Websters refers to three key terms in its definition of wisdom - knowledge, insight and judgment. Value Investing is based upon the underlying premise that one should invest in securities in the same fashion that a prudent businessman would invest in a business. We believe that the persistent pursuit of knowledge and insight about the companies in which we invest is the only way that we can exercise appropriate judgment for our clients.

The businessman makes investment decisions based on his knowledge that the underlying business must produce a return that will appropriately compensate him for the capital he allocates and the risk he assumes. He must also expend significant effort to acquire insight into what makes the business being considered an attractive business. No prudent businessman would buy another business without significant due diligence. Finally, the prudent businessman must exercise judgment based upon this knowledge and insight. For Oak Value, this judgment focuses on answering two basic questions:

• Is this a business which we would like to own?

• At what price would we be willing to buy this business?

We focus on investing in "Good Businesses with Good Management at Attractive Prices." We define "Good Businesses" as businesses which have the ability to generate increasing, predictable cash flow over some period of time. A Good Business usually has some competitive advantage, market niche or franchise. "Good Management" is management which is shareholder-oriented and has demonstrated an ability to competently manage the business and to effectively allocate the excess cash flows generated to other high return investments. This allocation may be to additional capacity or technology in the same business or to investments in other businesses on an active or passive basis. "Attractive Prices" refers to Oak Value's focus on the relationship between the intrinsic value of an entity and the price at which we would invest in that entity. In order for this price to be "attractive," it must represent a significant discount to intrinsic value which provides a margin of safety to the investor.