirits Production/Distribution Consumer Staples
- --------------------------------------------------------------------------------------------------
Dow Jones Newspaper Publishing & Information Consumer Discretionary
- --------------------------------------------------------------------------------------------------
E.W. Scripps Entertainment & Information/Media Consumer Discretionary
- --------------------------------------------------------------------------------------------------
Time Warner Entertainment & Information/Media Consumer Discretionary
- --------------------------------------------------------------------------------------------------
XL Capital Property & Casualty Insurance/Reinsurance Financials
- --------------------------------------------------------------------------------------------------
Zale Fine Jewelry Retailing Consumer Discretionary
- --------------------------------------------------------------------------------------------------
==================================================================================================
JULY 1 - DECEMBER 31, 2003 PURCHASE/SALE ACTIVITY
POSITION PRIMARY BUSINESS SECTOR CLASSIFICATION
==================================================================================================
PURCHASED:
- --------------------------------------------------------------------------------------------------
Cadbury Schweppes Soft Drinks and Confections Consumer Staples
- --------------------------------------------------------------------------------------------------
PURCHASED:
- --------------------------------------------------------------------------------------------------
Cox Communications Cable TV & Communications Services Consumer Discretionary
- --------------------------------------------------------------------------------------------------
SOLD: Diebold Electronic Transaction Machinery Information Technology
- --------------------------------------------------------------------------------------------------
SOLD:Medco Health Systems Pharmacy Benefits Management Information Technology
- --------------------------------------------------------------------------------------------------
SOLD: Waters High-Performance Analytical Instruments Information Technology
- --------------------------------------------------------------------------------------------------
2
OAK VALUE FUND
PERFORMANCE INFORMATION
================================================================================
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT
IN THE OAK VALUE FUND AND STANDARD & POOR'S 500 INDEX
[GRAPHIC OMITTED]
S&P 500 INDEX: OAK VALUE FUND:
---------------------------- ---------------
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
---- ------ ------- ---- ------ -------
12/31/93 10,000 12/31/93 10,000
06/30/94 -3.39% 9,661 06/30/94 -3.17% 9,683
12/31/94 4.87% 10,132 12/31/94 1.71% 9,849
06/30/95 20.21% 12,180 06/30/95 10.92% 10,924
12/31/95 14.45% 13,940 12/31/95 16.15% 12,689
06/30/96 10.10% 15,347 06/30/96 11.10% 14,097
12/31/96 11.68% 17,140 12/31/96 16.10% 16,367
06/30/97 20.61% 20,672 06/30/97 20.24% 19,680
12/31/97 10.58% 22,859 12/31/97 14.52% 22,538
06/30/98 17.71% 26,908 06/30/98 17.49% 26,480
12/31/98 9.23% 29,392 12/31/98 1.22% 26,803
06/30/99 12.38% 33,031 06/30/99 5.51% 28,280
12/31/99 7.71% 35,576 12/31/99 -8.18% 25,966
06/30/00 -0.42% 35,426 06/30/00 0.30% 26,044
12/31/00 -8.72% 32,337 12/31/00 17.82% 30,684
06/30/01 -6.70% 30,172 06/30/01 4.67% 32,118
12/31/01 -5.56% 28,494 12/31/01 -4.92% 30,539
06/30/02 -13.16% 24,744 06/30/02 -12.51% 26,719
12/31/02 -10.30% 22,197 12/31/02 -13.52% 23,106
06/30/03 11.76% 24,807 06/30/03 18.70% 27,427
12/31/03 15.15% 28,564 12/31/03 11.30% 30,525
- --------------------------------------
OAK VALUE FUND
AVERAGE ANNUAL TOTAL RETURNS(A)
AS OF DECEMBER 31, 2003
1 YEAR 5 YEARS 10 YEARS
32.11% 2.64% 11.81%
- --------------------------------------
Past performance is not predictive of future performance.
- -----------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS
- -----------------------------------------------------------------------------------------------------------------------------------
SINCE
CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR INCEPTION*
1993* 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 (AS OF 12/31/03)
- -----------------------------------------------------------------------------------------------------------------------------------
Oak Value Fund 22.04% -1.54% 28.89% 28.99% 37.70% 18.93% -3.12% 18.17% -0.47% -24.34% 32.11% 272.56%
S&P 500 Index 9.60% 1.32% 37.58% 22.96% 33.36% 28.58% 21.04% -9.12% -11.90% -22.10% 28.69% 213.06%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- -----------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIODS ENDED DECEMBER 31, 2003
- -----------------------------------------------------------------------------------------------------------------------------------
SINCE
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS INCEPTION*
- -----------------------------------------------------------------------------------------------------------------------------------
Oak Value Fund.......................................... 32.11% -0.17% 2.64% 11.81% 12.76%
S&P 500 Index........................................... 28.69% -4.05% -0.57% 11.07% 10.98%
- -----------------------------------------------------------------------------------------------------------------------------------
* Inception date of the Oak Value Fund was January 18, 1993.
(A) The returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the
redemption of Fund shares.
3
OAK VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2003 (UNAUDITED)
================================================================================
ASSETS
Investments in securities:
At cost .................................................... $ 176,335,806
==============
At market value (Note 1) ................................... $ 245,345,130
Cash ......................................................... 180,483
Receivable for capital shares sold ........................... 236,106
Receivable for investment securities sold .................... 4,472,572
Dividends receivable ......................................... 132,865
Other assets ................................................. 34,079
--------------
TOTAL ASSETS ............................................... 250,401,235
--------------
LIABILITIES
Payable for capital shares redeemed .......................... 443,376
Accrued investment advisory fees (Note 3) .................... 189,403
Payable to affiliate ......................................... 25,800
Other accrued expenses ....................................... 46,128
--------------
TOTAL LIABILITIES ................................... 704,707
--------------
NET ASSETS ................................................... $ 249,696,528
==============
Net assets consist of:
Paid-in capital .............................................. $ 200,166,594
Accumulated net investment loss .............................. (855,698)
Accumulated net realized losses from security transactions ... (18,623,692)
Net unrealized appreciation on investments ................... 69,009,324
--------------
Net assets ................................................... $ 249,696,528
==============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) .................. 8,771,961
==============
Net asset value, offering price and redemption price
per share (Note 1) .......................................... $ 28.47
==============
See accompanying notes to financial statements.
4
OAK VALUE FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends .................................................. $ 816,494
Interest ................................................... 28,257
--------------
TOTAL INVESTMENT INCOME ................................. 844,751
--------------
EXPENSES
Investment advisory fees (Note 3) .......................... 1,203,236
Shareholder services and transfer
agent fees (Note 3) ....................................... 112,889
Administration fees (Note 3) ............................... 98,595
Professional fees .......................................... 58,552
Postage and supplies ....................................... 57,568
Trustees' fees and expenses ................................ 46,841
Fund accounting fees (Note 3) .............................. 25,359
Custodian fees ............................................. 16,681
Proxy expense .............................................. 14,620
Printing fees .............................................. 10,274
Insurance expense .......................................... 6,667
Registration fees .......................................... 5,210
Other expenses ............................................. 43,957
--------------
TOTAL EXPENSES .......................................... 1,700,449
--------------
NET INVESTMENT LOSS .......................................... (855,698)
--------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized losses from security transactions ............. (9,014,078)
Net change in unrealized appreciation/depreciation
on investments ............................................ 37,024,810
--------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS ............. 28,010,732
--------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ................... $ 27,155,034
==============
See accompanying notes to financial statements.
5
OAK VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR
DECEMBER 31, ENDED
2003 JUNE 30,
(UNAUDITED) 2003
- --------------------------------------------------------------------------------
FROM OPERATIONS
Net investment loss .......................... $ (855,698) $ (762,312)
Net realized losses from security transactions (9,014,078) (8,599,400)
Net change in unrealized appreciation/
depreciation on investments ................. 37,024,810 12,178,162
------------ ------------
Net increase in net assets from operations ... 27,155,034 2,816,450
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .................... 46,555,182 101,301,189
Cost of shares redeemed ...................... (96,595,251) (111,271,746)
------------ ------------
Net decrease in net assets from capital share
transactions ................................ (50,040,069) (9,970,557)
------------ ------------
NET DECREASE IN NET ASSETS ..................... (22,885,035) (7,154,107)
NET ASSETS
Beginning of period .......................... 272,581,563 279,735,670
------------ ------------
End of period ................................ $249,696,528 $272,581,563
============ ============
ACCUMULATED NET INVESTMENT LOSS ................ $ (855,698) $ --
============ ============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold .................................. 1,780,674 4,427,573
Shares redeemed .............................. (3,663,297) (5,000,009)
------------ ------------
Net decrease in shares outstanding ........... (1,882,623) (572,436)
Shares outstanding, beginning of period ...... 10,654,584 11,227,020
------------ ------------
Shares outstanding, end of period ............ 8,771,961 10,654,584
============ ============
See accompanying notes to financial statements.
6
OAK VALUE FUND
FINANCIAL HIGHLIGHTS
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
================================================================================
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
DECEMBER 31, ENDED ENDED ENDED ENDED ENDED
2003 JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
(UNAUDITED) 2003 2002 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------
Net asset value beginning of period ..... $ 25.58 $ 24.92 $ 30.74 $ 25.13 $ 27.96 $ 27.04
-------- -------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income (loss) .......... (0.10) (0.07) (0.10) (0.03) 0.11 0.07
Net realized and unrealized gains
(losses) on investments ............ 2.99 0.73 (5.05) 5.88 (1.48) 1.76
-------- -------- -------- -------- -------- --------
Total from investment operations ........ 2.89 0.66 (5.15) 5.85 (1.37) 1.83
-------- -------- -------- -------- -------- --------
Less distributions:
From net investment income ............ -- -- -- -- (0.11) (0.07)
From net realized gains from
security transactions .............. -- -- (0.67) (0.24) (1.30) (0.81)
In excess of net realized gains ....... -- -- -- -- (0.05) (0.03)
-------- -------- -------- -------- -------- --------
Total distributions ..................... -- -- (0.67) (0.24) (1.46) (0.91)
-------- -------- -------- -------- -------- --------
Net asset value at end of period ........ $ 28.47 $ 25.58 $ 24.92 $ 30.74 $ 25.13 $ 27.96
======== ======== ======== ======== ======= ========
Total return ............................ 11.30%(a) 2.65% (16.81%) 0.23 (7.91%) 6.80%
======== ======== ======== ======== ======= ========
Net assets at end of period (000's) ..... $249,697 $272,582 $279,736$ 346,405 $280,833 $624,773
======== ======== ======== ======== ======= ========
Ratio of net expenses to average
net assets(b) ......................... 1.27%(c) 1.36% 1.23% 1.22% 1.13% 1.10%
Ratio of net investment income
(loss) to average net assets .......... (0.64%)(c) (0.33%) (0.36%) (0.12%) 0.28% 0.27%
Portfolio turnover rate ................. 25%(c) 28% 63% 52% 22% 38%
(a) Not annualized.
(b) Absent the use of earnings credits on cash balances, the ratios of expenses
to average net assets would have been 1.24%, 1.23% and 1.14% for the years
ended June 30, 2002, June 30, 2001 and June 30, 2000.
(c) Annualized.
See accompanying notes to financial statements.
7
OAK VALUE FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS -- 96.5% VALUE
- --------------------------------------------------------------------------------
CONSUMER RELATED -- 16.6%
191,625 Cadbury Schweppes PLC - ADR ........................$ 5,727,671
396,500 Constellation Brands, Inc. - Class A (a) ........... 13,056,745
243,150 Ross Stores, Inc. .................................. 6,426,455
306,875 Zale Corp. (a) ..................................... 16,325,750
-----------
41,536,621
-----------
DIVERSIFIED -- 16.2%
115 Berkshire Hathaway, Inc. - Class A (a) ............. 9,688,750
6,209 Berkshire Hathaway, Inc. - Class B (a) ............. 17,478,335
595,150 Cendant Corp. (a) .................................. 13,253,990
-----------
40,421,075
-----------
FINANCE RELATED -- 12.2%
182,725 Ambac Financial Group, Inc. ........................ 12,679,288
189,600 Certegy, Inc. (a) .................................. 6,218,880
471,175 Equifax, Inc. ...................................... 11,543,787
-----------
30,441,955
-----------
HEALTHCARE -- 2.9%
158,605 Merck & Co., Inc. .................................. 7,327,551
-----------
INSURANCE -- 12.5%
202,975 AFLAC, Inc. ........................................ 7,343,635
200,000 PartnerRe, Ltd. .................................... 11,610,000
156,575 XL Capital Ltd. - Class A .......................... 12,142,391
-----------
31,096,026
-----------
MARKETING SERVICES -- 1.5%
240,475 Interpublic Group Cos., Inc. ....................... 3,751,410
-----------
MEDIA -- 16.9%
239,125 Dow Jones & Co., Inc. .............................. 11,920,381
128,985 E.W. Scripps Co. (The) - Class A ................... 12,142,648
812,425 Time Warner, Inc. (a) .............................. 14,615,526
150,000 Walt Disney Co. (The) .............................. 3,499,500
-----------
42,178,055
-----------
TECHNOLOGY -- 6.6%
308,075 Hewlett-Packard Co. ................................ 7,076,483
375,700 IMS Health, Inc. ................................... 9,339,902
-----------
16,416,385
-----------
TELECOMMUNICATIONS -- 11.1%
1,105,400 Charter Communications, Inc. - Class A (a) ......... 4,443,708
551,975 Comcast Corp. - Class A Special (a) ................ 17,265,778
176,650 Cox Communications, Inc. - Class A (a) ............. 6,085,593
-----------
27,795,079
-----------
TOTAL COMMON STOCKS (Cost $171,954,833) ............$ 240,964,157
-------------
8
OAK VALUE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SHARES CASH EQUIVALENTS -- 1.8% VALUE
- --------------------------------------------------------------------------------
4,380,973 First American Government Obligations Fund - Class S
(Cost $4,380,973)...................................$ 4,380,973
-----------
TOTAL INVESTMENTS AT VALUE -- 98.3%
(Cost $176,335,806).................................$ 245,345,130
OTHER ASSETS IN EXCESS OF LIABILITIES-- 1.7%........ 4,351,398
-----------
NET ASSETS-- 100.0%.................................$ 249,696,528
=============
(a) Non-income producing security.
See accompanying notes to financial statements.
9
OAK VALUE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 (UNAUDITED)
================================================================================
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Oak Value Fund (the "Fund") is a diversified series of shares of Oak Value
Trust (the "Trust"). The Trust, registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
was organized as a Massachusetts business trust on March 3, 1995. The Fund began
operations on January 18, 1993 as a series of the Albemarle Investment Trust.
The Fund's investment objective is to seek capital appreciation primarily
through investments in equity securities, consisting of common and preferred
stocks and securities convertible into common stocks traded in domestic and
foreign markets.
The following is a summary of the Fund's significant accounting policies:
SECURITIES VALUATION -- The Fund's portfolio securities are valued as of the
close of business of the regular session of the principal exchange where the
security is traded. Securities which are traded over-the-counter are valued at
the last sales price, if available, otherwise, at the last quoted bid price.
Securities traded on a national stock exchange are valued based upon the closing
price on the principal exchange where the security is traded. In the event that
market quotations are not readily available, securities are valued at fair value
as determined in accordance with procedures adopted in good faith by the Board
of Trustees. The fair value of securities with remaining maturities of 60 days
or less has been determined in good faith by the Board of Trustees to be
represented by amotized cost value, absent unusual circumstances.
REPURCHASE AGREEMENTS -- The Fund may enter into repurchase agreements from
financial institutions such as banks and broker-dealers that the Trust's
investment adviser deems creditworthy under the guidelines approved by the Board
of Trustees, subject to the seller's agreement to repurchase such securities at
a mutually agreed-upon date and price. The repurchase price generally equals the
price paid by the Fund plus interest negotiated on the basis of current
short-term rates, which may be more or less than the rate on the underlying
portfolio securities. The seller, under a repurchase agreement, is required to
maintain the value of collateral held pursuant to the agreement at not less than
the repurchase price (including accrued interest).
SHARE VALUATION -- The net asset value per share of the Fund is calculated daily
by dividing the total value of the Fund's assets, less liabilities, by the
number of shares outstanding. The offering price and redemption price per share
of the Fund is equal to the net asset value per share.
INVESTMENT INCOME -- Interest income is accrued as earned. Dividend income is
recorded on the ex-dividend date.
DISTRIBUTIONS TO SHAREHOLDERS -- Dividends arising from net investment income,
if any, are declared and paid semi-annually to shareholders of the Fund. Net
realized short-term capital gains, if any, may be distributed throughout the
year and net realized long-term capital gains, if any, are distributed at least
once each year. The amount of distributions from net investment income and net
realized capital gains are determined in accordance with federal income tax
regulations which may differ from accounting principles generally accepted in
the United States (GAAP). These "book/tax" differences are either temporary or
permanent in nature and are primarily due to losses deferred due to wash sales.
There were no distributions during the periods ended December 31, 2003 and June
30, 2003.
SECURITY TRANSACTIONS -- Security transactions are accounted for on trade date.
Cost of securities sold is determined on a specific identification basis.
10
ESTIMATES -- The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of income and expenses during the reporting period. Actual results could
differ from those estimates.
FEDERAL INCOME TAX -- It is the Fund's policy to comply with the special
provisions of Subchapter M of the Internal Revenue Code applicable to regulated
investment companies. As provided therein, in any fiscal year in which the Fund
so qualifies and distributes at least 90% of its taxable net income, the Fund
(but not the shareholders) will be relieved of federal income tax on the income
distributed. Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare as dividends in
each calendar year at least 98% of its net investment income (earned during the
calendar year) and 98% of its net realized capital gains (earned during the
twelve months ended October 31) plus undistributed amounts from prior years.
The following information is computed on a tax basis for each item as of
December 31, 2003:
- --------------------------------------------------------------------------------
Cost of portfolio investments ................................ $ 176,345,842
=============
Gross unrealized appreciation ................................ $ 70,611,013
Gross unrealized depreciation ................................ (1,611,725)
-------------
Net unrealized appreciation .................................. $ 68,999,288
-------------
Accumulated ordinary loss .................................... (855,698)
Capital loss carryforwards ................................... (1,025,302)
Other losses ................................................. (17,588,354)
-------------
Total distributable earnings ................................. $ 49,529,934
=============
- --------------------------------------------------------------------------------
The difference between the Federal income tax cost of portfolio investments and
the financial statement cost for the Fund is due to certain timing differences
in the recognition of capital losses under income tax regulations and GAAP.
As of June 30, 2003, the Fund had a capital loss carryforward of $1,025,302
which expires June 30, 2011. In addition, the Fund had net realized capital
losses of $8,574,276 during the period November 1, 2002 through June 30, 2003,
which are treated for federal income tax purposes as arising during the Fund's
tax year ending June 30, 2004. The capital loss carryforward and "post-October"
losses may be utilized in the current and future years to offset net realized
capital gains, if any, prior to distributing such gains to shareholders.
2. INVESTMENT TRANSACTIONS
During the six months ended December 31, 2003, cost of purchases and proceeds
from sales and maturities of investment securities, excluding short-term
investments, amounted to $31,828,548 and $70,743,578, respectively.
3. TRANSACTIONS WITH AFFILIATES
The Fund's investments are managed by Oak Value Capital Management, Inc. (the
"Adviser") under the terms of an Investment Advisory Agreement. Under the
Investment Advisory Agreement, the Fund pays the Adviser a fee, which is
computed and accrued daily and paid monthly, at an annual rate of 0.90% of the
Fund's average daily net assets. Certain trustees and officers of the Trust are
also officers of the Adviser or of Ultimus Fund Solutions, LLC, the Fund's
administrator, transfer agent and fund accounting services agent. Such trustees
and officers receive no direct payments or fees from the Trust for serving as
officers.
11
Under the terms of the Administration Agreement with the Trust, Ultimus provides
non-investment related statistical and research data, internal regulatory
compliance services and executive and administrative services. Ultimus
supervises the preparation of tax returns, reports to shareholders of the Fund,
reports to and filings with the Securities and Exchange Commission and state
securities commissions, and materials for meetings of the Board of Trustees. For
the performance of these services, 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 and .05% of such assets in
excess of $200 million, provided, however, that the minimum fee is $2,000 per
month.
Under the terms of the Transfer Agency Agreement with the Trust, Ultimus
maintains the records of each shareholder's account, answers shareholders'
inquiries concerning their accounts, processes purchases and redemptions of the
Fund's shares, acts as dividend and distribution disbursing agent and performs
other shareholder service functions. Ultimus receives from the Fund for its
services as transfer agent a fee payable monthly at an annual rate of $16 per
account, provided, however, that the minimum fee is $2,000 per month. In
addition, the Fund pays out-of-pocket expenses, including but not limited to,
postage and supplies. Accordingly, during the six months ended December 31,
2003, Ultimus was paid $38,147 for transfer agent fees.
Under the terms of the Fund Accounting Agreement with the Trust, Ultimus
calculates the daily net asset value per share and maintains such books and
records as are necessary to enable the Administrator to perform its duties. For
these services, the Fund pays Ultimus a base fee of $2,000 per month, plus an
asset-based fee at the annual rate of .01% of the average value of its daily net
assets up to $500 million and .005% of such assets in excess of $500 million. In
addition, the Fund pays all costs of external pricing services.
4. BANK LINE OF CREDIT
The Fund has an unsecured $25,000,000 bank line of credit. Borrowings under this
arrangement bear interest at a rate determined by the bank at the time of
borrowing. As of December 31, 2003, the Fund had no outstanding borrowings under
the line of credit.
12
OAK VALUE FUND
RESULTS OF SPECIAL MEETING OF SHAREHOLDERS
DECEMBER 15, 2003 (UNAUDITED)
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On December 15, 2003, a Special Meeting of Shareholders of the Oak Value Trust
(the Trust) was held (1) to approve a new Investment Advisory Agreement with Oak
Value Capital Management, Inc., and (2) to elect three Trustees. The total
number of shares of the Trust present in person or by proxy represented 72.4% of
the shares entitled to vote at the meeting. The new Investment Advisory
Agreement with Oak Value Capital Management, Inc. was approved, and all nominees
for Trustee were elected.
The results of the voting for or against the approval of the new Investment
Advisory Agreement with Oak Value Capital Management, Inc. were as follows:
----------------------------------------------------
NUMBER OF SHARES
----------------------------------------------------
FOR AGAINST ABSTAIN
----------------------------------------------------
6,508,760 45,590 100,159
----------------------------------------------------
The results of the voting to elect the nominees for Trustee were as follows:
----------------------------------
NUMBER OF SHARES
----------------------------------
NOMINEE AFFIRMATIVE WITHHOLD AUTHORITY
----------------------------------------------------
Larry D. Coats, Jr. 6,568,745 85,764
Matthew F. Sauer 6,570,815 83,694
Charles T. Manatt 6,579,166 75,343
----------------------------------------------------
13
OAK VALUE FUND
INVESTMENT ADVISER
Oak Value Capital Management, Inc.
3100 Tower Boulevard, Suite 700
Durham, North Carolina 27707
1-800-680-4199
www.oakvaluefund.com
ADMINISTRATOR
Ultimus Fund Solutions, LLC
135 Merchant Street, Suite 230
Cincinnati, Ohio 45246
INDEPENDENT AUDITORS
Deloitte & Touche LLP
155 East Broad Street
Columbus, Ohio 43215
CUSTODIAN
US Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
BOARD OF TRUSTEES
C. Russell Bryan
Larry D. Coats, Jr.
John M. Day
Joseph T. Jordan, Jr.
Charles T. Manatt
Matthew F. Sauer
OFFICERS
Larry D. Coats, Jr., President
Matthew F. Sauer, Vice President
Robert G. Dorsey, Vice President
Mark J. Seger, Treasurer
John F. Splain, Secretary
This report is for the information of the shareholders of the Oak Value Fund. It
may not be distributed to prospective investors unless it is preceded or
accompanied by the current fund prospectus.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge
upon request by calling toll-free 1-800-622-2474, or on the Securities and
Exchange Commission's website at http://www.sec.gov.
ITEM 2. CODE OF ETHICS.
Not required
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not required
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not required
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) Based on their evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company Act of
1940) as of a date within 90 days of the filing date of this report, the
registrant's principal executive officer and principal financial officer have
concluded that such disclosure controls and procedures are reasonably designed
and are operating effectively to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to them
by others within those entities, particularly during the period in which this
report is being prepared, and that the information required in filings on Form
N-CSR is recorded, processed, summarized, and reported on a timely basis.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)
that occurred during the registrant's most recent fiscal half-year (the
registrant's second fiscal half-year in the case of an annual report) that have
materially affected, or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 10. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not required
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2 under
the Act (17 CFR 270.30a-2(a)): Attached hereto
(b) Certifications required by Rule 30a-2(b) under the Act (17CFR 270.30a-2(b)):
Attached hereto
Exhibit 99.CERT Certifications pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
Exhibit 99.906CERT Certifications pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Oak Value Trust
-------------------------------------------------------------------
By (Signature and Title)* /s/ Larry D. Coats, Jr.
-----------------------------------------------------
Larry D. Coats, Jr., President
Date March 5, 2004
-------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Larry D. Coats, Jr.
-----------------------------------------------------
Larry D. Coats, Jr., President
Date March 5, 2004
-------------------------
By (Signature and Title)* /s/ Mark J. Seger
-----------------------------------------------------
Mark J. Seger, Treasurer
Date March 5, 2004
-------------------------
* Print the name and title of each signing officer under his or her signature.