U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No.
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Post-Effective Amendment No. 2
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Name of Registrant as Specified in Charter: AEGIS VALUE FUND, INC.
Address of Principal Office: 1100 North Glebe Road, Suite 1040
Arlington, VA 22201
Registrant's Telephone Number: (703)528-7788
Name and Address of Agent for Service: Mr. Thomas C. Roberts
17521 Shenandoah Court
Ashton, MD 20861
It is proposed that this filing will become effective immediately upon filing
pursuant to paragraph (b).
Title of Securities Being Registered: Common Stock, $0.001 par value
Pursuant to Rule 24f-2 of the Investment Company Act of 1940, the Registrant
has registered an indefinite number of shares by this Registration Statement.
<PAGE>
AEGIS VALUE FUND, INC.
CROSS REFERENCE SHEET
FORM N-1A
PART A: INFORMATION REQUIRED IN THE PROSPECTUS
N-1A ITEM LOCATION IN REGISTRATION STATEMENT
ITEM No.
1. Cover Page Cover Page
2. Synopsis "Fund Expenses"
3. Condensed Financial "Financial Highlights"
Information
4. General Description "The Fund and its Investment
Objective"; "Investment
Philosophy";"InvestmentRisks";
"Investment Limitations"
5. Management of the Fund "Management of the Fund"
6. Capital Stock "Shares, Dividends and
Distributions"
7. Purchase of Securities "How to Purchase Shares";
Being Offered "Shareholder Accounts and
Services"
8. Redemption or Repurchase "How to Redeem Shares";
"Redemption Fee";
"Shareholder Accounts
and Services"
9. Pending Legal Proceedings Not Applicable
<PAGE>
AEGIS VALUE FUND, INC.
CROSS REFERENCE SHEET
PART B: Information Required in the STATEMENT OF ADDITIONAL INFORMATION
N-1A ITEM LOCATION IN REGISTRATION STATEMENT
ITEM NO.
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and Not Applicable
History
13. Investment Objectives "Investment Objectives and
and Policies Policies"; "Risk Factors and
Special Considerations"
14. Management of the Fund "Management of the Fund"
15. Control Persons and "Management of the Fund";
Principal Holders of "Principal Holders of Shares"
Shares
16. Investment Advisory "Investment Advisory Services"
and Other Services
17. Brokerage Allocation "Brokerage Allocation"
18. Capital Stock "Capital Stock and Other
and Other Securities Securities"
19. Purchase, Redemption and "Purchase, Redemption and Pricing
Pricing of Securities of Shares"
20. Tax Status "Tax Status"
21. Underwriters "Underwriter"
22. Calculation of Performance "Calculation of Performance Data"
Data
23. Financial Statements "Financial Statements"
<PAGE>
AEGIS VALUE FUND, INC.
PROSPECTUS AND APPLICATION
OCTOBER 30, 1998
Aegis Value Fund, Inc. is an open-end, diversified investment management
company organized as a Maryland corporation on October 22, 1997. The Fund
seeks long-term capital appreciation through a strategy of "value investing"
in common stocks.
At least 65% of the Fund's total assets will be invested in common stocks
which, at the time of initial purchase, sold at prices below the major stock
market averages in relation to their corporate book value, earnings, revenues
or cash flow. For example, if the broad market averages are priced at three
times book value and 18 times earnings, the Fund will emphasize stocks priced
at less than three times book value and less than 18 times earnings.
Some of the securities in which the Fund may invest can be regarded as
speculative, and there is no assurance that the Fund will achieve its
objective of capital appreciation.
The Fund is not intended to be a complete investment program. The
Fund's objective is most suitable for investors who are willing to hold their
shares for extended periods of time through market fluctuations and the
accompanying changes in share prices. The Fund's shares are not intended
for investors seeking short-term price appreciation or for purposes of any
market timing strategy.
This Prospectus contains important information about the Fund that you
should know before investing. Please read it carefully and retain it for
future reference. A "Statement of Additional Information" (SAI) dated
October 30, 1998 about the Fund has been filed with the Securities and
Exchange Commission and is incorporated by reference into this Prospectus.
The SAI includes more information about the Fund's procedures and policies.
You can obtain a copy of the SAI without charge by writing or calling the Fund
at 1100 North Glebe Road, Suite 1040, Arlington, VA 22201, (703)528-7788.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SHARES OF THE FUND ARE NOT OBLIGATIONS, DEPOSITS OR ACCOUNTS OF, OR ENDORSED
OR GUARANTEED BY THE FDIC OR ANY OTHER GOVERNMENTAL AGENCY AND INVOLVE RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
(1)
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AEGIS VALUE FUND, INC.
FUND EXPENSES
The following table illustrates all expenses and fees that a shareholder of
the Fund will incur:
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Redemption Fee 2.00% (1)
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees 1.20%
12b-1 Fees None
Other Expenses (after waivers) 0.30%(2)
Total Fund Operating Expenses (after waivers) 1.50%(2)
EXAMPLE
You would pay the following 1 Year 3 Years
expenses on a $1,000 investment,
assuming (1) a 5% annual return, $36 $47
and (2) redemption at the end of
each time period:
You would pay the following
expenses on the same investment, $15 $47
assuming no redemption:
The purpose of the above table and example is to assist investors in
understanding the various costs and expenses that an investor will bear
directly or indirectly. The expenses of the Fund are based on actual expenses
(after waivers) for the period May 15, 1998, commencement of operations, to
August 31, 1998. More detailed information concerning these expenses is set
forth in the sections of this Prospectus entitled "How to Redeem Shares",
"Management of the Fund", and "Redemption Fee". THE ABOVE EXAMPLE SHOULD NOT
BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN.
FOOTNOTES
(1) The Fund imposes a redemption fee on investors who redeem shares which
were purchased within the past two years. This charge is 2.00% of the
redemption amount. For further information, see the "Redemption Fee" section
of this Prospectus. In addition, the Fund's custodian charges a wire fee of
$20.00 for redemptions by wire transfer.
(2) The amount of Other Expenses reflects an agreement between the Fund and
the Fund's advisor to waive reimbursement and to absorb other expenses which
exceed 0.30% of net assets at the end of each quarter. The Fund's advisor
expects to continue the waiver for the current fiscal year; however, it may
discontinue the agreement at any time after August 31, 2000. In the absence
of any waivers, management estimates that other expenses would be 5.46% and
total fund operating expenses would be 6.66% for the most recent fiscal year.
(2)
<PAGE>
FINANCIAL HIGHLIGHTS
The following sets forth information for the Fund regarding per share
income and capital changes from the commencement of operations on May 15, 1998
to August 31, 1998, the end of the Fund's most recent fiscal year. The
Financial Highlights have been audited by Bish & Haffey, P.C., independent
accountants, whose unqualified report on the August 31, 1998 financial state-
ments appears in the Fund's Annual Report to Shareholders. This information
should be read in conjunction with the financial statements and accompanying
notes appearing in the 1998 Annual Report to Shareholders, which is
incorporated by reference into the Fund's Statement of Additional Information.
AEGIS VALUE FUND, INC. -- SELECTED DATA AND RATIOS
- --------------------------------------------------
Period May 15, 1998 to August 31, 1998
--------------------------------------
Net Asset Value, Beginning of Period $10.00
Income from Investment Operations
Net investment income 0.01
Net gain on securities (both realized (1.80)
and unrealized) -------
Total from Investment Operations (1.79)
-------
Less Distributions 0.00
Net Asset Value, End of Period $8.21
-------
Total Return (17.90%)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000's) 845
Ratio of Expenses to Average 1.50%(1)
Daily Net Assets
Ratio of Net Income to Average 0.76%(1)
Daily Net Assets
Portfolio Turnover Rate 6%(2)
(1) Annualized
(2) Not Annualized
THE FUND AND ITS INVESTMENT OBJECTIVE
AEGIS VALUE FUND, INC. is an open-end, diversified investment management
company organized as a Maryland corporation on October 22, 1997. The Fund is
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940.
The investment objective of the Fund is long-term capital appreciation
through a strategy of value investing in common stocks. There is no
assurance that the Fund will achieve its investment objective. This
investment objective is a fundamental policy and may not be changed without
the affirmative vote of a majority of the Fund's outstanding shares.
Shareholders are entitled to one vote per share.
(3)
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THE FUND (CONTINUED)
The Fund's business and affairs are managed under the direction of its
Board of Directors. The Board elects the officers of the Fund, who are
responsible for the Fund's day-to-day operations. Meetings of the Fund's
shareholders will not be held except as required under the Investment Company
Act of 1940. The custodian for securities, cash and other assets of the Fund
is Ernst & Company. The Fund serves as its own transfer agent and shareholder
services agent. Bish & Haffey, P.C. serves as independent accountants for
the Fund.
The Fund's investment advisor is Berno, Gambal & Barbee, Inc. (BGB), a
value-oriented money manager and broker-dealer. The Fund will hold a
diversified portfolio of common stocks which are purchased at prices believed
to represent substantial discounts to the long-run values of the companies.
BGB conducts an investment research effort which considers the following set
of factors, among others, in determining whether a security is undervalued:
Ratio of market price to book value per share
Ratio of market price to earnings per share (the P/E ratio)
Ratio of market price to cash flow per share
Ratio of market price to revenues per share
Financial strength
Industry market share
Purchases and sales by corporate insiders
Management experience and capabilities
Hidden or undervalued assets
Potential catalysts to realize shareholder value
In order to meet its investment objective, at least 65% of the Fund's
total assets will be invested in common stocks which, at the time of initial
purchase, sold at prices below the major stock market averages in relation to
their corporate book value, earnings, revenues or cash flow. For example, if
the broad market averages are priced at three times book value and 18 times
earnings, the Fund will emphasize stocks priced at less than three times book
value and less than 18 times earnings.
INVESTMENT PHILOSOPHY
The Fund's Advisor adheres to a strict value approach when selecting
securities for the Fund. The Advisor believes in the concept of "margin of
safety" first articulated by Benjamin Graham and David Dodd in their 1934
book, Security Analysis. This concept holds that purchasing common stocks at
a deep discount to their long-term intrinsic value provides the investor with
more safety of capital and a "margin of safety" if the analysis of that value
eventually proves to be incorrect. Thus the Advisor will attempt to purchase
securities at prices which are low enough to lower the risk of the portfolio
and also can enhance the potential for possible capital appreciation.
The Fund will hold a diversified portfolio of common stocks, across
various industry groups, as well as some small company shares, large company
shares and shares of mid-size companies. The Advisor uses a "bottom up"
approach, and will generally ignore stock market fluctuations and variations
in broad economic factors such as trade balances, fiscal policy and money
supply.
(4)
<PAGE>
Although at least 65% of the Fund's total assets will be invested in
common stocks, the remainder (i.e., up to 35% of total assets) may be held in
cash or invested in money market instruments, commercial paper, debt
securities or in other equity securities which includes convertible preferred
stocks and convertible debt; warrants, rights or other securities exchangeable
for shares of common stocks, or other equity securities such as shares of real
estate investment trusts, exchange-listed limited partnerships, or royalty
trusts.
When considering convertible debt, the Fund's adviser will make purchases
only when the convertible debt is believed to offer a better combination of
risk and return than the underlying common stock, and will only purchase debt
rated within the four highest grades of Moody's Investor Service, Inc. or
Standard & Poor's Corporation. Debt securities in the fourth highest rating
category (Baa or BBB, the lowest investment grade ratings) have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher grade bonds. It is the Fund's policy to
promptly dispose of a bond whose rating drops below investment grade.
The Fund makes long-term investments and does not frequently trade its
securities. Investors should have the patience to hold shares through at
least a full market cycle, and should realize that it can sometimes take a
period of years to realize the value of the Fund's portfolio securities.
This long-term approach, however, will help to reduce transaction costs and
the tax consequences of realized gains.
The Advisor in its investment research efforts emphasizes the analysis
of financial documents, particularly the stockholder reports and Securities
and Exchange Commission ("SEC") filings of various corporations in a number
of different industries. More attention is typically paid to the securities
of companies in industries which are temporarily depressed. The Advisor also
pays particular attention to companies where there is a change in management
and/or major shareholders and such change presents the opportunity for
improvement in the company's business operations or its stock price.
Because the Fund is often investing in industries which are experiencing
a cyclical downturn, the Advisor will generally focus more on companies with
solid financial strength, low costs and leading market shares within the
industry. These factors give them the long-term "staying power" to prosper
and succeed when industry conditions improve.
The Fund will from time to time invest in foreign securities, which will
have the same types of characteristics as domestic securities considered for
investment. The Fund intends to limit its direct investments in foreign
securities to less than 10% of net assets, and to typically purchase shares of
companies issuing U.S. dollar-denominated American Depository Receipts (ADR's)
or who otherwise comply with SEC disclosure requirements.
At certain times, the Fund may take a temporary defensive position.
Under such circumstances, the Fund may invest without limitation in deposits
in domestic banks, money market instruments, commercial paper, or debt
securities rated within the three highest grades of Moody's Investor Service,
Inc. or Standard & Poor's Corporation. As noted above, under normal
circumstances, the Fund may invest in debt securities rated within the four
highest grades by Moody's or Standard & Poor's, but only up to 35% of the
Fund's total assets.
INVESTMENT RISKS
GENERAL RISKS. Like any mutual fund investing in common stocks, AEGIS
VALUE FUND, INC. is subject to various investment risks. The net asset value
of the Fund will increase and decrease as the prices of shares in its
portfolio increase and decrease. In addition to the various factors that
affect the value of any particular security that the Fund owns, the value of
the Fund's shares may also change with the movements of the global stock
markets as a whole. There is always a possibility that common stock prices
will decline over short or even extended periods of time. Also, at certain
times, the market will have investment cycles where "growth" stocks may
significantly outperform the "value" stocks typically owned by the Fund.
These cycles can last for periods of a few months up to several years.
(5)
<PAGE>
INVESTMENT RISKS (CONTINUED)
BRIEF OPERATING HISTORY. The Fund has a brief operating history and
therefore no lengthy past performance record to guide prospective investors in
their decision whether or not to invest in shares of the Fund. In addition,
while the Fund's investment advisor BGB has been operating as a money manager
since 1994, BGB has no prior experience in managing a mutual fund. It should
not be assumed that BGB's past performance in its managed accounts will
translate into comparable performance for the Fund.
SMALLER COMPANIES. The Fund will invest a significant part of its assets
in the shares of small or mid-size companies, or in companies whose shares are
relatively illiquid. Such companies may not be well-known to the investing
public, may not have significant institutional ownership or analyst coverage,
and their shares may be more volatile in price, have lower trading volumes and
have wider market spreads between bid and ask prices than the shares of larger
companies.
Small and mid-size companies also sometimes have limited product lines,
management depth, financial resources and market shares. Therefore, the
companies are more vulnerable to adverse business or economic developments,
and their shares may involve considerably more risk than shares of larger and
more seasoned companies.
The purchase and sale of such securities may have a greater impact on
their market prices than would be the case with larger capitalization stocks.
Accordingly, the Fund will not trade its holdings frequently, and the Fund's
investment philosophy requires a long-term horizon. The Fund should not be
used as a "market timing" or short-term trading vehicle.
FOREIGN SECURITIES. Foreign securities will expose the Fund to certain
risks not present in domestic securities. These include currency
fluctuations, possible nationalization or expropriation of assets,
extraordinary taxation, political or social instability and future
unfavorable diplomatic developments. These risks could have a negative effect
on issuers in foreign nations and on the prices of their securities.
INVESTMENT LIMITATIONS
The Fund, which is registered under the Investment Company Act of 1940
and operates under policies decided by its Board of Directors, has various
investment limitations, several of which are required by the Act. These are
fundamental policies of the Fund which cannot be changed without the
affirmative vote of the holders of a majority of the outstanding shares of
the Fund. All percentage limitations set forth below apply immediately after
a purchase or initial investment, and any subsequent change in any applicable
percentage resulting from market fluctuation does not require elimination of
any security from the portfolio.
The Fund may not:
1) With respect to 75% of its total assets, invest in securities of any
one issuer if immediately after and as a result of such investment more than
5% of the total assets of the Fund, taken at market value, would be invested
in the securities of such issuer. This restriction does not apply to
investments in obligations of, or guaranteed by, the U.S. government, its
agencies or instrumentalities.
2) Invest 25% or more of its total assets in securities of issuers in
any one particular industry. This restriction does not apply to U.S.
Government securities.
(6)
<PAGE>
INVESTMENT LIMITATIONS (CONTINUED)
3) Purchase more than 10% of the outstanding voting securities, or any
class of securities, of any one issuer.
4) Invest for the purpose of exercising control or management of another
company.
5) Borrow money, except as a temporary measure for emergency or
extraordinary purposes.
MANAGEMENT OF THE FUND
The Board of Directors provides broad supervision over the affairs of
the Fund and elects the officers of the Fund, who are responsible for its
daily operations.
YEAR 2000. The services provided to the Fund by its investment advisor,
custodian, and other vendors depend upon the smooth functioning of their
computer systems and those of their outside service providers. Many computers
cannot recognize the year 2000. This specific problem may cause a computer
system to crash or malfunction. Such an event could have a negative impact on
the Fund's trades, payments, pricing and account services.
Although there can be no assurance that there will be no adverse impact
from this "Year 2000" problem, the Fund's advisor and its custodian have
advised the Fund that they have been working on changes for the year 2000 and
expect their computer systems to be adapted in time for that event. While the
Fund's service vendors will incur expenses to upgrade their computers, the
Fund itself will incur no direct expenses related to the year 2000 problem.
INVESTMENT ADVISOR. Berno, Gambal & Barbee, Inc. ("BGB"), an Arlington,
Virginia investment management firm and broker-dealer, provides the Fund with
overall investment advisory and administrative services under an Investment
Advisory Agreement with the Fund. Subject to policies established by the
Fund's Board of Directors, BGB makes investment decisions on behalf of the
Fund and supervises the acquisition and disposition of investments by the
Fund. BGB also acts as the distributor of the Fund's shares and provides
brokerage services for the Fund.
BGB, a Delaware corporation organized in 1994, has in excess of
$35 million of assets under management in private accounts and provides
investment management and brokerage services for individuals, institutional
accounts, and retirement plans. BGB is registered as an investment advisor
with the U.S. Securities and Exchange Commission, and has its offices at
1100 North Glebe Road, Suite 1040, Arlington, Virginia 22201.
William S. Berno and Scott L. Barbee, directors and officers of the Fund,
and Paul Gambal, an officer of the Fund, are also controlling persons of BGB
through their respective ownership interests in its common stock. These three
Managing Directors of BGB will together oversee day-to-day Fund operations and
by consensus will make all Fund investment decisions.
William S. Berno, a Chartered Financial Analyst, was a co-founder of BGB
in 1994 and was previously an Investment Officer with Kahn Brothers & Company,
Inc. for five years. From 1979 to 1989, Mr. Berno was a Vice President of
Ferris Baker Watts, Inc., a regional brokerage firm located in Washington,
D.C. and he began his career as a staff accountant with Price Waterhouse & Co.
Mr. Berno took his degree from the University of Virginia in 1975, and
received a M.B.A. degree with distinction from the University of Michigan in
1977.
Paul Gambal was a co-founder of BGB in 1994 and was previously an
Investment Officer with Kahn Brothers & Company, Inc. for five years. From
1988 to 1989, Mr. Gambal worked for Colonial Parking, Inc. to develop
investment strategies for its pension and profit-sharing plans. Prior to
that, Mr. Gambal was Assistant Vice President and Head Trader of Washington
Brokerage Services, Inc., a subsidiary of the National Bank of Washington,
which he joined after graduation from Kenyon College in 1982. Mr. Gambal
received his M.B.A. degree from The School of Business and Public Management
at George Washington University in 1992.
Scott L. Barbee, a Chartered Financial Analyst, joined BGB in 1997. From
1993 to 1995, Mr. Barbee was an oil service Equity Research Analyst and later
an oil service Investment Banking Analyst at Simmons & Company in Houston,
Texas. He later worked as an Equity Research Analyst with investment
(7)
<PAGE>
MANAGEMENT OF THE FUND (CONTINUED)
management boutique Donald Smith & Company in Paramus, New Jersey. Mr. Barbee
graduated from Rice University in 1993 and received a M.B.A. degree from the
Wharton School at the University of Pennsylvania in 1997.
BGB bears all of its expenses in providing services under its Investment
Advisory Agreement and pays all salaries, fees and expenses of the officers
and directors of the Fund who are affiliated with BGB. The Fund bears all of
its other expenses, including but not limited to, necessary office space,
telecommunications expense and administrative and clerical personnel; interest
expense; accounting and legal expenses; fees and expenses of the custodian and
transfer agent; taxes, registration and governmental fees; brokerage
commissions; insurance premiums; expenses of preparation, printing and
distribution to existing shareholders of reports, proxies and prospectuses;
and expenses of shareholder meetings.
As compensation for its services to the Fund, BGB is entitled to receive
an annual advisory fee of 1.20% of the Fund's average net assets.
TRANSFER AGENT. The Fund serves as its own transfer agent and dividend
paying agent, and keeps the books and records of shareholder accounts and
activity at its offices located at 1100 N. Glebe Road, Suite 1040, Arlington,
VA 22201.
PORTFOLIO TRANSACTIONS. As provided in its Investment Advisory
Agreement, BGB is responsible for the Fund's portfolio decisions and the
placing of portfolio transactions. Purchase and sale orders for portfolio
securities may be effected through brokers who charge a commission for their
services. In executing such transactions, BGB seeks to obtain the best net
results for the Fund, taking into account such factors as price (including
the brokerage commission or dealer spread), size of order, competitive
commissions on similar transactions, difficulty of execution and operational
facilities of the firm involved and the firm's risk in positioning a block of
securities. While BGB seeks reasonably competitive rates, it does not
necessarily pay the lowest commission or spreads available. Transactions in
smaller company shares, in particular, may involve specialized services on
the part of the broker and thus entail higher commissions or spreads than
would be paid in transactions involving more widely traded securities.
BGB may serve as a broker for the Fund in any securities transaction;
however, in order for BGB to effect any portfolio transaction for the Fund,
the commissions, fees or other remuneration received by BGB must be reasonable
and fair compared to the commissions, fees or other remuneration paid to other
brokers in connection with comparable transactions involving similar
securities being purchased or sold on a securities exchange or on NASDAQ
during a comparable period of time. The Fund will not deal with BGB in any
transaction in which BGB acts as a principal. However, BGB may serve as a
broker to the Fund in over-the-counter transactions conducted on an agency
basis.
Allocation of transactions, including their frequency, to various brokers
is determined by BGB in its best judgment and in a manner deemed fair and
reasonable to shareholders. The primary consideration is prompt and efficient
execution of orders in an effective manner at the most favorable price.
Subject to this primary consideration, BGB may also consider the provision of
supplemental research services in the selection of brokers to execute
portfolio transactions.
(8)
<PAGE>
SHARES, DIVIDENDS AND DISTRIBUTIONS
COMMON STOCK. The Fund will issue new shares at its most current net
asset value. The Fund currently has authorized common stock of one hundred
million shares, $0.001 par value per share. The Fund has registered an
indefinite number of shares under Rule 24f-2 of the Investment Company Act of
1940.
Each share will have one vote and be freely transferable. The shares,
when issued and paid for in accordance with the terms of the prospectus, will
be fully paid and non-assessable. Shares have no preemptive, cumulative
voting, subscription or conversion rights.
Shares can be issued as full shares or as fractions of shares. A
fraction of a share has the same kind of rights and privileges as a full share
on a pro-rata basis.
Shares of stock are redeemable at net asset value, less any applicable
redemption fee, at the option of the shareholder. Shareholder inquiries
should be directed to the Fund at the address shown on the first page of this
prospectus.
DIVIDENDS AND DISTRIBUTIONS. The Fund expects to declare and pay
distributions annually, generally in November. The Fund will notify
shareholders each year of the tax status of dividends and capital gain
distributions. Shareholders not otherwise subject to tax on their income
(such as retirement accounts or foundations) will not be required to pay tax
on amounts distributed to them.
Substantially all of the Fund's net investment income will be paid to
shareholders annually as a dividend. Dividends may be taken in cash or in
additional shares at net asset value. Capital gain distributions will
normally be paid within 90 days after the end of the Fund's fiscal year.
Dividends and capital gain distributions will be automatically reinvested in
additional shares of the Fund unless a shareholder has elected, by written
notice to the Fund, to receive dividends and capital gain distributions in
cash.
TAXES. The Fund intends to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code, and if so qualified, will not
be subject to federal income taxes to the extent its earnings are timely
distributed. The Fund also intends to make distributions as required by the
Internal Revenue Code to avoid the imposition of a 4% excise tax.
The Fund will distribute substantially all of its net investment income
and net capital gains to shareholders. Distributions from the Fund's net
investment income and short-term capital gains are taxed as dividends, and
long-term capital gain distributions are taxed as long-term capital gains.
Distributions of long-term capital gains will be taxable to the shareholder
as long-term capital gains regardless of the length of time shares have been
held. A portion of the Fund's dividends may qualify for the dividends
received deduction for corporations.
The Fund's distributions are taxable when they are paid, whether a
shareholder takes them in cash or reinvests them in additional shares, except
that distributions declared in October, November or December and paid in
January are taxable as if paid on December 31.
At the time of a shareholder's purchase, the Fund's net asset value may
reflect undistributed income or capital gains. A subsequent distribution of
these amounts by the Fund will be taxable to the shareholder, even though on
an economic basis the distribution is a return of part of the shareholder's
investment.
(9)
<PAGE>
SALE OF SHARES. The redemption of shares is a taxable event, and a
shareholder may realize a capital gain or a capital loss. The Fund will
report to redeeming shareholders the net proceeds of their sales. However,
because the tax consequences of a redemption will also depend on the
shareholder's basis in the redeemed shares for tax purposes, shareholders
should retain their regular account statements for use in determining their
tax liability on a sale of their shares in the Fund. The Fund is not
responsible for computing a shareholder's capital gains or capital losses on
the redemption of shares.
If a shareholder disposes of shares held for six months or less at a
loss, such loss will be treated as a long-term capital loss to the extent of
any long-term capital gains reported by the shareholder with respect to such
shares. A loss realized on a taxable disposition of Fund shares may be
disallowed to the extent that additional Fund shares are purchased (including
by reinvestment of distributions) within 30 days before or after such
distribution.
BACKUP WITHHOLDING. Under federal tax law, some shareholders may be
subject to a 31% tax withholding on reportable dividends, capital gains
distributions, and redemption proceeds. Generally, investors subject to this
"backup withholding" will be those for whom a taxpayer identification number
is not on file with the Fund or who, to the Fund's knowledge, have furnished
an incorrect number. In order to avoid this withholding requirement, an
investor must certify on the account application that the taxpayer
identification number provided is correct and that the investment is not
otherwise subject to backup withholding, or is exempt from backup withholding.
The discussion of Federal income taxes above is provided for general
information only. Shareholders may also be subject to state and local taxes
on income and gains from their investment. Investors should consult their
own tax advisers concerning the tax consequences of an investment in the Fund.
HOW TO PURCHASE SHARES
The Fund's shares are sold without a sales charge. The price paid for
shares is the net asset value next determined following the receipt of the
purchase order in proper form by the Fund. "Proper form" is defined as
including all required account information and payment or instructions for
payment by wire or from a broker. The Fund reserves the right to reject any
specific purchase order, and the right to suspend the offering of Fund shares
to new investors.
NET ASSET VALUE. Net asset value per share is calculated at the close
of regular trading on the New York Stock Exchange on each day the Exchange is
open for business. The net asset value per share is determined by dividing
the total value of the Fund's investments plus cash and other assets,
including accrued income, less any liabilities, including accrued expenses,
by the number of outstanding shares of the Fund.
In determining net asset value, securities listed on an exchange or the
NASDAQ National Market System are valued on the basis of the last reported
sale price prior to the time the valuation is made, or, if no sale is
reported for that day, at their closing bid price for listed securities and
at the average of their bid and ask prices for NASDAQ securities.
Quotations are taken from the market where the security is primarily
traded. Other over-the-counter securities for which market quotations are
readily available are valued at their bid price. Securities for which market
quotations are not readily available are carried at their fair value as
(10)
<PAGE>
HOW TO PURCHASE SHARES (CONTINUED)
determined in good faith under procedures established and supervised by the
Board of Directors. Bonds and other fixed income securities may be valued by
reference to other securities with comparable ratings, interest rates and
maturities, using established independent pricing services.
Foreign securities, if held in the form of American Depository Receipts,
are valued at the closing bid price of the ADR. Other foreign securities are
valued at the bid price of the latest dollar-denominated quotation from a
reputable market maker in the securities.
OPENING AN ACCOUNT. Shares of the Fund may be purchased through any
existing brokerage account held by the investor, or directly from the Fund.
An Account Application must be completed and signed for each new account
opened at the Fund, regardless of the method chosen for making the initial
investment. The minimum initial investment in the Fund is $10,000, although
for retirement accounts and IRA's the minimum initial investment is $2,000.
The minimum subsequent purchase amount is $1,000.
All purchases must be made in U.S. dollars and checks must be drawn on
U.S. banks. The Fund will not accept a check endorsed over by a third party.
A charge of $25.00 will be imposed if any check used for the purchase of
shares is returned unpaid. Investors who purchase Fund shares by check may
not receive redemption proceeds until there is reasonable belief that the
check has cleared, which may take up to fifteen calendar days after payment
has been received.
To open a regular account at the Fund by mail, simply complete and return
an Account Application with a check made payable to Aegis Value Fund. If you
have any questions about the Fund or need assistance with your application,
please call the Fund at (703)528-7788. Certain types of investors, such as
trusts, corporations, associations, partnerships or estates may be required to
furnish additional documents when they open an account. These documents may
include corporate resolutions, trusts, wills, partnership agreements, trading
authorizations, powers of attorney, or other documents.
Applications and checks should be mailed to:
Aegis Value Fund, Inc.
1100 N. Glebe Road, Suite 1040
Arlington, VA 22201
To open a regular account at the Fund and then wire money for the initial
investment in the Fund, please complete and sign an Account Application, then
call the Fund at (703)528-7788 before wiring the funds. You should be aware
that heavy traffic over the Federal Reserve System may delay the arrival of
purchase orders made by wire. Money should be wired to:
Chase Manhattan Bank
ABA#021-000-021
For the account of Ernst & Company
Account #140-080-524
FBO: Aegis Value Fund
Account #228-00177-1-2
(11)
<PAGE>
HOW TO PURCHASE SHARES (CONTINUED)
To open a retirement account or IRA with the Fund, please call the
Fund's office at (703)528-7788 and receive the necessary information and the
special retirement account application to establish your account.
To add money to an existing account at the Fund, make your check payable
to Aegis Value Fund, indicate your account number on the check, and mail it to
the Fund at the above address. If wiring funds to your Fund account, be sure
to wire for credit to Aegis Value Fund and include your name and account
number in the wiring instructions. Additional shares may also be purchased
through any existing brokerage account held by the investor.
Any purchase orders or funds received after 4:00 p.m. Eastern time will
be processed at the next day's closing net asset value. All shares
(including reinvested dividends and distributions) are issued in full and
fractional shares rounded to the third decimal place.
No share certificates will be issued except for shareholders who are
required by regulation to hold certificates. Instead, an account will be
established for each shareholder and all shares purchased will be held in
book entry form by the investor's brokerage firm or by the Fund, as the case
may be. Any transaction in an account, including reinvestment of dividends
and distributions, will be confirmed in writing to the shareholder.
HOW TO REDEEM SHARES
Shareholders may redeem shares as described below on any day the Fund is
open for business. Shares will be redeemed at the next determined net asset
value after the Fund receives the redemption request in good form, less any
applicable redemption fee for shares held less than two years (see "Redemption
Fee" below). Redemption requests received after 4:00 p.m. Eastern time will
be processed at the next day's closing net asset value.
BY MAIL. To redeem shares held by the Fund in writing, send a request
in good form to the Fund at:
Aegis Value Fund, Inc.
1100 N. Glebe Road, Suite 1040
Arlington, VA 22201
A request "in good form" means that the request includes all of the
following:
1. The name of the Fund and the shareholder's account number.
2. The amount of the transaction (specified in dollars or shares).
3. Signatures of all owners exactly as they are registered on
the account.
4. Signatures guaranteed. The shareholder signatures must be
guaranteed by an "eligible guarantor institution" as such
term is defined in Rule 17Ad-15 under the Securities and
Exchange Act of 1934, which includes FDIC-insured banks,
brokerage firms, credit unions, or other eligible guarantor.
A notary public is not an acceptable guarantor.
5. Share certificates, if held by the shareholder.
6. Other supporting legal documentation that may be required, in
the case of trusts, corporations, associations, partnerships,
estates, retirement plans and certain other accounts. These
documents may include copies of corporate resolutions, wills,
trusts, partnership agreements, retirement trusts, powers of
attorney, trading authorizations, or other documents.
(12)
<PAGE>
HOW TO REDEEM SHARES (CONTINUED)
If you have any questions about what is required for your redemption
request, please call the Fund at (703)528-7788.
Payment will normally be made by the Fund within one business day, but
not later than seven calendar days after receipt of the redemption request.
However, payment of redemption proceeds may be delayed until the purchase
check has cleared, or up to fifteen days from the date of purchase, whichever
occurs first.
If a shareholder redeems shares of the Fund with the assistance of a
broker-dealer, he or she should be aware that there may be a charge to the
shareholder for such services.
RETIREMENT DISTRIBUTIONS. A request for distribution from an IRA or
other retirement account may be delayed by the Fund pending proper
documentation and ascertaining the withholding requirement applicable to the
distribution. If a shareholder does not want tax withholding from
distributions, the shareholder may state in the distribution request that no
withholding is desired and that the shareholder understands that there may be
a liability for income tax on the distribution, including penalties for
failure to pay estimated taxes.
BY WIRE TRANSFER. A shareholder can request to have redemption proceeds
wired to the shareholder's specified bank account, but these full and
complete wire instructions must be included in the written redemption request
and the Fund's custodian will charge a $20.00 fee to make the wire transfer.
ACCOUNT MINIMUM. The Fund requires that a shareholder maintain a minimum
of $1,000.00 in an account to keep the account open. The Fund may, upon 30
days' prior written notice to a shareholder, redeem shares in any account
other than a retirement account if the account has an asset value, not
attributable to market fluctuations, less than $1,000.
REDEMPTION FEE
The Fund's Board of Directors believes that the Fund should be viewed as
a long-term investment by all of its shareholders, and should not be used as
a short-term trading vehicle. A high turnover of shareholders would result in
higher expenses, trading costs, and possibly higher taxable distributions to
the Fund's long-term shareholders. Therefore, to discourage short-term
trading in its shares, the Fund will impose a redemption fee of 2.00% on the
redemption proceeds of shares held for a period less than two years. Proceeds
of the redemption fee will be retained by the Fund.
The redemption fee will be assessed on an amount equal to the net asset
value of the shares redeemed, but no fee will be assessed on shares derived
from reinvestment of dividends or capital gains distributions. The
calculation of the redemption fee will be made in the manner that
results in the lowest possible amount being charged. Therefore, it will be
assumed that the redemption is first on any shares held more than two years or
acquired through reinvestment of dividends or capital gains distributions.
(13)
<PAGE>
REDEMPTION FEE (CONTINUED)
The redemption fee is waived with respect to the following classes
of redemptions:
1. Death or disability, if the redemption is made within one
year.
2. Retirement plan distributions which are required by the
shareholder's age, or are a result of the shareholder's death
or disability.
3. Redemptions by any tax-exempt employee benefit plan for which
continuation of its investment in the Fund would be improper
under applicable law or regulation (subject to the Fund's
right to require an opinion of counsel to that effect).
SHAREHOLDER ACCOUNTS AND SERVICES
ACCOUNT INFORMATION. The Fund will establish an account for each
shareholder, and send written confirmation of the initial purchase of shares
and any subsequent transactions. When there is any transaction in the
shareholder account, such as a purchase, redemption, change of address,
reinvestment of dividends and distributions, or withdrawal of share
certificates, a confirmation statement will be sent to the shareholder giving
complete details of the transaction.
ANNUAL STATEMENTS. The Fund will send an annual account statement to
each shareholder showing the distributions paid during the year and a summary
of any other transactions. The Fund will also provide year-end tax
information mailed to the shareholder by January 31 of each year, a copy of
which will also be filed with the Internal Revenue Service.
FUND REPORTS. The financial statements of the Fund with a summary of
portfolio composition and performance, along with the President's letter to
shareholders, will be mailed to each shareholder twice a year.
AUTOMATIC REINVESTMENT. Unless the shareholder elects to receive cash
distributions, dividends and capital gains distributions will automatically
be reinvested without charge in additional shares of the Fund. Such
distributions will be reinvested at the net asset value determined on the
dividend or distribution payment date in full and fractional shares rounded
to the third decimal place.
(14)
<PAGE>
AEGIS VALUE FUND, INC.
1100 North Glebe Road, Suite 1040
Arlington, Virginia 22201
Phone: (703)528-7788
Fax: (703)528-1395
Board of Directors
Scott L. Barbee
William S. Berno
Edward P. Faberman
Eskander Matta
William R. Morris III
Officers
William S. Berno, President
Scott L. Barbee, Treasurer
Paul Gambal, Secretary
Investment Advisor
Berno, Gambal & Barbee, Inc.
1100 North Glebe Road, Suite 1040
Arlington, VA 22201
Custodian
Ernst & Company
One Battery Park Plaza
New York, NY 10004-1478
Certified Public Accountants
Bish & Haffey, P.C.
50 South Pickett Street, Suite 200
Alexandria, VA 22304
(15)
<PAGE>
AEGIS VALUE FUND, INC.
1100 N. Glebe Road, Suite 1040
Arlington, VA 22201
(703)528-7788
ACCOUNT APPLICATION
1. New Account Registration
____________________________________________________________________________
Shareholder Name Taxpayer ID Number
____________________________________________________________________________
Joint Shareholder's Name (if applicable) Taxpayer ID Number
Type of Account: [] Individual [] Joint Tenants [] Tenants in Common
[] Custodial [] Trust [] Corporation or Partnership
[] Other___________
Note: Please provide this information exactly as you wish it to appear on
your account. Do not use this application for IRA's or retirement plans.
All retirement accounts require a separate retirement account application.
Please contact the Fund at (703)528-7788 for a copy.
2. Address
____________________________________________________________________________
Street Address or P.O. Box Home Telephone # Business Telephone #
___________________________________ Citizen of: [] U.S. []Other_________
City State Zip Code Country_____________
3. Amount of Investment (Minimum $10,000)
By check: [] $______________ (payable to Aegis Value Fund)
By wire: [] $______________ Funds were wired on ___________________
Date
4. Distribution Options
[] Reinvest both dividends and capital gains in shares.
[] Pay dividends in cash and reinvest capital gains in shares.
[] Pay dividends and capital gains in cash.
(16)
<PAGE>
AEGIS VALUE FUND, INC.
1100 N. Glebe Road, Suite 1040
Arlington, VA 22201
(703)528-7788
5. Signature and Certification
I have received, read and agree to the terms of the current Prospectus
of the Aegis Value Fund. I have the authority and the legal capacity to
purchase shares of the Fund, and I am of legal age in my state. I authorize
the Fund, its affiliates and agents to act on any instructions believed to be
genuine for any service authorized on this account application, and in
accordance with procedures described in the Prospectus. I agree that they
will not be liable for any resulting loss or expense.
Certification: Under penalties of perjury, I certify that the taxpayer
identification number entered on this account application is correct and that
I have not been notified by the IRS that I am subject to backup withholding,
or that the IRS has notified me that I am no longer subject to backup
withholding.
If you are currently subject to backup withholding, check here: []
The Internal Revenue Service does not require your consent to any provision
of this document other than the certification required to avoid backup
withholding.
Please sign here:
____________________________________________________________________
Signature of Owner, Trustee or Custodian Date
____________________________________________________________________
Signature of Joint Owner (if applicable) Date
6. Mailing Instructions
Please make your check payable to Aegis Value Fund, and mail to the Fund
at:
Aegis Value Fund, Inc.
1100 N. Glebe Road, Suite 1040
Arlington, VA 22201
If you have any questions while completing this application or need more
information, please call the Fund at (703)528-7788 for assistance.
(17)
<PAGE>
AEGIS VALUE FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
DATED OCTOBER 30, 1998
This Statement of Additional Information is in addition to and serves to
expand and supplement the current Prospectus of Aegis Value Fund, Inc. (the
"Fund"). This Statement of Additional Information, dated October 30, 1998,
is not a Prospectus and should be read in conjunction with the Prospectus
dated October 30, 1998. A copy of the Prospectus may be obtained without charge
by contacting the Fund at 1100 N. Glebe Road, Suite 1040, Arlington, VA 22201
(703)528-7788. Please retain this document for future reference.
(1)
<PAGE>
TABLE OF CONTENTS PAGE
Investment Objectives and
Policies...............................................3
Risk Factors and Special
Considerations.........................................4
Management of the Fund.................................6
Principal Holders of Shares............................8
Investment Advisory Services...........................8
Distributor............................................9
Custodian..............................................9
Independent Accountants................................9
Brokerage Allocation...................................9
Description of Common Stock...........................10
Purchase, Redemption, and Pricing of
Shares................................................10
Taxation..............................................11
Underwriter...........................................12
Performance Data......................................12
Financial Statements..................................13
(2)
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The following investment policies and limitations supplement those set
forth in the Fund's prospectus. As stated in the prospectus, the Fund's
investment objective is to seek long-term capital appreciation through a
strategy of value investing in common stocks. Unless otherwise noted,
whenever an investment policy or limitation states a maximum percentage of the
Fund's assets that may be invested in any security or other asset or sets
forth a policy regarding quality standards, the percentage limitation or
standard will be determined immediately after giving effect to the Fund's
acquisition of the security or other asset. Accordingly, any subsequent
change in values, net assets or other circumstances will not be considered
in determining whether the investment complies with the Fund's investment
policies and limitations. It should be noted that Items 8 and 9 regarding
illiquid investments and borrowing will be applied at all times, and not just
at the initial time of the transaction.
The Fund's fundamental investment policies cannot be changed without the
approval of a "majority of the outstanding voting securities" (as defined in
the Investment Company Act of 1940) of the Fund. Except for the fundamental
investment restrictions set forth below, the investment policies and
limitations described in this Statement of Additional Information are
operating policies and may be changed by the Board of Directors without
shareholder approval. However, shareholders will be notified prior to a
material change in an operating policy affecting the Fund.
The Fund may not, as a matter of fundamental policy:
1) With respect to 75% of its total assets, invest in securities of any
one issuer if immediately after and as a result of such investment more than
5% of the total assets of the Fund, taken at market value, would be invested
in the securities of such issuer. This restriction does not apply to
investments in obligations of, or guaranteed by, the U.S. government, its
agencies or instrumentalities.
2) Invest 25% or more of its total assets in securities or issuers in
any one industry. This restriction does not apply to U.S. government
securities.
3) Purchase more than 10% of the outstanding voting securities, or any
class of securities of any one issuer.
4) Purchase securities on margin. (But the Fund may obtain such
short-term credits as may be necessary for the clearing of securities trades.)
5) Engage in any stock option strategy, whether listed or over-the-
counter options.
6) Make short sales of securities.
7) Invest in real property, real estate limited partnerships, or oil,
gas or mineral exploration and development programs; although the Fund may
invest in marketable securities which are secured by real estate and
securities of companies which invest in or deal in real estate, oil, gas or
minerals or sponsor such partnerships or programs.
8) The Fund will not invest more than 5% of the value of its net assets
in illiquid securities, including any private placements and Rule 144A
securities. This percentage limitation will apply at all times, and not just
immediately after purchase.
9) Borrow money, except that the Fund may borrow money on a secured or
unsecured basis from banks as a temporary measure for extraordinary or
emergency purposes including, but not limited to, the purchase of its own
shares. Such temporary borrowings may not at any time exceed 5% of the value
of the Fund's net assets. No more than 10% of the value of the Fund's net
assets at any time may be pledged as collateral for such temporary borrowings.
(3)
<PAGE>
10) Buy or sell commodities, commodities futures contracts or commodities
option contracts.
11) Loan money, except by the purchase of debt obligations consistent
with the Fund's investment objective and policies. However, the Fund may loan
up to 25% of its net assets to qualified brokers, dealers or institutions for
their use relating to short sales or other securities transactions (provided
that such loans are fully collateralized at all times). The Fund currently
intends to limit any such lending of portfolio securities to no more than 5%
of its net assets.
12) Issue senior securities, as defined in the Investment Company Act
of 1940, or mortgage, pledge, hypothecate or in any manner transfer, as
security for indebtedness, any securities owned or held by the Fund except
as may be necessary in connection with borrowings mentioned in paragraph (9)
above, and then only to the extent there mentioned.
13) Invest more than 5% of the value of the Corporation's net assets
in securities of issuers which have been in continuous operation less than
three years.
14) Purchase or retain the securities of any issuer if, to the knowledge
of the Fund, any of the officers or directors of the Fund or its investment
advisor own individually more than one-half of one percent (0.50%) of the
securities of such issuer and together own more than 5% of the securities of
such issuer.
15) Underwrite securities of others, except to the extent the Fund may
be deemed to be an underwriter, under federal securities laws, in connection
with the disposition of portfolio securities.
16) Invest more than 10% of its net assets in the securities of other
investment companies, and then only as permitted under the Investment Company
Act of 1940.
17) Invest in securities restricted as to disposition under federal or
state securities laws.
PORTFOLIO TURNOVER. The Fund makes long-term investments and does not
engage in short-term trading strategies. While the Fund's portfolio turnover
will vary from year to year based upon market conditions and factors affecting
the particular securities held in the portfolio, it is anticipated that the
Fund's average portfolio turnover will not exceed 50% annually over periods
of several years.
It is the operating policy of the Fund to hold its securities as long as
they remain undervalued, and to benefit from the lower transaction costs and
more favorable tax rates available to long-term holders of equity securities.
However, when circumstances warrant, securities will be sold without regard
to their holding period.
RISK FACTORS AND SPECIAL CONSIDERATIONS
LENDING PORTFOLIO SECURITIES. The Fund may lend up to 25% of its net
assets to qualified brokers, dealers or institutions for their use relating to
short sales or other securities transactions. The Fund currently intends to
limit any lending of portfolio securities to no more than 5% of its net
assets.
Such loans are callable at any time and are continuously secured by
collateral consisting of cash or liquid assets at least equal to the value of
the security loaned. The collateral received by the Fund will be invested in
short-term debt instruments.
(4)
<PAGE>
Securities lending allows the Fund to retain ownership of the securities
loaned and at the same time earn additional income. Since there may be delays
in the recovery of loaned securities or even a loss of rights in collateral
supplied should the borrower fail financially, loans will be made only to
parties that participate in a lending program monitored by the Fund's
custodian and who are deemed by it to be of good standing. Furthermore, such
loans will be made only if, in the judgment of the Fund's management and
Board, the consideration to be earned from such loans would justify the risk.
The Fund complies with the current view of the staff of the Securities
and Exchange Commission that a mutual fund may engage in such loan
transactions only if: (i) the Fund receives 100% collateral in the form of
cash or cash equivalents (e.g., Treasury bills or notes) from the borrower;
(ii) the borrower must increase the collateral whenever the market value of
the securities loaned (determined daily) rises above the value of the
collateral; (iii) after giving notice, the Fund must be able to terminate the
loan at any time; (iv) the Fund must receive reasonable interest on the loan
or a flat fee from the borrower, as well as amounts equivalent to any
dividends, interest or other distributions on the securities loaned and to
any increase in market value; (v) the Fund may pay only reasonable custodian
fees in connection with the loan; (vi) the Fund must be able to vote proxies
on the securities loaned, either by terminating the loan or by entering into
an alternative arrangement with the borrower.
FOREIGN SECURITIES. The Fund may invest up to 10% of its net assets
directly in foreign securities, although the Fund intends to limit its
investments in foreign securities to companies issuing U.S. dollar-denominated
American Depository Receipts (ADR's) or who otherwise comply with SEC
disclosure requirements.
Foreign securities will expose the Fund to certain risks not present in
domestic securities. These risks are discussed under "Investment Risks" in
the prospectus. In addition to these risks, many foreign markets have less
trading volume and less liquidity than the U.S. markets, and therefore prices
in foreign markets can be highly volatile.
Foreign markets may also have less protection for investors than the U.S.
markets. Foreign issuers may be subject to less government supervision. It
may also be difficult to enforce legal and shareholder rights in foreign
countries. There is no assurance that the Fund will be able to anticipate
these risks or counter their effects.
LOWER-RATED DEBT SECURITIES. The Fund may purchase debt securities rated
within the four highest grades of Moody's Investor Service, Inc. or Standard
& Poor's Corporation. Debt securities in the fourth highest rating category
(Baa or BBB, the lowest investment grade ratings) have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher grade bonds. It is the Fund's policy to
promptly dispose of a bond whose rating drops below investment grade.
SHAREHOLDER RIGHTS. As noted in the prospectus, the Fund may not invest
for the purpose of exercising control of management of another company.
However, the Fund may exercise its rights as a stockholder in any of its
portfolio companies and communicate its views on important matters of policy
to management, the board of directors and other stockholders of those
companies if the Fund or its Board of Directors determine that such matters
could have a significant effect on the value of the Fund's investment in
those companies.
From time to time, the Fund may engage in activities in conjunction with
other stockholders or interested parties which may include, among others,
supporting or opposing proposed changes in a company's structure; seeking
changes in a company's board or management; seeking the sale or reorganization
of a company or a portion of its assets; or supporting or opposing third party
attempts to acquire or control a company. In all cases, the Fund will
exercise its rights as a stockholder to seek to protect the interests of the
Fund's shareholders and take actions which the Fund and its Board of Directors
determine to be in the best interests of the Fund's shareholders.
(5)
<PAGE>
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS. The following information is given for each
officer and director of the Fund: (*indicates persons who are affiliated
with BGB, the Fund's investment advisor, and are therefore considered to be
"interested persons" under the Investment Company Act of 1940, Section(2)(a))
Name, Address and Age Position Principal Occupation(s)
for Past 5 Years
- --------------------- -------- -----------------------
William S. Berno* (44) President, President and Managing Director of
1100 N. Glebe Rd., Suite 1040 Director Berno,Gambal & Barbee, Inc. since
Arlington, VA 22201 1994; Investment Officer with
investment advisor Kahn Brothers &
Co. 1989-94; President and Director
of the Fund since 1997.
Scott L. Barbee* (27) Treasurer, Treasurer and Managing Director of
1100 N. Glebe Rd., Suite 1040 Director Berno, Gambal & Barbee, Inc. since
Arlington, VA 22201 1997; Wharton School M.B.A.
candidate 1995-97; Investment
Analyst with Simmons & Co.,
investment bankers serving the
energy industry 1993-95; Treasurer
and Director of the Fund since
1997.
Paul Gambal* (39) Secretary Chairman, Secretary and Managing
1100 N. Glebe Rd., Suite 1040 Director of Berno, Gambal & Barbee
Arlington, VA 22201 Inc. since 1994; Investment Officer
with investment advisor Kahn
Brothers & Co. 1989-94; Director of
Colonial Parking,Inc. since 1993.
Secretary of the Fund since 1997.
Edward P. Faberman (53) Director Attorney with the law firm of
Ungaretti & Harris Ungaretti &Harris since 1996; Vice
1747 Pennsylvania Ave. N.W., Suite 900 President, Government Affairs of
Washington, D.C. 20006 American Airlines 1991-96.
Director of the Fund since 1997.
Eskander Matta (28) Director Investment banker, Credit Suisse
Credit Suisse First Boston Corp. First Boston Corp. since 1996.
11 Madison Avenue Harvard Business School M.B.A
New York, NY 10010 candidate 1994-96. Research
Associate with CSC Index, utility
industry consultants 1993-94.
Research Associate, Mercer
Management Consulting 1991-93.
Director of the Fund since 1997.
(6)
<PAGE>
MANAGEMENT OF THE FUND (CONTINUED)
Name, Address and Age Position Principal Occupation(s) for
Past 5 Years
- --------------------- -------- ---------------------------
William R. Morris, III (38) Director Chairman, Morris McNair &
Morris McNair & Associates, Inc. Associates, Inc., a commercial
888 17th Street, N.W., Suite 1150 real estate services firm, since
Washington, D.C. 20006 1988. Director of the Fund since
1997.
COMPENSATION. The Fund does not pay any fees or compensation to its
officers, but directors who are not affiliated with the Fund's investment
advisor receive a fee of $500 for each meeting of the Fund's Board of
Directors which they attend. In addition, the Fund reimburses its independent
directors for reasonable travel or incidental expenses incurred by them in
connection with their attendance at Board meetings. The Fund offers no
retirement plan or other benefits to its directors.
For the Fund's initial fiscal year ended August 31, 1998, the following
table gives the compensation to be paid to each of the unaffiliated directors
of the Fund for their services:
NAME, POSITION AGGREGATE COMPENSATION FROM FUND
- -------------- --------------------------------
Edward P. Faberman, Director $-0-
Eskander Matta, Director $-0-
William R. Morris III, Director $-0-
PRINCIPAL HOLDERS OF SHARES
PRINCIPAL STOCKHOLDERS. As of August 31, 1998, the following persons
were known to the Fund to be beneficial owners of 5% or more of the
outstanding shares of the Fund:
Name and Address Percentage Ownership Type of Ownership
- ---------------- -------------------- -----------------
Ernst & Company (1) 97.3% Record
One Battery Park Plaza
New York, NY 10004-1478
All officers and directors as a group: 2.6% Record
19.8% Beneficial
(1) Ernst & Company, a member of the New York Stock Exchange and the Fund's
custodian, is a broker-dealer holding shares for the benefit of its brokerage
customers including at such time clients of BGB, the Fund's affiliated
broker-dealer.
INVESTMENT ADVISORY SERVICES
INVESTMENT ADVISOR OF THE FUND. The Fund is managed by Berno, Gambal &
Barbee, Inc. ("BGB") under an Investment Advisory Agreement approved by the
Board of Directors and shareholders on March 11, 1998. BGB is a
value-oriented investment firm founded in 1994. William Berno, Paul Gambal
and Scott Barbee are the principal stockholders of the firm and are therefore
considered to be "controlling persons" of the Fund's investment advisor.
Each of the principals of BGB serves as an officer and director of that
firm. William Berno serves as President and a director of BGB, and also holds
those same positions with the Fund. Scott Barbee serves as Treasurer and a
director of BGB, and also holds those same positions with the Fund. Paul
Gambal serves as Chairman, Secretary and a director of BGB, and also holds
the position of Secretary of the Fund.
INVESTMENT ADVISORY FEES. As compensation for its services to the Fund
under the Investment Advisory Agreement, BGB is entitled to receive an annual
advisory fee of 1.20% of the Fund's average net assets.
The Fund pays BGB its advisory fee on a monthly basis, computed based on
the average net assets for the preceding month.
As a means of reducing the Fund's operating expense ratio in its early
periods of operation, BGB has agreed to absorb any other expenses of the Fund
which exceed 0.30% of the Fund's average net assets during the first three
fiscal years of the Fund's operation.
ADVISORY SERVICES. Under the Investment Advisory Agreement, BGB
determines the composition of the Fund's portfolio and supervises the
investment management of the Fund. BGB also provides investment research and
research evaluation and makes and executes recommendations for the purchase
and sale of securities. BGB furnishes at its expense all personnel and office
equipment necessary for performance of its obligations under the Agreement and
pays the compensation and expenses of the officers and directors of the Fund
who are affiliated with BGB.
The Fund will bear all of its other expenses, including but not limited
to the expenses of rent; telecommunications expense; administrative personnel;
interest expense; accounting and legal fees; taxes, registration and
governmental fees; fees and expenses of the custodian and transfer agent;
brokerage commissions; insurance premiums; and expenses of shareholder
meetings, preparation, printing and distribution to existing shareholders of
reports, proxies and prospectuses.
(8)
<PAGE>
DISTRIBUTOR. BGB, the Fund's investment advisor and a registered
broker-dealer, also serves as distributor of the Fund's shares in addition to
its portfolio advisory services. BGB receives no additional compensation
related to its services as distributor.
CUSTODIAN. The Fund uses Ernst & Company, a New York Stock Exchange
member firm and registered broker-dealer, as its custodian for cash and
securities. Ernst does not participate in the management of the Fund. The
Fund has authorized Ernst to deposit portfolio securities in several central
depository systems, as allowed by Federal law. Ernst maintains a separate
account in the name of the Fund, holds and transfers portfolio securities for
the Fund, accepts receipts and makes disbursements of cash on behalf of the
Fund, collects and receives all income and other payments on account of the
Fund's securities, and makes periodic reports to the Fund's officers
concerning the Fund's operations. Ernst & Company's mailing address is
One Battery Park Plaza, New York, NY 10004-1478.
INDEPENDENT PUBLIC ACCOUNTANTS. The Fund has engaged the accounting firm
of Bish & Haffey, P.C. to provide accounting services to the Fund, including
an annual audit of the Fund's financial statements. Bish & Haffey's address
is 50 South Pickett Street, Suite 200, Alexandria, VA 22304.
BROKERAGE ALLOCATION
PORTFOLIO TRANSACTIONS. As provided in its Investment Advisory Agreement,
BGB is responsible for the Fund's portfolio decisions and the placing of
portfolio transactions. Purchase and sale orders for portfolio securities may
be effected through brokers who charge a commission for their services. In
executing such transactions, BGB makes efforts in good faith to obtain the
best net results for the Fund, taking into account such factors as price
(including the brokerage commission or dealer spread), size of order,
competitive commissions on similar transactions, difficulty of execution and
operational facilities of the firm involved and the firm's financial strength
and its risk in positioning a block of securities. While BGB seeks reasonably
competitive rates, it does not necessarily pay the lowest commission or
spreads available. Transactions in smaller company shares may involve
specialized services on the part of the broker and thus entail higher
commissions or spreads than would be paid in transactions involving more
widely traded securities.
Such considerations involve judgment and experience, and are weighed by
BGB in determining the overall reasonableness of brokerage commissions paid.
The Fund does not deem it practicable and in its best interests to solicit
competitive bids for commission rates on each transaction. BGB intends to use
BGB's affiliated broker-dealer for brokerage transactions where, in its
judgment, BGB will be able to obtain a price and execution at least as
favorable as other qualified brokers. BGB may serve as a broker for the Fund
in any securities transaction; however, in order for BGB to effect any
portfolio transaction for the Fund, the commissions, fees or other
remuneration received by BGB must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers in connection
with comparable transactions involving similar securities being purchased or
sold on a securities exchange or on NASDAQ during a comparable period of time.
The Fund will not deal with BGB in any transaction in which BGB acts as a
principal. However, BGB may serve as a broker to the Fund in over-the-counter
transactions conducted on an agency basis.
(9)
<PAGE>
BROKERAGE ALLOCATION (CONTINUED)
Allocation of transactions, including their frequency, to various brokers
is determined by BGB in its best judgment and in a manner deemed fair and
reasonable to shareholders. The primary consideration is prompt and
efficient execution of orders in an effective manner at the most favorable
price. Subject to this primary consideration, BGB may also consider the
provision of supplemental research services in the selection of brokers to
execute portfolio transactions.
Brokerage and research services furnished by brokers through whom the
Fund effects securities transactions may be used by BGB in servicing all of
its accounts, and not all of such services may be used by BGB in connection
with the Fund.
The Fund's Board of Directors will review from time to time all of the
Fund's portfolio transactions including information relating to the
commissions charged by BGB's affiliated broker-dealer to the Fund. The Board
will also review information concerning the prevailing level of commissions
charged by other qualified brokers. In addition, the procedures pursuant to
which BGB's affiliated broker-dealer effects brokerage transactions for the
Fund must be reviewed and approved at least annually by a majority of the
outside directors of the Fund.
CAPITAL STOCK AND OTHER SECURITIES
COMMON STOCK. The Fund will issue new shares at its most current net
asset value. The Fund currently has authorized common stock of one hundred
million shares, $.0.001 par value per share. The Fund has registered an
indefinite number of shares under Rule 24f-2 of the Investment Company Act of
1940. Each share will have one vote and be freely transferable. The shares,
when issued and paid for in accordance with the terms of the prospectus, will
be fully paid and non-assessable. Shares have no preemptive, cumulative
voting, subscription or conversion rights.
Shares can be issued as full shares or as fractions of shares. A
fraction of a share has the same kind of rights and privileges as a full share
on a pro-rata basis. The Fund is not authorized to issue any class of
securities other than its common stock.
PURCHASE, REDEMPTION AND PRICING OF SHARES
PURCHASE ORDERS. The Fund reserves the right to reject any specific
purchase order in its sole discretion. The Fund also reserves the right to
suspend the offering of Fund shares to new investors. Without limiting the
foregoing, the Fund will consider suspending its offering of shares when it
determines that it cannot effectively invest the available funds on hand in
accordance with the Fund's investment policies.
REDEMPTIONS. Shares may be redeemed at net asset value, less any
redemption fee, as outlined in the prospectus. The Fund has elected to be
governed by Rule 18f-1 of the Investment Company Act of 1940 pursuant to which
the Fund is obligated during any 90-day period to redeem shares for any one
shareholder of record solely in cash up to the lesser of $250,000 or 1% of the
net asset value of the Fund at the beginning of such period. Should a
redemption exceed such limitation, the Fund may deliver, in lieu of cash,
readily marketable securities from its portfolio. The securities delivered
will be selected at the sole discretion of the Fund, will not necessarily be
representative of the entire portfolio and may be securities which the Fund
would otherwise sell. The redeeming shareholder will usually incur brokerage
costs in converting the securities to cash. The method of valuing securities
used to make the redemptions in kind will be the same as the method of valuing
(10)
<PAGE>
PURCHASE, REDEMPTION AND PRICING OF SHARES (CONTINUED)
portfolio securities and such valuation will be made as of the same time the
redemption price is determined. See the "Net Asset Value" section of the
prospectus.
PRICING OF SHARES. The purchase and redemption price of Fund shares is
based on the Fund's next determined net asset value per share. In certain
cases, redemptions will be reduced by a redemption fee. See "How to Purchase
Shares", "How to Redeem Shares", and "Redemption Fee" in the prospectus.
TAX STATUS
GENERAL. The Fund intends to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code, and if so qualified, will not
be subject to federal income taxes to the extent its earnings are timely
distributed. To qualify, the Fund must comply with certain requirements
relating to, among other things, the source of its income and the
diversification of its assets. The Fund must also distribute, as ordinary
income dividends, at least 90% of its investment company taxable income.
The Fund also intends to make distributions as required by the Internal
Revenue Code to avoid the imposition of a non-deductible 4% excise tax. The
Fund must distribute during each calendar year (i) 98% of its ordinary income
for such calendar year, (ii) 98% of its capital gain net income for the
one-year period ending October 31 of such calendar year (or the Fund's actual
taxable year ending December 31, if elected) and (iii) certain other amounts
not distributed in previous years.
DISTRIBUTIONS. The Fund will distribute substantially all of its net
investment income and net capital gains to shareholders. Distributions from
the Fund's net investment income and short-term capital gains are taxed as
dividends, and long-term capital gain distributions are taxed as long-term
capital gains. Distributions of long-term capital gains will be taxable to
the shareholder as long-term capital gains regardless of the length of time
shares have been held. A portion of the Fund's dividends may qualify for the
dividends received deduction for corporations.
The Fund's distributions are taxable when they are paid, whether a
shareholder takes them in cash or reinvests them in additional shares, except
that distributions declared in November or December and paid in January are
taxable as if paid on December 31.
At the time of a shareholder's purchase, the Fund's net asset value may
reflect undistributed income or capital gains. A subsequent distribution of
these amounts by the Fund will be taxable to the shareholder, even though on
an economic basis the distribution is a return of part of the shareholder's
investment.
SALE OF SHARES. The redemption of shares is a taxable event, and a
shareholder may realize a capital gain or a capital loss. The Fund will
report to redeeming shareholders the proceeds of their sales. However,
because the tax consequences of a redemption will also depend on the
shareholder's basis in the redeemed shares for tax purposes, shareholders
should retain their regular account statements for use in determining their
tax liability on a sale of their shares in the Fund.
(11)
<PAGE>
TAX STATUS (CONTINUED)
If a shareholder disposes of shares held for six months or less at a
loss, such loss will be treated as a long-term capital loss to the extent of
any long-term capital gains reported by the shareholder with respect to such
shares. A loss realized on a taxable disposition of Fund shares may be
disallowed to the extent that additional Fund shares are purchased (including
by reinvestment of distributions) within 30 days before or after such
distribution.
BACKUP WITHHOLDING. Under federal tax law, some shareholders may be
subject to a 31% tax withholding on reportable dividends, capital gains
distributions, and redemption proceeds. Generally, investors subject to this
"backup withholding" will be those for whom a taxpayer identification number
is not on file with the Fund or who, to the Fund's knowledge, have furnished
an incorrect number. In order to avoid this withholding requirement, an
investor must certify on the account application that the taxpayer
identification number provided is correct and that the investment is not
otherwise subject to backup withholding, or is exempt from backup withholding.
The discussion of Federal income taxes above is provided for general
information only. Shareholders may also be subject to state and local taxes
on income and gains from their investment. Investors should consult their own
tax advisers concerning the tax consequences of an investment in the Fund.
UNDERWRITER
CONTINUOUS OFFERING. Shares of the Fund are distributed to the public in
a continuous public offering. The Fund serves as its own underwriter of its
public offering, and is under no obligation to distribute any amount of Fund
shares. The Fund pays no fees or commissions to any underwriter or dealer in
connection with the distribution of its shares.
CALCULATION OF PERFORMANCE DATA
METHOD OF CALCULATION. The Fund calculates its performance on a total
return basis, assuming reinvestment of all distributions by the shareholder.
All performance information provided by the Fund is historical and is not
intended to indicate future returns. The Fund's share price and total return
fluctuate in response to market conditions and other factors, and the value
of the Fund's shares when redeemed may be more or less than their original
cost.
Performance information for the Fund may appear in advertisements, sales
literature, or reports to shareholders or prospective shareholders. This
performance information may be expressed as "average annual return" and as
"total return".
Total return may apply to a particular time period's cumulative return
or may also be shown as the increased dollar value of an investment over a
particular time period. Total returns reflect all aspects of the Fund's
return, including the effect of reinvesting dividends and capital gain
distributions and any change in the Fund's net asset value per share over
the period.
The Fund's average annual return is computed in accordance with a
standardized method prescribed by SEC rules. The average annual return for a
specific period is found by first taking a hypothetical investment of $1,000
in the Fund's shares on the first day of the period and computing the
redeemable value of that investment at the end of the period. The redeemable
value is then divided by the initial investment, and this quotient is taken
(12)
<PAGE>
CALCULATION OF PERFORMANCE DATA (CONTINUED)
to the Nth root (N representing the number of years in the period) and is
subtracted by the result, which is then expressed as a percentage. The
calculation assumes that all income and capital gains distributions paid by
the Fund have been reinvested at net asset value on the reinvestment dates
during the period. Average annual and cumulative total returns may be quoted
as a percentage or as a dollar amount, and may be calculated for a single
investment, a series of investments, or a series of redemptions, over any
time period. Total returns and other performance information may be quoted
numerically or in a table, graph or similar illustration.
HISTORICAL PERFORMANCE. The following table shows the Fund's total
return for the period from May 15, 1998, commencement of operations, to
August 31, 1998, the end of the Fund's most recent fiscal year. This total
return reflects all income earned by the Fund, any appreciation or
depreciation of the assets of the Fund, and all expenses incurred by the Fund
for the stated period.
The table compares the Fund's total return to the record of the Russell
2000 index and the Standard & Poor's 500 Composite index (S&P 500) over the
same period. The comparison to the Russell 2000 shows how the Fund's total
return compared to the record of a broad index of small capitalization stocks.
The S&P 500 comparison shows how the Fund's total return compared to the
record of a broad index of large capitalization stocks over the same period.
The Fund has the ability to invest in securities not included in the
indices, and its investment portfolio may or may not be similar in composition
to the indices. Figures for the indices are based on the prices of unmanaged
groups of stocks, and, unlike the Fund, their returns do not include the
effect of paying trading costs and the other costs and expenses of investing
in a mutual fund.
Aegis Value Fund Russell 2000 S&P 500
---------------- ------------ -------
Total return for the period
May 15, 1998 to August 31, 1998 -17.90% -28.26% -13.30%
FINANCIAL STATEMENTS
The Aegis Value Fund, Inc. completed its initial fiscal year of operation
on August 31, 1998. Financial statements audited by the Fund's independent
accountants Bish & Haffey, P.C. and schedules of portfolio investments
included in the Annual Report to Shareholders for the fiscal year ended
August 31, 1998 are incorporated herein by reference. To obtain a copy of the
Fund prospectus or the Annual Report to Shareholders, please call the Fund at
(703)528-7788.
<PAGE>
- ------------------------------------------------------------------------------
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT AUDITORS
- ------------------------------------------------------------------------------
AEGIS VALUE FUND, INC.
FIRST ANNUAL REPORT
AUGUST 31, 1998
SCHEDULE OF PORTFOLIO INVESTMENTS--AUGUST 31, 1998
- --------------------------------------------------
COMMON STOCKS--92.5%
COMPANY SHARES MARKET VALUE
- ------- ------ ------------
INDUSTRIAL CYCLICALS--20.6%
Commonwealth Industries, Inc. 2,000 $35,063
Ethyl Corporation 9,000 38,250
Inland Steel, Inc. 958 18,142
LTV Corporation 6,000 32,625
P.H. Glatfelter Company 3,000 34,875
Quipp, Inc. 1,000 15,500
-------
174,455
ENERGY & NATURAL RESOURCES--8.0%
ASARCO, Inc. 2,000 31,875
Freeport McMoran Sulphur, Inc. 3,000 26,625
Offshore Logistics, Inc. 1,000 9,000
-------
67,500
FINANCE & REAL ESTATE--21.0%
Acceptance Insurance Companies, Inc. 1,500 28,500
Annaly Mortgage Management, Inc. 5,500 39,875
Capitol Transamerica Corporation 500 8,750
Castle & Cooke, Inc. 2,000 30,000
First Union Real Estate Equity SBI 3,200 20,600
Markel Corporation 100 14,100
Redwood Trust 2,500 35,625
-------
177,450
SERVICES--12.6%
International Shipholding Corp. 2,000 30,625
Maritrans, Inc. 2,000 15,500
Medical Alliance, Inc. 11,500 25,156
Yellow Corporation 3,000 35,813
-------
107,094
CONSUMER DURABLES--10.8%
Audiovox Corporation--Class A 5,000 23,125
GT Bicycles, Inc. 4,600 33,638
TBC Corporation 7,500 34,687
-------
91,450
TECHNOLOGY--10.6%
CAM Data Systems, Inc. 4,000 11,000
CIDCO Inc. 2,000 4,500
Electroglas, Inc. 1,000 10,750
International Rectifier Corporation 4,000 17,000
Speedfam International 800 9,900
Spectrian Corporation (Delaware) 1,000 12,125
Thermedics Detection, Inc. 3,000 24,187
-------
89,462
AGRICULTURE--8.8%
Agco Corporation 2,000 17,250
The Andersons, Inc. 2,000 20,500
DIMON, Inc. 4,000 36,750
-------
74,500
Total--92.4% (Identified cost $900,184) $781,911
--------
CASH--7.5% $ 63,717
--------
INCOME RECEIVABLE--0.1% $ 604
--------
Total Assets--100.0% $846,232
========
The accompanying notes are an integral part of this financial statement.
STATEMENT OF OPERATIONS
FOR THE PERIOD MAY 15, 1998 TO AUGUST 31, 1998
INVESTMENT INCOME
Dividends 1,383
Interest 522
-------
Total income 1,905
EXPENSES
Investment advisory fees 1,013
Insurance 253
-------
1,266
Investment income--net 639
-------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain 1,698
Change in unrealized depreciation of
investments for the period (118,273)
---------
Net loss on investments (116,575)
Net decrease in net assets resulting from operation (115,936)
=========
The accompanying notes are an integral part of this financial statement.
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1998
ASSETS
Investment securities, at market (identified
cost, $900,184) $ 781,911
Cash 63,717
Dividends and interest receivable 604
---------
Total assets (all current) 846,232
LIABILITIES
Due to investment advisor (Note 6) 1,266
---------
Total liabilities (all current) 1,266
NET ASSETS
Net assets (equivalent to $8.21 per share based on
102,912.864 shares of capital stock outstanding)(Note 7) $ 844,966
=========
The accompanying notes are an integral part of this financial statement.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD MAY 15, 1998 TO AUGUST 31, 1998
DECREASE IN NET ASSETS FROM OPERATIONS
Investment income--net $ 639
Net realized gain on investments 1,698
Change in unrealized depreciation (118,273)
----------
Net decrease in net assets resulting from operations (115,936)
CAPITAL SHARE TRANSACTIONS 960,902
Net increase in net assets 844,966
NET ASSETS
At inception 0
End of fiscal year (including undistributed net
investment income of $639) $ 844,966
==========
The accompanying notes are an integral part of this financial statement.
STATEMENT OF CASH FLOWS
PERIOD MAY 15, 1998 TO AUGUST 31, 1998
Cash flows from operating activities
Net decrease in net assets resulting from operations $ (115,936)
Adjustments to reconcile net decrease in net assets
resulting from operations to net cash provided by
operating activities:
Change in unrealized depreciation of investments 118,273
Net realized gain on investments (1,698)
(Increase)decrease in income receivable (604)
Increase (decrease) in due to investment advisor 1,266
---------
Net cash provided by operating activities 1,301
---------
Cash flows from investing activities
Purchase of investments (915,946)
Proceeds from sale of investments 17,010
---------
Net cash used for investing activities (898,486)
---------
Cash flows from financing activities
Proceeds from issuance of stock 960,902
---------
Net cash provided from financing activities 960,902
---------
Net increase in cash 63,717
Cash at May 15, 1998 0
---------
Cash at August 31, 1998 63,717
=========
The accompanying notes are an integral part of this financial statement.
FINANCIAL HIGHLIGHTS
FOR THE PERIOD MAY 15, 1998 TO AUGUST 31, 1998
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Net asset value, beginning of period $ 10.00
Income from investment operations
Net investment income $ 0.01
Net realized and unrealized loss on investments (1.80)
---------
Total from investment operations $ (1.79)
Less distributions declared to shareholders $ 0.00
Net asset value, end of period $ 8.21
=========
Total return (not annualized) -17.90%*
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses (annualized) 1.50%#
Net investment income (annualized) 0.76%
Portfolio turnover 6%
Average commission rate $0.050
Net assets at end of period (000's) $845
*Total return does not include any effect of the Fund's redemption fee. If
the fee had been included, the results would have been lower.
#The Fund's advisor has agreed to maintain total expenses of the Fund at not
more than 1.50% of average daily net assets. To the extent actual expenses
were over this limitation, the net investment income per share and ratios
would have been:
Net investment income (loss) $(0.04)
Expense ratio (annualized) 6.66%
Net investment loss (annualized) -4.40%
The accompanying notes are an integral part of this financial statement.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1998
1. THE ORGANIZATION
Aegis Value Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940. The Fund was incorporated in the State of Maryland on
October 22, 1997 and commenced operations on May 15, 1998. There was no
operating activity before May 15, 1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION. Investments in securities traded on a national
securities exchange (or reported on the NASDAQ National Market) are stated at
the last reported sales price on the day of valuation; other securities traded
in the over-the-counter market and listed securities for which no sale was
reported on tha date are stated at the last quoted bid price or the average
of bid and ask price for NASDAQ National Market securities. Short-term notes
are stated at amortized cost, which is equivalent to value. Restricted
securities and other securities for which quotations are not readily available
are valued at fair value as determined by the Board of Directors.
FEDERAL INCOME TAXES. The Fund's policy is to comply with the require-
ments of the Internal Revenue Code that are applicable to regulated investment
companies and to distribute all its taxable income to shareholders. Therefore
no federal income tax provision is required.
CASH AND CASH EQUIVALENTS. For purposes of the statements of cash flows,
the Fund considers all highly liquid investments to be cash equivalents.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends to shareholders are recorded on
the ex-dividend date.
ORGANIZATION COSTS. Organization costs consist of costs incurred to
establish the Fund and legally equip it to engage in business. The costs are
amortized using the straight-line method over a period of 60 months beginning
from the date operations commence. If any of the original shares are redeemed
by their holders prior to the end of the amortization period, the redemption
proceeds will be reduced by the pro rata share of the unamortized organization
costs as of the date of redemption. The pro rata share by which the proceeds
are reduced will be derived by dividing the number of original shares
redeemed by the total number of original shares outstanding at the time of
redemption. Reimbursement of the registrant for the amount of the pro rata
share will not be used in lieu of reduction of redemption proceeds.
OFFERING COSTS. Offering costs represent costs associated with the sale
of the Fund's securities and costs incurred up to the date of filing its
Registration Statement with the U.S. Securities and Exchange Commission.
These costs were paid by the Fund's investment advisor.
BROKER COMMISSIONS. It is the Fund's policy to pay broker commissions at
a rate of five cents per share on its transactions.
OTHER. The Fund follows industry practice and records security trans-
actions on the trade date. Dividend income is recognized on the ex-dividend
date, and interest income is recognized on an accrual basis. Discounts and
premiums on securities purchased are amortized over the life of the respective
securities.
3. CAPITAL SHARE TRANSACTIONS
For the period from May 15, 1998 (commencement of operations) to August
31, 1998, there were 102,912.864 shares of common stock sold for a total of
$960,902. The par value is $0.001 per share.
4. INVESTMENT ADVISORY AND CUSTODIAN AGREEMENTS
The Fund pays advisory fees for investment management and advisory
services under a management agreement that provides for fees to be computed at
an annual rate of 1.20% of the Fund's average daily net assets. The agreement
provides for an expense reimbursement from the investment advisor if the
Fund's expenses, exclusive of taxes, interest, fees incurred in acquiring or
disposing of portfolio securities, and extraordinary expenses, exceed 1.50% of
the Fund's average daily net assets for any full fiscal year. The agreement
shall remain in force through March 11, 2000 and may be renewed for additional
two-year periods thereafter.
The Fund has also entered into an agreement with a custodian (Ernst &
Company) to hold and administer securities and cash of the Fund. The
agreement may be terminated by either party on 90 days' written notice.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities were $915,496 and $17,010,
respectively, for the period May 15, 1998 (commencement of operations) to
August 31, 1998. The specific identification method is used to determine cost
basis when calculating realized gains and losses. As of August 31, 1998, the
unrealized depreciation on investments was $118,273; accumulated undistrib-
uted net realized gains on investment transactions totaled $1,698.
6. DUE TO INVESTMENT ADVISOR
Certain officers and directors of the Fund are also officers and direc-
tors of the investment advisor. The investment advisory fee accrued through
August 31, 1998 was $1,013. The investment advisor also paid expenses on
behalf of the Fund, consisting mostly of legal, accounting and insurance
costs. Because the Fund shall not incue expenses over 1.50% of its average
daily net assets (see Note 4), the Fund owes $253 to the investment advisor as
a non-advisory fee expense reimbursement and the advisor must absorb the
remaining costs it paid on the Fund's behalf.
7. NET ASSETS
Net assets consists of the following as of August 31, 1998:
Common stock ($0.001 par value, 100,000,000 shares
authorized, 102,912.864 shares outstanding) $ 103
Paid-in capital 960,799
Undistributed net investment income 639
Accumulated net realized gains (losses) 1,698
Unrealized appreciation (depreciation) of investments (118,273)
------------
Total $ 844,966
============
<PAGE>
INDEPENDENT AUDITOR'S REPORT
SEPTEMBER 30, 1998
To the Shareholders and
Board of Directors of Aegis Value Fund, Inc.:
We have audited the accompanying statements of assets and liabilities of
Aegis Value Fund, Inc., including the schedule of portfolio investments, as of
August 31, 1998, and the related statements of operations, cash flows, changes
in net assets, and the selected per share data and ratios for the period of
May 15, 1998 (commencement of operations) to August 31, 1998. The financial
statements and per share data and ratios are the responsibility of the Fund's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement and per
share data and ratios are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statement. Our procedures included confirmation of securities
owned as of August 31, 1998, 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and selected per share data and
ratios referred to above present fairly, in all material respects, the
financial position of Aegis Value Fund, Inc. as of August 31, 1998, the
results of its operations and its cash flows for the period of May 15, 1998
(commencement of operations), the changes in its net assets for the period of
May 15, 1998 (commencement of operations) to August 31, 1998, and the selected
per share data and ratios for the period of May 15, 1998 (commencement of
operations) to August 15, 1998, in conformity with generally accepted
accounting principles.
September 30, 1998 Bish & Haffey, P.C.
<PAGE>
AEGIS VALUE FUND, INC.
1100 N. Glebe Road, Suite 1040
Arlington, VA 22201
(703)528-7788
PART C
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Included in the Prospectus:
Financial Highlights
Included in the Statement of Additional Information:
Schedule of Portfolio Investments--August 31, 1998
Statement of Assets and Liabilities--August 31, 1998
Statement of Operations--Period of May 15, 1998 to August 31, 1998
Statement of Changes in Net Assets--Period of May 15, 1998 to
August 31, 1998
Statement of Cash Flows--Period of May 15, 1998 to August 31, 1998
Notes to Financial Statements--August 31, 1998
Financial Highlights--For fiscal year ended August 31, 1998
Report of Independent Auditors
All other schedules are omitted because they are not required under the
related instructions, or they are not applicable, or the required information
is presented in the financial statements or notes which are included in the
Statement of Additional Information of the Registration Statement.
(b) Exhibits
1. Articles of Incorporation--Incorporated by reference to Exhibit 1 to
Post-effective Amendment No. 1 of Registrant's Registration Statement on
Form N-1A (File Nos. 333-49241 and 811-9174) filed with the Securities and
Exchange Commission on June 29, 1998.
2. By-Laws of the Corporation--Incorporated by reference to Exhibit 2 to
Post-effective Amendment No. 1 of Registrant's Registration Statement on
Form N-1A (File Nos. 333-49241 and 811-9174) filed with the Securities and
Exchange Commission on June 29, 1998.
3. Voting Trust Agreement--Not Applicable
4. Specimen of Capital Stock--Not Applicable
5. Investment Advisory Contract--Incorporated by reference to Exhibit 5
to Post-effective Amendment No. 1 of Registrant's Registration Statement on
Form N-1A (File Nos. 333-49241 and 811-9174) filed with the Securities and
Exchange Commission on June 29, 1998.
6. Underwriting or Distribution Contract--Not Applicable
7. Pension, Bonus or Similar Contracts--Not Applicable
8. Custodian Agreement--Incorporated by reference to Exhibit 8 to Post-
effective Amendment No. 1 of Registrant's Registration Statement on Form N-1A
(File Nos. 333-49241 and 811-9174) filed with the Securities and Exchange
Commission on June 29, 1998.
9. Other Material Contracts--Not Applicable
10. Opinion and Consent of Counsel--Incorporated by reference to Exhibit
10 to Post-effective Amendment No. 1 of Registrant's Registration Statement
on Form N-1A (File Nos. 333-49241 and 811-9174) filed with the Securities and
Exchange Commission on June 29, 1998.
11. Other Opinions and Consents--Consent of independent auditors is filed
as Exhibit 99.11 to this Post-effective Amendment No. 2.
12. Other Financial Statements--Not Applicable
13. Initial Capital Agreements--Not Applicable
14. Model Retirement Plan--Not Applicable
15. Rule 12b-1 Plan--Not Applicable
16. Schedule for Computation of Performance--Not Applicable
17. Financial Data Schedule--A financial data schedule is filed as
Exhibit 99.27 to this Post-effective Amendment No. 2.
18. Rule 18f-3 Plan--Not Applicable
Item 25. No Person is directly or indirectly controlled by, or under common
control with, the Corporation.
Item 26. Title of Class Number of Record Holders
Common Stock 5
Item 27. The By-Laws of the Corporation provide that the Corporation has the
power to indemnify any director, officer or affiliated person of the
Corporation against any expenses, fines or judgments in connection with any
legal action, suit or proceeding arising from their good faith actions taken
on behalf of the Corporation as part of their duties and had no reason to
believe their behavior was unlawful.
The By-Laws of the Corporation deny indemnification to any officer or
director "by reason of willful misfeasance, bad faith, negligence or reckless
disregard of the duties involved" in the conduct of their office.
Item 28. William Berno, Paul Gambal and Scott Barbee have been officers and
directors of the Investment Advisor during the past two fiscal years. Paul
Gambal during the past two fiscal years has served as a director of Colonial
Parking, Inc. There have been no other connections of a substantial nature
in which the officers or directors of the Advisor have been involved during
the last two fiscal years.
Item 29. The Corporation is the sole underwriter of its shares. No
commissions are charged by the Corporation, or are paid to another party.
Item 30. The accounts, books and other documents required by Section 31(a)
of the 1940 Act and the rules promulgated thereunder are maintained at the
office of the Corporation, located at 1100 N. Glebe Road, Suite 1040,
Arlington, Virginia 22201.
Item 31. Except as has been disclosed in Part A and Part B of this Form, the
Corporation has no management-related service contracts.
Item 32. Undertakings. (a) The Registrant undertakes to furnish each person
to whom a copy of the Fund prospectus is delivered with a copy of the Fund's
latest report to shareholders, upon request and without charge.
(b) The Registrant, if requested to do so by 10% of the outstanding
shares, will call a meeting of shareholders for the purpose of voting upon the
question of removal of a director or directors.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the County of Arlington and the Commonwealth of
Virginia on the 22nd day of October, 1998.
Aegis Value Fund, Inc.
BY: William S. Berno, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
William S. Berno President, Director October 22, 1998
Paul Gambal Secretary October 22, 1998
Scott L. Barbee Treasurer, Director October 22, 1998
Edward P. Faberman Director October 22, 1998
Eskander Matta Director October 22, 1998
William R. Morris, III Director October 22, 1998
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial High-
lights", "Independent Accountants", and "Financial Statements", and to the
use of our report dated September 30, 1998 included in this Registration
Statement (Form N-1A Nos. 333-49241 and 811-9174) of Aegis Value Fund, Inc.
/s/ Bish & Haffey, P.C.
Alexandria, Virginia
October 30, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
AEGIS VALUE FUND, INC. FINANCIAL STATEMENTS AND ANNUAL REPORT TO SHARE-
HOLDERS FOR THE PERIOD MAY 15, 1998 (COMMENCEMENT OF OPERATIONS) TO
AUGUST 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS OF THE FUND.
</LEGEND>
<CIK> 0001052169
<NAME> AEGIS VALUE FUND, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> MAY-15-1998
<PERIOD-END> AUG-31-1998
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</TABLE>
