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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)
1450 Raleigh Road, Suite 220 Chapel Hill, North Carolina 27517
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Larry D. Coats, Jr.
Oak Value Capital Management, Inc.
1450 Raleigh Road, Suite 220 Chapel Hill, NC 27517
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (919) 419-1900
----------------------------
Date of fiscal year end: June 30, 2009
-----------------------------
Date of reporting period: June 30, 2009
-----------------------------
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, 2009
[LOGO]
==============
OAK VALUE FUND
--------------
WWW.OAKVALUEFUND.COM
LETTER TO SHAREHOLDERS July 22, 2009
================================================================================
Dear Fellow Shareholders,
Benjamin Franklin said, "Despair ruins some, presumption many." In our opinion,
many investors were in a state of near total despair as the financial crisis
seemed to reach a crescendo in early March. Our experience suggests that it is
not so much the state of despair that leads to ruin, but rather the actions
taken when faced with despair that have the potential to cause the greatest
harm. In the case of the U.S. stock market and investors' general reactions
earlier this year, the presumption that we were faced with an impending and
terminal economic depression led to a significant gap between the value of many
of the world's great businesses and the prices of their respective stocks.
Though there were some challenging days along the way, we chose to focus our
efforts and actions on the opportunities presented by the gap.
The Oak Value Fund (the "Fund") handily outperformed the broader market as
measured by the S&P 500 Index for the fiscal year ended June 30, 2009. Though we
are never pleased to report a decline in the value of their investments to the
Fund shareholders, we are encouraged by these results on a relative basis as
they have affirmed the focus of our efforts in recent years. We are pleased to
report that the Fund outperformed in all four quarters, protecting capital on
the downside during the first three quarters of the year while outpacing the
recovery during the final quarter of the year. Our focus on quality, advantaged
businesses with solid financial positions during a period of extreme dislocation
produced, in our view, an attractive opportunity set for long-term investors.
As long-term investors, we believe the decisions we made during this period of
widespread despair will prove to be far more important than the relative
out-performance. In our opinion, the current Oak Value Fund portfolio is better
positioned than at any time in its sixteen year history. Though the portfolio
remains focused in a select collection of advantaged businesses, these
businesses represent a diversified set of industries and opportunities both
domestically and abroad. On average, the economic metrics for the portfolio are
more compelling than at any time that we can recall. Though the share prices of
many of these companies have somewhat recovered from their earlier lows, we
continue to believe that they are particularly compelling.
We have included the Fund's financial statements for the fiscal year ended June
30, 2009 as well as other financial and portfolio data in the pages that follow.
Consistent with the practices we established several years ago, the portfolio
commentary contained in this annual report is limited to a few summary
observations. A more detailed discussion of the Fund's investment activities is
available in the Investment Adviser Review posted on the Fund's website each
quarter at www.oakvaluefund.com. We encourage Fund shareholders to review
1
these reports on a regular basis. Shareholders, current and prospective, may
receive email copies of these quarterly reports by subscribing to the Fund's
email distribution list on the website.
On behalf of the entire Oak Value team, we thank you for your continued interest
and partnership and welcome your questions or comments.
Oak Value Fund Co-Managers,
/s/ David R. Carr, Jr. /s/ Larry D. Coats, Jr. /s/ Christy L. Phillips
David R. Carr, Jr. Larry D. Coats, Jr. Christy L. Phillips
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.
2
MANAGEMENT DISCUSSION AND ANALYSIS
================================================================================
Below we summarize the factors that most meaningfully impacted the Fund's
performance for the year. In general, the Fund's exposures in Consumer
Discretionary, Energy, Financials, Industrials and Materials contributed to the
Fund's outperformance while its Consumer Staples and Health Care holdings did
not keep pace. Table B provides a full listing of the Fund's top individual
security contributors and detractors during the fiscal year.
o The Fund's Consumer Discretionary holdings were the single largest class
of contributors to the positive relative results for the fiscal year, as a
result of the opportunistic management of portfolio positions in Apollo
Group and Coach. During a period in which the Consumer Discretionary
sector's average returns were down by more than 15%, the Fund's holdings
in this area produced an aggregate positive return of greater than 15%.
o In the area of Consumer Staples, the Fund's holdings underperformed the
sector on average as Diageo, Cadbury and Avon lagged while recent addition
Colgate somewhat softened the relative underperformance.
o All but one of the Fund's Finance-related holdings outperformed the
sector's painful -38% return for the fiscal period. Fortunately, the
damage of the halving of AFLAC's share price was more than offset by
sector beating performances from Moody's, Capital One, Berkshire Hathaway,
AON, and American Express.
o Fund holdings in Industrial companies United Technologies and 3M
significantly bested the near 35% decline in the overall Industrials
sector. Such was also the case for the Fund's Materials sector holdings as
the opportunistic addition of Swiss agri-chemicals company Syngenta
appreciated nearly 40%.
o The Fund's sole direct holding in the Energy sector, Chesapeake Energy,
advanced approximately 30% from its cost basis in the face of a 41%
decline for the Energy sector overall.
o The Fund's Health Care holdings were, in aggregate, its most significant
performance detractors, as Medtronic and Zimmer Holdings both declined
more than 30% during the fiscal year, noticeably underperforming the
negative 11% return of the broader Health Care sector.
o The Fund's holdings in Information Technology roughly matched the -18% of
the sector's overall showing.
Portfolio activity for the Fund for the fiscal year is summarized in Table C. We
use this opportunity to remind shareholders that the information provided in
Table C is limited to holdings that were added to the portfolio during the year
and to holdings that had been completely eliminated during the fiscal year. This
table does not address interim activity such as the opportunistic increasing or
decreasing of position sizes across various holdings.
3
- --------------------------------------------------------------------------------
TABLE A
- --------------------------------------------------------------------------------
QUARTERLY PERFORMANCE - FISCAL YEAR 2009
- --------------------------------------------------------------------------------
3RD QUARTER 4TH QUARTER 1ST QUARTER 2ND QUARTER
2008 2008 2009 2009
- --------------------------------------------------------------------------------
Oak Value Fund -3.22% -21.85% -10.74% 21.00%
- --------------------------------------------------------------------------------
S&P 500 Index -8.37% -21.94% -11.01% 15.93%
- --------------------------------------------------------------------------------
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. 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. THE FUND'S PROSPECTUS CONTAINS THIS
AND OTHER IMPORTANT INFORMATION. THE FUND'S ANNUALIZED EXPENSE RATIO AS OF
FISCAL YEAR-END JUNE 30, 2009 WAS 1.57%. THE EXPENSE RATIO AS DISCLOSED IN THE
NOVEMBER 1, 2008 PROSPECTUS 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.
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
TABLE B
- ---------------------------------------------------------------------------------------------------------
LARGEST NET CONTRIBUTORS TO INVESTMENT RESULTS
YEAR ENDED JUNE 30, 2009
- ---------------------------------------------------------------------------------------------------------
TOP 5 SECURITIES BY % OF BOTTOM 5 SECURITIES BY % OF
CONTRIBUTION NET ASSETS CONTRIBUTION NET ASSETS
- ---------------------------------------------------------------------------------------------------------
Apollo Group, Inc. - Class A 4.29% Berkshire Hathaway, Inc. - Class A 7.46%
Scripps Networks Interactive, Inc. - Class A Sold Tiffany & Co. 4.03%
Syngenta AG - ADR 3.94% American Express Co. 3.54%
Chesapeake Energy Corp. 2.63% AFLAC, Inc. 4.03%
MasterCard, Inc - Class A 3.25% Medtronic, Inc. 3.28%
- ---------------------------------------------------------------------------------------------------------
4
- ---------------------------------------------------------------------------------------------------------------------
JULY 1, 2008 - JUNE 30, 2009 POSITIONS ADDED
- ---------------------------------------------------------------------------------------------------------------------
COMPANY PURCHASED PRIMARY BUSINESS SECTOR CLASSIFICATION
- ---------------------------------------------------------------------------------------------------------------------
Apollo Group, Inc. - Class A Education and Training Services Consumer Discretionary
- ---------------------------------------------------------------------------------------------------------------------
Automatic Data Processing, Inc. Technology Based Payroll and
Employment Services Information Technology
- ---------------------------------------------------------------------------------------------------------------------
Avon Products, Inc. Cosmetics and Fragrance
Manufacturer and Marketer Consumer Staples
- ---------------------------------------------------------------------------------------------------------------------
Becton, Dickinson and Co. Medical Supply Manufacturer and Developer Health Care
- ---------------------------------------------------------------------------------------------------------------------
Colgate-Palmolive Co. Consumer Product, Manufacturer and Marketer Consumer Staples
- ---------------------------------------------------------------------------------------------------------------------
Chesapeake Energy Corp. Oil and Natural Gas, Exploration and Production Energy
- ---------------------------------------------------------------------------------------------------------------------
MasterCard, Inc. - Class A Credit Card Payment Processing and
Transaction Services Information Technology
- ---------------------------------------------------------------------------------------------------------------------
Monsanto Co. Agricultural Chemical Manufacturer and Distributor Materials
- ---------------------------------------------------------------------------------------------------------------------
Syngenta AG - ADR Crop Protection and Commercial Seed Business Materials
- ---------------------------------------------------------------------------------------------------------------------
JULY 1, 2008 - JUNE 30, 2009 POSITIONS ELIMINATED
- ---------------------------------------------------------------------------------------------------------------------
COMPANY SOLD PRIMARY BUSINESS SECTOR CLASSIFICATION
- ---------------------------------------------------------------------------------------------------------------------
Apollo Group, Inc. - Class A Education and Training Services Consumer Discretionary
- ---------------------------------------------------------------------------------------------------------------------
Capital One Financial Corp. Consumer Financial Products Financials
- ---------------------------------------------------------------------------------------------------------------------
E.I. du Pont de Nemours and Co. Chemicals Materials
- ---------------------------------------------------------------------------------------------------------------------
E. W. Scripps Co. - Class A Broadcasting and Print Media Consumer Discretionary
- ---------------------------------------------------------------------------------------------------------------------
Fidelity National Information
Services, Inc. Financial Transaction Processing Information Technology
- ---------------------------------------------------------------------------------------------------------------------
Lender Processing Services, Inc. Financial Transaction Processing Information Technology
- ---------------------------------------------------------------------------------------------------------------------
Scripps Networks
Interactive, Inc. - Class A Category Broadcasting Network Consumer Discretionary
- ---------------------------------------------------------------------------------------------------------------------
Viacom, Inc. - Class B Broadcasting, Entertainment, and Online Media Consumer Discretionary
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
TOP TEN HOLDINGS AS OF JUNE 30, 2009(1)
- ---------------------------------------------------------------------------------------------------------------------
COMPANY PRIMARY BUSINESS S&P SECTOR
- ---------------------------------------------------------------------------------------------------------------------
Apollo Group, Inc. - Class A Education and Training Services Consumer Discretionary
- ---------------------------------------------------------------------------------------------------------------------
Avon Products, Inc. Cosmetics and Fragrance Manufacturer
and Marketer Consumer Staples
- ---------------------------------------------------------------------------------------------------------------------
Berkshire Hathaway, Inc. -
Class A Insurance, Reinsurance and Capital Allocation Financials
- ---------------------------------------------------------------------------------------------------------------------
Cadbury PLC - ADR Confectioneries Consumer Staples
- ---------------------------------------------------------------------------------------------------------------------
Coach, Inc. Handbags and Accessories Consumer Discretionary
- ---------------------------------------------------------------------------------------------------------------------
Diageo PLC - ADR Global Premium Alcohol Business Consumer Staples
- ---------------------------------------------------------------------------------------------------------------------
Moody's Corp. Credit Rating Services Financials
- ---------------------------------------------------------------------------------------------------------------------
Oracle Corp. Database, Middleware and Application Software Information Technology
- ---------------------------------------------------------------------------------------------------------------------
Praxair, Inc. Industrial Use Atmospheric and Process Gases Materials
- ---------------------------------------------------------------------------------------------------------------------
Tiffany & Co. Designer, Manufacturer and Retailer of Fine Jewelry Consumer Discretionary
- ---------------------------------------------------------------------------------------------------------------------
1 Top Ten Holdings are listed alphabetically, not based on position size. They 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.
- ---------------------------------------------------------------------------------------------------------------------
5
IMPORTANT INFORMATION
This Management Discussion and Analysis seeks to describe some of 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, 2009 or held during the fiscal year ended June 30, 2009. 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
6
investment markets. Although our comments focus on the most recent fiscal year,
we use this perspective only because it reflects industry convention and
regulatory 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.
The Standard & Poor's 500 Index is an unmanaged index of common stock prices of
500 widely held U.S. stocks and includes the reinvestment of dividends.
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
accurate 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.
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.
7
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
---- ----- ---- -----
06/30/99 $10,000 06/30/99 $10,000
12/31/99 9,182 12/31/99 10,771
06/30/00 9,209 06/30/00 10,725
12/31/00 10,850 12/31/00 9,790
06/30/01 11,357 06/30/01 9,134
12/31/01 10,799 12/31/01 8,626
06/30/02 9,448 06/30/02 7,491
12/31/02 8,170 12/31/02 6,720
06/30/03 9,698 06/30/03 7,510
12/31/03 10,794 12/31/03 8,647
06/30/04 11,003 06/30/04 8,945
12/31/04 11,655 12/31/04 9,588
06/30/05 11,685 06/30/05 9,511
12/31/05 11,495 12/31/05 10,059
06/30/06 11,491 06/30/06 10,332
12/31/06 13,125 12/31/06 11,648
06/30/07 14,367 06/30/07 12,459
12/31/07 13,764 12/31/07 12,288
06/30/08 12,063 06/30/08 10,824
12/31/08 9,124 12/31/08 7,742
06/30/09 9,854 06/30/09 7,987
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- ------------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS(A)
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR-TO-DATE SINCE
2009 INCEPTION*
CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR CALENDAR (AS OF (AS OF
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 6/30/09) 06/30/09)
- ------------------------------------------------------------------------------------------------------------------------------------
Oak Value
Fund -3.12% 18.17% -0.47% -24.34% 32.11% 7.97% -1.37% 14.18% 4.87% -33.71% 8.00%(B) 240.13%(B)
S&P 500
Index 21.04% -9.10% -11.89% -22.10% 28.68% 10.88% 4.91% 15.79% 5.49% -37.00% 3.16%(B) 189.38%(B)
- ------------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(A)
- -------------------------------------------------------------------------------------------
FOR THE PERIODS ENDED JUNE 30, 2009
-------------------------------------------------------------
SINCE
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS INCEPTION*
- -------------------------------------------------------------------------------------------
Oak Value Fund............. -18.31% -4.99% -2.18% -0.15% 7.73%
S&P 500 Index.............. -26.21% -8.22% -2.24% -2.22% 6.67%
- -------------------------------------------------------------------------------------------
* 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.
8
OAK VALUE FUND
PORTFOLIO INFORMATION
JUNE 30, 2009 (UNAUDITED)
================================================================================
DISTRIBUTION BY BUSINESS CATEGORY (% OF NET ASSETS)
[PIE CHART OMITTED]
Consumer Related 29.3%
Energy 2.6%
Finance Related 23.2%
Health Care 9.8%
Industrials 7.1%
Information Technology 17.0%
Materials 10.3%
Cash Equivalents 0.7%
TEN LARGEST HOLDINGS
% OF
COMPANY NET ASSETS
--------------------------------------------------
Berkshire Hathaway, Inc. - Class A 7.46%
Avon Products, Inc. 5.49%
Oracle Corp. 5.16%
Praxair, Inc. 4.92%
Coach, Inc. 4.90%
Diageo PLC - ADR 4.33%
Apollo Group, Inc. - Class A 4.29%
Moody's Corp. 4.22%
Cadbury PLC - ADR 4.05%
Tiffany & Co. 4.03%
9
OAK VALUE FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2009
================================================================================
SHARES COMMON STOCKS -- 99.3% VALUE
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 13.2%
37,800 Apollo Group, Inc. - Class A (A) .................. $ 2,688,336
114,450 Coach, Inc. ....................................... 3,076,416
99,750 Tiffany & Co. ..................................... 2,529,660
------------
8,294,412
------------
CONSUMER STAPLES -- 16.1%
133,550 Avon Products, Inc. ............................... 3,442,919
73,848 Cadbury PLC - ADR ................................. 2,540,371
19,375 Colgate-Palmolive Co. ............................. 1,370,588
47,475 Diageo PLC - ADR .................................. 2,717,944
------------
10,071,822
------------
ENERGY -- 2.6%
83,225 Chesapeake Energy Corp. ........................... 1,650,352
------------
FINANCIALS -- 23.2%
81,275 AFLAC, Inc. ....................................... 2,526,840
95,500 American Express Co. .............................. 2,219,420
66,250 AON Corp. ......................................... 2,508,887
52 Berkshire Hathaway, Inc. - Class A (A) ............ 4,680,000
100,450 Moody's Corp. ..................................... 2,646,858
------------
14,582,005
------------
HEALTH CARE -- 9.8%
30,750 Becton, Dickinson and Co. ......................... 2,192,782
59,000 Medtronic, Inc. ................................... 2,058,510
43,900 Zimmer Holdings, Inc. (A) ......................... 1,870,140
------------
6,121,432
------------
INDUSTRIALS -- 7.1%
37,875 3M Co. ............................................ 2,276,287
41,750 United Technologies Corp. ......................... 2,169,330
------------
4,445,617
------------
INFORMATION TECHNOLOGY -- 17.0%
30,675 Automatic Data Processing, Inc. ................... 1,087,122
102,775 Cisco Systems, Inc. (A) ........................... 1,915,726
25,000 eBay, Inc. (A) .................................... 428,250
12,175 MasterCard, Inc. - Class A ........................ 2,036,999
83,550 Microsoft Corp. ................................... 1,985,983
151,175 Oracle Corp. ...................................... 3,238,169
------------
10,692,249
------------
MATERIALS -- 10.3%
11,925 Monsanto Co. ...................................... 886,504
43,450 Praxair, Inc. ..................................... 3,087,992
53,075 Syngenta AG - ADR ................................. 2,469,049
------------
6,443,545
------------
TOTAL COMMON STOCKS (Cost $65,904,043) ............ $ 62,301,434
------------
10
OAK VALUE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
================================================================================
SHARES CASH EQUIVALENTS -- 0.6% VALUE
- --------------------------------------------------------------------------------
391,592 First American Government Obligations Fund -
Class Y, 0.00% (B) (Cost $391,592) ............. $ 391,592
------------
TOTAL INVESTMENTS AT VALUE -- 99.9%
(Cost $66,295,635) ............................. $ 62,693,026
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.1% ..... 39,015
------------
NET ASSETS -- 100.0% .............................. $ 62,732,041
============
(A) Non-income producing security.
(B) Variable rate security. The rate shown is the 7-day effective yield as of
June 30, 2009.
ADR - American Depositary Receipt
See accompanying notes to financial statements.
11
OAK VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2009
==============================================================================================================
ASSETS
Investments in securities:
At cost .................................................................................... $ 66,295,635
============
At market value (Note 1) ................................................................... $ 62,693,026
Receivable for capital shares sold ............................................................ 40,082
Dividends receivable .......................................................................... 53,711
Other assets .................................................................................. 18,083
------------
TOTAL ASSETS ............................................................................... 62,804,902
------------
LIABILITIES
Payable for capital shares redeemed ........................................................... 578
Accrued investment advisory fees (Note 3) ..................................................... 46,944
Payable to administrator (Note 3) ............................................................. 12,200
Other accrued expenses and liabilities ........................................................ 13,139
------------
TOTAL LIABILITIES .......................................................................... 72,861
------------
NET ASSETS .................................................................................... $ 62,732,041
============
Net assets consist of:
Paid-in capital ............................................................................... $ 69,776,632
Undistributed net investment income ........................................................... 2,459
Accumulated net realized losses from security transactions .................................... (3,444,441)
Net unrealized depreciation on investments .................................................... (3,602,609)
------------
Net assets .................................................................................... $ 62,732,041
============
Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) 4,005,945
============
Net asset value, offering price and redemption price per share (A) ............................ $ 15.66
============
(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.
12
OAK VALUE FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2009
================================================================================
INVESTMENT INCOME
Dividends (Net of foreign tax of $2,394) ........................ $ 1,262,336
------------
EXPENSES
Investment advisory fees (Note 3) ............................... 621,039
Transfer agent and shareholder services fees (Note 3) ........... 94,448
Trustees' fees and expenses ..................................... 65,211
Administration fees (Note 3) .................................... 64,119
Professional fees ............................................... 50,324
Fund accounting fees (Note 3) ................................... 30,816
Insurance expense ............................................... 27,463
Registration fees ............................................... 22,411
Compliance service fees (Note 3) ................................ 17,989
Custody and bank service fees ................................... 13,970
Printing of shareholder reports ................................. 12,612
Interest expense (Note 4) ....................................... 80
Other expenses .................................................. 63,522
------------
TOTAL EXPENSES ............................................... 1,084,004
------------
NET INVESTMENT INCOME ........................................... 178,332
------------
REALIZED AND UNREALIZED LOSSES ON INVESTMENTS
Net realized losses from security transactions .................. (3,343,745)
Net change in unrealized appreciation/depreciation on investments (14,518,138)
------------
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS ............... (17,861,883)
------------
NET DECREASE IN NET ASSETS FROM OPERATIONS ...................... $(17,683,551)
============
See accompanying notes to financial statements.
13
OAK VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
=======================================================================================================
YEAR YEAR
ENDED ENDED
JUNE 30, JUNE 30,
2009 2008
- -------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) .................................... $ 178,332 $ (99,216)
Net realized gains (losses) from security transactions .......... (3,343,745) 13,297,916
Net change in unrealized appreciation/depreciation on investments (14,518,138) (32,835,797)
-------------- --------------
Net decrease in net assets from operations ......................... (17,683,551) (19,637,097)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ...................................... (175,873) --
From net realized gains from security transactions .............. (182,611) (13,111,978)
-------------- --------------
Decrease in net assets from distributions to shareholders .......... (358,484) (13,111,978)
-------------- --------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ....................................... 2,636,301 4,383,470
Reinvestment of distributions to shareholders ................... 349,638 12,789,625
Proceeds from redemption fees collected (Note 1). ............... 4,759 5,060
Payments for shares redeemed .................................... (15,957,667) (33,027,500)
-------------- --------------
Net decrease in net assets from capital share transactions ......... (12,966,969) (15,849,345)
-------------- --------------
NET DECREASE IN NET ASSETS ......................................... (31,009,004) (48,598,420)
NET ASSETS
Beginning of year ............................................... 93,741,045 142,339,465
-------------- --------------
End of year ..................................................... $ 62,732,041 $ 93,741,045
============== ==============
UNDISTRIBUTED NET INVESTMENT INCOME ................................ $ 2,459 $ --
============== ==============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ..................................................... 171,685 191,644
Shares reinvested ............................................... 24,168 588,072
Shares redeemed ................................................. (1,052,157) (1,433,786)
-------------- --------------
Net decrease in shares outstanding .............................. (856,304) (654,070)
Shares outstanding, beginning of year ........................... 4,862,249 5,516,319
-------------- --------------
Shares outstanding, end of year ................................. 4,005,945 4,862,249
============== ==============
See accompanying notes to financial statements.
14
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,
2009 2008 2007 2006 2005
- ---------------------------------------------------------------------------------------------------------------
Net asset value at
beginning of year ............... $ 19.28 $ 25.80 $ 28.00 $ 30.82 $ 29.02
---------- ---------- ---------- ---------- ----------
Income (loss) from investment
operations:
Net investment income (loss) .... 0.04 (0.02) (0.05) 0.08 (0.12)
Net realized and unrealized gains
(losses) on investments ...... (3.58) (3.87) 6.61 (0.60) 1.92
---------- ---------- ---------- ---------- ----------
Total from investment operations ... (3.54) (3.89) 6.56 (0.52) 1.80
---------- ---------- ---------- ---------- ----------
Less distributions:
From net investment income ...... (0.04) -- (0.00)(A) (0.08) --
From net realized gains from
security transactions......... (0.04) (2.63) (8.77) (2.22) --
---------- ---------- ---------- ---------- ----------
Total distributions ................ (0.08) (2.63) (8.77) (2.30) --
---------- ---------- ---------- ---------- ----------
Proceeds from redemption
fees collected (Note 1).. ....... 0.00(A) 0.00(A) 0.01 0.00(A) 0.00(A)
---------- ---------- ---------- ---------- ----------
Net asset value at end of year ..... $ 15.66 $ 19.28 $ 25.80 $ 28.00 $ 30.82
========== ========== ========== ========== ==========
Total return (B) ................... (18.31%) (16.04%) 25.03% (1.66%) 6.20%
========== ========== ========== ========== ==========
Net assets at end of year (000's) .. $ 62,732 $ 93,741 $ 142,339 $ 201,024 $ 248,782
========== ========== ========== ========== ==========
Ratio of expenses to
average net assets .............. 1.57% 1.37% 1.35% 1.29% 1.25%
Ratio of net investment income
(loss) to average net assets .... 0.26% (0.08%) (0.16%) 0.24% (0.39%)
Portfolio turnover rate ............ 37% 52% 44% 29% 29%
(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.
15
OAK VALUE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2009
================================================================================
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.
The Financial Accounting Standards Board's ("FASB") Statement on Financial
Accounting Standards No. 157 "Fair Value Measurements" establishes a single
authoritative definition of fair value, sets out a framework for measuring fair
value and requires additional disclosures about fair value measurements. Various
inputs are used in determining the value of the Fund's investments. These inputs
are summarized in the three broad levels listed below:
o Level 1 - quoted prices in active markets for identical securities
o Level 2 - other significant observable inputs
o Level 3 - significant unobservable inputs
The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities.
As of June 30, 2009, all of the inputs used to value the Fund's investments were
Level 1.
In April 2009, FASB issued Staff Position No. 157-4, "Determining Fair Value
When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly" ("FSP
157-4" or the "Position"). FSP 157-4 provides additional guidance for estimating
fair value when the volume and level of activity has significantly decreased in
relation to normal market activity for the asset or liability. The Position also
provides additional guidance on circumstances that may indicate that a
transaction is not orderly and requires additional disclosures in annual and
interim reporting periods. FSP 157-4 is effective for fiscal periods and interim
periods ending after June 15, 2009. Management has evaluated the impact of FSP
157-4 and has concluded that FSP 157-4 has no impact on these financial
statements.
16
OAK VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
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, 2009 and June 30, 2008,
proceeds from redemption fees totaled $4,759 and $5,060, 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). If the seller defaults, and
the fair value of the collateral declines, realization of the collateral by the
Fund may be delayed or limited.
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
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, 2009 was $175,873 of ordinary income and $182,611 of long-term capital
gains. 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.
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.
17
OAK VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
The following information is computed on a tax basis for each item as of June
30, 2009:
- --------------------------------------------------------------------------------
Tax cost of portfolio investments ............................. $ 66,349,756
============
Gross unrealized appreciation ................................. $ 8,347,565
Gross unrealized depreciation ................................. (12,004,295)
------------
Net unrealized depreciation ................................... $ (3,656,730)
Undistributed ordinary income ................................. 2,459
Capital loss carryforward ..................................... (819,758)
Post-October losses ........................................... (2,570,562)
------------
Accumulated deficit ........................................... $ (7,044,591)
============
- --------------------------------------------------------------------------------
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 gains and losses under income tax regulations and GAAP.
These "book/tax" differences are temporary in nature and are primarily due to
the tax deferral of losses on wash sales.
As of June 30, 2009, the Fund had a capital loss carryforward for federal income
tax purposes of $819,758, which expires on June 30, 2017. In addition, the Fund
had net realized capital losses of $2,570,562 during the period November 1, 2008
through June 30, 2009, which are treated for federal income tax purposes as
arising during the Fund's tax year ending June 30, 2010. The capital loss
carryforward and "post-October" losses may be utilized in future years to offset
net realized capital gains, if any, prior to distributing such gains to
shareholders.
FASB's 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. As required by FIN 48, management has analyzed the
Fund's tax positions taken on Federal income tax returns for all open tax years
(tax years ended June 30, 2006 through June 30, 2008) and has concluded that no
provision for income tax is required in these financial statements.
2. INVESTMENT TRANSACTIONS
During the year ended June 30, 2009, cost of purchases and proceeds from sales
and maturities of investment securities, excluding short-term investments,
amounted to $25,184,407 and $37,455,163, 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.
18
OAK VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
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 (the "SEC") 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,
2009, Ultimus received $40,364 for transfer agent and shareholder services.
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, 2009, the Fund paid $54,084 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.
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 $20,000,000 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, 2009, the Fund incurred $80 of interest expense
related to borrowings under the line of credit. Average debt outstanding during
the year ended June 30, 2009 was $1,925. As of June 30, 2009, the Fund had no
outstanding borrowings.
19
OAK VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
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. SUBSEQUENT EVENTS
In May 2009, the FASB issued SFAS No. 165, "Subsequent Events" ("SFAS No. 165").
The Fund has adopted SFAS No. 165, which requires the Fund to recognize in the
financial statements the effects of all subsequent events that provide
additional evidence about conditions that existed at the date of the Statement
of Assets and Liabilities. For nonrecognized subsequent events that must be
disclosed to keep the financial statements from being misleading, the Fund will
be required to disclose the nature of the event as well as an estimate of its
financial effect, or a statement that such an estimate cannot be made. In
addition, SFAS No. 165 requires the Fund to disclose the date through which
subsequent events have been evaluated. Management has evaluated subsequent
events through the issuance of its financial statements on August 11, 2009 and
believes that there are no events or transactions that require disclosure or
recognition.
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, 2009, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended and the financial
highlights for each of the three 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 two 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, 2009 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, 2009, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and its financial highlights for each of the three 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 11, 2009
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, 2009) and held until the end of the period
(June 30, 2009).
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, 2009 June 30, 2009 During Period*
- --------------------------------------------------------------------------------
Based on Actual Fund Return $1,000.00 $1,080.00 $8.66
Based on Hypothetical 5% Return
(before expenses) $1,000.00 $1,016.46 $8.40
- --------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio of 1.68% 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)
================================================================================
EXECUTIVE 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(A)
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
1450 Raleigh Road President President Since years, Mr. Coats has been
Suite 220 July 2003; President, Chief Executive
Chapel Hill, NC 27517 Trustee Since Officer and Senior Portfolio
Age: 49 December 2003 Manager with Oak Value
Capital Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret C. Landis Vice President Appointed For more than the past five
1450 Raleigh Road annually; years, Ms. Landis has been
Suite 220 Since Senior Vice President, Chief
Chapel Hill, NC 27517 May 2007 Compliance Officer, Treasurer
Age: 51 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: 52 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: 47 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: 52 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.
(A) 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(A)
HELD WITH SERVED IN PRINCIPAL OCCUPATION(S) COMPLEX HELD BY
NAME, ADDRESS, AND AGE TRUST OFFICE DURING PAST 5 YEARS OVERSEEN TRUSTEE
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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: 63 Since January (a medical practice
2005 management firm).
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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: 49 Compensation (an investment banking firm).
Committee
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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: 55 investment firm).
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(A) 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)
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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 SEC's website at
http://www.sec.gov. Information regarding how the Fund voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30 is
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, 2009. For the fiscal year
ended June 30, 2009, 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 $175,873 as taxed at a maximum rate of 15%, as well as $182,611 as long-term
gain distributions. Complete information will be computed and reported in
conjunction with your 2009 Form 1099-DIV.
25
OAK VALUE FUND
INVESTMENT ADVISER
Oak Value Capital Management, Inc.
1450 Raleigh Road, Suite 220
Chapel Hill, North Carolina 27517
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
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 $15,000 and $14,500 with
respect to the registrant's fiscal years ended June 30, 2009 and
2008, 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, 2009 and 2008,
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, 2009 and 2008, 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
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By (Signature and Title)* /s/ Larry D. Coats, Jr.
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Larry D. Coats, Jr., President
Date August 18, 2009
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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 18, 2009
------------------------------
By (Signature and Title)* /s/ Mark J. Seger
--------------------------------------------------
Mark J. Seger, Treasurer
Date August 18, 2009
------------------------------
* Print the name and title of each signing officer under his or her signature.