MANAGERS' COMMENTARY
First Quarter, 2003

INTRODUCTION AND PORTFOLIO CONTEXT

The past few years have been a historically challenging period for investors, and that pattern continued as both market benchmarks and Fund portfolio values continued to slide to open 2003. Plausible contributing factors abound: ongoing fallout from the late 90s market bubble, anxiety over terrorism’s personal and financial toll, debate about and then actual armed conflict, and a cyclically weak economy and profits. Underlying all of this, a sustained undercurrent of skepticism has also pervaded investors’ worldview since Enron’s humiliating collapse.

While we hope the experience won’t repeat any time soon, we have executed a prudent set of responses to recent market volatility. We have heightened our level of inquiry, refocused our analysis, and retested our assumptions about a handful of holdings in the Fund portfolio that have experienced sizable price declines. We haven’t entered that exercise with a predetermined conclusion, but have taken our cues about any required portfolio response from an updated and newly considered assessment of the value of the underlying business. The alternative is assigning undue relevance to “signals” purportedly sent by the market prices. We believe those signals are too often inaccurate barometers of value to accept at face value or use to dictate investment behavior.

Warren Buffett once wryly opined something along the lines of, “If history were the most important determinant of success in investing, librarians would be the richest people in the world.” Prejudiced by emotions so understandably provoked by losses, many investors forget the wisdom implied by Mr. Buffett’s aphorism when faced with paper losses. We think it makes more sense to look forward and determine what portfolio companies are capable of achieving rather than risk being misled by their past stock price performances. In many endeavors, the appropriate response to setbacks is endurance in order to achieve success. We believe that virtue applies particularly well to investing.

1Q 2003 PORTFOLIO UPDATE

Courtesy of Comcast’s appreciation, and despite continued weakness in Charter’s stock price, the Fund’s “Telecommunications exposure” posted the only positive contribution to performance for the first quarter, measuring price changes at the business category level. However, price depreciation in all the other business categories from Consumer to Technology (highlighted in the nearby pie chart) swamped Telecom’s sole positive move, leaving Fund performance once again in negative territory for the period.

As indicated, Comcast added one of the few positive contributions to first quarter performance. Cendant was another, as its stock price regained some of the ground it gave up last summer. We think the business at Cendant has performed remarkably well, as the company continues to post strong financial results despite difficult conditions in the travel industry. If the underlying business units continue to deliver, we believe Cendant’s resulting financial performance will appear increasingly incongruous with its stock price. On the other side of the ledger, Berkshire Hathaway, Interpublic Group, AOL Time Warner, and Dow Jones generally were the worst Fund portfolio performers during the first quarter, based on a combination of sizable portfolio commitments and weak stock price performance.

The latter three are economically sensitive businesses in that much of their revenue derives from advertising sources. Their financial performance and stock prices have been impacted accordingly over the past year or so, as advertising has suffered from economic malaise and the war. Near term price weakness in media companies is not surprising in an unsteady economy. Several other companies in the Fund portfolio (for example, consumer or retail-oriented businesses) have been impacted in much the same way.

Dow Jones has (thankfully) been spared any additional controversy beyond cyclically weak financial performance. We expect an eventual return to robust economic growth and growing ad spending to reverse that situation. We are confident in the interim that Dow Jones is maintaining and even enhancing its franchise strength and its intrinsic value despite the decline in its stock price. Similarly, Berkshire Hathaway’s business is performing remarkably well, based on any fair-minded analysis of its recent results.

Interpublic and AOL have been faced with multiple concerns in recent months. In addition to cyclical business pressures, each has been plagued by some measure of accounting uncertainty and/or anxiety over debt levels. These concerns have led to fairly precipitous stock price declines for both companies since we established current portfolio positions (the Fund previously owned Interpublic profitably before re-entering for the recent almost entirely unpleasant experience). We provide additional detail on our thoughts about these two companies below.

1Q 2003 PORTFOLIO OUTLOOK

Mark Twain observed of German composer Richard Wagner’s music that it was “better than it sounds.” Our assessment of the current Fund portfolio concurs: it’s better than it probably looks. Despite Fund performance results that don’t seem to show it, in our view the majority of portfolio companies maintain businesses that are performing well, some particularly so in light of the less than robust economy. As we review the Fund portfolio, we believe that companies possessing solid business fundamentals as an underlying store of value represent the majority of shareholders’ invested capital. Merck, Cendant, Waters, Comcast, Diebold, IMS Health, and Certegy fall into this category, in our view.

A subset of companies in the Fund portfolio is actually experiencing some combination of solid revenue growth, value creation, and financial performance right now, during the tough times. Examples include, Constellation Brands, Ambac Financial, Equifax, E.W. Scripps, and our insurance holdings including Berkshire Hathaway, AFLAC, XL Capital, and Partner Reinsurance. These yeoman performances have gone largely unrewarded by bear market pricing, with the exception of AFLAC and Scripps. We don’t expect that to remain a permanent condition, but patience will be required to get stock prices that better reflect our opinion of intrinsic value.

A second category of companies in the Fund portfolio are businesses that are largely operating well, but that have been financially and/or operationally impacted to some degree in a difficult environment. Most of them rely to one degree or another on robust economies for their times of most superior profitability. While not impaired by downturns, their financial results possess an aspect of economic sensitivity. These companies have exhibited slow growth and some even selected declines in financial performance over roughly the past twelve months and many of them have seen their stock prices impacted accordingly. Examples include Tupperware, Zale, Dow Jones, Disney, Hewlett Packard and Scientific Atlanta.

Finally, in reviewing companies in the Fund portfolio and their stock prices, a “vocal minority” category is, not surprisingly, generating the majority of interest from our shareholder base. There are a few companies where some or all of a mixture of reported business weakness, accounting, or balance sheet concerns (some substantive, others not so) and a related steady stream of negative press have contributed to investor unease and substantial stock price erosion. Often the price decline of the companies’ outstanding marketable securities, both debt and equity instruments, have contributed to further perceptions of weakness. In our view, the reality is that remaining portfolio positions in this category really belong in one of the prior two categories (performing well/as expected, or experiencing cyclical difficulty), but individual circumstances have placed them for the time being in the “penalty box.”

As has so often been the case in this bear market, concerns over accounting of one type or another represent the common denominator that has spooked investors. A laundry list of public companies have suffered severe penalties related to lost confidence, some of them deservedly so. While the roster of companies in the Fund portfolio included in this category has, to some degree, fluctuated over time as concerns have ebbed and flowed, we assure you that our investment team has focused significant attention on all of them. We regularly engage in frequent and ongoing evaluation of evolving business, operational and financial circumstances for portfolio holdings, but especially do so where our shareholders’ capital appears threatened. Below, we briefly summarize our view on the three portfolio examples that currently comprise this “problem child” grouping: Charter Communications, AOL Time Warner, and Interpublic Group.

Charter Communications
Charter has been plagued since early 2002 by concerns about (in no particular order) changes in management, accounting reliability and associated SEC and Department of Justice investigations, and a sizable debt load. Charter’s stock price problems, in our view, have been more significantly related to the debt-heavy way in which the company is financed than to the fundamentals of its underlying business model. A recent $300 million commitment to a backup line of credit for Charter by majority owner Paul Allen appears to have mitigated Wall Street’s obsessive predictions of an impending cash shortage for Charter.

None of their recent financial statement adjustments have meaningfully impacted their underlying business economics. Revenue and cash flow have remained healthy even in a tough economy, however the accounting has been presented. In a bad – make that a terrible – investment environment, we have learned that financial leverage can impact an investment in a way that swamps the underlying economics of an otherwise very sound business. Given that hindsight, if we had it to do again, we would pay more attention to the debt level of an investment like Charter.

The key issue for Charter remains whether executing their operational plan produces financial results that support their sizable debt repayment commitments. We aren’t out of the woods, though recent progress has been somewhat encouraging. We have maintained our commitment because we believe the underlying business is healthy, management is laser focused on the challenges they face, and progress and success remain, in our view, achievable. It seems to us that the risk/reward relationship for the Charter investment is favorable from here, especially since we have already experienced such significant pain in the form of paper losses to date.

Interpublic Group
Several concerns have impacted Interpublic’s stock price over roughly the past eighteen months. Management changes, financial restatements, operational challenges with acquisitions, liquidity and balance sheet concerns, and the worst advertising downturn in a generation have weighed on both Interpublic’s business and its share price. None of these were developments we viewed positively, though the concerns have been accompanied by an adjustment to Interpublic’s stock price that we believe exceeds the underlying economic realities. For example, they are winning new business at the ad agency level, the best leading indicator of holding company financial results as long as management gets that house in order.

We have considered the likely economic impact of the uncertainties that have so decimated Interpublic’s stock price. We knew about the management changes, and therefore eliminated the Fund’s position at higher prices, based on related misgivings in early 2001 after a long ownership period. We have investigated the accounting items in question and believe the public relations impact is worse than the economic one. Management has pledged to close or sell their troubled motor sports acquisition expeditiously. Finally, debt repayment ability was, in our view, more of a perceived problem than a real one. A weak economy and the worst advertising recession in decades, plus a collection of company-specific missteps, have impacted Interpublic’s financial performance but devastated its stock price. Ultimately, we think an impacted financial performance and a devastated stock price are incongruous for a company with Interpublic’s competitive strengths and valuable cash producing assets.

AOL Time Warner
We established the Fund’s position in AOL Time Warner after much (but not all) of the damage related to its lopsided merger economics had already been done to the stock price of the combined entity. Essentially, the old Time Warner shareholders swapped their company and assets straight up with another one, AOL. At the time, AOL’s business was valued equally to Time Warner’s, but time has made clear that its assets were not equally valuable. Various additional uncertainties (management turnover, accounting controversies, revenue shrinkage at AOL, concerns over a debt heavy capital structure, etc.) have swirled about the company and eroded confidence to the detriment of its stock price. Once again, we remain focused on the distinction between the stock price to which such concerns may temporarily contribute and the long term value of the assets in question. While the AOL moniker garners much media attention and has contributed most to the uncertainties, our attraction was and remains to the traditional media assets of the former Time Warner.

In our view, the AOL online service is now a division of a diversified media company. There were apparently some bad accounting practices in that division, and we are encouraged that all of senior management from that era is gone. As importantly, the amounts in question, while large in absolute dollars, are not meaningful when compared to the intact cash producing prowess of the parent company’s combined asset base. Our calculations indicate that AOL, the internet pioneer and still the largest internet service provider with roughly 26 million subscribers, is currently being attributed roughly zero value by the market, based on recent quotes for AOL shares. We believe that AOL Time Warner’s traditional media assets are very reasonably valued at more than the current stock price, even if the AOL division is worthless, which it likely is not. New management seems appropriately focused on cash flow and has committed to reducing an admittedly sizable debt load, actions we believe are likely to reward shareholders going forward.

PORTFOLIO ACTIVITY

We sold the Fund’s position in Schering Plough in the first quarter. The company had experienced several business setbacks during the course of ownership in the Fund, including greater than expected competition for their hepatitis therapy, a disappointing transition of their next generation allergy franchise, a potential slowdown in the roll out of their new cholesterol reducing compound, and management turnover.

One or more of these negative outcomes may have been surmountable; all of them combined to create an adjusted financial and risk profile for the company. In the context of our evaluation of its changing circumstances, we concluded that even the recent price to which Schering Plough’s shares had been reduced left us with an inadequate margin of safety to warrant continued capital commitment. When we (occasionally) reach such a conclusion in an evaluation of an existing portfolio business, there has clearly been a change relative to our original investment assumptions and thesis, and we sell.

We also eliminated the Fund’s Household position as the closing date of its acquisition transaction by HSBC approached. Value may accrue going forward in the combined business, and HSBC is a fine company, but it is not the one we set out to own for shareholders.

Elimination of these two holdings has temporarily increased the Fund’s cash position. As previously indicated, we are actively, though cautiously, examining a number of potential purchase candidates that may soak up some of that cash, depending on both price behavior in the market and the pace of our evaluations.

WE WERE JUST THINKING…

“We have retaken the airport. There are NO Americans there. I will take you there and show you.” (Former) Iraqi Minister of Information

We have recently been getting one form or another of “Is the Fund portfolio really worth that?” as a question from shareholders. We must of course answer yes in the objective sense, based on the absolute reality of closing market prices. But we also answer no, and since somebody asked, we think it is more than semantics that the portfolio is decidedly not, in our view, worth only that at which it has been recently priced.

As you know, for a select few examples in the Fund portfolio, such as Household (recently sold, at a loss), Interpublic, and Charter, the price/value debate is far from academic. We believe that questions about the viability of a few portfolio positions as going concerns – contentions that have helped wreak havoc on prices and thereby impacted YOUR Fund account performance – are not supported by the facts. Too many investors and commentators in our view have emotionally reacted to virtually any question related to accounting or balance sheet concerns, assumed nefarious intent, and extrapolated impending financial doom. Some of what we have seen written about portfolio companies, in our opinion, should have been granted all the credibility of our friend “Baghdad Bob” quoted above.

Make no mistake, questions of accounting credibility for any company are a serious matter, and we take them seriously. We are keenly aware that notable and memorable recent egregious examples of fraud and financial meltdown have many investors on a knife edge when the topic turns to believing reported numbers. We have carefully investigated and thoughtfully assessed any such items related to positions in the Fund. Having made that examination for ourselves, in painstaking detail, we can say that in our opinion the ones we have reviewed resemble those at Enron or WorldCom about as much as rapper Eminem’s lyrics recall the Puritan sermons of Cotton Mather.

Our point? Let’s circle back to our “Is the Fund portfolio really worth that?” question. Accounting adjustments, differences of opinion, or less than material changes to financial statements have often been accepted as signposts on a road to financial perdition, facts be damned. Much mischief in our view has been perpetrated in this climate of equivocation. If you doubt it, consider that Household was so impacted by the situation that they recently sold the entire company to HSBC. The price tag was a paltry $30 per share, a measly 7 times trailing twelve month operating earnings, for a company with 125 years of business history and a track record of impressive performance and financial results.

What are we going to do about all of this? There isn’t much we can do, other than try to keep our heads while others about us are losing theirs. We remain confident that discernment will ultimately win out, and that Fund portfolio companies retain sufficient financial flexibility to sustain them in a more rational environment. We continue to rely on past evidence that successful business models producing cash earnings for their owners are eventually rewarded with stock prices consistent with that outcome. Against an improved context (for example, a better economy, less skepticism toward company financial results, an improved geopolitical situation), we think that essentially the same companies will likely be viewed – and valued – dramatically differently. In fact, we’re counting on it.

HOUSEKEEPING

Effective July 1, 2003, Ultimus Fund Solutions will assume the duties of Administrator, Fund Accounting Agent, Transfer Agent, and Fund Distributor for the Oak Value Fund. We believe that this transition to Ultimus will enable us to provide our investors with the highest level of shareholder services.

After the change to Ultimus, the transaction confirmation and shareholder statements you receive will take on a new format, but provide the same basic information to shareholders. In addition, the change will facilitate our plans to introduce online access to your account through our website (www.oakvaluefund.com) later this year. This new feature will give you the ability to check account balances, net asset values, transactions and dividend information at any time via the internet. Look for future announcements about this new feature. As always, if you have any questions, please do not hesitate to contact us at 1-800-680-4199 or info@oakvalue.com.

CONCLUSION

Nothing has changed about our goal: the purchase of a few good businesses with good management available at attractive prices. We are actively engaged in that pursuit in an environment that offers selected but compelling opportunities for long term investors. Current or future difficulties and concerns may delay economic improvement, but in our view they will not permanently eliminate profitable financial progress. Better underlying economic surroundings typically support growth in company revenues and cash flows. Attendant improvement in investor sentiment has historically proven to encourage a supportive environment for recognition of rational intrinsic value. Though value remains, history indicates it’s easier for investors to recognize that value in more certain conditions.

We personally think it would not be prudent for investors to plan for a return to a world of equity profits well above long term averages (roughly 11%). We have historically endorsed investor expectations consistent with long term equity market returns: 8-12% average annual returns over a reasonable number of years. Membership of even longer term results within the admittedly wide range is of course not a guaranteed outcome. As recent experience indicates, single year and even multi year results will surely vary widely outside the range, with some higher and some lower.

The Oak Value Fund celebrated its ten-year anniversary earlier this year, on January 18th. Despite the extreme volatility of the past five years and the challenging environment in which we crossed the ten year threshold, inception results are ironically positioned squarely in the realm of our expectations and long term equity market returns, and comfortably ahead of the unmanaged benchmark. Our efforts have met our original goals during the Fund’s first ten years of operation and, while past performance is no guarantee of future results, we have no plans to vary our method of pursuing that outcome in the future. Our ongoing goal is to invest shareholders’ capital in such a way that results both to 1) achieve a reasonable positive absolute return on that capital over a long time horizon (greater than five years) and 2) outperform the broad market, net of fees, over a similar time frame.

While we endure disappointing recent results, we are doing what we surmise shareholders would expect of us in such a challenging period. We are adhering to the investment discipline and principles that have proven successful in the past. We are selectively searching for opportunities in a market teeming with perils. We maintain confidence in the healthy positive investment returns that we believe remain available to those with the patience to discern long-term value from short-term price dislocations.

As always, thanks for your continued support.

George W. Brumley, III

David R. Carr, Jr.

IMPORTANT INFORMATION

Authorized for distribution only if preceded or accompanied by a prospectus. Where shown or quoted, recent company returns (for example calendar quarter or trailing twelve months) are stock price changes only, and reflect neither dividends nor any fees associated with an investment in the Oak Value Fund (the “Fund”). This commentary seeks to describe the Fund managers' current views of the market and to highlight selected activity in the Fund. Any discussion of specific securities is intended to help shareholders understand the Fund's investment style, and should not be regarded as a recommendation of any security. Displays detailing a summary of holdings (e.g., best and worst stocks, business category distribution, etc.) are based on the Fund’s holdings on March 31,2003 or held during the first quarter of 2003.

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 our recommendations over the last year are available upon request. Past performance is no indication of future performance. You should not assume that future recommendations will be as profitable or will equal the performance of past recommendations.

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. 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 commentary 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 calendar quarter and year, we use this perspective only because it reflects industry convention. The Fund and its investment adviser do not subscribe to the notion that three-month calendar 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 Fund portfolio commentary should be construed as a forecast of overall market movements, either in the short or long term.

Any hyperlinks and/or references to other web sites contained in this material are provided for your convenience and information. We do not assume any responsibility or liability for any information accessed via links to or referenced in third party web sites. The existence of these links and references is not an endorsement, approval or verification by us of any content available on any third party site. In providing access to other web sites, we are not recommending the purchase or sale of the stock issued by any company, nor are we endorsing products or services made available by the sponsor of any third party web site.

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. Average Annual Total Returns for the Fund for periods ended 03/31/03: One Year = -29.5%, Five Years = -3.2%, Ten Years = +9.9%, Since Inception (1/18/93) = +10.0%.

For more information about the Fund, including objectives, strategies, risks, charges and expenses, please obtain a copy of the Fund's prospectus which is available on this website or by calling 1-800-622-2474.