The Oak Value Fund (the “Fund”) posted a positive 15.8% fourth quarter result, topping the S&P 500 Index's 10.7% quarterly posting through December 31 by 5 percentage points. Many of the stocks that helped to drive improving performance during the fourth quarter were the very same companies that were so negatively impacted in the third quarter, particularly by the volatile trading environment following the September 11 attacks that had closed that time frame. Specifically, recovery in the travel-related and insurance businesses that were so troublesome for the third quarter's results helped bolster a strong recovery during the fourth quarter, a recovery that left the full year results roughly flat in a year when it was very easy to lose money. There was also a positive contribution from several of the third quarter purchases made on behalf of Fund shareholders (e.g., Goldman Sachs, Interpublic Group, Tiffany, Disney) in the dark mood of late September wherein we had surmised good values were being priced badly by an emotion-laden market. Detailed performance information for the Fund for various time periods, including since the Fund's inception in 1993, can be found in the Performance or Fact Sheet pages on this website.

AFLAC, AOL Time Warner, and (newcomer) Tupperware were the worst three performers in the Fund portfolio during the fourth quarter, in terms of contribution to results, and in fact were the only detractors from absolute positive results in 2001's final three months. On the other side of the ledger, Cendant, USA Networks, and Charter Communications were the largest positive contributors, at least partially retracing much of the stock price ground they lost in the third quarter. We discussed three months ago that while USA and Cendant were involved in businesses that were travel related, and therefore impacted by the September 11 events, we thought the price reaction had overcompensated for those concerns. As our long-time readers know, we rely for success on stock prices tracking business values over the long term, and we think recent improvement is more reflective of the economic realities of these fine businesses.

We know that a number of interested parties review the Fund's performance in a quarter-by-quarter comparison based on Standard and Poor's standard sector classification scheme. We note that this is most certainly not how we make our investment decisions in the Fund portfolio, i.e., with one eye on the benchmark and focused on short term volatility, but we also recognize that such short term “performance attribution” information is of interest in assisting others in evaluating interim results. We very broadly review results in that light and provide a few observations based on that analysis below.

Fund performance in the fourth quarter was largely confined to the same four sectors that essentially dictated the S&P 500 Index's 4Q '01 results: Technology, Industrials, Consumer Discretionary and Financials. (These four comprised roughly 60% of the year-end value of the Index, but accounted for nearly all of its 10.7% 4Q '01 total return.) The Fund performed above and beyond even the respective positive S&P 500 sector results in these areas with the notable exception of Technology, which was a positive contributor, though not to the same extent as in the Index's return.

For the quarter, every Fund portfolio holding recorded positive stock price performance, except for AFLAC, AOL Time Warner, RLI, Inc., and Tupperware. Cendant is a company we believed had gotten badly oversold in the wake of the September 11 attacks (it was among the Funds' poorest performers in the third quarter, losing 35% of its value from July to September with almost all that ground lost after September 11). We are pleased to report that Cendant essentially led the charge in the Industrials sector, in a fourth quarter wherein we were aggressive buyers of the stock in the Fund portfolio at what we viewed as very attractive prices. Pretty much everything categorized in the Industrials sector had positive performance in the Fund portfolio during the quarter, even previously battered Sabre Group (now departed from the Fund portfolio). Media businesses USA Networks, Disney, and EW Scripps and cable company Charter performed well in Consumer Discretionary, retracing prior price weakness from last quarter that we thought was related more to short term challenges and market volatility than to their long-term business fundamentals. Similarly, bounces from post-September 11 low prices for Interpublic and Tiffany, two stocks we added to the Fund portfolio in September, also contributed strongly to 4Q '01 results in the Consumer Discretionary sector.

The Fund portfolio was also rewarded by the continued rebound of insurance holdings XL Capital, Partner Re, and Berkshire Hathaway in Financials, as the nearly double weighting in that sector versus the S&P 500 became a double-barreled positive for the fourth quarter. (It has worked the other way around in the past; the shift is one we have consciously positioned for and obviously welcome.) Finally, Technology holdings also contributed to performance, with all Fund portfolio technology companies turning in positive fourth quarter stock price performance (though of course a number of technology holdings, notably Corning, Tellabs, and Compaq have been weaker performers on a longer term basis and relative to average cost). On a weighted basis, Technology actually detracted somewhat from performance relative to the S&P 500, as the Index's Technology holdings performed better, and its double weighting helped it surge ahead in the fourth quarter (see our thoughts on this below).

Consistent with our methodology, we tend to focus on specific companies, whatever their industry or sector, where we believe we have superior knowledge, and also tend to ignore interim stock price volatility in favor of observation of the health of the underlying business for evaluating investment progress. So we don't think in terms of being purposely “under- or over-weighted” to a particular S&P sector, but prefer to gather knowledge about a variety of businesses that have reasonable growth opportunities, and to consider them in the context of our understanding of the attractiveness of their economic realities rather than their S&P categories. For example, the Fund portfolio was “under-weighted” in Technology in the fourth quarter, a time period when tech stocks rallied meaningfully, a positioning that theoretically “cost us money,” at least in the short term. Because we are confident about the value of our current holdings in a few technology businesses that we believe we know something about - and frankly are quite uncomfortable with some of the valuations we see in other companies in the Technology area and/or businesses about which we have little clarity or conviction - “giving up” some relative performance in a positive market over a brief time period is not a concern on which we spend much (or any, really) time.

As to the oft-asked question about “what happens next?” we try to have little, if any, view on “big picture” macro economic issues and certainly avoid future prognostications about “the market.” Moreover, we've found that it ultimately doesn't much matter. We are careful to retain an appropriately long term view, and to evaluate what we view as the real economic value of companies that trade in the stock market. We try to base our assessment of those companies on the strength of their underlying enterprises and their competitive positions. The final ingredient to successful investing, in our humble opinion, is patient and careful observation of stock price activity for buying opportunities in those limited situations where we have developed an informed opinion of rational value for a small number of businesses. We are in business to evaluate the various and sundry variables that might impact the economic earning power of businesses, attach rational values to those reasoned judgments, and condition our actions on behalf of Fund shareholders on the relationship between price - often emotionally driven in our opinion - and value, which we believe is ultimately rationally determined. We think that's likely to be a more fruitful application of our effort than anything we could possibly think up about what's going to happen to the market.

We had a fairly active trading quarter, adding three new names and eliminating exposure to five prior investments. We eliminated Goldman Sachs, RLI, Sabre Group, Valassis Communications, and Waters from the Fund portfolio during the fourth quarter, and began new positions in three companies – Constellation Brands, Dow Jones, and Tupperware.

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 our 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. Any displays detailing a summary of holdings (e.g., best and worst stocks, business category distribution, etc.) are based on the Fund's holdings on December 31, 2001 or held during the fourth quarter of 2001.

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 portfolio 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, 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 12/31/01: Since inception (1/18/93) = 15.83%, One Year = -0.47%, Five Years = 13.29%.

For more information about the Fund, including a prospectus, please call 1-800-622-2474.