---------------------------
OMB APPROVAL
---------------------------
OMB Number: 3235-0570
Expires: April 30, 2008
Estimated average burden
hours per response: 19.4
---------------------------
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, 2007
-------------------------------------------
Date of reporting period: June 30, 2007
-------------------------------------------
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.
ANNUAL REPORT
JUNE 30, 2007
[GRAPHIC OMITTED]
==============
OAK VALUE FUND
--------------
WWW.OAKVALUEFUND.COM
LETTER TO SHAREHOLDERS August 9, 2007
================================================================================
Dear Fellow Oak Value Fund Shareholders:
We are pleased to report that the Oak Value Fund handily outperformed the broad
market (as measured by the S&P 500 Index) for the fiscal year which ended June
30, 2007, posting an impressive return of 25.03% compared to the S&P 500 return
of 20.59%* (see page 9 for complete performance information). We attribute this
outperformance to the disciplined focus on buying higher quality, sustainably
advantaged businesses where the risks assumed are more than appropriately
reflected in the prices that have been paid. Our task is not that of completely
eliminating risk or uncertainty. Alternatively, we believe that our charge is to
identify, understand and price risk and to take advantage of that mispricing
when we believe the rewards are attractive.
There is an old adage in the stock market that rising stock prices climb a "wall
of worry." Such was certainly the case over the Oak Value Fund (the "Fund")'s
most recent fiscal year. Foremost among these worries was a slowing U.S.
economy, a slowing housing market, a shakeout in the sub-prime mortgage market,
continued concern over the risk of terrorism, high energy prices, and the risk
of inflation resulting from increased commodity prices. While never completely
immune to the indirect impact of these and other "worries" that may be present
in the market at any given point in time, the collection of businesses (in
aggregate) in which we have invested on behalf of Fund shareholders performed
particularly well during the year.
It is human nature to worry about recent events or factors which are apparent
with the benefit of hindsight. An obvious example of this "worry" is the
presumption that the shares of a company contain more "risk" after a decline
that has been caused by some short-term disappointment or surprise. The ultimate
risk that we attempt to guard against is that of a permanent loss of capital.
The balancing of potential short-term volatility with the potential for
significant long-term appreciation is an essential ingredient in our work. Our
pedigree as value investors requires not that we "torment" ourselves with this
task, but that we embrace the challenge as potentially ripe with opportunity.
We have often referenced this challenge as sorting the "wheat from the chaff."
The author Nassim Nicholas Taleb states that "Sometimes a lot of data can be
meaningless; at other times a single piece of information can be very
meaningful." Our research efforts are keenly tuned to that which we believe to
be relevant in the long-term though ignored by the general market in the short
term. We believe that it is more important to "worry" about that which may
happen as opposed to that which has happened and to make sure that we
1
have reflected such in our decisions. It is not necessarily our opinion that all
"worry" is useless; we would argue that it is most important that an investor
"worry" about the things that are relevant to long-term business models and the
valuations thereof. This discipline is not easy. In fact, it is often very
difficult and periodically contrary to public sentiment.
Fortunately, we operate with the confidence of a proven set of principles that
have withstood the test of time. We believe our philosophical framework of
searching out "good businesses with good management at attractive prices"
continues to serve Fund shareholders well. The recent results only reinforce
this confidence, as we remain focused on MAKING GOOD INVESTMENT DECISIONS.
The operating results and related information for the Fund's fiscal year ended
June 30, 2007 are presented in the pages that follow. We welcome questions and
comments from Fund shareholders and encourage you to visit www.oakvaluefund.com
for various periodic commentaries and publications that we make available.
We thank you, our fellow Fund shareholders, for your interest in the Oak Value
Fund and the confidence you have placed in our team.
Oak Value Fund Co-Managers,
/s/ David R. Carr, Jr. /s/ Larry D. Coats, Jr.
David R. Carr, Jr. Larry D. Coats, Jr.
Note: Please see the Important Information section of this report for disclosure
that applies to both this letter and the Management Discussion and Analysis that
follows.
* The S&P 500 Index returns referenced include the reinvestment of dividends.
2
MANAGEMENT DISCUSSION AND ANALYSIS
================================================================================
The Fund's performance for the fiscal year ended June 30, 2007 can be most
notably attributed to the outstanding performance of holdings across a broad
spectrum of market exposure. The market beating performance of Fund holdings in
the Consumer, Financials, Industrials, Technology and Materials sectors more
than compensated for the headwinds created by the lack of direct exposure to the
Energy, Telecommunications and Utilities sectors. Below we summarize some of the
specifics. (Table B provides a full listing of the Fund's top contributors
during the fiscal year.)
o The single largest contributor to the Fund's performance during the period
was Apollo Group, as the shares of this, the largest for-profit
educational company in the country, advanced nearly 60 percent from the
Fund's initial purchase price.
o Shares of Cadbury Schweppes, a long-term and significant Fund holding,
advanced nearly 40 percent during the fiscal year. As the world's largest
confectionary company, the value of this fine collection of businesses was
alas given its due (somewhat).
o Advancing more than 35 percent during the fiscal year were the shares of
insurance brokerage firm Willis Group. Our investment thesis in the case
of Willis was predicated on the realization of growth opportunities the
company pursued after the shake-up in its industry nearly three years ago.
o The Fund's investment in the shares of Fidelity National Information
Services during the year was actually a continuation of a longer-term
investment thesis. Having owned shares in its predecessor company Certegy
for several years, we returned to this relatively unknown company early in
the fiscal year. Its shares advanced nearly 40 percent as well.
o Specialty and industrial gas producer Praxair advanced 33 percent during
the fiscal year as the company continued to deliver on the long-term
potential we identified a couple of years ago.
o Shares of Harley Davidson advanced nearly 30 percent by mid-year and
provided us with the opportunity to exit this position at near our
conservative estimate of its intrinsic value.
o Finally, the shares of Oracle advanced more than 35 percent during the
fiscal year adding this fine company to the list of outstanding
contributors for the period.
In reviewing the list of Fund portfolio holdings that did not keep pace during
the period, we note that several of them are among the "new purchases." We view
the presence of these recent additions amongst the Fund's underperformers as the
seeds of future harvest. This list includes Microsoft, Capital One, UPS,
Medtronic and Omnicare.
3
Portfolio activity (purchases and sales) for the Fund is summarized in Table C.
We use this opportunity to remind shareholders that the information provided in
Table C is limited to the holdings which were new to the portfolio during the
year and those which were completely eliminated during the period. Furthermore,
we note that the number of issues added and eliminated during the period is
greater than has been the case in recent fiscal years. This increased activity
is primarily a function of the particularly appealing "opportunity set" we
experienced during the year.
Though we remain focused on individual security selection from a bottom-up
perspective, readers will observe that a top-down view of the portfolio reflects
a reduced exposure to Consumer related holdings and increased exposures to
Health Care, Technology and Industrial businesses as compared to the prior
fiscal year end. We view this "shift" purely as a function of the opportunities
afforded by a rising, though still somewhat manic market and encourage
shareholders to share that view. Our charge of investing in good businesses with
good management at attractive prices requires that we be prepared and
opportunistic.
On a final note, the capital gains distributions made by the Fund during the
fiscal year were larger than in years past. The realization of gains in the Fund
is first and foremost a by-product of the ongoing management of the portfolio
toward the objective of producing above average returns for the benefit of
shareholders. The gains realized during the period were also impacted by the
level of shareholder activity the Fund experienced. Throughout the life of the
Fund, nearly 80% of the capital gains distributions have been in the form of
long-term gains.
- --------------------------------------------------------------------------------
TABLE A
- --------------------------------------------------------------------------------
QUARTERLY PERFORMANCE - FISCAL YEAR 2007
- --------------------------------------------------------------------------------
3RD 4TH 1ST 2ND
QUARTER QUARTER QUARTER QUARTER
2006 2006 2007 2007
- --------------------------------------------------------------------------------
Oak Value Fund 7.29% 6.47% 1.24% 8.12%
- --------------------------------------------------------------------------------
S&P 500 (with dividends) 5.67% 6.70% 0.64% 6.28%
- --------------------------------------------------------------------------------
The performance information quoted above represents past performance and past
performance does not guarantee future results. Investment return and principal
value of an investment will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Current
performance may be lower or higher than the performance data quoted. Performance
data, current to the most recent month end, may be found at the Oak Value Fund
("Fund")'s website www.oakvaluefund.com. An investor should consider the Fund's
investment objectives, risks, and charges and expenses carefully before
investing. The Fund's prospectus contains this and other important information.
THE FUND'S ANNUALIZED GROSS EXPENSE RATIO AS OF FISCAL YEAR-END (6/30/07) WAS
1.35%.
The Fund imposes a 2% redemption fee on shares redeemed within 90 days of their
purchase date. See the Fund's current Prospectus for more information on the
Fund's redemption fee. Please keep in mind the performance information above
does not reflect the imposition of a 2% redemption fee. You may obtain a copy of
the Fund's prospectus at www.oakvaluefund.com or by calling 1-800-622-2474.
Please read the prospectus carefully before you invest or send money.
- --------------------------------------------------------------------------------
4
- -------------------------------------------------------------------------------------------------------
TABLE B
- -------------------------------------------------------------------------------------------------------
LARGEST NET CONTRIBUTORS TO INVESTMENT RESULTS
YEAR ENDED JUNE 30, 2007
- -------------------------------------------------------------------------------------------------------
TOP 5 SECURITIES % OF BOTTOM 5 SECURITIES % OF
BY CONTRIBUTION NET ASSETS BY CONTRIBUTION NET ASSETS
- -------------------------------------------------------------------------------------------------------
Apollo Group, Inc. - Class A 5.77% Omnicare, Inc. 2.02%
- -------------------------------------------------------------------------------------------------------
Cadbury Schweppes PLC - ADR 4.09% Masco Corp. Sold
- -------------------------------------------------------------------------------------------------------
Willis Group Holdings Ltd. 4.00% CBS Corp. Sold
- -------------------------------------------------------------------------------------------------------
Praxair, Inc. 5.26% Estee Lauder Co. Sold
- -------------------------------------------------------------------------------------------------------
Fidelity National Information Medtronic, Inc. 3.44%
Services, Inc. 5.73%
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
TABLE C
- -------------------------------------------------------------------------------------------------------
JULY 1, 2006 - JUNE 30, 2007 PURCHASE ACTIVITY
- -------------------------------------------------------------------------------------------------------
COMPANY PURCHASED PRIMARY BUSINESS SECTOR CLASSIFICATION
- -------------------------------------------------------------------------------------------------------
3M Co. Manufacturing & Marketing Industrials
Technology Products/Services
- -------------------------------------------------------------------------------------------------------
American Express Co. Charge Card, Travel, Network, Financials
& Global Payments
- -------------------------------------------------------------------------------------------------------
Aon Corp. Insurance Brokerage, Consulting, Financials
& Supplemental Insurance
- -------------------------------------------------------------------------------------------------------
Apollo Group, Inc. - Class A Education & Training Services Consumer Discretionary
- -------------------------------------------------------------------------------------------------------
CBS Corp. Diversified Media Broadcasting Consumer Discretionary
- -------------------------------------------------------------------------------------------------------
Capital One Financial Corp. Financial Services Financials
- -------------------------------------------------------------------------------------------------------
eBay, Inc. Online Marketplace, Payment Services Information Technology
& Communications
- -------------------------------------------------------------------------------------------------------
Fidelity National Information Financial Transaction Processing Information Technology
Services, Inc.
- -------------------------------------------------------------------------------------------------------
Harley-Davidson, Inc. Heavyweight High-End Motorcycles Consumer Discretionary
- -------------------------------------------------------------------------------------------------------
Medtronic, Inc. Medical Appliances and Equipment Health Care
- -------------------------------------------------------------------------------------------------------
Microsoft Corp. Software Development and Manufacturing Information Technology
- -------------------------------------------------------------------------------------------------------
Omnicare, Inc. Geriatric Pharmaceutical Services Health Care
- -------------------------------------------------------------------------------------------------------
Tiffany & Co. Fine Jewelry Retailer Consumer Discretionary
- -------------------------------------------------------------------------------------------------------
United Parcel Service, Inc. Air Delivery and Freight Services Industrials
- -------------------------------------------------------------------------------------------------------
JULY 1, 2006 - JUNE 30, 2007 SALE ACTIVITY
- -------------------------------------------------------------------------------------------------------
COMPANY PURCHASED PRIMARY BUSINESS SECTOR CLASSIFICATION
- -------------------------------------------------------------------------------------------------------
CBS Corp. Diversified Media Broadcasting Consumer Discretionary
- -------------------------------------------------------------------------------------------------------
Diageo plc ADR Global Premium Alcohol Business Consumer Staples
- -------------------------------------------------------------------------------------------------------
Entercom Communications Corp. Radio Broadcasting Consumer Discretionary
- -------------------------------------------------------------------------------------------------------
Equifax, Inc. Credit Reporting Services Industrials
- -------------------------------------------------------------------------------------------------------
Estee Lauder, Inc. Beauty/Skin Care Products Consumer Staples
- -------------------------------------------------------------------------------------------------------
Harley-Davidson, Inc. Heavyweight High-End Motorcycles Consumer Discretionary
- -------------------------------------------------------------------------------------------------------
Masco Corp. Home Improvement & Building Products Industrials
- -------------------------------------------------------------------------------------------------------
Tiffany & Co. Fine Jewelry Retailer Consumer Discretionary
- -------------------------------------------------------------------------------------------------------
Time Warner, Inc. Entertainment & Information/Media Consumer Discretionary
- -------------------------------------------------------------------------------------------------------
Tyco International, Ltd. Diversified Manufacturing & Services Industrials
- -------------------------------------------------------------------------------------------------------
5
- -------------------------------------------------------------------------------------------------------
TABLE D
- -------------------------------------------------------------------------------------------------------
TOP TEN HOLDINGS AS OF JUNE 30, 2007(1)
- -------------------------------------------------------------------------------------------------------
COMPANY PRIMARY BUSINESS S&P SECTOR
- -------------------------------------------------------------------------------------------------------
3M Co. Manufacturing & Marketing Technology Industrials
Products/Services
- -------------------------------------------------------------------------------------------------------
American Express Co. Charge Card, Travel, Network, Financials
& Global Payments
- -------------------------------------------------------------------------------------------------------
Apollo Group, Inc. - Class A Education & Training Services Consumer Discretionary
- -------------------------------------------------------------------------------------------------------
Berkshire Hathaway, Inc. Insurance, Reinsurance & Capital Allocation Financials
- -------------------------------------------------------------------------------------------------------
E.I. du Pont de Nemours and Co. Chemicals Materials
- -------------------------------------------------------------------------------------------------------
E.W. Scripps Co. (The) Entertainment & Information/Media Consumer Discretionary
- -------------------------------------------------------------------------------------------------------
Fidelity National Information Financial Transaction Processing Information Technology
Services, Inc.
- -------------------------------------------------------------------------------------------------------
Oracle Corp. Database, Middleware, & Application Software Information Technology
- -------------------------------------------------------------------------------------------------------
Praxair, Inc. Industrial Use Atmospheric & Process Gases Materials
- -------------------------------------------------------------------------------------------------------
United Technologies Corp. Diversified Manufacturing and Service Industrials
- -------------------------------------------------------------------------------------------------------
1 Top Ten Holdings are presented to illustrate examples of the securities in which the Fund may
invest. Because they are presented as of the dates indicated and change from time to time, they
may not be representative of the Fund's current or future investments. Top Ten Holdings do not
include money market instruments.
- -------------------------------------------------------------------------------------------------------
6
IMPORTANT INFORMATION
This Management Discussion and Analysis seeks to describe some of the Oak Value
Fund ("the Fund") managers' current views of the market that shareholders may
find relevant and to provide a discussion of the market conditions and
investment strategies that significantly affected the Fund's performance during
its latest fiscal year.
Any listing or discussion of specific securities is intended to help
shareholders understand the Fund's investment strategies and/or factors that
influenced the Fund's investment performance, and should not be regarded as a
recommendation of any security. We believe we have a reasonable basis for any
opinions expressed, though actual results may differ, sometimes significantly
so, from those we expect and express. Statements referring to future actions or
events, such as the future financial performance or ongoing business strategies
of the companies in which the Fund invests, are based on the current
expectations and projections about future events provided by various sources,
including company management. These statements are not guarantees of future
performance, and actual events and results may differ materially from those
discussed herein.
Any opinions and views expressed related to the prospects of any individual
portfolio holdings or grouping thereof or of the Fund itself are "forward
looking statements" which may or may not prove to be accurate over the long term
when viewed from the perspective of hindsight. Forward looking statements can be
identified by words, phrases, and expressions such as "believe," "expect,"
"anticipate," "in our view," "in our opinion," or similar terminology when
discussing prospects for particular Fund portfolio companies or groupings of
companies, and/or of the Fund itself. We cannot assure future results or
performance. You should not place undue reliance on forward looking statements,
which are effective only as of the date of this report. We recognize no
obligation to update or alter such forward looking statements, whether as a
result of changes in our opinion or analysis, subsequent information, future
events, or other circumstances.
Any displays detailing a summary of holdings (e.g., top holdings, purchases and
sales, largest net contributors, etc.) are based on the Fund's holdings on June
30, 2007 or held during the fiscal year ended June 30, 2007. References to
securities purchased or held are only as of the date of this communication to
shareholders. Although the Fund's investment adviser focuses on long-term
investments, holdings are subject to change.
This Letter to Shareholders and Management Discussion and Analysis may include
statistical and other factual information obtained from third-party sources. We
believe those sources to be accurate and reliable; however, we are not
responsible for errors by them on which we reasonably rely. In addition, our
comments are influenced by our analysis of information from a wide variety of
sources and may contain syntheses, synopses, or excerpts of ideas from written
or oral viewpoints provided to us by investment, industry, press and other
public sources about various economic, political, central bank, and other
suspected influences on investment markets.
Although our comments focus on the most recent fiscal year, we use this
perspective only because it reflects industry convention and regulatory
7
expectations and requirements. The Fund and its investment adviser do not
subscribe to the notion that twelve-month periods or other short-term periods
are either appropriate for making judgments or useful in setting long-term
expectations for returns from our, or any other, investment strategy. The Fund
and its investment adviser do not subscribe to any particular viewpoint about
causes and effects of events in the broad capital markets, other than that they
are not predictable in advance. Specifically, nothing contained in the Letter to
Shareholders or Management Discussion and Analysis should be construed as a
forecast of overall market movements, either in the short or long term.
Any headings, titles, section dividers, quotations, or other devices used herein
are provided for the convenience of the reader and purposes of style. They are
not required elements of the presentation and may or may not be applied
identically in similar publications over time.
We do not attempt to address specifically how individual shareholders have
fared, since shareholders also receive account statements showing their holdings
and transactions. Information concerning the performance of the Fund and the
Fund's portfolio holdings over the last year are available upon request. You
should not assume that future recommendations will be as profitable as past
recommendations.
Comparisons to benchmarks have limitations because benchmarks have volatility
and other material characteristics that may differ from open-end mutual funds.
Because of these differences, benchmarks should not be relied upon as an exact
measure of comparison. Indices are unmanaged and do not reflect the payment of
advisory fees and other expenses associated with open-end mutual funds.
Investors cannot directly invest in an index, though index funds designed to
replicate the performance of various indices are generally available. The S&P
500 index is weighted by market value, and its performance is thought to be
representative of the stock market as a whole. The S&P 500 index was created in
1957, although it has been extrapolated backwards to several decades earlier for
performance comparison purposes. This index provides a broad snapshot of the
overall U.S. equity market; in fact, over 70% of all U.S. equity is tracked by
the S&P 500. The index selects its companies based upon their market size,
liquidity, and sector. Most of the companies in the index are mid cap or large
cap corporations. The S&P 500 Index referenced includes the reinvestment of
dividends.
Past performance is no indication of future performance. Any performance data
quoted represents past performance and the investment return and principal value
of an investment in the Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Current
performance may be higher or lower than performance quoted. Performance data is
updated monthly and is available on the Fund's website at www.oakvaluefund.com.
An investor should consider the investment objectives, strategies, risks,
charges and expenses of the Fund before investing. The prospectus contains this
and other important information about the Fund. For a prospectus, please call 1
(800) 622-2474 or visit the Fund's website at www.oakvaluefund.com. Read the
prospectus carefully before you invest.
Oak Value Fund is distributed by Ultimus Fund Distributors, LLC.
8
OAK VALUE FUND
PERFORMANCE INFORMATION (UNAUDITED)
================================================================================
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT
IN THE OAK VALUE FUND AND THE S&P 500 INDEX
[GRAPHIC OMITTED]
OAK VALUE FUND S&P 500 INDEX
-------------- --------------
DATE VALUE DATE VALUE
---- ------- ---- -------
06/30/97 $ 10,000 06/30/97 $ 10,000
12/31/97 11,452 12/31/97 11,058
06/30/98 13,456 06/30/98 13,016
12/31/98 13,620 12/31/98 14,218
06/30/99 14,370 06/30/99 15,978
12/31/99 13,194 12/31/99 17,209
06/30/00 13,234 06/30/00 17,136
12/31/00 15,591 12/31/00 15,643
06/30/01 16,320 06/30/01 14,595
12/31/01 15,518 12/31/01 13,783
06/30/02 13,577 06/30/02 11,970
12/31/02 11,741 12/31/02 10,737
06/30/03 13,937 06/30/03 12,000
12/31/03 15,511 12/31/03 13,817
06/30/04 15,811 06/30/04 14,293
12/31/04 16,748 12/31/04 15,321
06/30/05 16,791 06/30/05 15,197
12/31/05 16,519 12/31/05 16,073
06/30/06 16,512 06/30/06 16,508
12/31/06 18,861 12/31/06 18,612
06/30/07 20,646 06/30/07 19,907
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURNS(A)
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR-TO-DATE SINCE
2007 INCEPTION*
CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR (AS OF (AS OF
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 6/30/07) 06/30/07)
- ------------------------------------------------------------------------------------------------------------------------------------
Oak Value Fund 37.70% 18.93% -3.12% 18.17% -0.47% -24.34% 32.11% 7.97% -1.37% 14.18% 9.46%(B) 395.89%(B)
S&P 500 Index 33.36% 28.58% 21.04% -9.12% -11.90% -22.10% 28.68% 10.88% 4.91% 15.79% 6.96%(B) 351.42%(B)
- ------------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(A)
- -----------------------------------------------------------------------------------------------------
FOR THE PERIODS ENDED JUNE 30, 2007
-------------------------------------------------------------
SINCE
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS INCEPTION*
- -----------------------------------------------------------------------------------------------------
Oak Value Fund ...................... 25.03% 9.30% 8.74% 7.52% 11.72%
S&P 500 Index ....................... 20.59% 11.68% 10.71% 7.13% 11.00%
- -----------------------------------------------------------------------------------------------------
* 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.
9
OAK VALUE FUND
PORTFOLIO INFORMATION
JUNE 30, 2007 (UNAUDITED)
================================================================================
DISTRIBUTION BY BUSINESS CATEGORY (% OF NET ASSETS)
Consumer Related - 22.5%
Finance Related - 25.7%
Healthcare - 12.2%
[GRAPHIC OMITTED] Industrials - 11.8%
Information Technology - 17.6%
Materials - 10.1%
Cash Equivalents - 0.1%
TEN LARGEST HOLDINGS
% OF
COMPANY NET ASSETS
--------------------------------------------------------
Berkshire Hathaway, Inc.(A) 9.34%
Apollo Group, Inc. - Class A 5.77%
Fidelity National Information Services, Inc. 5.73%
E.W. Scripps Co. (The) - Class A 5.40%
Praxair, Inc. 5.26%
E.I. du Pont de Nemours and Co. 4.87%
3M Co. 4.82%
Oracle Corp. 4.77%
United Technologies Corp. 4.73%
American Express Co. 4.53%
(A) Class A and Class B shares combined.
10
OAK VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2007
================================================================================
ASSETS
Investments in securities:
At cost .................................................. $ 98,786,367
===============
At market value (Note 1) ................................. $ 142,537,693
Receivable for capital shares sold .......................... 14,527
Dividends receivable ........................................ 34,301
Other assets ................................................ 43,763
---------------
TOTAL ASSETS ............................................. 142,630,284
---------------
LIABILITIES
Payable for capital shares redeemed ......................... 138,767
Accrued investment advisory fees (Note 3) ................... 106,803
Payable to administrator (Note 3) ........................... 19,165
Other accrued expenses and liabilities ...................... 26,084
---------------
TOTAL LIABILITIES ........................................ 290,819
---------------
NET ASSETS .................................................. $ 142,339,465
===============
Net assets consist of:
Paid-in capital ............................................. $ 98,592,946
Distributions in excess of net realized gains
from security transactions ................................ (4,807)
Net unrealized appreciation on investments .................. 43,751,326
---------------
Net assets .................................................. $ 142,339,465
===============
Shares of beneficial interest outstanding
(unlimited number of shares authorized, no par value) ..... 5,516,319
===============
Net asset value, offering price and redemption
price per share (A) ....................................... $ 25.80
===============
(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.
11
OAK VALUE FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2007
================================================================================
INVESTMENT INCOME
Dividends ................................................... $ 1,911,666
Other ....................................................... 13,200
---------------
TOTAL INCOME.............................................. 1,924,866
---------------
EXPENSES
Investment advisory fees (Note 3) ........................... 1,453,570
Transfer agent and shareholder services fees (Note 3) ....... 154,344
Administration fees (Note 3) ................................ 133,463
Trustees' fees and expenses ................................. 106,285
Professional fees ........................................... 63,670
Postage and supplies ........................................ 61,322
Insurance expense ........................................... 51,917
Fund accounting fees (Note 3) ............................... 40,136
Registration fees ........................................... 34,641
Compliance service fees (Note 3) ............................ 24,101
Custodian fees .............................................. 21,824
Printing of shareholder reports ............................. 16,677
Interest expense (Note 4) ................................... 4,360
Other expenses .............................................. 18,118
---------------
TOTAL EXPENSES ........................................... 2,184,428
---------------
NET INVESTMENT LOSS ......................................... (259,562)
---------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains from security transactions ............... 43,370,966
Net change in unrealized appreciation/depreciation
on investments ............................................ (8,062,465)
---------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS ............ 35,308,501
---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS .................. $ 35,048,939
===============
See accompanying notes to financial statements.
12
OAK VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
==============================================================================================
YEAR YEAR
ENDED ENDED
JUNE 30, JUNE 30,
2007 2006
- ----------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) ............................. $ (259,562) $ 566,488
Net realized gains from security transactions ............ 43,370,966 15,683,448
Net change in unrealized appreciation/depreciation
on investments ......................................... (8,062,465) (20,219,133)
------------- -------------
Net increase (decrease) in net assets from operations ....... 35,048,939 (3,969,197)
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ............................... (446) (566,042)
From net realized gains from security transactions ....... (43,116,232) (15,290,172)
------------- -------------
Net decrease in net assets from distributions to shareholders (43,116,678) (15,856,214)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ................................ 17,453,371 37,744,165
Reinvestment of distributions to shareholders ............ 42,229,998 14,515,519
Proceeds from redemption fees collected (Note 1) ........ 63,530 11,580
Payments for shares redeemed ............................. (110,363,326) (80,204,484)
------------- -------------
Net decrease in net assets from capital share transactions .. (50,616,427) (27,933,220)
------------- -------------
NET DECREASE IN NET ASSETS .................................. (58,684,166) (47,758,631)
NET ASSETS
Beginning of year ........................................ 201,023,631 248,782,262
------------- -------------
End of year .............................................. $ 142,339,465 $ 201,023,631
============= =============
ACCUMULATED UNDISTRIBUTED NET
INVESTMENT INCOME ........................................ $ -- $ 446
============= =============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold .............................................. 594,036 1,242,359
Shares reinvested ........................................ 1,587,288 514,088
Shares redeemed .......................................... (3,844,593) (2,647,888)
------------- -------------
Net decrease in shares outstanding ....................... (1,663,269) (891,441)
Shares outstanding, beginning of year .................... 7,179,588 8,071,029
------------- -------------
Shares outstanding, end of year .......................... 5,516,319 7,179,588
============= =============
See accompanying notes to financial statements.
13
OAK VALUE FUND
FINANCIAL HIGHLIGHTS
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
==================================================================================================================================
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2007 2006 2005 2004 2003
------------- ------------- ------------- ------------- -------------
Net asset value at
beginning of year ..................... $ 28.00 $ 30.82 $ 29.02 $ 25.58 $ 24.92
------------- ------------- ------------- ------------- -------------
Income (loss) from investment operations:
Net investment income (loss) .......... (0.05) 0.08 (0.12) (0.15) (0.07)
Net realized and unrealized gains
(losses) on investments ............. 6.61 (0.60) 1.92 3.59 0.73
------------- ------------- ------------- ------------- -------------
Total from investment operations ........ 6.56 (0.52) 1.80 3.44 0.66
------------- ------------- ------------- ------------- -------------
Less distributions:
From net investment income ............ (0.00)(A) (0.08) -- -- --
From net realized gains from
security transactions ............... (8.77) (2.22) -- -- --
------------- ------------- ------------- ------------- -------------
Total distributions ..................... (8.77) (2.30) -- -- --
------------- ------------- ------------- ------------- -------------
Proceeds from redemption
fees collected (Note 1) ............... 0.01 0.00(A) 0.00(A) 0.00(A) --
------------- ------------- ------------- ------------- -------------
Net asset value at end of year .......... $ 25.80 $ 28.00 $ 30.82 $ 29.02 $ 25.58
============= ============= ============= ============= =============
Total return(B) ......................... 25.03% (1.66%) 6.20% 13.45% 2.65%
============= ============= ============= ============= =============
Net assets at end of year (000's) ....... $ 142,339 $ 201,024 $ 248,782 $ 259,488 $ 272,582
============= ============= ============= ============= =============
Ratio of expenses to
average net assets .................... 1.35% 1.29% 1.25% 1.25% 1.36%
Ratio of net investment income
(loss) to average net assets .......... (0.16%) 0.24% (0.39%) (0.52%) (0.33%)
Portfolio turnover rate ................. 44% 29% 29% 24% 28%
(A) Amount rounds to less than $0.01 per share.
(B) Total return is a measure of the change in value of an investment in the
Fund over the periods covered, which assumes any dividends or capital
gains distributions are reinvested in shares of the Fund. Returns shown do
not reflect the deduction of taxes a shareholder would pay on Fund
distributions or the redemption of Fund shares.
See accompanying notes to financial statements.
14
OAK VALUE FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2007
================================================================================
SHARES COMMON STOCKS -- 99.9% VALUE
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 14.3%
140,450 Apollo Group, Inc. - Class A (A) ................... $ 8,206,493
168,245 E.W. Scripps Co. (The) - Class A ................... 7,687,114
108,262 Viacom, Inc. - Class B (A) ......................... 4,506,947
--------------
20,400,554
--------------
CONSUMER STAPLES -- 8.2%
107,175 Cadbury Schweppes PLC - ADR ........................ 5,819,602
243,150 Constellation Brands, Inc. - Class A (A) ........... 5,903,682
--------------
11,723,284
--------------
FINANCIALS -- 25.7%
67,200 AFLAC, Inc. ........................................ 3,454,080
105,500 American Express Co. ............................... 6,454,490
56,450 AON Corp. .......................................... 2,405,335
93 Berkshire Hathaway, Inc. - Class A (A) ............. 10,181,175
863 Berkshire Hathaway, Inc. - Class B (A) ............. 3,111,115
67,600 Capital One Financial Corp. ........................ 5,302,544
129,150 Willis Group Holdings Ltd. ......................... 5,690,349
--------------
36,599,088
--------------
HEALTH CARE -- 12.2%
144,925 IMS Health, Inc. ................................... 4,656,440
80,200 Johnson & Johnson .................................. 4,941,924
94,450 Medtronic, Inc. .................................... 4,898,177
79,775 Omnicare, Inc. ..................................... 2,876,687
--------------
17,373,228
--------------
INDUSTRIALS -- 11.8%
79,075 3M Co. ............................................. 6,862,919
42,650 United Parcel Services - Class B ................... 3,113,450
94,875 United Technologies Corp. .......................... 6,729,484
--------------
16,705,853
--------------
INFORMATION TECHNOLOGY -- 17.6%
151,625 eBay, Inc. (A) ..................................... 4,879,292
150,149 Fidelity National Information Services, Inc. ....... 8,150,088
177,725 Microsoft Corp. .................................... 5,237,556
344,300 Oracle Corp. (A) ................................... 6,786,153
--------------
25,053,089
--------------
MATERIALS -- 10.1%
136,475 E.I. du Pont de Nemours and Co. .................... 6,938,389
103,925 Praxair, Inc. ...................................... 7,481,561
--------------
14,419,950
--------------
TOTAL COMMON STOCKS (Cost $98,523,720) ............. $ 142,275,046
--------------
15
OAK VALUE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
================================================================================
SHARES CASH EQUIVALENTS -- 0.2% VALUE
- --------------------------------------------------------------------------------
262,647 First American Government Obligations Fund - Class Y
(Cost $262,647)..................................... $ 262,647
--------------
TOTAL INVESTMENTS AT VALUE -- 100.1%
(Cost $98,786,367).................................. $ 142,537,693
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.1%)..... (198,228)
--------------
NET ASSETS -- 100.0%................................ $ 142,339,465
==============
(A) Non-income producing security.
ADR - American Depositary Receipt
See accompanying notes to financial statements.
16
OAK VALUE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007
================================================================================
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Oak Value Fund (the "Fund") is a diversified series 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 traded on a national stock exchange are valued
based upon the closing price on the principal exchange where the security is
traded. Securities which are quoted by NASDAQ are valued at the NASDAQ Official
Closing Price. Securities which are traded over-the-counter are valued at the
last sales price, if available, otherwise, at the last quoted bid price. 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% if redeemed within 90 days of the
date of purchase. During the years ended June 30, 2007 and 2006, proceeds from
redemption fees totaled $63,530 and $11,580, respectively.
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 of America ("GAAP"). These "book/tax" differences are either
17
OAK VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
temporary or permanent in nature and are primarily due to losses deferred due to
wash sales. The tax character of distributions paid during the year ended June
30, 2007 was $5,256,740 of ordinary income and $37,859,938 of long-term capital
gains. The tax character of distributions paid during the year ended June 30,
2006 was $566,042 of ordinary income and $15,290,172 of long-term capital gains.
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
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 GAAP
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 June 30,
2007:
- --------------------------------------------------------------------------------
Tax cost of portfolio investments ........................... $ 98,804,036
=============
Gross unrealized appreciation ............................... $ 43,882,304
Gross unrealized depreciation ............................... (148,647)
-------------
Net unrealized appreciation ................................. $ 43,733,657
Undistributed ordinary income ............................... 12,862
-------------
Total distributable earnings ................................ $ 43,746,519
=============
- --------------------------------------------------------------------------------
The difference between the federal income tax cost of portfolio of investments
and the financial statement cost is due to the certain timing differences in the
recognition of capital losses under income tax regulations and accounting
principles generally accepted in the United States of America. These "book/tax"
differences are temporary in nature and are primarily due to the tax deferral of
losses on wash sales.
For the year ended June 30, 2007, the Fund reclassified its net investment loss
of $259,562 against distributions in excess of net realized gains from security
transactions on the Statement of Assets and Liabilities. Such reclassification,
the result of permanent differences between the financial statement and income
tax reporting requirements, has no effect on the Fund's net assets or net asset
value per share.
2. INVESTMENT TRANSACTIONS
During the year ended June 30, 2007, cost of purchases and proceeds from sales
and maturities of investment securities, excluding short-term investments,
amounted to $70,978,008 and $162,507,030, respectively.
18
OAK VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
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
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. During the year ended June 30, 2007, Ultimus
was paid $133,463 of 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 year ended June 30,
2007, Ultimus was paid $53,988 of 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 year ended June 30, 2007, the Fund paid $100,356 for such services.
These fees are included 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 year ended June 30, 2007, the Fund paid Ultimus $40,136 of 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 year ended June
30, 2007, Ultimus was paid $24,101 for such services. In addition, the Fund
reimburses Ultimus for its reasonable out-of-pocket expenses relating to these
compliance services.
19
OAK VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
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 per annum equal to Prime Rate minus 0.50%.
During the year ended June 30, 2007, the Fund incurred $4,360 of interest
expense related to borrowings under the line of credit. Average debt outstanding
during the year ended June 30, 2007 was $55,484. As of June 30, 2007, the Fund
had no outstanding borrowings.
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.
6. ACCOUNTING PRONOUNCEMENTS
On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB
Interpretation No. 48 (FIN 48) "Accounting for Uncertainty in Income Taxes." FIN
48 provides guidance for how uncertain tax positions should be recognized,
measured, presented and disclosed in the financial statements. FIN 48 requires
the evaluation of tax positions taken in the course of preparing the Fund's tax
returns to determine whether the tax positions are "more-likely-than-not" of
being sustained by the applicable tax authority. Tax benefits of positions not
deemed to meet the more-likely-than-not threshold would be recorded as a tax
benefit or expense in the current year. Adoption of FIN 48 is required for
fiscal years beginning after December 15, 2006 and is to be applied to all open
tax years as of the effective date. Recent SEC guidance allows implementing FIN
48 in fund NAV calculations as late as the Fund's last NAV calculation in the
first required financial statement reporting period. As a result, the Fund will
incorporate FIN 48 in its Semi-Annual Report on December 31, 2007. Management is
in the process of determining the impact of the adoption of FIN 48.
In September 2006, the Financial Accounting Standards Board (FASB) issued
Statement on Financial Accounting Standards (SFAS) No. 157, "Fair Value
Measurements." This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and requires
additional disclosures about fair value measurements. SFAS No. 157 applies to
fair value measurements already required or permitted by existing standards.
SFAS No. 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007 and interim periods within those fiscal years.
The changes to current generally accepted accounting principles from the
application of this Statement relate to the definition of fair value, the
methods used to measure fair value, and the expanded disclosures about fair
value measurements. As of June 30, 2007, the Fund does not believe the adoption
of SFAS No. 157 will impact the amounts reported in the financial statements,
however, additional disclosures may be required about the inputs used to develop
the measurements and the effect of certain of the measurements reported on the
statement of changes in net assets for a fiscal period.
20
OAK VALUE FUND
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
================================================================================
To the Board of Trustees of
Oak Value Trust
and the Shareholders of the Oak Value Fund
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the Oak Value Fund, a series of shares of
beneficial interest of the Oak Value Trust, as of June 30, 2007, and the related
statement of operations, the statement of changes in net assets and financial
highlights for the year then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit. The statement of changes in net assets for the year ended
June 30, 2006 and the financial highlights for each of the four years ended June
30, 2006 were audited by other auditors whose report dated August 11, 2006
expressed an unqualified opinion on such statement and financial highlights.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 2007 by correspondence with the custodian. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Oak Value Fund as of June 30, 2007, the results of its operations, the changes
in its net assets and the financial highlights for the year then ended, in
conformity with accounting principles generally accepted in the United States of
America.
/s/ BRIGGS, BUNTING & DOUGHERTY, LLP
BRIGGS, BUNTING & DOUGHERTY, LLP
Philadelphia, Pennsylvania
July 31, 2007
21
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 ongoing costs 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 impose any sales charges. However,
a redemption fee of 2% is applied on the sale of shares sold within 90 days of
the date of purchase. The redemption fee 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
January 1, 2007 June 30, 2007 During Period*
- --------------------------------------------------------------------------------
Based on Actual Fund Return $1,000.00 $1,094.60 $6.96
Based on Hypothetical 5% Return
(before expenses) $1,000.00 $1,018.15 $6.71
- --------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio of 1.34% for the
period, multiplied by the average account value over the period,
multiplied by 181/365 (to reflect the one-half year period).
22
OAK VALUE FUND
TRUSTEES AND OFFICERS (UNAUDITED)
================================================================================
OFFICERS AND INTERESTED TRUSTEES. The table below sets forth certain information
about each of the Trust's Interested Trustees, as well as its executive
officers.
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
TERM OF PORTFOLIOS OTHER
POSITION(S) OFFICE; TERM IN FUND DIRECTORSHIPS(1)
HELD WITH SERVED IN PRINCIPAL OCCUPATION(S) COMPLEX HELD BY
NAME, ADDRESS, AND AGE TRUST OFFICE DURING PAST 5 YEARS OVERSEEN TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------------
Larry D. Coats, Jr.* Trustee and Indefinite term; President, Chief Executive 1 None
3100 Tower Blvd. President President Since Officer and Senior Portfolio
Suite 700 July 2003; Manager with Oak Value
Durham, NC 27707 Trustee Since Capital Management, Inc;
Age: 47 December 2003 Prior to July 2003, Executive
Vice President and Portfolio
Manager with Oak Value
Capital Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret C. Landis Vice President Appointed Senior Vice President, the
3100 Tower Blvd. annually; Chief Compliance Officer,
Suite 700 Since Treasurer and Secretary
Durham, NC 27707 May 2007 of Oak Value Capital
Age: 49 Managment, Inc.; Prior to
December 2003, Vice
President, Director of
Compliance, Treasurer
and Secretary with Oak Value
Capital Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Robert G. Dorsey Vice President Appointed For more than the past five
225 Pictoria Drive annually; years, Mr. Dorsey has been a
Suite 450 Since: Managing Director of Ultimus
Cincinnati, OH 45246 June 2003 Fund Solutions, LLC and
Age: 50 Ultimus Fund Distributors,
LLC, the Fund's principal
underwriter.
- ------------------------------------------------------------------------------------------------------------------------------------
Mark J. Seger Treasurer, Appointed For more than the past five
225 Pictoria Drive Chief annually; years, Mr. Seger has been a
Suite 450 Compliance Since: Managing Director of Ultimus
Cincinnati, OH 45246 Officer June 2003 Fund Solutions, LLC and
Age: 45 Ultimus Fund Distributors, LLC.
- ------------------------------------------------------------------------------------------------------------------------------------
John F. Splain Secretary Appointed For more than the past five
225 Pictoria Drive annually; years, Mr. Splain has been a
Suite 450 Since: Managing Director of Ultimus
Cincinnati, OH 45246 June 2003 Fund Solutions, LLC and
Age: 50 Ultimus Fund Distributors, LLC.
- ------------------------------------------------------------------------------------------------------------------------------------
* Mr. Coats is 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 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.
23
OAK VALUE FUND
TRUSTEES AND OFFICERS (CONTINUED) (UNAUDITED)
================================================================================
INDEPENDENT TRUSTEES. The following table sets forth certain information about
the Trust's Independent Trustees.
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
TERM OF PORTFOLIOS OTHER
POSITION(S) OFFICE; TERM IN FUND DIRECTORSHIPS(1)
HELD WITH SERVED IN PRINCIPAL OCCUPATION(S) COMPLEX HELD BY
NAME, ADDRESS, AND AGE TRUST OFFICE DURING PAST 5 YEARS OVERSEEN TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------------
Joseph T. Jordan, Jr. Chairman and Indefinite Term; For more than the past five 1 Director of
1816 Front Street Trustee Trustee years, Mr. Jordan has served Cardinal
Suite 320 Since May 1995; as the President of Practice State Bank
Durham, NC 27705 Chairman Management Services, Inc.
Age: 61 Since January (a medical practice
2005 management firm).
C. Russell Bryan Trustee; Indefinite Term; For more than the past five 1 None
121 W. Trade Street Chairman of Since: years, Mr. Bryan has been a
Suite 3000 Governance, May 1995 Managing Director of
Charlotte, NC 28202 Nomination and Brookwood Associates, L.L.C.
Age: 47 Compensation (an investment banking firm).
Committee
John M. Day Trustee; Indefinite Term; For more than the past five 1 None
5151 Glenwood Ave. Chairman of Since: years, Mr. Day has been
Raleigh, NC 27612 Audit May 1995 Managing Partner, Maynard
Age: 53 Committee Capital Partners (an
investment firm).
Charles T. Manatt, Esq. Trustee Indefinite Term; Founder, Manatt, Phelps & 1 Director of
700 12th Street, N.W. Since: Phillips, L.L.P. (a law firm); FedEx
Suite 1100 February 2002 from 1999-2001, served as Corporation
Washington, DC 20005 U.S. Ambassador to the
Age: 71 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.
The Statement of Additional Information ("SAI") includes additional information
about the Trust's Trustees and officers. To obtain a copy of the SAI, without
charge, call (800) 622-2474.
OTHER INFORMATION (UNAUDITED)
================================================================================
A description of the policies and procedures 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 ("SEC") 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 also available without charge upon request by
calling toll-free 1-800-622-2474, or on the SEC's website http://www.sec.gov.
The Trust files a complete listing of portfolio holdings for the Fund with the
SEC as of the end of the first and third quarters of each fiscal year on Form
N-Q. The filings are available without charge upon request, by calling
1-800-622-2474. Furthermore, you will be able to obtain a copy of the filings on
the SEC's website at http://www.sec.gov. The Trust's Forms N-Q may also be
reviewed and copied at the SEC's Public Reference Room in Washington, DC, and
information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
24
OAK VALUE FUND
CHANGE IN INDEPENDENT AUDITOR (UNAUDITED)
================================================================================
On May 8, 2007, Deloitte & Touche ("D&T") was replaced as independent auditor of
the Fund, and Briggs, Bunting and Dougherty, LLP was selected as the Fund's new
independent auditor. The Fund's selection of Briggs, Bunting and Dougherty, LLP
as its independent auditor was approved by the Fund's Audit Committee and by the
Fund's Board of Trustees.
D&T's reports on the Fund's financial statements for the fiscal years ended June
30, 2006 and 2005 did not contain an adverse opinion or a disclaimer of opinion,
and were not qualified or modified as to uncertainty, audit scope or accounting
principles. During such fiscal years, and through the date of D&T's replacement,
there were no disagreements between the Fund and D&T on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedures, which disagreements, if not resolved to the satisfaction of D&T,
would have caused it to make reference to the subject matter of the
disagreements in connection with its reports on the financial statements for
such years.
FEDERAL TAX INFORMATION (UNAUDITED)
================================================================================
In accordance with federal tax requirements, the following provides shareholders
with information concerning distributions from ordinary income and net realized
gains made by the Fund during the year ended June 30, 2007. For the fiscal year
ended June 30, 2007, certain dividends paid by the Fund may be subject to a
maximum tax rate of 15%, as provided by the Jobs and Growth Tax Relief
Reconciliation Act of 2003. The Fund intends to designate up to a maximum amount
of $5,256,740 as taxed at a maximum rate of 15%, as well as $37,859,938 as
long-term gain distributions. Complete information will be computed and reported
in conjunction with your 2007 Form 1099-DIV.
25
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 REGISTERED PUBLIC
ACCOUNTING FIRM
Briggs, Bunting & Dougherty, LLP
Two Penn Center
Suite 820
Philadelphia, Pennsylvania 19102
CUSTODIAN
US Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
BOARD OF TRUSTEES
Joseph T. Jordan, Jr., Chairman
C. Russell Bryan
Larry D. Coats, Jr.
John M. Day
Charles T. Manatt
OFFICERS
Larry D. Coats, Jr., President
Margaret C. Landis, Vice President
Robert G. Dorsey, Vice President
Mark J. Seger, Treasurer/
Chief Compliance Officer
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.
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, the registrant has adopted a
code of ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions, regardless of whether these individuals
are employed by the registrant or a third party. Pursuant to Item 12(a)(1), a
copy of registrant's code of ethics is filed as an exhibit to this Form N-CSR.
During the period covered by this report, the code of ethics has not been
amended, and the registrant has not granted any waivers, including implicit
waivers, from the provisions of the code of ethics.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's board of trustees has determined that the registrant has at
least one audit committee financial expert serving on its audit committee. The
name of the audit committee financial expert is Joseph T. Jordan, Jr. Mr. Jordan
is "independent" for purposes of this Item.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) AUDIT FEES. The aggregate fees billed for professional
services rendered by the principal accountant for the audit of
the registrant's annual financial statements or for services
that are normally provided by the accountant in connection
with statutory and regulatory filings or engagements were
$14,000 with respect to the registrant's fiscal year ended
June 30, 2007. The aggregate fees billed for professional
services rendered by the former principal accountant for the
audit of the registrant's annual financial statements or for
services that are normally provided by the accountant in
connection with statutory and regulatory filings or
engagements were $21,500 with respect to the registrant's
fiscal year ended June 30, 2006.
(b) AUDIT-RELATED FEES. No fees were billed in either of the last
two fiscal years for assurance and related services by the
principal accountant that are reasonably related to the
performance of the audit of the registrant's financial
statements and are not reported under paragraph (a) of this
Item.
(c) TAX FEES. The aggregate fees billed for professional services
rendered by the principal accountant for tax compliance, tax
advice, and tax planning were $2,000 with respect to the
registrant's fiscal year ended June 30, 2007. The aggregate
fees billed for professional services rendered by the former
principal accountant for tax compliance, tax advice, and tax
planning were $2,200 with respect to the registrant's fiscal
year ended June 30, 2006. The services comprising these fees
are the preparation of the registrant's federal income and
excise tax returns.
(d) ALL OTHER FEES. No fees were billed in either of the last two
fiscal years for products and services provided by the
principal accountant, other than the services reported in
paragraphs (a) through (c) of this Item.
(e)(1) The audit committee has not adopted pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of
Regulation S-X.
(e)(2) None of the services described in paragraph (b) through (d) of
this Item were approved by the audit committee pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Less than 50% of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for
the most recent fiscal year were attributed to work performed
by persons other than the principal accountant's full-time,
permanent employees.
(g) During the fiscal year ended June 30, 2007, aggregate
non-audit fees of $2,000 were billed by the registrant's
accountant for services rendered to the registrant. During the
fiscal year ended June 30, 2006, aggregate non-audit fees of
$2,200 were billed by the registrant's former accountant for
services rendered to the registrant. No non-audit fees were
billed in either of the last two fiscal years by the
registrant's accountant for services rendered to the
registrant's investment adviser (not including any sub-adviser
whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser),
and any entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the
registrant.
(h) The principal accountant has not provided any non-audit
services to the registrant's investment adviser (not including
any sub-adviser whose role is primarily portfolio management
and is subcontracted with or overseen by another investment
adviser), and any entity controlling, controlled by, or under
common control with the investment adviser that provides
ongoing services to the registrant.
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. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable
ITEM 10. 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 registrant's board of
trustees if such recommendations are submitted in writing and addressed to the
committee at the registrant's offices. The committee may adopt, by resolution, a
policy regarding its procedures for considering candidates for the board of
trustees, including any recommended by shareholders.
ITEM 11. 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 second fiscal quarter of the period covered by this
report that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
ITEM 12. 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: Attached hereto
(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.CODE ETH Code of Ethics
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 August 22, 2007
----------------------
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 August 22, 2007
----------------------
By (Signature and Title)* /s/ Mark J. Seger
------------------------------------
Mark J. Seger, Treasurer
Date August 22, 2007
----------------------
* Print the name and title of each signing officer under his or her signature.