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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, Suite 700 Durham, NC 27707
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (919) 419-1900
----------------------------
Date of fiscal year end: June 30, 2008
-------------------------------
Date of reporting period: June 30, 2008
-------------------------------
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, 2008
[LOGO OMITTED]
==============
--------------
OAK VALUE FUND
--------------
WWW.OAKVALUEFUND.COM
LETTER TO SHAREHOLDERS August 7, 2008
================================================================================
Dear Fellow Oak Value Fund Shareholders,
John D. Rockefeller is credited with having said, "the way to make money is to
buy when blood is running in the streets." Using the words of one of history's
great monopolists as a call to arms amid runaway energy prices is more than a
tad ironic, but now that we are officially in a bear market, Rockefeller's
advice is as relevant as ever. While we would not characterize what's happening
in the broader market as a total bloodbath, there are definitely some streets
that could stand a scrubbing. A resurgence of fears regarding the health of a
number of financial institutions coupled with the massive spike in energy prices
made for a disappointing end to the second quarter, as these forces reached a
crescendo in the closing days of June. Fear that the mighty consumer has finally
rolled over seems to have supplanted credit concerns as the primary purveyor of
pessimism in the overall market. Both of these factors are certainly valid
concerns, but the very fact that the sources of discontent among investors are
shifting reminds us that the forces that influence valuations in the short term
are just that--short-term forces.
While the Oak Value Fund's (the "Fund") performance bested that of relevant
value-style indices during the fiscal year, it under-performed the broader
market as measured by the S&P 500 Index. Higher energy prices and continued
"credit crisis" concerns contributed to a period of extreme volatility. Energy
stocks advanced more than 24% while financial stocks declined by more than 42%,
on average. A simple analysis suggests that the underperformance of the Fund
during the year can be singularly attributed to its lack of direct exposure to
the energy sector. In short, the out-performance of the Fund's holdings in the
financial, consumer discretionary and healthcare sectors was just not enough to
make up for the gale-force headwinds of rising energy prices and the shares of
the companies who benefit from such.
The macro-economic outlook for the next six to twelve months is as unclear as
ever, though we believe the Fund is composed of businesses that should perform
admirably through the course of the business cycle. As long-term investors, we
have seen these kinds of markets before and we will see them again. We believe
our philosophy of seeking good businesses that have sustainable advantages and
buying them at attractive prices is as appropriate today as ever. We think that
owning advantaged companies that not only perform well in good times, but that
are also likely to emerge from difficult operating environments as even stronger
competitors within their respective industries, is a good way to make money,
especially in a bear market.
We have included the Fund's financial statements for the fiscal year ended June
30, 2008 as well as other financial and portfolio data in the pages that follow.
Consistent with the practices we established in prior years, the portfolio
commentary contained in this annual report is limited to summary observations. A
more detailed discussion of the Fund's investment activities is provided in the
1
Investment Adviser's Review posted on the Fund's website each quarter -
www.oakvaluefund.com. We encourage investors to review these reports on a
regular basis. Shareholders may receive copies of the quarterly Investment
Adviser's Review reports by subscribing to the Fund's email distribution list.
On behalf of the Oak Value team, 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.
David R. Carr, Jr. Larry D. Coats, Jr.
Note: Please see Important Information section of this report for disclosure
that applies to both this letter and the Management Discussion and Analysis that
follows.
2
MANAGEMENT DISCUSSION AND ANALYSIS
================================================================================
The relative underperformance of the Oak Value Fund during the fiscal year was
influenced as much by what it did not own than what it did own. Though the
Fund's investments performed respectably during this period, the out-performance
of Fund holdings in the financials, consumer discretionary and healthcare
sectors was just not enough to make up for the market beating performance of the
energy related holdings in which the Fund had limited participation. As a point
of reference, the S&P 500 Index decline during the fiscal year would have been
nearly 16% without the contributions of the energy sector. In the areas in which
the Fund did have exposure, we were generally pleased with results and have
highlighted these below. (Table B provides a full listing of the Fund's top
contributors and detractors during the fiscal year.)
o As indicated, the Fund's holdings in the hard hit financials sector
generally outperformed their peers during the period. In fact six of the
eight Fund holdings in this sector bested the sector average while three
of the Fund holdings in the financials sector posted advances in their
share prices. The largest positive contributor to Fund results during the
year was its largest position, Berkshire Hathaway. Shares of Berkshire
advanced approximately 25% during the year. Shares of insurance companies
AFLAC and AON also saw their shares advance during the period. Capital One
and Ambac were among the Fund's most notable detractors during the year as
they declined even more than the dreadful decline of the financials
sector.
o The Fund's consumer discretionary holdings also outperformed their peers,
in aggregate, during the period as the only holding in this area that
significantly underperformed the group was Office Depot. Otherwise, these
Fund holdings generally performed in-line or better. The most notable of
these positive contributors was Apollo Group, the country's largest
for-profit education company. After having sold the Fund holdings in this
company during the first half of the fiscal year, the shares of Apollo
declined significantly during the second half, giving us the opportunity
to re-establish a position in this company.
o Fund holdings in the healthcare area also contributed to relative
performance, all out-performing the overall market. Shares of Johnson &
Johnson and Medtronic posted positive returns in a decidedly negative
market environment.
o The Fund had no direct exposure to the energy sector, which advanced
nearly 25% during the period. Importantly, the Fund's best performing
holding overall, Praxair, posted a consolidated 40% return. While Praxair
is technically classified as a "materials sector" holding, its position as
a supplier of atmospheric gases to multiple areas of the energy value
chain including refining and drilling proved profitable for Fund
shareholders and at least partially offset some of the headwinds of the
sector's advance.
3
Portfolio activity 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 as well
as those which were completely eliminated during the period. Though we remain
focused on individual security selection from a bottom-up perspective,
shareholders will observe that a top-down view of the portfolio reflects an
increased exposure to consumer discretionary, healthcare and information
technology related businesses. We encourage readers to view these apparent
"shifts" in portfolio positioning as a by-product of our search for attractive
long term opportunities. Our charge as long-term investors in good businesses
with good management at attractive prices requires that we be prepared and
opportunistic.
============================================================================================
TABLE A
- --------------------------------------------------------------------------------------------
QUARTERLY PERFORMANCE - FISCAL YEAR 2008
- --------------------------------------------------------------------------------------------
3RD QUARTER 2007 4TH QUARTER 2007 1ST QUARTER 2008 2ND QUARTER 2008
============================================================================================
Oak Value Fund 0.00% -4.20% -8.22% -4.51%
- --------------------------------------------------------------------------------------------
S&P 500 Index
with dividends 2.03% -3.33% -9.44% -2.73%
- --------------------------------------------------------------------------------------------
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'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 EXPENSE RATIO FOR THE
FISCAL YEAR ENDED JUNE 30, 2008 WAS 1.37%.
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.
- --------------------------------------------------------------------------------------------
============================================================================================
TABLE B
- --------------------------------------------------------------------------------------------
LARGEST NET CONTRIBUTORS TO INVESTMENT RESULTS
YEAR ENDED JUNE 30, 2008
- --------------------------------------------------------------------------------------------
TOP 5 SECURITIES BY % OF BOTTOM 5 SECURITIES BY % OF
CONTRIBUTION NET ASSETS CONTRIBUTION NET ASSETS
============================================================================================
Berkshire Hathaway, Inc.(1) 9.27% Ambac Financial Group, Inc. Sold
- --------------------------------------------------------------------------------------------
Praxair, Inc. 4.08% American Express Co. 4.24%
- --------------------------------------------------------------------------------------------
Apollo Group, Inc. - Class A 4.21% Capital One Financial Corp. 1.46%
- --------------------------------------------------------------------------------------------
AFLAC, Inc. 1.72% Office Depot, Inc. Sold
- --------------------------------------------------------------------------------------------
Johnson & Johnson Sold Fidelity Ntl. Information Svcs, Inc. 3.26%
- --------------------------------------------------------------------------------------------
(1) Class A and B Shares were both held during the fiscal year. As of June 30, 2008, only
Class A Shares were held by the Fund.
- --------------------------------------------------------------------------------------------
4
===========================================================================================================
TABLE C
- -----------------------------------------------------------------------------------------------------------
JULY 1, 2007 - JUNE 30, 2008 PURCHASE ACTIVITY
- -----------------------------------------------------------------------------------------------------------
COMPANY PURCHASED PRIMARY BUSINESS SECTOR CLASSIFICATION
===========================================================================================================
Ambac Financial Group, Inc. Financial Services & Guarantee Products Financials
- -----------------------------------------------------------------------------------------------------------
Apollo Group, Inc. - Class A Education & Training Services Consumer Discretionary
- -----------------------------------------------------------------------------------------------------------
Cisco Systems, Inc. Manufacturer of Networking
and Communication Devices Information Technology
- -----------------------------------------------------------------------------------------------------------
Coach, Inc. Upscale Textile Accessories and Apparel Consumer Discretionary
- -----------------------------------------------------------------------------------------------------------
Diageo PLC - ADR Global Premium Alcohol Business Consumer Staples
- -----------------------------------------------------------------------------------------------------------
Harley-Davidson Inc. Heavyweight High-end Motorcycles Consumer Discretionary
- -----------------------------------------------------------------------------------------------------------
Moody's Corp. Credit Ratings and Related Credit Services Financials
- -----------------------------------------------------------------------------------------------------------
Office Depot, Inc. Office Supply Retailer Consumer Discretionary
- -----------------------------------------------------------------------------------------------------------
Tiffany & Co. Designer, Manufacturer, and
Retailer of Fine Jewelry Consumer Discretionary
- -----------------------------------------------------------------------------------------------------------
Zimmer Holdings, Inc. Manufacturing and Design
of Orthopedic Implants Healthcare
===========================================================================================================
JULY 1, 2007 - JUNE 30, 2008 SALE ACTIVITY
- -----------------------------------------------------------------------------------------------------------
COMPANY SOLD PRIMARY BUSINESS SECTOR CLASSIFICATION
===========================================================================================================
Ambac Financial Group, Inc. Financial Services & Guarantee Products Financials
- -----------------------------------------------------------------------------------------------------------
Apollo Group, Inc. - Class A Education & Training Services Consumer Discretionary
- -----------------------------------------------------------------------------------------------------------
Constellation Brands, Inc. Alcoholic Beverage Production & Marketing Consumer Staples
- -----------------------------------------------------------------------------------------------------------
Dr. Pepper Snapple Group Owning, Bottling, and Distribution
of Non-Alcoholic Beverages Consumer Staples
- -----------------------------------------------------------------------------------------------------------
Harley-Davidson, Inc. Heavyweight High-end Motorcycles Consumer Discretionary
- -----------------------------------------------------------------------------------------------------------
IMS Health Inc. Information Solutions to Pharmaceuticals/
Healthcare Industry Healthcare
- -----------------------------------------------------------------------------------------------------------
Johnson & Johnson Healthcare Products Healthcare
- -----------------------------------------------------------------------------------------------------------
Office Depot, Inc. Office Supply Retailer Consumer Discretionary
- -----------------------------------------------------------------------------------------------------------
Omnicare, Inc. Geriatric Pharmaceutical Services Healthcare
- -----------------------------------------------------------------------------------------------------------
United Parcel Service, Inc. Air Delivery and Freight Services Industrials
- -----------------------------------------------------------------------------------------------------------
Willis Group Holdings Ltd. Commercial Insurance Brokerage Services Financials
- -----------------------------------------------------------------------------------------------------------
5
===========================================================================================================
TOP TEN HOLDINGS AS OF JUNE 30, 2008(1)
- -----------------------------------------------------------------------------------------------------------
COMPANY PRIMARY BUSINESS S&P SECTOR
===========================================================================================================
3M Co. Manufacturing & Marketing
Technology Products/Services Industrials
- -----------------------------------------------------------------------------------------------------------
Berkshire Hathaway, Inc. - Class A Insurance, Reinsurance & Capital Allocation Financials
- -----------------------------------------------------------------------------------------------------------
Cadbury PLC - ADR Confectioneries Consumer Staples
- -----------------------------------------------------------------------------------------------------------
Coach Inc. Upscale Textile Accessories and Apparel Consumer Discretionary
- -----------------------------------------------------------------------------------------------------------
E.I. Dupont de Nemours and Co. Chemicals Materials
- -----------------------------------------------------------------------------------------------------------
Diageo PLC - ADR Global Premium Alcohol Business Consumer Staples
- -----------------------------------------------------------------------------------------------------------
Medtronic, Inc. Medical Device Manufacturer Healthcare
- -----------------------------------------------------------------------------------------------------------
Oracle Corp. Database, Middleware, & Application Software Information Technology
- -----------------------------------------------------------------------------------------------------------
E.W. Scripps Co. (The) - Class A Entertainment & Information/Media Consumer Discretionary
- -----------------------------------------------------------------------------------------------------------
Tiffany & Co. Designer, Manufacturer, and
Retailer of Fine Jewelry Consumer Discretionary
- -----------------------------------------------------------------------------------------------------------
(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, 2008 or held during the fiscal year ended June 30, 2008. 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
[LINE GRAPH OMITTED]
OAK VALUE FUND S&P 500 INDEX
-------------- ----------------------
DATE VALUE DATE VALUE
---- ------- ---- -------
06/30/98 $10,000 06/30/98 $10,000
12/31/98 10,122 12/31/98 10,923
06/30/99 10,680 06/30/99 12,276
12/31/99 9,806 12/31/99 13,222
06/30/00 9,835 06/30/00 13,165
12/31/00 11,587 12/31/00 12,018
06/30/01 12,129 06/30/01 11,213
12/31/01 11,533 12/31/01 10,589
06/30/02 10,090 06/30/02 9,196
12/31/02 8,726 12/31/02 8,249
06/30/03 10,357 06/30/03 9,219
12/31/03 11,528 12/31/03 10,615
06/30/04 11,750 06/30/04 10,981
12/31/04 12,447 12/31/04 11,770
06/30/05 12,479 06/30/05 11,675
12/31/05 12,277 12/31/05 12,349
06/30/06 12,272 06/30/06 12,683
12/31/06 14,017 12/31/06 14,299
06/30/07 15,344 06/30/07 15,294
12/31/07 14,700 12/31/07 15,085
06/30/08 12,883 06/30/08 13,287
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- ------------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS(A)
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR-TO-DATE SINCE
2008 INCEPTION*
CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR (AS OF (AS OF
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 6/30/08) 6/30/08)
- ------------------------------------------------------------------------------------------------------------------------------------
Oak Value Fund 18.93% -3.12% 18.17% -0.47% -24.34% 32.11% 7.97% -1.37% 14.18% 4.87% -12.36%(B) 316.36%(B)
S&P 500 Index 28.58% 21.04% -9.10% -11.89% -22.10% 28.68% 10.88% 4.91% 15.79% 5.49% -11.91%(B) 292.19%(B)
- ------------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(A)
- --------------------------------------------------------------------------------
FOR THE PERIODS ENDED JUNE 30, 2008
------------------------------------------------------------
SINCE
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS INCEPTION*
- --------------------------------------------------------------------------------
Oak Value Fund... -16.04% 1.07% 4.46% 2.57% 9.67%
S&P 500 Index.... -13.12% 4.41% 7.58% 2.88% 9.25%
- --------------------------------------------------------------------------------
* 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, 2008 (UNAUDITED)
================================================================================
DISTRIBUTION BY BUSINESS CATEGORY (% OF NET ASSETS)
[PIE CHART OMITTED]
Consumer Related -- 29.8%
Finance Related -- 22.7%
Health Care -- 7.9%
Industrials -- 9.3%
Information Technology -- 20.4%
Materials -- 8.9%
Cash Equivalents -- 1.0%
TEN LARGEST HOLDINGS
% OF
COMPANY NET ASSETS
-----------------------------------------------------------
Berkshire Hathaway, Inc. - Class A 9.27%
Medtronic, Inc. 5.67%
Oracle Corp. 5.65%
Diageo PLC - ADR 5.29%
Coach, Inc. 4.92%
E.W. Scripps Co. (The) - Class A 4.87%
E.I. du Pont de Nemours and Co. 4.84%
3M Co. 4.83%
Tiffany & Co. 4.77%
Cadbury PLC - ADR 4.62%
10
OAK VALUE FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2008
================================================================================
SHARES COMMON STOCKS -- 99.0% VALUE
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 19.9%
89,225 Apollo Group, Inc. - Class A (a) ................ $ 3,949,098
159,600 Coach, Inc. (a) ................................. 4,609,248
109,895 E.W. Scripps Co. (The) - Class A ................ 4,565,038
109,750 Tiffany & Co. ................................... 4,472,312
33,787 Viacom, Inc. - Class B (a) ...................... 1,031,855
------------
18,627,551
------------
CONSUMER STAPLES -- 9.9%
86,048 Cadbury PLC - ADR ............................... 4,329,935
67,125 Diageo PLC - ADR ................................ 4,958,524
------------
9,288,459
------------
FINANCIALS -- 22.7%
25,700 AFLAC, Inc. ..................................... 1,613,960
105,500 American Express Co. ............................ 3,974,185
56,450 AON Corp. ....................................... 2,593,313
72 Berkshire Hathaway, Inc. - Class A (a) .......... 8,694,000
35,925 Capital One Financial Corp. ..................... 1,365,509
87,875 Moody's Corp. ................................... 3,026,415
------------
21,267,382
------------
HEALTH CARE -- 7.9%
102,675 Medtronic, Inc. ................................. 5,313,431
30,550 Zimmer Holdings, Inc. (a) ....................... 2,078,928
------------
7,392,359
------------
INDUSTRIALS -- 9.3%
65,050 3M Co. .......................................... 4,526,830
67,175 United Technologies Corp. ....................... 4,144,698
------------
8,671,528
------------
INFORMATION TECHNOLOGY -- 20.4%
108,550 Cisco Systems, Inc. (a) ......................... 2,524,873
151,625 eBay, Inc. (a) .................................. 4,143,911
82,999 Fidelity National Information Services, Inc. .... 3,063,493
149,725 Microsoft Corp. ................................. 4,118,935
252,075 Oracle Corp. (a) ................................ 5,293,575
------------
19,144,787
------------
MATERIALS -- 8.9%
105,700 E.I. du Pont de Nemours and Co. ................. 4,533,473
40,625 Praxair, Inc. ................................... 3,828,500
------------
8,361,973
------------
TOTAL COMMON STOCKS (Cost $81,838,510) .......... $ 92,754,039
------------
11
OAK VALUE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
================================================================================
SHARES CASH EQUIVALENTS -- 1.2% VALUE
- --------------------------------------------------------------------------------
1,167,625 First American Government Obligations Fund -
Class Y, 1.933% (b) (Cost $1,167,625) ........... $ 1,167,625
------------
TOTAL INVESTMENTS AT VALUE -- 100.2%
(Cost $83,006,135) .............................. $ 93,921,664
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.2%) . (180,619)
------------
NET ASSETS -- 100.0% ............................ $ 93,741,045
============
(a) Non-income producing security.
(b) Variable rate security. The rate shown is the 7-day effective yield as of
June 30, 2008.
ADR - American Depositary Receipt
See accompanying notes to financial statements.
12
OAK VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2008
================================================================================
ASSETS
Investments in securities:
At cost ...................................................... $ 83,006,135
============
At market value (Note 1) ..................................... $ 93,921,664
Receivable for capital shares sold .............................. 78,632
Dividends receivable ............................................ 22,794
Other assets .................................................... 17,450
------------
TOTAL ASSETS ................................................. 94,040,540
------------
LIABILITIES
Payable for capital shares redeemed ............................. 190,371
Accrued investment advisory fees (Note 3) ....................... 75,269
Payable to administrator (Note 3) ............................... 15,424
Other accrued expenses and liabilities .......................... 18,431
------------
TOTAL LIABILITIES ............................................ 299,495
------------
NET ASSETS ...................................................... $ 93,741,045
============
Net assets consist of:
Paid-in capital ................................................. $ 82,743,601
Undistributed net realized gains from security transactions ..... 81,915
Net unrealized appreciation on investments ...................... 10,915,529
------------
Net assets ...................................................... $ 93,741,045
============
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) .......................... 4,862,249
============
Net asset value, offering price and redemption
price per share (A) .......................................... $ 19.28
============
(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.
13
OAK VALUE FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2008
================================================================================
INVESTMENT INCOME
Dividends .................................................... $ 1,536,784
------------
EXPENSES
Investment advisory fees (Note 3) ............................ 1,081,242
Transfer agent and shareholder services fees (Note 3) ........ 116,284
Administration fees (Note 3) ................................. 102,677
Trustees' fees and expenses .................................. 91,670
Postage and supplies ......................................... 50,520
Fund accounting fees (Note 3) ................................ 36,066
Professional fees ............................................ 35,446
Insurance expense ............................................ 26,251
Registration fees ............................................ 25,683
Compliance service fees (Note 3) ............................. 19,997
Custodian fees ............................................... 19,223
Printing of shareholder reports .............................. 13,623
Interest expense (Note 4) .................................... 566
Other expenses ............................................... 16,752
------------
TOTAL EXPENSES ............................................ 1,636,000
------------
NET INVESTMENT LOSS .......................................... (99,216)
------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains from security transactions ................ 13,297,916
Net change in unrealized appreciation/
depreciation on investments ............................... (32,835,797)
------------
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS ............ (19,537,881)
------------
NET DECREASE IN NET ASSETS FROM OPERATIONS ................... $(19,637,097)
============
See accompanying notes to financial statements.
14
OAK VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
=======================================================================================================
YEAR YEAR
ENDED ENDED
JUNE 30, JUNE 30,
2008 2007
- -------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment loss ............................................. $ (99,216) $ (259,562)
Net realized gains from security transactions ................... 13,297,916 43,370,966
Net change in unrealized appreciation/depreciation on investments (32,835,797) (8,062,465)
-------------- --------------
Net increase (decrease) in net assets from operations .............. (19,637,097) 35,048,939
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ...................................... -- (446)
From net realized gains from security transactions .............. (13,111,978) (43,116,232)
-------------- --------------
Net decrease in net assets from distributions to shareholders ...... (13,111,978) (43,116,678)
-------------- --------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ....................................... 4,383,470 17,453,371
Reinvestment of distributions to shareholders ................... 12,789,625 42,229,998
Proceeds from redemption fees collected (Note 1) ................ 5,060 63,530
Payments for shares redeemed .................................... (33,027,500) (110,363,326)
-------------- --------------
Net decrease in net assets from capital share transactions ......... (15,849,345) (50,616,427)
-------------- --------------
NET DECREASE IN NET ASSETS ......................................... (48,598,420) (58,684,166)
NET ASSETS
Beginning of year ............................................... 142,339,465 201,023,631
-------------- --------------
End of year ..................................................... $ 93,741,045 $ 142,339,465
============== ==============
ACCUMULATED NET INVESTMENT INCOME .................................. $ -- $ --
============== ==============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ..................................................... 191,644 594,036
Shares reinvested ............................................... 588,072 1,587,288
Shares redeemed ................................................. (1,433,786) (3,844,593)
-------------- --------------
Net decrease in shares outstanding .............................. (654,070) (1,663,269)
Shares outstanding, beginning of year ........................... 5,516,319 7,179,588
-------------- --------------
Shares outstanding, end of year ................................. 4,862,249 5,516,319
============== ==============
See accompanying notes to financial statements.
15
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,
2008 2007 2006 2005 2004
- ---------------------------------------------------------------------------------------------------------------
Net asset value at
beginning of year ..................... $ 25.80 $ 28.00 $ 30.82 $ 29.02 $ 25.58
---------- ---------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income (loss).. ........ (0.02) (0.05) 0.08 (0.12) (0.15)
Net realized and unrealized gains
(losses) on investments ............. (3.87) 6.61 (0.60) 1.92 3.59
---------- ---------- ---------- ---------- ----------
Total from investment operations ........ (3.89) 6.56 (0.52) 1.80 3.44
---------- ---------- ---------- ---------- ----------
Less distributions:
From net investment income ............ -- (0.00)(A) (0.08) -- --
From net realized gains from
security transactions ............... (2.63) (8.77) (2.22) -- --
---------- ---------- ---------- ---------- ----------
Total distributions ..................... (2.63) (8.77) (2.30) -- --
---------- ---------- ---------- ---------- ----------
Proceeds from redemption
fees collected (Note 1) ............... 0.00(A) 0.01 0.00(A) 0.00(A) 0.00(A)
---------- ---------- ---------- ---------- ----------
Net asset value at end of year.. ........ $ 19.28 $ 25.80 $ 28.00 $ 30.82 $ 29.02
========== ========== ========== ========== ==========
Total return (B) ........................ (16.04%) 25.03% (1.66%) 6.20% 13.45%
========== ========== ========== ========== ==========
Net assets at end of year (000's) ....... $ 93,741 $ 142,339 $ 201,024 $ 248,782 $ 259,488
========== ========== ========== ========== ==========
Ratio of expenses to
average net assets .................... 1.37% 1.35% 1.29% 1.25% 1.25%
Ratio of net investment income
(loss) to average net assets .......... (0.08%) (0.16%) 0.24% (0.39%) (0.52%)
Portfolio turnover rate ................. 52% 44% 29% 29% 24%
(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.
16
OAK VALUE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008
================================================================================
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, 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, 2008 and June 30, 2007,
proceeds from redemption fees totaled $5,060 and $63,530, 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, 2008 was $268,376 of ordinary income and $12,843,602 of long-term capital
gains. 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. 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 and disclosure of contingent 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 June
30, 2008:
- --------------------------------------------------------------------------------
Tax cost of portfolio investments ...................... $ 83,106,831
============
Gross unrealized appreciation .......................... $ 16,681,944
Gross unrealized depreciation .......................... (5,867,111)
------------
Net unrealized appreciation ............................ $ 10,814,833
Undistributed long-term gains .......................... 182,611
------------
Total distributable earnings ........................... $ 10,997,444
============
- --------------------------------------------------------------------------------
The difference between the federal income tax cost of portfolio of investments
and the financial statement cost is due to 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.
The Financial Accounting Standards Board's ("FASB") Interpretation No. 48 ("FIN
48") "Accounting for Uncertainty in Income Taxes" 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 positions not deemed to meet the more-likely-than-not
threshold would be recorded as a tax benefit or expense in the current year.
Based on management's analysis, the application of FIN 48 does not have a
material impact on these financial statements. The statute of limitations on the
Fund's tax returns remains open for the years ended June 30, 2005 through June
30, 2007.
18
OAK VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
For the year ended June 30, 2008, the Fund reclassified its net investment loss
of $99,216 against undistributed 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, 2008, cost of purchases and proceeds from sales
and maturities of investment securities, excluding short-term investments,
amounted to $61,037,205 and $90,835,894, 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
internal regulatory compliance services and executive and administrative
services. Ultimus supervises the preparation of tax returns, reports to
shareholders of the Fund, reports to and filings with the Securities and
Exchange Commission and state securities commissions, and materials for meetings
of the Board of Trustees. For the performance of these services, the Fund pays
Ultimus a fee at the annual rate of .10% of the average value of its daily net
assets up to $50 million, .075% of such assets from $50 million to $200 million
and .05% of such assets in excess of $200 million, provided, however, that the
minimum fee is $2,000 per month.
Under the terms of 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,
2008, Ultimus was paid $44,920 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, 2008, the Fund paid $71,364 for such services.
These fees are included in "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. In
addition, the Fund pays all costs of external pricing services.
19
OAK VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
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. In addition, the Fund
reimburses Ultimus for its reasonable out-of-pocket expenses, if any, relating
to these compliance services.
4. BANK LINE OF CREDIT
The Fund has an unsecured $25,000,000 bank line of credit. Borrowings under this
arrangement bear interest at a rate per annum equal to Prime Rate minus 0.50%.
During the year ended June 30, 2008, the Fund incurred $566 of interest expense
related to borrowings under the line of credit. Average debt outstanding during
the year ended June 30, 2008 was $8,183. As of June 30, 2008, 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. NEW ACCOUNTING PRONOUNCEMENT
In September 2006, the 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 SFAS No. 157 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, 2008, the Fund does not believe
the adoption of SFAS No. 157 will impact the amounts reported in the financial
statements, however, additional disclosures will 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, 2008, and the related
statement of operations for the year then ended, and the statement of changes in
net assets and financial highlights for each of the two years in the period 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
audits. The financial highlights for each of the three years ended June 30, 2006
were audited by other auditors whose report dated August 11, 2006 expressed an
unqualified opinion on such financial highlights.
We conducted our audits 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, 2008 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 audits provide 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, 2008, the results of its operations for the year
then ended, and the changes in its net assets and the financial highlights for
each of the two years in the period 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
August 13, 2008
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 mutual 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 most
recent semi-annual period (January 1, 2008) and held until the end of the period
(June 30, 2008).
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
return, 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, 2008 June 30, 2008 During Period*
- -----------------------------------------------------------------------------------------
Based on Actual Fund Return $1,000.00 $ 876.40 $ 6.39
Based on Hypothetical 5% Return
(before expenses) $1,000.00 $1,018.05 $ 6.87
- -----------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio of 1.37% for the
period, multiplied by the average account value over the period,
multiplied by 182/366 (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; For more than the past five 1 None
3100 Tower Blvd. President President Since years, Mr. Coats has been
Suite 700 July 2003; President, Chief Executive
Durham, NC 27707 Trustee Since Officer and Senior Portfolio
Age: 48 December 2003 Manager with Oak Value
Capital Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret C. Landis Vice President Appointed For more than the past five
3100 Tower Blvd. annually; years, Ms. Landis has been
Suite 700 Since Senior Vice President, the
Durham, NC 27707 May 2007 Chief Compliance Officer,
Age: 50 Treasurer and Secretary
of Oak Value Capital
Managment, 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: 51 Ultimus Fund Distributors,
LLC, the Fund's principal
underwriter.
- ------------------------------------------------------------------------------------------------------------------------------------
Mark J. Seger Treasurer Appointed For more than the past five
225 Pictoria Drive and 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: 46 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: 51 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 (UNAUDITED) (CONTINUED)
================================================================================
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 None
1816 Front Street Trustee Trustee years, Mr. Jordan has served
Suite 320 Since May 1995; as President of Practice
Durham, NC 27705 Chairman Management Services, Inc.
Age: 62 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: 48 Compensation (an investment banking firm).
Committee
- ------------------------------------------------------------------------------------------------------------------------------------
John M. Day Trustee; Indefinite Term; For more than the past five 1 None
4101 Lake Boone Trail Chairman of Since: years, Mr. Day has been
Suite 218 Audit May 1995 Managing Partner, of KDI
Raleigh, NC 27607 Committee Capital Partners (an
Age: 54 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: 72 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.
24
OAK VALUE FUND
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 may 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.
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, 2008. For the fiscal year
ended June 30, 2008, 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 $268,376 as taxed at a maximum rate of 15%, as well as $12,843,602 as
long-term gain distributions. Complete information will be computed and reported
in conjunction with your 2008 Form 1099-DIV.
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.
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
1835 Market Street
26th Floor
Philadelphia, Pennsylvania 19103
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 $14,500 and $14,000 with
respect to the registrant's fiscal years ended June 30, 2008 and
2007, respectively.
(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 and $2,000 with respect to the
registrant's fiscal years ended June 30, 2008 and 2007,
respectively. 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 years ended June 30, 2008 and 2007, aggregate
non-audit fees of $2,000 and $2,000, respectively, were billed by
the registrant's principal 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 principal 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 19, 2008
-----------------------------
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 19, 2008
-----------------------------
By (Signature and Title)* /s/ Mark J. Seger
---------------------------------------------------
Mark J. Seger, Treasurer
Date August 19, 2008
-----------------------------
* Print the name and title of each signing officer under his or her signature.