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OMB APPROVAL
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OMB Number: 3235-0570
Expires: October 31, 2006
Estimated average burden
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 Boulevard 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, 2005
---------------------------------------------
Date of reporting period: December 31, 2004
---------------------------------------------
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, 2004
(UNAUDITED)
[GRAPHIC OMITTED]
---------------
OAK VALUE FUND
---------------
WWW.OAKVALUEFUND.COM
LETTER TO SHAREHOLDERS February 2005
================================================================================
Dear Fellow Oak Value Fund Shareholders:
We have included the Fund's financial statements for the six months ended
December 2004 and a variety of other financial and portfolio data in the pages
that follow. The Fund is currently invested across various profitable economic
activities including insurance and risk transfer, entertainment, beverages,
confectionary, travel, real estate, media & information, and retailing. We are
confident that we have allocated capital to businesses that we know well and
have researched thoroughly. For example, over three fourths of the Fund's
capital is allocated to companies which it also owned at the end of both 2003
and 2002. Nearly two thirds is invested in companies the Fund has held since
December 2001.
Our long-term holding periods notwithstanding, we continue to regularly
challenge the assumptions which support our allocations and decisions and to
look for additional opportunities. GOOD BUSINESSES, with GOOD MANAGEMENT, at
ATTRACTIVE PRICES remains our simple formula. We are enthusiastically pursuing
research, investigating businesses 1) where we believe we understand and can
reasonably predict the long term profitability dynamics, 2) that are run by
capable management, and 3) when they are available for less than our
conservative appraisal of their long term value.
In other Fund news, the board of the Oak Value Trust, including independent
trustees Mr. Russell Bryan, Mr. John Day, and Amb. Charles Manatt, unanimously
elected Mr. Joe Jordan, a long-time independent board member with an accounting
and financial background, to serve as Chairman of the Oak Value Trust effective
January 1, 2005, more than a year in advance of the compliance date mandated by
the Securities and Exchange Commission. The Oak Value Trust has recently
instituted several new initiatives, including the formation of the Fund
Governance, Nomination and Compensation Committee, chaired by Russell Bryan, an
independent trustee with significant mergers and acquisitions experience; and
the appointment of Mark Seger, co-founder and Managing Director of Ultimus Fund
Solutions, LLC, as the Chief Compliance Officer. Ultimus is the Fund's service
provider for Fund Accounting, Fund Administration and Transfer Agent services.
The Audit Committee is now chaired by John Day, an independent director with
extensive investment management and financial experience. Additionally, as we
previously reported to you, in April of 2004, the Oak Value Trust Board elected
to institute a 2% redemption fee on Oak Value Fund shares redeemed within 90
days of their date of purchase.
A variety of information that you may find useful can be found on the Fund's
website at WWW.OAKVALUEFUND.COM, including the Oak Value Fund Investment
Adviser's Reviews that we have been preparing since the fourth quarter of last
year. Hard
1
copies are available upon request by contacting us at 1-800-680-4199 or
INFO@OAKVALUE.COM. You may also sign up for Oak Value Fund email at
WWW.OAKVALUEFUND.COM/MAIL.HTM to receive timely access to email notifications of
website updates and document postings.
We thank you for your continued interest and partnership and welcome your
questions and comments.
Oak Value Fund Co-Managers,
/s/ David R. Carr, Jr. /s/ Larry D. Coats, Jr. /s/ Matthew F. Sauer
David R. Carr, Jr. Larry D. Coats, Jr. Matthew F. Sauer
Important Information:
The Oak Value Fund is distributed by Ultimus Fund Distributors, LLC. The
information presented above is not to be construed as an offer or solicitation
to purchase the Oak Value Fund (the "Fund"), which is offered only by
prospectus. An investor should consider the investment objectives, risks,
charges and expenses of the Fund carefully before investing. The Fund's
prospectus contains this and other important information. To obtain a copy of
the Oak Value Fund's prospectus please visit our website at www.oakvaluefund.com
or call 1-800-622-2474 and a copy will be sent to you free of charge. Please
read the prospectus carefully before you invest.
2
OAK VALUE FUND
PERFORMANCE INFORMATION (UNAUDITED)
================================================================================
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT
IN THE OAK VALUE FUND AND STANDARD & POOR'S 500 INDEX
[GRAPHIC OMITTED]
OAK VALUE FUND S&P 500 INDEX
---------------------------------- ---------------------------------
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
---- ------ ------- ---- ------ -------
12/31/94 10,000 12/31/94 10,000
06/30/95 20.21% 12,021 06/30/95 10.92% 11,092
12/31/95 14.45% 13,758 12/31/95 16.15% 12,884
06/30/96 10.10% 15,147 06/30/96 11.10% 14,313
12/31/96 11.68% 16,917 12/31/96 16.10% 16,618
06/30/97 20.61% 20,402 06/30/97 20.24% 19,981
12/31/97 10.58% 22,560 12/31/97 14.52% 22,883
06/30/98 17.71% 26,556 06/30/98 17.49% 26,886
12/31/98 9.23% 29,008 12/31/98 1.22% 27,214
06/30/99 12.38% 32,599 06/30/99 5.51% 28,714
12/31/99 7.71% 35,111 12/31/99 -8.18% 26,364
06/30/00 -0.42% 34,963 06/30/00 0.30% 26,443
12/31/00 -8.72% 31,915 12/31/00 17.82% 31,154
06/30/01 -6.70% 29,777 06/30/01 4.67% 32,610
12/31/01 -5.56% 28,121 12/31/01 -4.92% 31,008
06/30/02 -13.16% 24,421 06/30/02 -12.51% 27,129
12/31/02 -10.30% 21,907 12/31/02 -13.52% 23,460
06/30/03 11.76% 24,482 06/30/03 18.70% 27,847
12/31/03 15.14% 28,190 12/31/03 11.30% 30,993
06/30/04 3.44% 29,161 06/30/04 1.93% 31,592
12/31/04 7.19% 31,258 12/31/04 5.93% 33,465
Past performance is not predictive of future performance.
- ------------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS(A)
- ------------------------------------------------------------------------------------------------------------------------------------
SINCE
CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR INCEPTION*
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 (AS OF 12/31/04)
- ------------------------------------------------------------------------------------------------------------------------------------
Oak Value Fund -1.54% 28.89% 28.99% 37.70% 18.93% -3.12% 18.17% -0.47% -24.34% 32.11% 7.97% 302.27%(B)
S&P 500 Index 1.32% 37.58% 22.96% 33.36% 28.58% 21.04% -9.12% -11.90% -22.10% 28.68% 10.88% 247.42%(B)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(A)
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIODS ENDED DECEMBER 31, 2004
SINCE
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS INCEPTION*
- ------------------------------------------------------------------------------------------------------------------------------------
Oak Value Fund ..................................................... 7.97% 2.57% 4.89% 12.84% 12.35%
0S&P 500 Index ..................................................... 10.88% 3.59% -2.30% 12.07% 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.
(B) Not annualized.
3
OAK VALUE FUND
PORTFOLIO INFORMATION
DECEMBER 31, 2004 (UNAUDITED)
================================================================================
DISTRIBUTION BY BUSINESS CATEGORY
Consumer Related - 31.2%
Diversified - 14.6%
Finance Related - 12.4%
[GRAPHIC OMITTED] Insurance - 8.9%
Media - 16.2%
Technology - 5.8%
Telecommunications - 5.5%
Cash Equivalents- 5.4%
TOP TEN ISSUERS
COMPANY % OF NET ASSETS
-------------------------------------------------
Berkshire Hathaway, Inc. 9.35%
Constellation Brands, Inc. 7.06%
Zale Corp. 6.99%
E.W. Scripps Co. (The) 6.22%
Time Warner, Inc. 6.02%
Comcast Corp. 5.49%
Ambac Financial Group, Inc. 5.41%
Cadbury Schweppes PLC - ADR 5.37%
AutoZone, Inc. 5.36%
Cendant Corp. 5.30%
4
OAK VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2004 (UNAUDITED)
================================================================================
ASSETS
Investments in securities:
At cost ....................................................... $177,295,335
============
At market value (Note 1) ...................................... $262,575,749
Receivable for capital shares sold .............................. 97,732
Dividends receivable ............................................ 70,228
Other assets .................................................... 49,152
------------
TOTAL ASSETS .................................................. 262,792,861
------------
LIABILITIES
Payable for capital shares redeemed ............................. 102,755
Accrued investment advisory fees (Note 3) ....................... 198,202
Payable to affiliate ............................................ 30,150
Other accrued expenses and liabilities .......................... 55,919
------------
TOTAL LIABILITIES ............................................. 387,026
------------
NET ASSETS ...................................................... $262,405,835
============
Net assets consist of:
Paid-in capital ................................................. $192,224,711
Accumulated net investment loss ................................. (604,698)
Accumulated net realized losses from security transactions ...... (14,494,592)
Net unrealized appreciation on investments ...................... 85,280,414
------------
Net assets ...................................................... $262,405,835
============
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) ........................... 8,537,231
============
Net asset value, offering price and redemption price per share (A)$ 30.74
============
(A) Redemption price may differ from the net asset value per share depending
upon the length of time the shares are held (Note 1).
See accompanying notes to financial statements.
5
OAK VALUE FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 2004 (UNAUDITED)
================================================================================
INVESTMENT INCOME
Dividends ....................................................... $ 986,507
------------
EXPENSES
Investment advisory fees (Note 3) ............................... 1,136,505
Transfer agent and shareholder services fees (Note 3) ........... 122,587
Administration fees (Note 3) .................................... 94,196
Trustees' fees and expenses ..................................... 48,824
Professional fees ............................................... 34,854
Postage and supplies ............................................ 33,457
Fund accounting fees (Note 3) ................................... 24,592
Insurance expense ............................................... 21,935
Registration fees ............................................... 19,037
Compliance service fees (Note 3) ................................ 16,511
Custodian fees .................................................. 12,769
Printing fees ................................................... 12,570
Other expenses .................................................. 13,368
------------
TOTAL EXPENSES ................................................ 1,591,205
------------
NET INVESTMENT LOSS ............................................. (604,698)
------------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions ................... 307,966
Net change in unrealized appreciation/depreciation on investments 14,792,820
------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS ................ 15,100,786
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ...................... $ 14,496,088
============
See accompanying notes to financial statements.
6
OAK VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
==================================================================================================
SIX MONTHS
ENDED YEAR
DECEMBER 31, ENDED
2004 JUNE 30,
(UNAUDITED) 2004
- --------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment loss ............................................. $ (604,698) $ (1,344,329)
Net realized gains (losses) from security transactions .......... 307,966 (5,192,944)
Net change in unrealized appreciation/depreciation on investments 14,792,820 38,503,080
------------- -------------
Net increase in net assets from operations ...................... 14,496,088 31,965,807
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ....................................... 22,211,633 86,650,844
Proceeds from redemption fees collected (Note 1) ................ 27,313 1,864
Payments for shares redeemed .................................... (33,816,747) (131,712,530)
------------- -------------
Net decrease in net assets from capital share transactions ...... (11,577,801) (45,059,822)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS ............................. 2,918,287 (13,094,015)
NET ASSETS
Beginning of period ............................................. 259,487,548 272,581,563
------------- -------------
End of period ................................................... $ 262,405,835 $ 259,487,548
============= =============
ACCUMULATED NET INVESTMENT LOSS ................................... $ (604,698) $ --
============= =============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ..................................................... 768,998 3,151,677
Shares redeemed ................................................. (1,172,666) (4,865,362)
------------- -------------
Net decrease in shares outstanding .............................. (403,668) (1,713,685)
Shares outstanding, beginning of period ......................... 8,940,899 10,654,584
------------- -------------
Shares outstanding, end of period ............................... 8,537,231 8,940,899
============= =============
See accompanying notes to financial statements.
7
OAK VALUE FUND
FINANCIAL HIGHLIGHTS
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
========================================================================================================
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
DEC. 31, ENDED ENDED ENDED ENDED ENDED
2004 JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
(UNAUDITED) 2004 2003 2002 2001 2000
- --------------------------------------------------------------------------------------------------------
Net asset value beginning of period .. $29.02 $25.58 $24.92 $30.74 $25.13 $27.96
-------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income (loss) ....... (0.07) (0.15) (0.07) (0.10) (0.03) 0.11
Net realized and unrealized gains
(losses) on investments ........... 1.79 3.59 0.73 (5.05) 5.88 (1.48)
-------- -------- -------- -------- -------- --------
Total from investment operations ..... 1.72 3.44 0.66 (5.15) 5.85 (1.37)
-------- -------- -------- -------- -------- --------
Less distributions:
From net investment income ......... -- -- -- -- -- (0.11)
From net realized gains from
security transactions ............ -- -- -- (0.67) (0.24) (1.30)
In excess of net realized gains .... -- -- -- -- -- (0.05)
-------- -------- -------- -------- -------- --------
Total distributions .................. -- -- -- (0.67) (0.24) (1.46)
-------- -------- -------- -------- -------- --------
Proceeds from redemption
fees collected ..................... 0.00(A) 0.00(A) -- -- -- --
-------- -------- -------- -------- -------- --------
Net asset value at end of period ..... $30.74 $29.02 $25.58 $24.92 $30.74 $25.13
======== ======== ======== ======== ======== ========
Total return ......................... 5.93%(B) 13.45% 2.65% (16.81%) 23.32% (7.91%)
======== ======== ======== ======== ======== ========
Net assets at end of period (000's) .. $262,406 $259,488 $272,582 $279,736 $346,405 $280,833
======== ======== ======== ======== ======== ========
Ratio of expenses to
average net assets (C) ............. 1.26%(D) 1.25% 1.36% 1.23% 1.22% 1.13%
Ratio of net investment income
(loss) to average net assets ....... (0.48%)(D) (0.52%) (0.33%) (0.36%) (0.12%) 0.28%
Portfolio turnover rate .............. 16%(D) 24% 28% 63% 52% 22%
(A) Amount rounds to less than $0.01 per share.
(B) Not annualized.
(C) 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, respectively.
(D) Annualized.
See accompanying notes to financial statements.
8
OAK VALUE FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2004 (UNAUDITED)
================================================================================
SHARES COMMON STOCKS -- 94.6% VALUE
- --------------------------------------------------------------------------------
CONSUMER RELATED -- 31.2%
154,100 AutoZone, Inc. (A) .................................... $14,070,871
373,850 Cadbury Schweppes PLC - ADR ........................... 14,094,145
398,275 Constellation Brands, Inc. - Class A (A) .............. 18,523,770
171,350 Diageo PLC - ADR (A) .................................. 9,917,738
243,150 Ross Stores, Inc. ..................................... 7,019,740
613,750 Zale Corp. (A) ........................................ 18,332,713
-----------
81,958,977
-----------
DIVERSIFIED -- 14.6%
115 Berkshire Hathaway, Inc. - Class A (A) ................ 10,108,500
4,913 Berkshire Hathaway, Inc. - Class B (A) ................ 14,424,568
595,150 Cendant Corp. ......................................... 13,914,607
-----------
38,447,675
-----------
FINANCE RELATED -- 12.4%
172,725 Ambac Financial Group, Inc. ........................... 14,185,904
189,600 Certegy, Inc. ......................................... 6,736,488
411,175 Equifax, Inc. ......................................... 11,554,018
-----------
32,476,410
-----------
INSURANCE -- 8.9%
277,475 AFLAC, Inc. ........................................... 11,054,604
200,000 PartnerRe, Ltd. ....................................... 12,388,000
-----------
23,442,604
-----------
MEDIA -- 16.2%
126,225 Dow Jones & Co., Inc. ................................. 5,435,248
337,970 E.W. Scripps Co. (The) - Class A ...................... 16,317,192
812,425 Time Warner, Inc. (A) ................................. 15,793,542
133,775 Viacom, Inc. - Class B ................................ 4,868,072
-----------
42,414,054
-----------
TECHNOLOGY -- 5.8%
308,075 Hewlett-Packard Co. ................................... 6,460,333
375,700 IMS Health, Inc. ...................................... 8,719,997
-----------
15,180,330
-----------
TELECOMMUNICATIONS -- 5.5%
438,650 Comcast Corp. - Class A Special (A) ................... 14,405,266
-----------
TOTAL COMMON STOCKS (Cost $163,044,902) $248,325,316
-----------
9
OAK VALUE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
================================================================================
SHARES CASH EQUIVALENTS -- 5.4% VALUE
- --------------------------------------------------------------------------------
14,250,433 First American Government Obligations Fund - Class A
(Cost $14,250,433) ................................... $14,250,433
-----------
TOTAL INVESTMENTS AT VALUE--100.0% (Cost $177,295,335).$262,575,749
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.0)%........ (169,914)
-----------
NET ASSETS -- 100.0% ..................................$262,405,835
===========
(a) Non-income producing security.
See accompanying notes to financial statements.
10
OAK VALUE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 (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. Such methods of fair valuation may include, but are not limited to:
multiple of earnings, discount from market of a similar freely traded security,
or a combination of these or other methods. 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 amortized cost value, absent unusual
circumstances.
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, except that shares of the
Fund are subject to a redemption fee of 2.00% if redeemed within 90 days of the
date of purchase. For the six months ended December 31, 2004, proceeds from
redemption fees totaled $27,313.
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).
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, 2004 and June
30, 2004.
11
OAK VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
SECURITY TRANSACTIONS -- Security transactions are accounted for on trade date.
Gains and losses on securities sold are determined on a specific identification
basis.
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, 2004:
- --------------------------------------------------------------------------------
Cost of portfolio investments ................................. $ 177,305,675
=============
Gross unrealized appreciation ................................. $ 85,556,377
Gross unrealized depreciation ................................. (286,303)
-------------
Net unrealized appreciation ................................... $ 85,270,074
Capital loss carryforwards .................................... (14,792,522)
Other losses .................................................. (296,428)
-------------
Total distributable earnings .................................. $ 70,181,124
=============
- --------------------------------------------------------------------------------
The difference between the federal income tax cost of portfolio of investments
and the financial statement cost is due to the tax deferral of losses on wash
sales.
As of June 30, 2004, the Fund had a capital loss carryforward of $14,792,522, of
which $1,025,305 expires June 30, 2011 and $13,767,217 expires June 30, 2012.
The capital loss carryforward 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, 2004, cost of purchases and proceeds
from sales and maturities of investment securities, excluding short-term
investments, amounted to $19,954,673 and $44,273,151, 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 ("Ultimus"), 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.
Under the terms of an 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
12
OAK VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
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.
For the six months ended December 31, 2004, Ultimus was paid $94,196 for
administration fees.
Under the terms of a Transfer Agent and Shareholder Services 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, 2004, Ultimus was paid $43,484 for transfer agent and shareholder
services fees.
The Fund has entered into agreements with certain financial intermediaries to
provide record keeping, processing, shareholder communications and other
services to the Fund. These services would be provided by the Fund if the shares
were held in accounts registered directly with the Fund's transfer agent.
Accordingly, the Fund pays a fee to such service providers in an amount
equivalent to or less than the per account fee paid to the transfer agent.
During the six months ended December 31, 2004, the Fund paid $79,103 for such
services. These fees are reflected as "Transfer agent and shareholder services
fees" on the Statement of Operations.
Under the terms of a 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 Ultimus 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.
During the six months ended December 31, 2004, the Fund paid Ultimus $24,592 in
fund accounting fees. In addition, the Fund pays all costs of external pricing
services.
Under the terms of a Compliance Consulting Agreement with the Trust, Ultimus
provides an individual with the requisite background and familiarity with the
Federal Securities Laws to serve as the Chief Compliance Officer and to
administer the Trust's compliance policies and procedures. For these services,
the Fund pays Ultimus a base fee of $1,500 per month, plus an asset-based fee at
the annual rate of .01% of the average value of its daily net assets from $100
million to $500 million, .005% of such assets from $500 million to $1 billion
and .0025% of such assets in excess of $1 billion. During the six months ended
December 31, 2004, Ultimus was paid $16,511 for such services. In addition, the
Fund reimburses Ultimus for its reasonable out-of-pocket expenses.
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. During the six months ended December 31, 2004, the Fund had no
outstanding borrowings under the line of credit.
5. CONTINGENCIES AND COMMITMENTS
The Fund indemnifies the Trust's officers and trustees for certain liabilities
that might arise from their performance of their duties to the Fund.
Additionally, in the normal course of business the Fund enters into contracts
that contain a variety of representations and warranties and which provide
general indemnifications. The Fund's maximum exposure under these arrangements
is unknown, as this would involve future claims that may be made against the
Fund that have not yet occurred. However, based on experience, the Fund expects
the risk of loss to be remote.
13
OAK VALUE FUND
ABOUT YOUR FUND'S EXPENSES (UNAUDITED)
================================================================================
We believe it is important for you to understand the impact of costs on your
investment. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, including redemption fees; and (2) ongoing costs, including
management fees and other Fund expenses. The following examples are intended to
help you understand your ongoing costs (in dollars) of investing in the Fund and
to compare these costs with the ongoing costs of investing in other mutual
funds.
A fund's expenses are expressed as a percentage of its average net assets. This
figure is known as the expense ratio. The expenses in the table below are based
on an investment of $1,000 made at the beginning of the period shown and held
for the entire period.
The table below illustrates the Fund's costs in two ways:
ACTUAL FUND RETURN - This section helps you to estimate the actual expenses that
you paid over the period. The "Ending Account Value" shown is derived from the
Fund's actual return, and the third column shows the dollar amount of operating
expenses that would have been paid by an investor who started with $1,000 in the
Fund. You may use the information here, together with the amount you invested,
to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for the Fund under the heading "Expenses Paid During Period."
HYPOTHETICAL 5% RETURN - This section is intended to help you compare the Fund's
costs with those of other mutual funds. It assumes that the Fund had an annual
return of 5% before expenses during the period shown, but that the expense ratio
is unchanged. In this case, because the return used is not the Fund's actual
returns, the results do not apply to your investment. The example is useful in
making comparisons because the Securities and Exchange Commission requires all
mutual funds to calculate expenses based on a 5% return. You can assess the
Fund's costs by comparing this hypothetical example with the hypothetical
examples that appear in shareholder reports of other funds.
Note that expenses shown in the table are meant to highlight and help you
compare ongoing costs only. The Fund does not charge a front-end sales load.
However, a redemption fee of 2% is applied on the sale of shares held within 90
days of the date of purchase and does not apply to the redemption of shares
acquired through reinvestment of dividends and other distributions.
The calculations assume no shares were bought or sold during the period. Your
actual costs may have been higher or lower, depending on the amount of your
investment and the timing of any purchases or redemptions.
More information about the Fund's expenses, including annual expense ratios for
the prior five fiscal years, can be found in this report. For additional
information on operating expenses and other shareholder costs, please refer to
the Fund's prospectus.
- --------------------------------------------------------------------------------
Beginning Ending
Account Value Account Value Expenses Paid
July 1, 2004 Dec. 31, 2004 During Period*
- --------------------------------------------------------------------------------
Based on Actual Fund Return $1,000.00 $1,059.30 $6.54
Based on Hypothetical 5% Return
(before expenses) $1,000.00 $1,018.85 $6.41
- --------------------------------------------------------------------------------
o Expenses are equal to the annualized expense ratio of 1.26% for the period,
multiplied by the average account value over the period, multiplied by
184/365 (to reflect the one-half year period).
14
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
225 Pictoria Drive, Suite 450
Cincinnati, Ohio 45246
INDEPENDENT AUDITORS
Deloitte & Touche LLP
250 East Fifth Street
Suite 1900
Cincinnati, Ohio 45202
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
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 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. INFORMATION REGARDING HOW THE FUND VOTED PROXIES
RELATING TO PORTFOLIO SECURITIES DURING THE MOST RECENT 12-MONTH PERIOD ENDED
JUNE 30 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. SCHEDULE OF INVESTMENTS.
Not applicable [schedule filed with Item 1]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant's Governance, Nomination and Compensation Committee will consider
shareholder recommendations to fill vacancies on the board of trustees if such
recommendations are submitted in writing and addressed to the Governance,
Nomination and Compensation Committee at the registrant's offices.
ITEM 10.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 11. 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(a) under
the Act (17 CFR 270.30a-2(a)): Attached hereto
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under
the Act (17 CFR 270.23c-1) sent or given during the period covered by the report
by or on behalf of the registrant to 10 or more persons: Not applicable
(b) Certifications required by Rule 30a-2(b) under the Act (17 CFR
270.30a-2(b)): Attached hereto
Exhibit 99.CERT Certifications required by Rule 30a-2(a) under the Act
Exhibit 99.906CERT Certifications required by Rule 30a-2(b) under the Act
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 February 23, 2005
------------------------------
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 February 23, 2005
------------------------------
By (Signature and Title)* /s/ Mark J. Seger
--------------------------------------------
Mark J. Seger, Treasurer
Date February 23, 2005
------------------------------
* Print the name and title of each signing officer under his or her signature.