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. ____
Post-Effective Amendment No. ____
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Exact 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
Approximate Date of Proposed Public Offering: as soon as practicable after
the effective date of the Registration Statement
Calculation of Registration Fee under the Securities Act of 1933:
Title of Securities Being Registered: Common Stock, $0.001 par value
Amount Being Registered: 500,000 shares
Proposed Maximum Offering Price Per Unit: $10.10*
Proposed Maximum Aggregate Offering Price: $5,050,000
Amount of Registration Fee: $1,742.00
*Estimated solely for the purpose of determining the amount of the
registration fee.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration Statement shall
become effective on such date as the Commission acting pursuant to said
Section 8(a) may determine.
Page 1 of 88 pages
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"
5A. Management's Discussion Not Applicable
of Fund Performance
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";
"Contingent Deferred Sales
Charge"; "Shareholder
Accounts and Services"
9. Pending Legal Proceedings Not Applicable
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
MARCH 31, 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 equity securities.
The Fund will at all times invest at least 65% of its assets in stocks
which, at the time of initial purchase, sell 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 securities
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
March 31, 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)
<PAGE>
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
Deferred Sales Load 2.00%(1)
Redemption Fee None (2)
ANNUAL FUND OPERATING EXPENSES
Management Fees 1.20%
12b-1 Fees None
Other Expenses 0.30%(after waivers)(3)
Total Fund Operating Expenses 1.50%
EXAMPLE
The following example illustrates the expenses you would pay on a $1,000
investment in the Fund, assuming a 5% annual rate of return and redemption at
the end of each time period:
One Year: $36 Three Years: $47 Five Years: $82
The purpose of this table and example is to assist investors in
understanding the various costs and expenses that an investor will bear
directly or indirectly. Because the Fund has no operating history, "Other
Expenses" is based on estimated amounts for the current fiscal year. 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 "Contingent Deferred Sales Charge". 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 contingent deferred sales charge 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 "Contingent
Deferred Sales Charge" section of this Prospectus.
(2) While the Fund does not charge a redemption fee, the Fund's custodian
charges a wire fee of $20.00 for redemptions by wire transfer.
(3) The amount of Other Expenses reflects an agreement between the Fund and
the Fund's advisor to waive reimbursement and to absorb operating 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.
(2)
<PAGE>
FINANCIAL HIGHLIGHTS
The following sets forth financial information for AEGIS VALUE FUND, INC.
This information should be read in conjunction with the financial statements
and accompanying footnotes, which have been audited by Bish & Haffey, P.C.,
independent certified public accountants. The financial statements are
incorporated by reference into the Statement of Additional Information.
(NOTE: The Fund has not yet commenced operations, so no financial highlights
are reported.)
Beginning Net Asset Value $10.00
Income from Investment Operations:
Net investment income N/A
Net gain on securities N/A
(both realized and unrealized)
Total from Investment Operations N/A
Less Distributions:
Dividends from net investment income N/A
Distributions from net realized capital gains N/A
Total Distributions N/A
Ending Net Asset Value $10.00
Total Return N/A
Ratios/Supplemental Data
Net assets, end of period (in thousands) N/A
Ratio of expenses to average net assets 1.50%
Ratio of net investment income to
average net assets N/A
Portfolio turnover rate N/A
Average commission rate paid N/A
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 equity securities. 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)
<PAGE>
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 equity securities and/or convertible securities
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, the Fund intends to keep at
least 65% of its net assets invested at all times in equities which are
trading 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 securities 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 shares 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 securities, 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>
Equity securities which the Fund may hold include common stocks; convertible
preferred stocks and convertible debt; warrants, rights or other securities
exchangeable for shares of common stocks, and other equity securities.
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 stocks considered for
investment. 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.
The Fund may also invest a portion of its assets, during periods of
unusual market conditions, in debt securities. These securities will consist
solely of securities purchased for temporary or liquidity purposes or for
defensive purposes and will be comprised only of deposits in domestic banks,
money market instruments, commercial paper, or all other debt securities
rated within the three highest grades of Moody's Investor Service, Inc. or
Standard & Poor's Corporation.
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)
LACK OF OPERATING HISTORY. The Fund has no past operating history and
therefore no 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 more than 25% 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.
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 has authorized common stock of one hundred million
shares, $0.001 par value per share. 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
contingent deferred sales charge, 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 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 or its authorized service agent.
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 latest quotation from the primary market in which they are
traded, and are translated from the local currency into U.S. dollars using
current exchange rates. Fluctuations in the value of such currencies in
relation to the U.S. dollar may affect the net asset value of the Fund's
shares even if there has not been any change in the foreign currency-
denominated value of such 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 Ernst & Company/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.
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 Ernst & Company/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 4:30 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 deferred sales charge for shares held less than two years (see
"Contingent Deferred Sales Charge" below). Redemption requests received
after 4:30 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.
(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, if the Fund has not collected the funds used to purchase the shares,
the redemption will not be processed until such collection has been completed.
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.
BACKUP WITHHOLDING. Under federal tax law, the Fund may be required to
withhold taxes at a rate of 31% from dividends, capital gain distributions and
payment of redemption proceeds to shareholders if the shareholders have not
complied with the provisions of the law relating to the furnishing of taxpayer
identification numbers and reporting of dividends.
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.
CONTINGENT DEFERRED SALES CHARGE
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 contingent deferred sales charge
of 2.00% on the redemption proceeds of shares held for a period less than two
years. Proceeds of the deferred sales charge will be retained by the Fund.
The deferred sales charge will be assessed on an amount equal to the net
asset value of the shares redeemed, but no charge will be assessed on shares
derived from reinvestment of dividends or capital gains distributions. The
calculation of the deferred sales charge will be made in the manner that
results in the lowest possible rate 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>
CONTINGENT DEFERRED SALES CHARGE (CONTINUED)
The deferred sales charge 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
Leigh E. Keith, Vice President of Administration
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 Ernst & Company/AegisValue 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 Ernst & Company/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 MARCH 31, 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 March 31, 1998,
is not a Prospectus and should be read in conjunction with the Prospectus
dated March 31, 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............................7
Investment Advisory Services...........................8
Distributor............................................9
Custodian..............................................9
Independent Accountants................................9
Portfolio Transactions.................................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 equity securities. 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.
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 more than 25% 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 estate, 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. The Fund will not invest more than 5%
of the value of its total assets in illiquid securities, including real estate
interests.
8) 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 exceed 5% of the value of the
Fund's total assets at the time any loan is made. No more than 10% of the
value of the Fund's total assets at the time any loan is made may be pledged
as collateral for such temporary borrowings.
(3)
<PAGE>
9) Buy or sell commodities, commodities futures contracts or commodities
option contracts.
10) 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 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).
11) 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 (8)
above, and then only to the extent there mentioned.
12) Invest more than 5% of the value of the Corporation's total assets
in securities of issuers which have been in continuous operation less than
three years.
13) 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.
14) 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.
15) 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.
16) 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 assets
to qualified brokers, dealers or institutions for their use relating to short
sales or other securities transactions. 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 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.
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: (*officers and directors who are affiliated
with BGB, the Fund's investment advisor)
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* (26) 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* (38) 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 (52) 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 (27) 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 (37) 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.
Leigh E. Keith*(33) Vice Pres., Vice President/Operations of
1100 N. Glebe Rd., Suite 1040 Operations Berno, Gambal & Barbee, Inc. since
Arlington, VA 22201 1994; Administrator with
investment advisor Kahn Brothers &
Co. 1990-94; Vice President 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.
PRINCIPAL HOLDERS OF SHARES
PRINCIPAL STOCKHOLDERS. As of March 31, 1998, the following persons
were known to the Fund to be the record or beneficial owners of 5% or more of
the outstanding shares of the Fund:
Name and Address Percentage Ownership Type of Ownership
William S. Berno 20.0% Record
1100 N. Glebe Road, Suite 1040
Arlington, VA 22201
Scott L. Barbee 20.0% Record
1100 N. Glebe Road, Suite 1040
Arlington, VA 22201
Paul Gambal 20.0% Beneficial
1100 N. Glebe Road, Suite 1040
Arlington, VA 22201
Eskander Matta 10.0% Record
Credit Suisse First Boston Corp.
11 Madison Avenue
New York, NY 10010
(7)
<PAGE>
PRINCIPAL HOLDERS OF SHARES (CONTINUED)
Name and Address Percentage Ownership Type of Ownership
William R. Morris, III 20.0% Record
Morris McNair & Associates, Inc.
888 17th Street, N.W., Suite 1150
Washington, D.C. 20006
Edward P. Faberman 10.0% Record
Ungaretti & Harris
1747 Pennsylvania Avenue, N.W., Suite 900
Washington, D.C. 20006
All officers and directors as a group: 80.0% Record
20.0% Beneficial
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. 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. Leigh Keith is Vice-President of BGB,
and also holds the position of Vice-President 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 annual operating 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 from the Fund.
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 has authorized common stock of one hundred million
shares, $.0.001 par value per share. 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
contingent deferred sales charge, 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
(10)
<PAGE>
PURCHASE, REDEMPTION AND PRICING OF SHARES (CONTINUED)
the same as the method of valuing 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 contingent deferred sales charge. See
"How to Purchase Shares", "How to Redeem Shares", and "Contingent Deferred
Sales Charge" 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.
FINANCIAL STATEMENTS
The Aegis Value Fund, Inc. 1998 financial statements and notes thereto
appearing in its Annual Report to Shareholders and report thereon of Bish &
Haffey, P.C., independent accountants, appearing therein, are incorporated by
reference in this Statement of Additional Information. The Fund will issue
unaudited semi-annual and audited annual financial statements.
(13)
<PAGE>
AEGIS VALUE FUND, INC.
1100 N. Glebe Road, Suite 1040
Arlington, VA 22201
(703)528-7788
PART C
Item 24. (a) Financial Statements
1. Balance Sheet - Part B, Item 23 (Not Applicable--the Fund has
not yet commenced operations pending its registration becoming effective.)
(b) Exhibits
1. Articles of Incorporation EX-99.B1
2. By-Laws of the Corporation EX-99.B2
3. Voting Trust Agreement -- Not Applicable
4. Specimen of Capital Stock -Not Applicable
5. Investment Advisory Contract EX-99.B5
6. Underwriting or Distribution Contract -- Not Applicable
7. Pension, Bonus or Similar Contracts -- Not Applicable
8. Custodian Agreement EX-99.B8
9. Other Material Contracts -- Not Applicable
10. Opinion and Consent of Counsel EX-99.B10
11. Other Opinions and Consents -- Not Applicable
12. Other Financial Statements -- Not Applicable
13. Initial Capital Agreements EX-99.B13A thru B13F
14. Model Retirement Plan EX-99.B14
15. Rule 12b-1 Plan -- Not Applicable
16. Schedule for Computation of Performance - Not Applicable
17. Financial Data Schedule--Not Applicable
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 6 (capital commitments)
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.
(1)
<PAGE>
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. The Registrant will file a post-effective amendment
using financial statements, which need not be certified, within four to six
months from the effective date of the registration statement.
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 11th day of March, 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 March 10, 1998
Paul Gambal Secretary March 10, 1998
Scott L. Barbee Treasurer, Director March 10, 1998
Edward P. Faberman Director March 12, 1998
Eskander Matta Director February 28, 1998
William R. Morris, III Director March 11, 1998
(2)
AEGIS VALUE FUND, INC.
(A MARYLAND STOCK CORPORATION)
ARTICLES OF INCORPORATION
DATED OCTOBER 21, 1997
FIRST: The undersigned William S. Berno, Paul Gambal and Scott L.
Barbee, whose address is 1100 North Glebe Road, Suite 1040, Arlington,
Virginia 22201, being at least eighteen years of age, do hereby form a
corporation under the laws of the State of Maryland.
SECOND: The name of the corporation is Aegis Value Fund, Inc.
THIRD: The purposes for which the corporation is formed are as follows:
To operate as an open-end diversified investment company registered under the
Investment Company Act of 1940, and to conduct such other business as its
corporate bylaws may allow.
FOURTH: The post office address of the principal office of the
corporation in Maryland is 17521 Shenandoah Court, Ashton, Maryland 20861.
FIFTH: The name and post office address of the resident agent of the
corporation in Maryland are: Mr. Thomas C. Roberts, 17521 Shenandoah Court,
Ashton, Maryland 20861.
SIXTH: The corporation has the authority to issue One Hundred Million
shares at $0.001 par value per share.
SEVENTH: The number of directors of the corporation shall be five (5)
which number may be increased or decreased pursuant to the bylaws of the
corporation, and so long as there are less than three (3) stockholders, the
number of directors may be less than three (3) but not less than the number
of stockholders, and the names of the directors who shall act until the first
meeting of directors or until their successors are duly chosen and qualified
are William S. Berno, Scott L. Barbee, Eskander Matta, Edward P. Faberman and
William R. Morris, III.
EIGHTH: IN WITNESS WHEREOF, I have signed these Articles and acknowledge
the same to be my act.
SIGNATURES
William S. Berno
Paul Gambal
Scott L. Barbee
October 21, 1997
AEGIS VALUE FUND, INC.
CORPORATE BY-LAWS
A Maryland Corporation (the "Corporation")
Article 1 - Offices
Section 1.01 Location and Agent. The registered office of the
Corporation shall be located at 17521 Shenandoah Court, Ashton, Montgomery
County, Maryland 20861. Its registered agent is Mr. Thomas C. Roberts.
Section 1.02 Change of Location. The Corporation may also have offices
at such other places both within or without the State of Maryland as the Board
of Directors may from time to time designate or the business of the
Corporation may require.
Section 1.03 Change of Registered Office or Agent. The Corporation may
change its registered office or change its registered agent, or both by
following the procedure set forth under Maryland law. Any such change shall
constitute an amendment to these By-Laws.
Article 2 - Meetings of Stockholders
Section 2.01 Annual Meeting. Any required annual meeting of the
stockholders of the Corporation for the election of directors and for the
transaction of such other business as may properly come before the meeting
shall be held at the registered office of the Corporation, or at such other
place within or without the State of Maryland as the Board of Directors may
designate, on the date specified in the notice of such annual meeting or in
a duly executed waiver of notice thereof. Unless specifically stated in
applicable federal or state laws and regulations, the Corporation is not
required to hold a regular annual meeting of its stockholders.
Section 2.02 Special Meetings. Special meetings of stockholders, unless
otherwise prescribed by law, may be called at any time by the President, by
the Secretary, by the Treasurer, by order of the Board of Directors, or at the
request of stockholders owning a majority of the voting stock. Special
meetings of stockholders shall be held at such place within or without the
State of Maryland as shall be designated in the notice of such meeting.
Business transacted at a special meeting shall be confined to the subjects
stated in the notice of the meeting. Special meetings may be held for
electing or removing directors, changing fundamental investment policies of
the Corporation, or approving investment advisory contracts.
Section 2.03 List of Stockholders Entitled to Vote; Record Date. The
officer who has charge of the stock ledger of the Corporation shall, at the
written request of any stockholder made at least ten (10) days prior to any
meeting of stockholders, prepare and make available at least five (5) days
prior to any meeting of stockholders, a complete list, based upon the record
date for such meeting, of the stockholders entitled to vote at the meeting,
and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Once compiled, such list shall be
open prior to the meeting, during ordinary business hours, to the examination
of any stockholder for any purpose germane to the meeting. For purposes of
stockholder examination, the list shall be either at a place which shall be
specified in the notice of the meeting, or, if such place shall not be so
specified, at the place where said meeting is to be held. The list shall also
be produced and kept during the entire meeting, and may be inspected by any
stockholder who is present.
The stock ledger shall be the only evidence as to who are the stockholders
entitled (i) to examine the stock ledger, the list of stockholders entitled
to vote at any meeting, or the books of the Corporation, or (ii) to vote in
person or by proxy at any meeting of stockholders.
The Board of Directors may fix in advance a record date for the purpose
of determining shareholders entitled to notice of, or to vote at, a meeting of
shareholders, such record date to be not less than ten (10) nor more than
fifty (50) days prior to such meeting; or the Board of Directors may close the
stock transfer books for such purpose for a period of not less than ten (10)
days nor more than fifty (50) days prior to such meeting. In the absence of
any action by the Board of Directors, the date upon which the notice of the
meeting is mailed shall be the record date.
Section 2.04 Notice of Meeting. Whenever shareholders are required or
permitted to take any action at a meeting, a written notice of the meeting
shall be given to each shareholder of record entitled to vote at the meeting
at the direction of the President, the Secretary, or the Officer or person
calling the meeting, which notice shall state the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. The written notice shall be given not less than
ten (10) nor more than fifty (50) days before the date of the meeting to each
stockholder entitled to vote thereat. If mailed, such notice shall be deemed
to be delivered when deposited in the United States mail, postage prepaid, and
directed to the stockholder at his address as the same appears on the records
of the Corporation.
Section 2.05 Adjourned Meetings and Notice Thereof. Any meeting of
stockholders may be adjourned to another time or place, and the Corporation
may transact at any adjourned meeting any business which might have been
transacted at the original meeting. Notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at which
the adjournment is taken. If the adjournment is for more than thirty (30)
days, or if after adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder
of record entitled to vote at the meeting.
Section 2.06 Quorum. At any meeting of stockholders, except as
otherwise expressly required by law, by the Articles of Incorporation or by
these By-Laws, the holders of record of at least a majority of the outstanding
shares of capital stock entitled to vote or act at such meeting shall be
present or represented by proxy in order to constitute a quorum for the
transaction of any business. Less than a quorum shall have power to adjourn
any meeting until a quorum shall be present. When a quorum is once present to
organize a meeting, the quorum cannot be destroyed by the subsequent
withdrawal or revocation of the proxy of any stockholder.
Section 2.07 Voting. At any meeting of stockholders, each stockholder
entitled to vote at such meeting shall have one (1) vote for each share of
stock held by such stockholder, except to the extent that the voting rights of
the shares of any class or classes are limited or denied by the Articles of
Incorporation. Any vote may be taken by voice vote or by show of hands,
unless someone entitled to vote objects, in which case written ballots shall
be used.
Unless otherwise provided by law, the Articles of Incorporation or these
By-Laws, the vote of the holders of a majority of shares present at a meeting
which has a quorum is required for action by the stockholders. Voting for
Directors shall be in accordance with Section 3.04 of these By-Laws.
Cumulative voting is prohibited.
Each stockholder entitled to vote at a meeting of stockholders, or to
express consent or dissent to corporate action in writing without a meeting,
may authorize an attorney-in-fact to act for him by proxy, provided that no
proxy shall be voted or acted upon after eleven (11) months from its date,
unless the proxy provides for a longer period. A duly executed proxy shall be
irrevocable only if it states that it is irrevocable and if, and only so long
as, it is coupled with an interest, whether in the stock itself or in the
Corporation, sufficient in law to support an irrevocable power.
Section 2.08 Action by Consent of Stockholders. Unless otherwise
provided in the Articles of Incorporation, any action required or permitted by
law, the Articles of Incorporation, or these By-Laws to be taken at any annual
or special meeting of the stockholders of the Corporation may be taken without
a meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by all of the holders of
the outstanding stock of the Corporation entitled to vote with respect to the
subject matter thereof.
Section 2.09 Presiding Officer; Order of Business. Meetings of the
stockholders shall be presided over by the Chairman of the Board, or if the
Chairman is not present, by the President, or if the President is not present,
by a Vice President. The Secretary of the Corporation, or in his or her
absence, an Assistant Secretary, shall act as secretary of every meeting, but
if neither the Secretary nor an Assistant Secretary is present, the
shareholders present at the meeting shall choose any person present to act as
secretary of the meeting.
The order of business shall be as follows: i) call to order of meeting;
ii) proof of notice of meeting; iii) reading of minutes of the previous
stockholder meeting; iv) reports of officers; v) reports of committees;
vi) election of directors, if an item of business included in notice of the
meeting; vii) miscellaneous business.
Article 3 - Board of Directors
Section 3.01 General Powers. The property, business and affairs of the
Corporation shall be managed by the Board of Directors. The Board of
Directors may exercise all such powers of the Corporation and have such
authority and do all such lawful acts and things as are permitted by law, the
Articles of Incorporation or these By-Laws, subject to any express limitations
set forth herein.
Section 3.02 Number of Directors. The Board of Directors shall consist
of not less than three (3) nor more than seven (7) members: provided however,
the initial Board of Directors shall consist of five (5) members.
Section 3.03 Qualification. Directors shall be at least eighteen (18)
years of age and need not be residents of the State of Maryland nor
stockholders of the Corporation.
Section 3.04 Election. Except as otherwise provided by law or these
By-Laws, directors of the Corporation shall be elected in each year at the
annual meeting of stockholders, or at a special meeting in lieu of the annual
meeting called for such purpose, by a majority of votes cast at such meeting.
The voting on directors at any such meeting shall be by written ballot.
Section 3.05 Term. Each director shall hold office until his successor
is elected and qualified, except in the event of the earlier termination of
his term of office by reason of death, resignation, removal or other reason.
Section 3.06 Resignation and Removal. Any director may resign at any
time upon written notice to the Board of Directors, the President and the
Secretary. The resignation of any director shall take effect upon receipt of
notice thereof or at such later time as shall be specified in such notice.
Unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective. Any director may be removed at any
time with or without cause by the stockholders at a special meeting called for
such purpose by a majority vote cast at such meeting.
Section 3.07 Vacancies. Vacancies in the Board of Directors and newly
created directorships resulting from an increase in the authorized number of
directors shall be filled by a majority of the directors then in office,
though less than a quorum, or by a sole remaining director.
If one or more directors shall resign from the Board of Directors
effective at a future date, a majority of the directors then in office,
including those who have so resigned at a future date, shall have the power to
fill such vacancy or vacancies. The vote thereon shall take effect and the
vacancy shall be filled when such resignation or resignations shall become
effective, and each director so chosen shall hold office as provided in this
section.
Each director chosen to fill a vacancy on the Board of Directors shall
hold office until the next annual election of directors and until his
successor shall be elected and qualified, except in the event of the earlier
termination of his office by reason of death, resignation, removal or other
reason.
Section 3.08 Quorum and Voting. A majority of the total number of
directors shall constitute a quorum for the transaction of ordinary business.
A director interested in a contract or transaction may be counted in
determining the presence of a quorum at a meeting of the Board of Directors
which authorizes the contract or transaction. In the absence of a quorum, a
majority of the directors present may adjourn the meeting until a quorum shall
be present.
Members of the Board of Directors may participate in a meeting of the
Board of Directors by means of conference telephone or similar communications
equipment by means of which all persons participating in a meeting can hear
each other. The participation in such a meeting shall constitute presence in
person at such a meeting for all purposes.
The vote of the majority of the directors present at a meeting at which
a quorum is present shall be the act of the Board of Directors unless the
Articles of Incorporation or these By-Laws shall require a vote of a greater
number.
Section 3.09 Special Voting. The affirmative vote of eighty percent
(80%) of the total number of directors constituting the whole Board of
Directors shall be necessary before any of the following extraordinary acts
may be taken by the Corporation:
(1) Cause or permit the Corporation to engage in any activity that is
not consistent with its purposes as set forth in its Articles of
Incorporation;
(2) Do any act in contravention of these By-Laws in their present form
or as amended;
(3) Do any act which would make it impossible to carry on the ordinary
business of the Corporation, except as otherwise provided in these By-Laws;
(4) Confess a judgment against the Corporation;
(5) Incur any debt or sign any promissory note on behalf of the
Corporation;
(6) Adopt or propose any plan to partially liquidate, dissolve,
reorganize, consolidate, merge, or recapitalize the Corporation, or for the
sale, pledge, assignment, transfer or other disposition of all or
substantially all of its assets, or to amend its Articles of Incorporation
or By-Laws.
Section 3.10 Rules and Regulations. The Board of Directors may adopt
such rules and regulations for the conduct of the business and management of
the Corporation, not inconsistent with law or the Articles of Incorporation
or these By-Laws, as the Board of Directors may deem proper. The Board of
Directors may hold its meetings and cause the books and records of the
Corporation to be kept at such place or places within or without the State of
Maryland as the Board of Directors may from time to time determine. A member
of the Board of Directors, shall, in the performance of his duties, be fully
protected in relying in good faith upon the books of account or reports made
to the Corporation by any of its officers, by an independent certified public
accountant, or by an appraiser selected with reasonable care by the Board of
Directors or any committee of the Board of Directors, or in relying in good
faith upon other records of the Corporation.
Section 3.11 Annual Meeting of the Board of Directors. An annual
meeting of the Board of Directors shall be called and held for the purpose of
organization, election of officers and transaction of any other business. No
notice of the annual meeting of the Board of Directors need be given if such
meeting is held promptly after and at the place specified for the annual
meeting of stockholders. Otherwise, such annual meeting shall be held at such
time (but not more than thirty (30) days after the annual meeting of
stockholders) and place as may be specified in a notice of the meeting.
Section 3.12 Regular Meetings. Regular meetings of the Board of
Directors shall be held at the time and place, within or without the State of
Maryland, as shall from time to time be determined by the Board of Directors.
Except as otherwise provided by law, any business may be transacted at any
regular meeting.
Section 3.13 Special Meetings. Special meetings of the Board of
Directors may be called from time to time by the President, and shall be
called by the President or the Secretary upon written request of any member of
the Board of Directors directed to the President or Secretary. Except as
provided below, notice of any special meeting of the Board of Directors,
stating the time, place and purpose of such special meeting, shall be given to
each director.
Section 3.14 Notice of Meetings; Waiver of Notice. Except as provided
in this section and in Section 3.10, notice of any meeting of the Board of
Directors must be given to all directors. Notice of any meeting of the Board
of Directors shall be deemed to be duly given to a director (i) if mailed to
such director, addressed to him at his address as it appears upon the books
of the Corporation, or at the address last made known in writing to the
Corporation by such director as the address to which such notices are to be
sent, at least four (4) days before the day on which such meeting is to be
held, or (ii) if sent to him at such address by facsimile, telegraph or cable
not later than the day before the day on which such meeting is to be held, or
(iii) if delivered to him personally or orally, by telephone or otherwise, not
later than the day before the day on which such special meeting is to be held.
Each such notice shall state the time and place of the meeting and the
purposes thereof.
Notice of any meeting of the Board of Directors need not be given to any
director if waived by him in writing (or by telegram or cable and confirmed
in writing) whether before or after the holding of such meeting, or if such
director is present at such meeting. Any meeting of the Board of Directors
shall be a legal meeting without any notice thereof having been given if all
directors then in office shall be present thereat.
Section 3.15 Compensation of Directors. Subject to any limitations
stated in these By-Laws or the Articles of Incorporation, the directors may
be compensated for their services to the Corporation in such amount as may
from time to time be determined by the Board of Directors. Nothing herein
contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
Section 3.16 Action Without Meeting. Any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee
thereof may be taken without a meeting if a written consent thereto is signed
by all members of the Board of Directors or of such committee, as the case may
be, and such written consent is filed with the minutes of proceedings of the
Board of Directors or such committee.
Section 3.17 Interested Directors, Officers and Shareholders.
(A) No contract or transaction between the Corporation and one or more
of its directors, officers, employees or shareholders or between the
Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors, officers, employees or
shareholders have any such positions or relationships, or has a financial
interest, shall be void or voidable solely for this reason or solely because
such person is present or participates in the meeting or action which
authorizes the contract or transaction, or solely because the votes of any
person are counted for such purpose, if :
(1) The material facts as to such person's relationship or
interest, and as to the contract or transaction, are disclosed, or are known,
to the Board of Directors and the Board in good faith authorizes the contract
or transaction by the affirmative vote of a majority of the disinterested
directors, even though the disinterested directors are less than a quorum; or
(2) The material facts as to such person's relationship or
interest, and as to the contract or transaction, are disclosed, or are known,
to the shareholders entitled to vote thereon, and the contract or transaction
is specifically approved in good faith by vote of the shareholders; or
(3) The contract or transaction is fair as to the Corporation as
of the time it is authorized, approved or ratified by the Board of Directors,
a committee thereof, or the shareholders.
(B) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or a committee
thereof which authorizes the contract or transaction.
(C) This provision shall not be construed to invalidate any contract
or transaction which would be valid in the absence of this provision.
Section 3.18 Committees. The Board of Directors may, by resolution
adopted by a majority of the entire Board, designate one or more committees,
each committee to consist of two or more of the directors, which, to the
extent provided in said resolution and within the limitations prescribed by
statute, shall have and may exercise the powers of the Board of Directors in
the management of the business and affairs of the corporation, and may have
power to authorize the seal of the corporation to be affixed to all papers
which may require it.
Article 4 - Officers
Section 4.01 Principal Officers. The principal officers of the
Corporation shall be elected by the Board of Directors and shall include a
President, a Secretary, and a Treasurer; and may, at the discretion of the
Board of Directors, also include one or more Vice Presidents and Managing
Directors. One person may hold the offices and perform the duties of any two
(2) or more of said principal offices except the offices and duties of
President and Secretary. An individual who holds more than one office in the
Corporation may act in more than one capacity to execute, acknowledge, or
verify any instrument required to be executed, acknowledged or verified by
more than one officer. None of the principal officers need be directors or
shareholders of the Corporation.
Section 4.02 Election of Principal Officers; Term of Office. The
principal officers of the Corporation shall be elected annually by the Board
of Directors at each annual meeting of the Board of Directors. Failure to
elect any principal officer annually shall not dissolve the Corporation.
If the Board of Directors shall fail to fill any principal office at an
annual meeting, or if any vacancy in any principal office shall occur, or if
any principal office shall be newly created, such principal office may be
filled at any regular or special meeting of the Board of Directors.
Section 4.03 Subordinate Officers, Agents and Employees. In addition to
the principal officers, the Corporation may have one or more Assistant
Treasurers, Assistant Secretaries and such other subordinate officers, agents
and employees as the Board of Directors may deem advisable. Each shall hold
office for such period and have such authority and perform such duties as the
Board of Directors, the President or any officer designated by the Board of
Directors may from time to time determine. The Board of Directors at any time
may appoint and remove, or may delegate to any principal officer the power to
appoint and to remove, any subordinate officer, agent or employee of the
Corporation.
Section 4.04 Compensation of Officers. The compensation of all officers
and agents of the Corporation shall be fixed by the Board of Directors.
Section 4.05 Delegation of Duties of Officers. The Board of Directors
may delegate the duties and powers of any officer of the Corporation to any
other officer or to any director for a specified period of time for any reason
that the Board of Directors may deem sufficient.
Section 4.06 Removal of Officers. Any officer of the Corporation may be
removed with or without cause by resolution adopted by a majority of all of
the directors then in office at any regular or special meeting of the Board of
Directors or by a written consent signed by all of the directors then in
office.
Section 4.07 Resignations. Any officer may resign at any time by giving
written notice of resignation to the Board of Directors, to the President or
to the Secretary. Any such resignation shall take effect upon receipt of such
notice or at any later time specified therein. Unless otherwise specified in
the notice, the acceptance of a resignation shall not be necessary to make the
resignation effective.
Section 4.08 President. The President shall preside at all meetings of
the stockholders and of the Board of Directors at which he is present. The
President shall be the Chief Executive and Administrative Officer of the
Corporation and shall have general supervision over the administration of the
business of the Corporation. The President shall have all powers and duties
usually incident to the office of the President, except as specifically
limited by a resolution of the Board of Directors. The President shall have
such other powers and perform such other duties as may be assigned to him from
time to time by the Board of Directors.
Section 4.09 Vice Presidents. In the absence or disability of the
President or if the office of President is vacant, the Vice Presidents in the
order determined by the Board of Directors, or if no such determination has
been made in the order of their seniority, shall perform the duties and
exercise the powers of the President, subject to the right of the Board of
Directors at any time to extend or confine such powers and duties or to assign
them to others. Any Vice President may have such additional designations in
his title as the Board of Directors may determine. The Vice Presidents shall
generally assist the President in such manner as the President shall direct.
Each Vice President shall have such other powers and perform such other duties
as may be assigned to him from time to time by the Board of Directors or the
President.
Section 4.10 Secretary. The Secretary shall act as Secretary of all
meetings of stockholders and of the Board of Directors at which he is present,
shall record all the proceedings of all such meetings in a book to be kept for
that purpose, shall have supervision over the giving and service of notices of
the Corporation, and shall have supervision over the care and custody of the
corporate records and the corporate seal of the Corporation. The Secretary
shall be empowered to affix the corporate seal to documents, the execution of
which on behalf of the Corporation under its seal is duly authorized, and when
so affixed may attest the same. The Secretary shall have all powers and
duties usually incident to the office of the Secretary, except as specifically
limited by a resolution of the Board of Directors. The Secretary shall have
such other powers and perform such other duties as may be assigned to him from
time to time by the Board of Directors or the President. In the absence or
disability of the Secretary, any Assistant Secretary shall exercise the powers
and perform the duties of the Secretary.
Section 4.11 Treasurer. The Treasurer shall have general supervision
over the care and custody of the funds and over the receipts and disbursements
of the Corporation and shall cause the funds of the Corporation to be
deposited in the name of the Corporation in such banks or other depositories
as the Board of Directors may designate. The Treasurer shall have supervision
over the care and safekeeping of the securities of the Corporation. The
Treasurer shall render to the President, and the Board of Directors at a
regular meeting or whenever they may request it, an account of all of his
transactions as Treasurer and of the financial condition of the Corporation.
The Treasurer shall have all powers and duties usually incident to the office
of Treasurer, except as specifically limited by a resolution of the Board of
Directors. The Treasurer shall have such other powers and perform such other
duties as may be assigned to him from time to time by the Board of Directors
or the President.
Section 4.12 Bond. The Board of Directors shall have the power, to the
extent permitted by law, to require any officer, agent or employee of the
Corporation to give bond for the faithful discharge of his duties; and for the
restoration to the Corporation in case of his death, disability, resignation,
retirement or removal from office of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control
belonging to the Corporation. The bond shall be in such form and with such
surety or sureties as the Board of Directors may determine.
Article 5 - Capital Stock
Section 5.01 Certificates for Stock. Each stockholder of the
Corporation shall be entitled to a certificate signed by, or in the name of,
the Corporation by the President or a Vice President and by either the
Treasurer, an Assistant Treasurer, the Secretary, or an Assistant Secretary
of the Corporation, certifying the number of shares of capital stock of the
Corporation owned by such stockholder. The certificate shall bear the seal of
the Corporation or a printed or engraved facsimile thereof. Certificates
issued shall be consecutively numbered and shall be entered in the books of
the Corporation as they are issued. Each certificate shall state on the face
thereof that the Corporation is organized under the laws of the State of
Maryland, the stockholder's name, the number and class of shares, the par
value of such shares and such other matters as may be required by law.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued,
such certificate may be issued by the Corporation with the same effect as if
such signer were such officer, transfer agent or registrar at the date of
issue.
Section 5.02 Stock Ledger. A record of all certificates for capital
stock issued by the Corporation shall be kept by the Secretary or any other
officer, employee or agent designated by the Board of Directors. Such record
shall show the name and address of the person, firm or corporation in which
certificates for capital stock are registered, the number of shares
represented by each such certificate, the date of each such certificate, and,
in the case of certificates which have been canceled, the dates of
cancellation thereof.
The Corporation shall be entitled to treat the holder of record of shares
of capital stock as shown on the stock ledger as the owner thereof and as the
only person entitled to receive dividends thereon, to vote such shares and to
receive notice of meetings, and for all other purposes. The Corporation shall
not be bound to recognize any equitable or other claim to or interest in any
share of capital stock on the part of any person who is not a stockholder of
record whether or not the Corporation shall have express or other notice
thereof.
Section 5.03 Regulations Relating to Transfer. The Board of Directors
may make such rules and regulations as it may deem expedient, not inconsistent
wil law, the Articles of Incorporation or these By-Laws. concerning issuance,
transfer and registration of certificates for shares of capital stock of the
Corporation. The Board of Directors may appoint, or authorize any principal
officer to appoint, one or more transfer clerks or one or more transfer agents
and one or more registrars and may require all certificates for capital stock
to bear the signature or signatures of any of them.
Section 5.04 Cancellation. Each certificate for capital stock
surrendered to the Corporation for exchange or transfer shall be canceled and
no new certificate or certificates shall be issued in exchange for any
existing certificate (other than pursuant to Section 5.05) until such existing
certificate shall have been canceled.
Section 5.05 Lost, Destroyed, and Mutilated Certificates. In the event
that any certificate for shares of capital stock of the Corporation shall be
mutilated, the Corporation shall issue a new certificate in place of such
mutilated certificate. In case any such certificate shall be lost, stolen or
destroyed, the Corporation may in the discretion of the Board of Directors or
a committee designated thereby with power so to act, issue a new certificate
for capital stock in the place of any such lost, stolen or destroyed
certificate. The applicant for any substituted certificate or certificates
shall surrender any mutilated certificate or, in the case of any lost, stolen
or destroyed certificate, furnish satisfactory proof of such loss, theft or
destruction of such certificate and of the ownership thereof. The Board of
Directors or such committee may, in its discretion, require the owner of a
lost or destroyed certificate, or his representatives, to furnish to the
Corporation a bond with an acceptable surety or sureties and in such sum as
will be sufficient to indemnify the Corporation against any claim that may be
made against it on account of the lost, stolen or destroyed certificate or the
issuance of such new certificate. A new certificate may be issued without
requiring a bond when, in the judgment of the Board of Directors, it is proper
to do so.
Section 5.06 Restrictions on Transfer. Shares of the Corporation may be
transferred only in accordance with the restrictions specified in the Articles
of Incorporation, and in compliance with the law and securities regulations.
Any restrictions imposed by the Corporation on the sale or other
disposition of its shares and on the transfer thereof must be copied at length
or in summary form on the face of each certificate representing shares to
which the restriction applies. The certificate may however state on the face
or back that such a restriction exists pursuant to a specified document and
that the corporation will furnish a copy of the document to the holder of the
certificate without charge upon written request to the Corporation at its
principal place of business.
Any security of the Corporation, including, among others, any certificate
evidencing shares of the common stock or warrants to purchase common stock of
the Corporation, which is issued to any person without registration under the
Securities Act of 1933, as amended, or the Blue Sky laws of any state, shall
not be transferable until the Corporation has been furnished with a legal
opinion of counsel with reference thereto, satisfactory in form and content
to the Corporation and its counsel, to the effect that such sale, transfer or
pledge does not involve a violation of the Securities Act of 1933, as amended,
or the Blue Sky laws of any state having jurisdiction. The certificate
representing the security shall bear substantially the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR UNDER THE BLUE SKY LAWS OF ANY STATE AND
MAY NOT BE OFFERED, SOLD OR TRANSFERRED UNLESS SUCH OFFER, SALE OR TRANSFER
WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933 OR ANY APPLICABLE BLUE
SKY LAWS. ANY OFFER, SALE OR TRANSFER OF THESE SECURITIES MAY NOT BE MADE
WITHOUT THE PRIOR WRITTEN APPROVAL OF THE CORPORATION OR ITS COUNSEL."
Section 5.07 Sale and Payment for Shares. (A) SHARE SALES--The Board
of Directors may from time to time issue and sell or provide for the issuance
and sale of shares (both treasury and authorized but unissued) of the
Corporation. The Board of Directors may terminate the issue and sale of such
shares at any time such termination is determined to be in the best interest
of the Corporation.
(B) CONSIDERATION--All shares shall be sold for cash, except as
otherwise provided in this Section 5.07, which shall in each case be paid
prior to the delivery of any certificate of the Corporation for such shares.
Shares shall be sold at net asset value. No shares will be sold by the
Corporation during any period when the determination of net asset value is
suspended.
(C) EFFECT--When consideration, fixed as provided by law, has been paid,
the shares shall be deemed to have been issued and shall be considered fully
paid and non-assessable.
(D) ALLOCATION OF CONSIDERATION--The consideration received for shares
shall be allocated by the Board of Directors, in accordance with law, between
stated capital and surplus accounts.
(E) FRACTIONAL SHARES--The Corporation may issue and sell fractions of
shares (such shares being rounded to the third decimal place) having pro-rata
all the rights of whole shares, including, without limitation, the right to
vote and receive dividends; and wherever the words "share" or "shares" are
used in these By-Laws or in the Articles of Incorporation they shall be deemed
to include fractions of shares where the context does not clearly indicate
that only whole shares are intended.
(F) ACQUISITION SHARES--In connection with the acquisition of all or
substantially all the assets of another entity, the Board of Directors may
issue or cause to be issued shares of the Corporation and accept in payment
thereof in lieu of cash such assets of such entity at market value, provided
such assets are of the character in which the Board of Directors are
authorized to invest the funds of the Corporation.
Section 5.08 Redemption and Payment for Shares. (A) Share Redemption--
The shares of the Corporation will be redeemed on request of the shareholder
in "proper form" to the Corporation. Upon receipt of a request to redeem in
"proper form", the applicable shares shall be redeemed on the Valuation Date
next following such request and at a price equal to the then current net asset
value per share, less any deferred sales charge if applicable.
"Proper form" means that the request to redeem must meet all of the
following requirements:
(1) It must be in writing sent to the Corporation at its current mailing
address (or to such designated agent or address as may be furnished to the
Shareholders by written notice).
(2) It must be signed by the shareholder(s) exactly in the manner as
the shares are registered, and must specify either the number of shares, or
the dollar amount of shares, to be redeemed.
(3) The signature(s) of the redeeming shareholders(s) must be
guaranteed by a commercial bank located in the United States or a member firm
of the New York Stock Exchange, and if the shares are registered in more than
one name, then the signatures of each of the shareholders must be guaranteed
separately.
(4) If certificates have been issued for the shares being redeemed, the
request must be accompanied by such certificates together with a stock power
signed by the shareholder(s), with signature(s) guaranteed in the same manner
as described in item 3 above.
(5) If the shares being redeemed are registered in the name of an
estate, trust, custodian, guardian, retirement plan or the like, or in the
name of a corporation or partnership, documents must also be included which,
in the judgment of the Corporation or its designated agent, are sufficient to
establish the authority of the person or persons signing the request, and/or
as may be required by applicable laws or regulations, with signature(s)
guaranteed in the same manner as described in item 3 above.
(6) The signature guarantee requirements in items 3,4 and 5 above may be
waived if the redeeming shareholder is personally known by an officer or
director of the Corporation and such officer or director satisfies the
Corporation that the applicable request for redemption is valid.
(B) Proceeds--Payment for shares which are redeemed by the Corporation
as provided for in these By-Laws shall be made within five (5) days of the
Valuation Date for which the net asset value of such shares has been
determined. Whenever the Board of Directors, by declaration or resolution,
has suspended the determination of net asset value pursuant to the provisions
of these By-Laws, the right of any shareholder to require the Corporation to
redeem his shares shall be likewise suspended. At any time such suspension is
in effect, any shareholder may withdraw his certificate or certificates from
deposit or may leave the same on deposit, in which case the redemption price
shall be the net asset value next determined after the suspension is
terminated.
(C) Share Purchases--The Corporation may by agreement with any
shareholder purchase shares of the Corporation at a price not exceeding the
net asset value in effect at the time when such purchase or contract to
purchase is made or the net asset value next to be determined. Any shares of
its stock purchased or redeemed by the Corporation pursuant to the provisions
of these By-Laws shall be deemed retired and shall thereafter have the status
of authorized but unissued stock.
Section 5.09 Preemptive Rights. Unless otherwise determined by the
Board of Directors in the manner provided under applicable law, no holder of
shares of capital stock of the Corporation shall, as such holder, have any
right to purchase or subscribe for any capital stock of any class which the
Corporation may issue or sell, whether or not exchangeable for any capital
stock of the Corporation of any class or classes, whether issued out of
unissued shares authorized by the Articles of Incorporation, as amended, or
out of shares of capital stock of the Corporation acquired by it after the
issue thereof; nor, unless otherwise determined by the Board of Directors in
the manner provided under applicable law, as such holder have any right to
purchase, acquire, or subscribe for any securities which the Corporation may
issue or sell whether or not convertible into or exchangeable for shares of
capital stock of the Corporation of any class or classes, and whether or not
any such securities have attached or appurtenant thereto warrants, options,
or other instruments which entitle the holders thereof to purchase, acquire
or subscribe for shares of capital stock of any class or classes.
Section 5.10 Fixing of Record Dates. The Board of Directors may fix,
in advance, a record date, which shall not be more than fifty (50) not less
than ten (10) days before the date of any meeting of stockholders, nor more
than fifty (50) days prior to any other action, for the purpose of determining
stockholders entitled to notice of or to vote at such meeting of stockholders
or any adjournment thereof, or to express consent to dissent to corporate
action in writing without a meeting, or to receive payment of any dividend or
other distribution or allotment of any rights, or to exercise any rights in
respect to any change, conversion or exchange of stock or for the purpose of
any other lawful action.
If no record date is fixed by the Board of Directors:
(i) The record date for determining stockholders shall be at the close
of business on the day before the day on which notice is given, or, if notice
is waived, at the close of business on the day before the day on which the
meeting is held;
(ii) The record date for determining stockholders entitled to express
consent to Corporate action in writing without a meeting, when no prior action
by the Board of Directors is necessary, shall be the day on which the first
written consent is expressed;
(iii) The record date for determining stockholders for any other purpose
shall be at the close of business on the date on which the Board of Directors
adopts the resolution relating thereto;
(iv) A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting, provided that the Board of Directors may fix a new record date for
the adjourned meeting.
Article 6 - Net Asset Value
Section 6.01 Valuation Date. As of the close of business on the last
business day of each calendar month beginning January 1, 1998 and on such
additional business day or days as the Board of Directors shall designate,
the net asset value shall be determined as provided for in these By-Laws and
each such date shall be known as the Valuation Date.
Section 6.02 Corporate Net Asset Value. The net asset value of the
Corporation shall be determined by or under the direction of the Board of
Directors. In determining the net asset value of the Corporation:
(a) Securities listed on security exchanges and securities traded in the
Over-the-Counter market shall be valued at their closing sale prices on the
Valuation Date. If no sale has been reported for that day, the last published
sale or the last recorded bid price, whichever is the more recent, shall be
used, unless in the opinion of the Board of Directors the value thus obtained
may not fairly indicate the actual market value, in which case the Board of
Directors shall value the securities at a price furnished by a reputable
broker or investment banker as of the Valuation Date.
(b) The Board of Directors may rely, as sufficient evidence, upon
reports of sale and bid and asked prices, and over-the-counter quotations,
printed in any newspaper of general circulation or in any financial periodical
or quotation service, or in the records of security exchanges.
(c) An investment purchased, and awaiting payment against delivery shall
be included for valuation purposes as a security held, and the cash accounts
of the Corporation shall be adjusted by the deduction of the purchase price
including brokers' commissions and other expenses of the purchase.
(d) An investment sold but not delivered pending receipt of proceeds
shall be valued at the net sales price after deducting brokers' commissions
and other expenses of the sale.
(e) Interest accrued and uncollected since the last valuation, dividends
declared since said date but not paid on shares of stock where the market
quotation used in determining the value thereof is ex-dividend and the value
of any other assets determined by the Board of Directors to be income shall be
added to the total net asset value thereof at such Valuation Date.
(f) To the aggregate value of investments determined in the manner set
forth above in this Section 6.02 there shall be added the cash and cash
equivalents adjusted for all liabilities (fixed or accrued) determined in
accordance with generally accepted accounting principles as of the Valuation
Date.
Section 6.03 Net Asset Value Per Share. The net asset value of each
share shall be determined by dividing the net asset value of the Corporation
by the number of shares outstanding as of the Valuation Date, the result being
adjusted to the nearest whole cent.
Section 6.04 Suspension of Valuation Date. The Board of Directors may
suspend the Valuation Date and therefore the determination of net asset value
for all or any part of any period during which the New York Stock Exchange is
normally closed, or during which trading on the New York Stock Exchange or in
the markets normally utilized by the Corporation is restricted by governmental
order, or during which an emergency exists such as would make disposal by the
Corporation of securities owned by the Corporation impracticable, or would
make determination of the net asset value of the assets of the Corporation
impracticable. The determination of whether trading on the New York Stock
Exchange or in the markets normally utilized by the Corporation is restricted
or whether such an emergency, as herein provided, exists shall be by
applicable rules and regulations of the United States Securities and Exchange
Commission or other governmental authority. The suspension shall become
effective at such time as the Board of Directors shall specify in their
declaration or resolution, but not later than the close of business on the
next succeeding business day following the declaration or resolution. After
such suspension becomes effective, there shall be no determination of net
asset value until the Board of Directors shall declare the suspension
terminated. The suspension shall terminate in any event on the first day on
which the New York Stock Exchange is open, the restricted trading on the New
York Stock Exchange or in the markets utilized by the Corporation has ended,
or the emergency shall have expired in accordance with the official ruling of
the United States Securities and Exchange Commission or other governmental
authority; or in the absence of such ruling, upon the determination of the
Board of Directors. The Corporation shall not determine net asset value on
days when no share subscription or share redemption requests are received,
except on such days as provided for in Section 6.01 herein.
Section 6.05 Valuation Delegation. The Board of Directors may delegate
any of its powers and duties under this Section 6 with respect to appraisal of
assets and liabilities and determination of net asset value or with respect
to suspension of the determination of net asset value to an officer or
officers or agent or agents of the Corporation designated from time to time
by the Board of Directors.
Article 7 - Dividends and Distributions
Section 7.01 Ordinary Dividends. The Board of Directors may from time
to time declare and pay dividends with the amount, source and payment thereof
to be within their discretion and calculated on the basis of generally
accepted accounting principles.
Section 7.02 Capital Gains. The Board of Directors may also declare
dividends or distributions out of accumulated and undistributed net realized
capital gains.
Section 7.03 Distributions. The Board of Directors has the power, in
its discretion, to distribute for any year as ordinary dividends and as
capital gains distributions, respectively, amounts sufficient to enable the
Corporation to qualify as a regulated investment company, if so registered
under the Investment Company Act of 1940. The Board of Directors may at any
time declare and distribute pro-rata among the shareholders a stock dividend
out of authorized but unissued shares of the Corporation. All dividends
declared, except as provided above, shall be deemed liquidating dividends and
the shareholders shall be advised accordingly. In the case of a dividend
payable in shares of stock or in cash at the election of a shareholder, the
Board of Directors may prescribe whether a shareholder failing to express his
election before a given time shall be deemed to have elected to take cash
rather than shares, or to take shares rather than cash, or to take shares with
cash adjustment of fractions.
Article 8 - Nature of Business and Investment Restrictions
Section 8.01 Nature of Business. The Corporation shall transact,
promote and carry on the business of an incorporated investment company of the
management type. In accordance with the Articles of Incorporation and these
By-Laws, the Corporation may invest and reinvest its assets in notes, stocks,
bonds, or other securities or financial instruments of whatsoever in nature;
do any and all acts necessary or incidental thereto to the extent permitted
business corporations under the laws of the State of Maryland; and sell, hold,
purchase and reissue shares of its own capital stock.
Section 8.02 Investment Objective. The investment objective of the
Corporation is fundamental and may not be changed without shareholder
approval. The particular investment policies of the Corporation, unless
otherwise specified in Section 8.03, are not fundamental policies and
therefore may be changed by the vote of a majority of the Board of Directors.
The investment objective of the Corporation is long-term capital
appreciation through a strategy of value investing in equity securities.
Unless otherwise authorized by a vote of a majority of the holders of
outstanding shares of common stock of the Corporation, at least 65% of the
Corporation's total assets (taken at current value) excluding cash, cash
equivalents or U.S. government securities, will be invested in equity
securities of well-financed companies which are believed by the Corporation's
investment advisors to be priced below their long-term intrinsic values.
The Corporation may also invest in "debt" securities which will consist
solely of securities purchased for temporary or liquidity purposes or for
defensive purposes during periods of unusual market conditions and will
consist only of deposits in domestic banks, money market instruments,
commercial paper, and securities or all other debt securities rated within the
three highest grades of Moody's Investor Service, Inc. or Standard & Poor's
Corporation.
Section 8.03 Investment Restrictions. The Corporation shall operate
under the following investment restrictions which constitute fundamental
policies that cannot be changed without the affirmative vote of the holders of
a majority of the outstanding shares of the common stock of the Corporation.
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 fluctuations does not require elimination of
any security from the portfolio. The Corporation may not:
(a) With respect to 75 percent (75%) of its total assets, invest in
securities of any one issuer if immediately after and as a result of such
investment more than five percent (5%) of the total assets of the Corporation,
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.
(b) Invest more than 25 percent (25%) of its total assets in securities
or issuers in any one particular industry. This restriction does not apply to
U.S. Government securities.
(c) Purchase more than ten percent (10%) of the outstanding voting
securities, or any class of securities, of any one issuer.
(d) Purchase securities on margin (but the Corporation may obtain such
short-term credits as may be necessary for the clearing of purchases and
sales of securities).
(e) Engage in any stock option strategy, whether listed or
over-the-counter options.
(f) Make short sales of securities.
(g) Invest in real estate, real estate limited partnerships, or oil,
gas or mineral exploration and development programs; although the Corporation
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 programs. The Corporation will not invest more than
ten percent (10%) of the value of its total assets in illiquid securities,
including real estate interests.
(h) Borrow money, except that the Corporation 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
common stock. Such temporary borrowings may not exceed five percent (5%) of
the value of the Corporation's total assets at the time any loan is made. No
more than ten percent (10%) of the value of the Corporation's total assets at
the time any loan is made may be pledged as collateral for such temporary
borrowings.
(i) Buy or sell commodities, commodities futures contracts or
commodities options contracts.
(j) Loan money, except by the purchase of debt obligations consistent
with the Corporation's investment objective and policies. However, the
Corporation may loan up to 25% of its assets in the form of investment
securities 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). Securities lending procedures
must be approved and supervised by the Board of Directors of the Corporation.
(k) 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 Corporation except as
may be necessary in connection with borrowings mentioned in paragraph (h)
above, and then only to the extent there mentioned.
(l) Invest more than five percent (5%) of the value of the Corporation's
total assets in securities of issuers which have been in continuous operation
less than three (3) years.
(m) Purchase or retain the securities of any issuer, if to the knowledge
of the Corporation, any of the officers or directors of the Corporation 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 five percent (5%)
of the securities of such issuer.
(n) Underwrite securities of others except to the extent the Corporation
may be deemed to be an underwriter, under federal securities laws, in
connection with the disposition of portfolio securities.
(o) Purchase securities of other investment companies, except as
permitted under the Investment Company Act of 1940.
(p) Invest for the purpose of exercising control or management of
another company.
(q) Invest in securities restricted as to disposition under federal or
state securities laws.
Article 9 - Expenses and Service Contracts
Section 9.01 Business Expenses. The Corporation may incur such expenses
as are necessary to perform its function and such expenses may include but are
not limited to the following: compensation to be paid to any other party to
an investment advisory contract with the Corporation entered into pursuant to
these By-Laws; the compensation to be paid to the officers and employees of
the Corporation; office hire; ordinary office expenses; investment advisory,
statistical and research facilities; director's fees; legal and accounting
expenses; taxes and governmental fees; Federal and state registration and
qualification fees; cost of stock certification; cost of reports and notices
to shareholders; dues and subscriptions; brokers' commissions; transaction
costs; fees and expenses of any custodian; expenses of computing the net asset
value; and fees and expenses of any transfer agent, registrar and dividend
disbursing agent.
During any period during which the determination of net asset value is
suspended or not required, as provided in these By-Laws, the net asset value
as last determined and effective shall for the purposes of this Section be
deemed to be the net asset value as of the close of business on each business
day until a new net asset value is again determined and made effective as
provided herein.
The provisions of this Section shall not preclude the payment of
reasonable fees for legal or accounting services to any firm of which a
director or officer of the Corporation may be a member, nor of customary
brokerage charges in connection with the purchase or sale of securities to any
firm in the brokerage business of which a director or officer may be a member;
and no part of any such fee, charge or compensation shall be deemed
compensation to such officer or director within the purview of this Section.
No compensation, commission, fee or profit which may be received by the other
party to a contract entered into pursuant to these By-Laws shall be deemed
compensation to any officer or director of the Corporation simply because such
officer or director is also an officer, director, shareholder or member of
such other party.
Section 9.02 Investment Advisor. The Board of Directors, with the
approval of the shareholders, may enter into a contract with any person, firm
or corporation to act as investment advisor for the Corporation and to perform
such duties and render such other services as shall be deemed necessary. Any
such contract shall provide that it may be terminated at any time by the
Corporation without penalty and upon not more than sixty (60) days' written
notice and shall be automatically terminated in the event of its assignment.
Any such contract shall continue in effect only if approved in accordance
with the provisions of the Investment Company Act of 1940 or any successor
statute as amended from time to time. Such contract may contain any other
provision not inconsistent with the Articles of Incorporation and these
By-Laws.
Section 9.03 Shareholder Services. The Corporation may act as its own
shareholder servicing agent and/or the Board of Directors in its discretion
may employ a transfer agent, registrar or dividend disbursing agent for the
Corporation under such terms and conditions as the Board shall deem advisable.
Section 9.04 Custodian. The Corporation may act as its own custodian
or the Corporation may employ by contract a custodian which shall be a bank,
brokerage firm, or trust company having an aggregate capital, surplus and
undivided profits of at least $500,000. The compensation to be paid to an
employed custodian shall be such amount as agreed upon by the Corporation and
such custodian. The contract with an employed custodian shall contain in
substance the following provisions:
(a) The Corporation will cause all securities and funds owned by the
Corporation to be delivered or paid to the custodian.
(b) The custodian will receive and receipt for any monies due to the
Corporation and deposit the same in an account in its own banking department
or in such other banking institution, if any, as the Board of Directors may
direct. The custodian shall have the sole power to draw upon any such account.
(c) The custodian shall release and deliver securities owned by the
Corporation in the following cases only:
1. Upon the sale of such securities for the account of the
Corporation and the receipt of payment therefor;
2. To the issuer thereof or its agent when such securities are
called, redeemed, retired, or otherwise become payable, provided that in any
such case the cash proceeds thereof shall be delivered to the custodian;
3. To the issuer thereof or its agent for transfer into the name of
the Corporation or its custodian, or a nominee of either, or for exchange for
a different number of bonds or certificates representing the same number of
shares or aggregate face amount, provided that in any such case the new
securities replacing such securities are delivered to the custodian;
4. To the broker selling the same for examination in accord with
the "street delivery" custom;
5. For exchange or conversion pursuant to any plan of merger,
consolidation, reorganization, recapitalization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions for
conversion contained in such securities, provided that in any such case the
new securities and cash, if any, are delivered to the custodian;
6. In the case of warrants, rights or similar options, the
surrender thereof shall be only for the exercise of such warrants, rights or
other options on behalf of the Corporation upon interim receipts or temporary
securities for definitive securities;
7. For any other proper purpose.
(d) The custodian shall pay out monies of the Corporation only upon the
purchase of securities for the account of the Corporation and the delivery in
due course of such securities to the custodian, or in connection with the
conversion, exchange or surrender of securities owned by the Corporation as
set forth herein, or for the repurchase of shares issued by the Corporation,
or for making of any disbursements authorized by the Board of Directors
pursuant to the Articles of Incorporation and these By-Laws, or for the
payment of any expenses or liabilities incurred by the Corporation.
(e) The custodian shall make deliveries of securities and payments of
cash only upon instructions by such officer or officers or other agents of the
Corporation, including the investment advisor, as may be authorized to give
instructions by resolution of the Board of Directors. The directors may, from
time to time, authorize different persons to give instructions for different
purposes.
The contract between the Corporation and a custodian may contain any
other provisions not inconsistent with the Articles of Incorporation or with
these By-Laws which the Board of Directors may approve. Such contract shall
be terminable by either party upon written notice to the other; provided,
however, that upon termination of the contract or inability of the custodian
to continue to serve, the custodian, upon written notice of the appointment
by the Board of Directors of a successor custodian, shall deliver and pay over
to such successor custodian all securities and monies held by it for the
account of the Corporation.
Section 9.05 Related Party Contracts. The Board of Directors, subject
to the provisions of the Articles of Incorporation and these By-Laws, may in
its discretion enter into any contract with any person, firm or corporation,
irrespective of whether or not one or more of the directors or officers of
this Corporation may also be an officer, director, shareholder or member of
such other person, firm or corporation, and such contract shall not be
invalidated or rendered voidable by reason of any such relationship.
No person holding such relationship shall be liable because of such
relationship for any loss or expense to the Corporation under or by reason of
such contract, or therefrom, provided that such contract when executed was
reasonable, fair and consistent with the provisions of the Articles of
Incorporation and these By-Laws.
Section 9.06 Consistency of Terms. Any contract entered into pursuant
to the terms of this Article 9 shall be consistent with and subject to the
requirements of the Investment Company Act of 1940, including any amendment
thereto or other applicable act of Congress hereafter enacted, with respect
to its duration, termination, authorization, approval, assignment, amendment
or renewal.
Article 10 - Indemnification
Section 10.01 Indemnification. The Corporation shall have the power to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or contemplated action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or
in the right of the Corporation), by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding.
Indemnification will, however, only apply if he acted in good faith and
in a manner he believed in good faith to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his conduct was
unlawful.
Nothing in this Section 10.01 protects, or purports to protect, or may be
interpreted or construed to protect, any director or officer against any
liability to the Corporation or its shareholders to which he would otherwise
be subject by reason of willful misfeasance, bad faith, negligence or reckless
disregard of the duties involved in the conduct of his office.
Section 10.02 Indemnification Insurance. The Corporation shall have the
power to purchase and maintain insurance on behalf of any person who is or was
a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
applicable law.
Article 11 - Miscellaneous Provisions
Section 11.01 Corporate Seal. The seal of the Corporation shall be
circular in form with the name of the Corporation, the year of its
organization and the name of the state of incorporation. The seal may be used
by causing it to be affixed or impressed, or a facsimile thereof may be
reproduced or otherwise used, in such manner as the Board of Directors may
determine.
Section 11.02 Fiscal Year. The fiscal year of the Corporation shall be
the calendar year, or such other twelve (12) consecutive months as the Board
of Directors may designate.
Section 11.03 Waiver of Notice. Whenever any notice is required to be
given under any provision of law, the Articles of Incorporation or these
By-Laws, a written waiver thereof, signed by the person or persons entitled to
such notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the stockholders, directors, or
members of a committee of directors need be specified in any written waiver of
notice unless so required by the Articles of Incorporation or these By-Laws.
Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of
any business because the meeting is not lawfully called or convened.
Section 11.04 Execution of Instruments. All checks, drafts, bills of
exchange, notes or other obligations or orders for the payment of money shall
be signed in the name of the Corporation by such officer or officers or
person or persons, as the Board of Directors may from time to time designate.
Except as otherwise provided by law, the Articles of Incorporation or
these By-Laws, the Board of Directors, any committee given specific authority
in the premises by the Board of Directors, or any committee given authority to
exercise generally the powers of the Board of Directors during the intervals
between meetings of the Board of Directors, may authorize any officer,
employee or agent, in the name of and on behalf of the Corporation, to enter
into or execute and deliver deeds, bonds, contracts and other obligations or
instruments, and such authority may be general or confined to specific
instances.
Except as otherwise provided by law, the Articles of Incorporation or
these By-Laws, all applications, written instruments and papers required by
any department of the United States Government or by any state, county,
municipal or other governmental authority, may be executed in the name of the
Corporation by any principal officer or subordinate officer of the
Corporation, or, to the extent designated for such purpose from time to time
by the Board of Directors, by an employee or agent of the Corporation. Such
designation may contain the power to substitute, in the discretion of the
person named, one or more persons.
Section 11.05 Shareholder Reports. The Board of Directors shall submit
to the shareholders at least semi-annually a written report which shall
include such financial statements and other information about the Corporation
deemed appropriate or required by law. The financial statements in such
reports shall be certified to at least annually by independent certified
public accountants.
Section 11.06 Dissolution. In the event holders of two-thirds of the
outstanding shares of the Corporation shall vote at any time to wind up and
liquidate the Corporation, no further shares of the Corporation shall be
issued, sold or purchased by the Corporation and the directors shall
immediately proceed to wind up the Corporation's affairs, liquidate the
assets, pay all liabilities and expenses of the Corporation and distribute the
remaining assets, if any among the shareholders in proportion to their holding
of shares.
The Board of Directors shall also do any other acts necessary to secure
and complete the dissolution of the Corporation. When the dissolution and
liquidation of the Corporation has been directed by vote of the shareholders,
the directors then holding office shall continue in office until the
liquidation and dissolution of the Corporation has been completed. During the
period of liquidation and until final distribution to the shareholders has
been made, the compensation of the directors and all other parties shall be
determined on the same basis as if as if the computation of the net asset
value of the shares had been suspended as provided in these By-Laws.
Section 11.07 Books and Records. The Corporation or its designated
agent shall keep correct and complete books and records of account and shall
keep minutes of the proceedings of its shareholders and Board of Directors,
and shall keep at its registered office or principal place of business, or at
the office of its transfer agent or registrar, a record of its shareholders,
giving the names and addresses of all shareholders and the number and class of
the shares held by each.
Section 11.08 Federal and State Laws. In the event of any conflict
between the provisions of these By-Laws and any state or federal securities
laws or regulations, such securities laws or regulations shall control.
For any reason whatsoever, the Board of Directors may register the
Corporation and/or its common stock under the Investment Company Act of 1940,
the Securities Act of 1933 and/or under or with any other federal or state
laws or entity, but shall not be required to do so solely due to the
existence of this provision.
Any reference in these By-Laws to any particular state or federal
securities laws or regulations is intended to serve as an operational
guideline or limitation and should not be construed as an intention to
register the Corporation or its shares under such laws or regulations.
Section 11.09 Certain Stock Transactions. Any officer, director or
agent of the Corporation may acquire, own and dispose of shares of the
Corporation to the same extent as if he were not such officer, director or
agent.
Section 11.10 Resignation. Any director, officer or agent may resign
by giving written notice to the President or the Secretary of the Corporation.
The resignation shall take effect at the time specified therein, or
immediately if no time is specified therein. Unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
Section 11.11 Receipt of Stock Transfer Requests. The Corporation shall
not consider the U.S. Postal Service or other independent delivery services
to be its agents. Therefore, deposit in the U.S. Mail or with such other
services, or receipt at the Corporation's Post Office Box or the Post Office
Box of its designated agents of purchase subscriptions or redemption requests
shall not constitute receipt by the Corporation.
Section 11.12 Construction. Whenever the context so requires, the
masculine shall include the feminine and neuter, and the singular shall
include the plural, and conversely. If any portion of these By-Laws shall be
invalid or inoperative, then, so far as is reasonable and possible:
(a) The remainder of these By-Laws shall be considered valid and
operative; and
(b) Effect shall be given to the intent manifested by the portion held
invalid or inoperative.
Article 12 - Amendment
Section 12.01 By Board of Directors or Shareholders. These By-Laws may
be amended, altered or repealed or new By-Laws may be adopted by the
affirmative vote of the majority of shareholders at any meeting duly held, or
by a resolution of the Board of Directors.
However, the provisions contained in Article 8 of these By-Laws shall
only be amended, altered or repealed by the vote of a majority of the
outstanding common shares of the Corporation as provided for in the federal
Investment Company Act of 1940 or any successor statute as amended from time
to time. Any By-Laws adopted by the directors may be amended or repealed by
the vote of a majority of the outstanding common shares of the Corporation.
AEGIS VALUE FUND, INC.
INVESTMENT ADVISORY AGREEMENT
For the period from March 31, 1998 to March 31, 2000
THIS AGREEMENT is made March 11, 1998 by and between Aegis Value Fund,
Inc., a Maryland corporation (the "Fund") and Berno, Gambal & Barbee, Inc., a
Delaware corporation (the "Advisor"). In consideration of the mutual
covenants hereinafter contained, it is hereby agreed by and between the
parties hereto as follows:
1. The Fund hereby employs and authorizes the Advisor to act as the
investment advisor for and to manage at its sole discretion the investment and
reinvestment of the assets of the Fund in accordance with the Fund's
investment objective and policies and limitations; to place orders for
execution and make purchases, sales and other changes in the investments of
the Fund; and to administer its affairs to the extent requested by and subject
to the supervision of the Board of Directors of the Fund for the period and
upon the terms herein set forth. The investment of funds shall be subject to
all applicable restrictions of the Articles of Incorporation and By-Laws of
the Fund as may from time to time be in force.
The Advisor accepts such employment and agrees during such period to
render such services, to furnish office facilities and equipment, to provide
clerical, bookkeeping and administrative services for the Fund, to permit any
of its officers or employees to serve without compensation as directors or
officers of the Fund if elected to such positions and to assume the
obligations herein set forth for the compensation herein provided. The
Advisor shall for all purposes herein provided be deemed to be an independent
contractor, and, unless otherwise expressly provided or authorized, shall have
no authority to act for or represent the Fund in any way or otherwise be
deemed an agent of the Fund. All information and advice furnished by either
party to the other shall be treated as confidential, except for information
required to be disclosed by applicable securities laws and regulations.
The Fund represents that the terms of this Agreement and the Fund's
investment policies and limitations do not violate any obligation or
restriction by which the Fund is bound, whether arising by contract, operation
of law or otherwise, that all information that the Fund has provided to the
Advisor is accurate, and that the Fund agrees to indemnify and hold the
Advisor and its agents harmless from any liability, loss and expense arising
out of any breach of any of the foregoing representations provided the
Advisor or its agents have not acted with negligence or willful misconduct in
respect thereof. The Advisor represents that the terms of this Agreement do
not violate any obligation or restriction by which the Advisor is bound,
whether arising by contract, operation of law or otherwise, that all
information that the Advisor has provided to the Fund is accurate to the best
of its knowledge.
2. For the services and facilities described in Section 1, the Fund will
pay to the Advisor at the end of each calendar month an investment management
fee computed at the annual rate of 1.20% of the average daily net assets of
the Fund.
If expenses borne by the Fund in its fiscal years ending up to August 31,
2000 (including the Advisor's fee, but excluding interest, taxes, fees
incurred in acquiring or disposing of portfolio securities and, as determined
by the Board of Directors, extraordinary expenses) exceed 1.50% of average
daily net assets, the Advisor will reimburse the Fund for any excess. If for
any month the expenses of the Fund properly chargeable to the income account
shall exceed 1/12 of the percentage of average daily net assets allowable as
expenses (one twelfth of 1.50%, or 0.125%), the Advisor shall make a refund
payment to the Fund so that the total net expense will not exceed such
percentage. As of the end of the Fund's fiscal year, however, the foregoing
computations and payments shall be readjusted so that the aggregate
compensation payable to the Advisor for the year is equal to the percentage
set forth herein of the average daily net assets as determined as described
herein throughout the fiscal year, diminished to the extent necessary so that
the total of said expense item shall not exceed the expense limitation. The
aggregate of repayments, if any, by the Advisor to the Fund for the year shall
be the amount necessary to limit the said net expense to said percentage.
The net asset value of the Fund shall be calculated at the close of the
New York Stock Exchange on each day the Exchange is open for trading or as of
such other time or times as the directors may determine in accordance with the
provisions of the Investment Company Act of 1940. On each day when net asset
value is not calculated, the net asset value of a share of common stock of the
Fund shall be deemed to be the net asset value of such a share as of the close
of business on the last day on which such calculation was made for the purpose
of the foregoing computations.
For the month and year in which this Agreement becomes effective or
terminates, there shall be an appropriate proration on the basis of the number
of days that the Agreement is in effect during the month and year,
respectively. The services of the Advisor to the Fund under this Agreement
are not to be deemed exclusive, and the Advisor shall be free to render
similar services or other services to others so long as its services hereunder
are not impaired thereby.
3. In addition to the fee of the Advisor, the Fund shall assume and pay
any expenses for services rendered by a custodian for the safekeeping of the
Fund's securities or other property, for keeping its books of account, for any
other charges of the custodian and for calculating the net asset value of the
Fund as provided in the Articles of Incorporation of the Fund. The Advisor
shall not be required to pay and the Fund shall assume and pay the charges
and expenses of its operations, including compensation of the directors (other
than those affiliated with the Advisor), charges and expenses of independent
auditors, of legal counsel, of shareholder services and information, of any
transfer or dividend disbursing agent or any registrar of the Fund, costs of
acquiring and disposing of portfolio securities, interest, if any, on
obligations incurred by the Fund, costs of share certificates and of reports,
membership dues in the Investment Company Institute or any similar
organization, costs of reports and notices to shareholders, other like
miscellaneous expenses and all taxes and fees payable to federal, state or
other governmental agencies on account of the registration of securities
issued by the Fund, filing of corporate documents or otherwise.
The Fund shall not pay or incur any obligation for any management or
administrative expenses for which the Fund intends to seek reimbursement from
the Advisor as herein provided without first obtaining the written approval
of the Advisor. The Advisor shall arrange, if desired by the Fund, for
officers or employees of the Advisor to serve, without compensation from the
Fund, as directors, officers or agents of the Fund if duly elected or
appointed to such positions and subject to their individual consent and to any
limitations imposed by law.
4. Subject to applicable statutes and regulations, it is understood that
directors, officers or agents of the Fund are or may be interested in the
Advisor as officers, directors, agents, shareholders or otherwise, and that
the officers, directors, shareholders and agents of the Advisor may be
interested in the Fund otherwise than as a director, officer or agent.
5. The Advisor shall not be liable for any error of judgment or of law,
or for any loss suffered by the Fund in connection with the matters to which
this Agreement relates, except loss resulting from willful malfeasance, bad
faith or negligence on the part of the Advisor in the performance of its
obligations and duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement. It is understood that Advisor's
investment advice, while based on information believed to be correct, is not
guaranteed. The Advisor will not be responsible for the acts, omissions, or
solvency of any broker, dealer or agent selected by the Advisor in good faith
to effect any transaction for the Fund.
6. This Agreement shall become effective on the date hereof and shall
remain in full force for a period of two years from the effective date, unless
sooner terminated as hereinafter provided. This Agreement shall continue in
force for periods of two (2) years thereafter, but only as long as such
continuance is specifically approved in such manner as is required in Section
15 of The Investment Company Act of 1940 and any regulations thereunder.
This Agreement shall automatically terminate in the event of its
assignment, and may be terminated at any time, without the payment of any
penalty by the Fund or by the Advisor on sixty (60) days written notice to the
other party. The Fund may effect termination by action of the Board of
Directors or by vote of a majority of the outstanding shares of common stock
of the Fund, accompanied by appropriate notice.
This Agreement may be terminated at any time without the payment of any
penalty by the Board of Directors or by vote of a majority of the outstanding
shares of common stock of the Fund in the event that it shall have been
established by a court of competent jurisdiction that the Advisor or any
officer or director of the Advisor has taken any action which results in a
breach of covenants of the Advisor set forth herein.
Termination of this Agreement shall not affect the right of the Advisor
to receive payment on any unpaid balance of the compensation described in
Section 2 earned prior to such termination.
7. In the event any provision or provisions of this Agreement shall be
held to be illegal or invalid for any reason (including, without limitation,
not conforming to applicable federal and state securities laws), the
illegality or invalidity shall not effect the remaining provisions of this
Agreement, but shall be fully severable and the Agreement shall be construed
in force as if the illegal or invalid provisions had never been included
herein. Furthermore, in lieu of such illegal or invalid provision, there
shall be added automatically as part of the Agreement a provision as similar
in terms to such illegal or such invalid provision as may be possible and be
legal and valid.
8. This Agreement contains the entire Agreement of the parties hereto
with respect to the subject matter contained herein and supersedes all prior
agreements and understandings, oral or written, if any, between the parties
hereto. No modification or amendment of any of the terms, conditions, or
provisions herein may be made otherwise than by written agreement signed by
the parties hereto.
9. This Agreement may be executed in a number of identical counterparts,
each of which for all purposes is to be deemed an original, and all of which
constitute, collectively, one Agreement; but in making proof of this
Agreement, it shall not be necessary to produce or account for more than one
counterpart.
10. Except to the extent preempted by federal securities laws, the laws
of the State of Delaware shall govern the validity, construction, enforcement
and interpretation of this Agreement.
11. Any notice under this Agreement shall be in writing addressed and
delivered or mailed, postage prepaid, to the other party at such address as
such other party may designate for the receipt of such notice.
12. No waiver by any party hereto of any breach of any covenant,
condition or agreement hereof on the part of the parties hereto to be kept and
performed shall be considered to constitute a waiver of any such covenant,
condition or provision, or of any subsequent breach thereof.
IN WITNESS WHEREOF, the Fund and the Advisor have caused this Agreement
to be executed on the day and year first above written.
Date: March 11, 1998
Aegis Value Fund, Inc. Berno, Gambal & Barbee, Inc.
By: William S. Berno, By: William S. Berno,
President, Director Managing Director
Edward P. Faberman, Director Paul Gambal, Managing Director
William R. Morris, III, Director Scott L. Barbee,
Managing Director
AEGIS VALUE FUND, INC.
CUSTODIAN AGREEMENT
THIS AGREEMENT made February 23, 1998, between Aegis Value Fund, Inc., a
Maryland corporation (hereinafter called the "Fund") and Ernst & Company, a
corporation organized under the laws of the State of Delaware (hereinafter
called "Custodian"),
WITNESSETH:
WHEREAS, the Fund desires that its securities and cash shall be hereafter
held and administered by Custodian pursuant to the terms of this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Fund and Custodian agree as follows:
1. Definitions
The word "securities" as used herein includes stocks, shares, bonds,
debentures, notes, mortgages or other obligations, and any certificates,
receipts, warrants or other instruments representing rights to receive,
purchase or subscribe for the same, or evidencing or representing any other
rights or interests therein, or in any property or assets.
The words "officers' certificate" shall mean a request or direction or
certification in writing signed in the name of the Fund by any two of the
President, a Vice President, the Secretary and the Treasurer of the Fund, or
any other persons duly authorized to sign by the Board of Directors.
The word "Board" shall mean the Board of Directors of Aegis Value
Fund, Inc.
2. Names, Titles, and Signatures of the Fund's Officers
An officer of the Fund will certify to Custodian the names and signatures
of those persons authorized to sign the officers' certificates described in
Section 1 hereof, and the names of the members of the Board of Directors,
together with any changes which may occur from time to time.
3. Receipt and Disbursement of Money
A. Custodian shall open and maintain a separate account or accounts in
the name of the Fund, subject only to draft or order by Custodian acting
pursuant to the terms of this Agreement. Custodian shall hold in such account
or accounts, subject to the provisions hereof, all cash received by it from
or for the account of the Fund. Custodian shall make payments of cash to, or
for the account of, the Fund from such cash only:
(a) for the purchase of securities for the portfolio of the Fund upon
the delivery of such securities to Custodian, registered in the name of the
Fund or of the nominee of Custodian referred to in Section 7 or in proper form
for transfer;
(b) for the purchase or redemption of shares of the common stock of the
Fund upon delivery thereof to Custodian, or upon proper instructions from the
Aegis Value Fund, Inc.;
(c) for the payment of interest, dividends, taxes, investment adviser's
fees or operating expenses (including, without limitation thereto, fees for
legal, accounting, auditing and custodian services and expenses for printing
and postage);
(d) for payments in connection with the conversion, exchange or
surrender of securities owned or subscribed to by the Fund held by or to be
delivered to Custodian; or
(e) for other proper corporate purposes certified by resolution of the
Board of Directors of the Fund.
Before making any such payment, Custodian shall receive (and may rely
upon) an officers' certificate requesting such payment and stating that it is
for a purpose permitted under the terms of items (a), (b), (c), or (d) of this
Subsection A, and also, in respect of item (e), upon receipt of an officers'
certificate specifying the amount of such payment, setting forth the purpose
for which such payment is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom such payment is to
be made, provided, however, that an officers' certificate need not precede the
disbursement of cash for the purpose of purchasing a money market instrument,
or any other security with same or next-day settlement, if the President, a
Vice President, the Secretary or the Treasurer of the Fund issues appropriate
oral or facsimile instructions to Custodian and an appropriate officers'
certificate is received by Custodian within two business days thereafter.
B. Custodian is hereby authorized to endorse and collect all checks,
drafts or other orders for the payment of money received by Custodian for the
account of the Fund.
C. Custodian shall, upon receipt of proper instructions, make federal
funds available to the Fund as of specified times agreed upon from time to
time by the Fund and the custodian in the amount of checks received in payment
for shares of the Fund which are deposited into the Fund's account.
4. Segregated Accounts
Upon receipt of proper instructions, the Custodian shall establish and
maintain a segregated account(s) for and on behalf of the portfolio, into
which account(s) may be transferred cash and/or securities.
5. Transfer, Exchange, Redelivery, etc. of Securities
Custodian shall have sole power to release or deliver any securities of
the Fund held by it pursuant to this Agreement. Custodian agrees to transfer,
exchange or deliver securities held by it hereunder only:
(a) for sales of such securities for the account of the Fund upon
receipt by Custodian of payment therefor;
(b) when such securities are called, redeemed or retired or otherwise
become payable;
(c) for examination by any broker selling any such securities in
accordance with "street delivery" custom;
(d) in exchange for, or upon conversion into, other securities alone or
other securities and cash whether pursuant to any plan of merger,
consolidation, reorganization, recapitalization or readjustment, or otherwise;
(e) upon conversion of such securities pursuant to their terms into
other securities;
(f) upon exercise of subscription, purchase or other similar rights
represented by such securities;
(g) for the purpose of exchanging interim receipts or temporary
securities for definitive securities;
(h) for the purpose of redeeming in kind shares of common stock of the
Fund upon delivery thereof to Custodian; or
(i) for other proper corporate purposes.
As to any deliveries made by Custodian pursuant to items (a), (b), (d),
(e), (f) and (g), securities or cash receivable in exchange therefor shall be
deliverable to Custodian.
Before making any such transfer, exchange or delivery, Custodian shall
receive (and may rely upon) an officers' certificate requesting such transfer,
exchange or delivery, and stating that it is for a purpose permitted under the
terms of items (a), (b), (c), (d), (e), (f), (g), or (h) of this Section 5 and
also, in respect of item (i), upon receipt of an officers' certificate
specifying the securities to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made, provided, however, that an officers' certificate need not
precede any such transfer, exchange or delivery of a money market instrument,
or any other security with same or next-day settlement, if the President, a
Vice President, the Secretary or the Treasurer of the Fund issues appropriate
oral or facsimile instructions to Custodian and an appropriate officers'
certificate is received by Custodian within two business days thereafter.
6. Custodian's Acts Without Instructions
Unless and until Custodian receives an officers' certificate to the
contrary, Custodian shall: (a) present for payment all coupons and other
income items held by it for the account of the Fund, which call for payment
upon presentation and hold the cash received by it upon such payment for the
account of the Fund; (b) collect interest and cash dividends received, with
notice to the Fund, for the account of the Fund; (c) hold for the account of
the Fund hereunder all stock dividends, rights and similar securities issued
with respect to any securities held by it hereunder; and (d) execute, as agent
on behalf of the Fund, all necessary ownership certificates required by the
Internal Revenue Code or the Income Tax Regulations of the United States
Treasury Department or under the laws of any state now or hereinafter in
effect, inserting the Fund's name on such certificates as the owner of the
securities covered thereby, to the extent it may lawfully do so.
7. Registration of Securities
Except as otherwise directed by an officers' certificate, Custodian shall
register all securities, except such as are in bearer form, in the name of a
registered nominee of Custodian as defined in the Internal Revenue Code and
any Regulations of the Treasury Department issued hereunder or in any
provision of any subsequent federal tax law exempting such transaction from
liability for stock transfer taxes, and shall execute and deliver all such
certificates in connection therewith as may be required by such laws or
regulations or under the laws of any state. Custodian shall use its best
efforts to the end that the specific securities held by it hereunder shall be
at all times identifiable in its records.
The Fund shall from time to time furnish to Custodian appropriate
instruments to enable Custodian to hold or deliver in proper form for
transfer, or to register in the name of its registered nominee, any securities
which it may hold for the account of the Fund and which may from time to time
be registered in the name of the Fund.
8. Voting and Other Action
Neither Custodian nor any nominee of Custodian shall vote any of the
securities held hereunder by or for the account of the Fund, except in
accordance with the instructions contained in an officers' certificate.
Custodian shall deliver, or cause to be executed and delivered, to the
Corporation all notices, proxies and proxy soliciting materials with relation
to such securities, such proxies to be executed by the registered holder of
such securities (if registered otherwise than in the name of the Fund), but
without indicating the manner in which such proxies are to be voted.
9. Transfer Tax and Other Disbursements
The Fund shall pay or reimburse Custodian from time to time for any
transfer taxes payable upon transfers of securities made hereunder, and for
all other necessary and proper disbursements and expenses made or incurred by
Custodian in the performance of this Agreement.
Custodian shall execute and deliver such certificates in connection with
securities delivered to it or by it under this Agreement as may be required
under the provisions of the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, or under the laws of any state, to
exempt from taxation any exemptable transfers and/or deliveries of any such
securities.
10. Concerning Custodian
Custodian shall be paid as compensation for its services pursuant to this
Agreement such compensation as may from time to time be agreed upon in writing
between the two parties. Until modified in writing, such compensation shall
be as set forth in Exhibit A attached hereto.
Custodian shall not be liable for any action taken in good faith upon any
certificate herein described or certified copy of any resolution of the Board,
and may rely on the genuineness of any such document which it may in good
faith believe to have been validly executed.
The Fund agrees to indemnify and hold harmless Custodian and its nominee
from all taxes, charges, expenses, assessments, claims and liabilities
(including counsel fees) incurred or assessed against it or by its nominee in
connection with the performance of this Agreement, except such as may arise
from its or its nominee's own negligent action, negligent failure to act or
willful misconduct. Custodian is authorized to charge any account of the Fund
for such items.
In the event of any advance of cash for any purpose made by Custodian
resulting from orders or instructions of the Fund, or in the event that
Custodian or its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the
performance of this Agreement, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund shall
be security therefore.
11. Subcustodians
Custodian is hereby authorized to engage another bank or trust company
as a Subcustodian for all or any part of the Fund's assets, so long as any
such bank or trust company is a bank or trust company organized under the laws
of any state of the United States, having an aggregate capital, surplus and
undivided profit, as shown by its last published report, of not less than Two
Million Dollars ($2,000,000) and provided further that, if the Custodian
utilizes the services of a Subcustodian, the Custodian shall remain fully
liable and responsible for any losses caused to the Fund by the Subcustodian
as fully as if the Custodian was directly responsible for any such losses
under the terms of the Custodian Agreement.
Notwithstanding anything contained herein, if the Fund requires the
Custodian to engage specific Subcustodians for the safekeeping and/or clearing
of assets, the Fund agrees to indemnify and hold harmless Custodian from all
claims, expenses and liabilities incurred or assessed against it in connection
with the use of such Subcustodian in regard to the Fund's assets, except as
may arise from its own negligent action, negligent failure to act or willful
misconduct.
12. Reports by Custodian
Custodian shall furnish the Fund periodically as agreed upon with a
statement summarizing all transactions and entries for the account of the
Fund. Custodian shall furnish to the Fund, at the end of every month, a list
of the portfolio securities showing the aggregate cost of each issue. The
books and records of Custodian pertaining to its actions under this Agreement
shall be open to inspection and audit at reasonable times by officers of, and
of auditors employed by, the Fund.
13. Termination or Assignment
This Agreement may be terminated by the Fund, or by Custodian, on ninety
(90) days notice, given in writing and sent by registered mail to Custodian at
One Battery Park Plaza, New York, New York 10004, or to the Fund at 1100 North
Glebe Road, Suite 1040, Arlington, Virginia 22201, as the case may be.
Upon any termination of this Agreement, pending appointment of a
successor to Custodian or a vote of the shareholders of the Fund to dissolve
or to function without a custodian of its cash, securities and other property,
Custodian shall not deliver cash, securities or other property of the Fund to
the Fund, but may deliver them to a bank or trust company of its own
selection, having an aggregate capital, surplus and undivided profits, as
shown by its last published report of not less than Two Million Dollars
($2,000,000) as a Custodian for the Fund to be held under terms similar to
those of this Agreement, provided, however, that Custodian shall not be
required to make any such delivery or payment until full payment shall have
been made by the Fund of all liabilities constituting a charge on or against
the properties then held by Custodian or on or against Custodian, and until
full payment shall have been made to Custodian of all its fees, compensation,
costs and expenses, subject to the provisions of Section 10 of this
Agreement.
This Agreement may not be assigned by Custodian without the consent of
the Fund, authorized or approved by a resolution of its Board of Directors.
14. Deposits of Securities in Securities Depositories
No provision of this Agreement shall be deemed to prevent the use by
Custodian of a central securities clearing agency or securities depository,
provided, however, that Custodian and the central securities clearing agency
or securities depository meet all applicable federal and state laws and
regulations, and the Board of Directors of the Fund approves by resolution the
use of such central securities clearing agency or securities depository.
15. Records
To the extent that Custodian in any capacity prepares or maintains any
records required to be maintained and preserved by the Fund pursuant to the
provisions of the Investment Company Act of 1940, as amended, or the rules
and regulations promulgated thereunder, Custodian agrees to make any such
records available to the Fund upon request and to preserve such records for
the periods prescribed in Rule 31a-2 under the Investment Company Act of 1940,
as amended.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and their respective corporate seals to be affixed hereto as of the
date first above-written by their respective officers thereunto duly
authorized.
Executed in several counterparts, each of which is an original.
Attest: ERNST & COMPANY
Daniel J. Cristofano, Secretary By: William P. Behrens, CEO
Attest: AEGIS VALUE FUND, INC.
Paul Gambal, Secretary By: William S. Berno, President
Jackson & Campbell, P.C.
1120 Twentieth St. N.W.
South Tower
Washington, D.C. 20036-3437
(202)457-1600
Fax: (202)457-1678
February 11, 1998
Aegis Value Fund, Inc.
1100 N. Glebe Road, Suite 1040
Arlington, VA 22201
Ladies and Gentlemen:
We have acted as special counsel to Aegis Value Fund, Inc. ("Company") in
connection with the rendering of certain opinions under Maryland law in
connection with the Company's filing of a Registration Statement with the
Securities and Exchange Commission under the Securities Act of 1933 and/or the
Investment Company Act of 1940 ("Registration Statement").
In so acting we have examined and relied upon originals or copies of such
records, documents, certificates and other instruments of the Company as in
our judgment are necessary or appropriate to enable us to render the opinions
expressed below. Based on the foregoing and such examination of the law as we
have deemed necessary, we are of the opinion that:
(1) The Company has been duly formed and is validly existing as a
corporation under the laws of the State of Maryland.
(2) Upon the effectiveness of the Registration Statement
under applicable federal and state securities laws and the payment of the
consideration specified in the Registration Statement, the securities being
registered by the Company, when sold, will be legally issued, fully paid and
non-assessable.
The foregoing is limited to the matters expressly set forth herein and
excludes all other matters, including, but not limited to, the content,
accuracy or completeness of the Registration Statement or any amendments
thereto. No opinions are to be implied or may be inferred beyond what is
expressly stated.
Sincerely yours,
JACKSON & CAMPBELL, P.C.
BY: DAVID H. COX
February 4, 1998
Aegis Value Fund, Inc.
1100 N. Glebe Rd., Suite 1040
Arlington, VA 22201
Dear Sir:
I am pleased to be an initial investor in the Aegis Value Fund, Inc.
I am committing to invest $20,000.00 in shares of the Fund at the time it
commences operations.
This capital is intended as a long-term investment in the Fund, and it is
not a temporary investment for the mere purpose of qualifying the Fund to
become effective.
I look forward to making this initial investment and adding to it in the
future.
Sincerely,
William S. Berno
February 4, 1998
Aegis Value Fund, Inc.
1100 N. Glebe Rd., Suite 1040
Arlington, VA 22201
Dear Sir:
I am pleased to be an initial investor in the Aegis Value Fund, Inc.
I am committing to invest $20,000.00 in shares of the Fund at the time it
commences operations.
This capital is intended as a long-term investment in the Fund, and it is
not a temporary investment for the mere purpose of qualifying the Fund to
become effective.
I look forward to making this initial investment and adding to it in the
future.
Sincerely,
Scott L. Barbee
February 4, 1998
Aegis Value Fund, Inc.
1100 N. Glebe Rd., Suite 1040
Arlington, VA 22201
Dear Sir:
I am pleased to be an initial investor in the Aegis Value Fund, Inc.
I am committing to invest $20,000.00 in shares of the Fund at the time it
commences operations.
This capital is intended as a long-term investment in the Fund, and it is
not a temporary investment for the mere purpose of qualifying the Fund to
become effective.
I look forward to making this initial investment and adding to it in the
future.
Sincerely,
Paul Gambal
February 16, 1998
Aegis Value Fund, Inc.
1100 N. Glebe Rd., Suite 1040
Arlington, VA 22201
Dear Sir:
I am pleased to be an initial investor in the Aegis Value Fund, Inc.
I am committing to invest $10,000.00 in shares of the Fund at the time it
commences operations.
This capital is intended as a long-term investment in the Fund, and it is
not a temporary investment for the mere purpose of qualifying the Fund to
become effective.
I look forward to making this initial investment and adding to it in the
future.
Sincerely,
Eskander Matta
February 23, 1998
Aegis Value Fund, Inc.
1100 N. Glebe Rd., Suite 1040
Arlington, VA 22201
Dear Sir:
I am pleased to be an initial investor in the Aegis Value Fund, Inc.
I am committing to invest $20,000.00 in shares of the Fund at the time it
commences operations.
This capital is intended as a long-term investment in the Fund, and it
is not a temporary investment for the mere purpose of qualifying the Fund to
become effective.
I look forward to making this initial investment and adding to it in the
future.
Sincerely,
William R. Morris, III
March 9, 1998
Aegis Value Fund, Inc.
1100 N. Glebe Rd., Suite 1040
Arlington, VA 22201
Dear Sir:
I am pleased to be an initial investor in the Aegis Value Fund, Inc.
I am committing to invest $10,000.00 in shares of the Fund at the time it
commences operations.
This capital is intended as a long-term investment in the Fund, and it is
not a temporary investment for the mere purpose of qualifying the Fund to
become effective.
I look forward to making this initial investment and adding to it in the
future.
Sincerely,
Edward P. Faberman
AEGIS VALUE FUND, INC.
PROTOTYPE RETIREMENT TRUST
TRUSTEE:
DELAWARE CHARTER GUARANTEE & TRUST CO.
P.O. BOX 8963
WILMINGTON, DE 19899-8963
(302)995-2131
SELF-DIRECTED INDIVIDUAL RETIREMENT TRUST
ARTICLE I-INTRODUCTION
This Trust is established under the Code in order to create a fund out of
which benefits shall be paid to individuals participating herein upon their
retirement, disability, or other termination of employment; or in the event of
death, to their Beneficiary.
ARTICLE II-DEFINITIONS
As used in this Trust, the following terms shall have the meaning
hereinafter set forth, unless a different meaning is plainly required by the
context:
2.1 Act shall mean the Employee Retirement Income Security Act of 1974 as
amended.
2.2 Application shall mean the Application by which this Trust, as may be
amended form time to time, is adopted by the Grantor. The statements
contained therein shall be part of this Trust, as fully set forth herein.
2.3 Beneficiary shall mean the person or persons designated by the Grantor in
the Application.
2.4 Code shall mean the Internal Revenue Code of 1986, as amended from time
to time.
2.5 Compensation means wages, salaries, professional fees, or other amounts
derived from or received for personal services actually rendered (including,
but not limited to commissions paid salesmen, compensation for services on the
basis of a percentage of profits, commissions on insurance premiums, tips, and
bonuses) and includes earned income, as defined in section 401c(2) (reduced by
the deduction the self employed individual takes for contributions made to a
self-employed retirement plan).
For purposes of this definition, section 401c(2) shall be applied as if
the term trade or business for purposes of section 1402 included service
described in subsection c6.
Compensation does not include amounts derived from or received as
earnings or profits from property (including but not limited to interest and
dividends) or amounts not includible in gross income.
Compensation also does not include any amount received as a pension or
annuity or as deferred compensation. The term "compensation" shall include
any amount includible in the individual's gross income under section 71 with
respect to a divorce or separation instrument described in subparagraph (A)
of section 71(b)(2).
2.6 Disability shall mean the Grantor's inability to engage in any
substantial gainful activity by reason of any medically determinable physical
or mental impairment which can be expected to result in death or to be
long-continued and indefinite duration and as further described in Code
section 72(m)(7).
2.7 Individual shall mean any person for whom contributions have been
received by this Trust.
2.8 Grantor shall mean that person for whom contributions are made to this
Trust, and if a Spousal IRA it shall also mean the spouse.
2.9 Trust Year shall mean the calendar year from January first to December
thirty-first each year.
2.10 Regulations shll mean Federal income tax regulations, as amended from
time to time.
2.11 Trustee shall mean the Delaware Charter Guarantee & Trust Company
(Guarantee & Trust Company) and any successor trustees under this Trust.
2.12 Trust shall mean this Trust established hereunder as it may from time
to time hereafter be amended including the Application which is part of this
Trust.
ARTICLE III-ELIGIBILITY
3.1 An eligible Individual is any person who received Compensation for
services rendered (including earned income of a self-employed individual)
during the taxable year and is under 70 1/2. An individual making a rollover
contribution (as permitted by Code Section 402c, 403a4, 403b8, or 408d3), or
an employer contribution to a Simplified Employee Pension (SEP) as described
in Code section 408(k) is also an eligible individual.
3.2 As a condition of the participation, the Grantor shall be required to
consent, which consent need not be in writing, to the terms and conditions of
this Trust, as may be amended from time to time.
ARTICLE IV-CONTRIBUTIONS
4.1 Each taxable year, an Individual may contribute on a periodic basis to
this Trust an amount not to exceed the lesser of two thousand dollars ($2000)
or one hundred percent (100%) of Compensation, or four thousand dollars
($4000) if a Spousal IRA (but not to exceed $2000 to any one account) or such
limits as may be prescribed by law. Under a Simplified Employee Pension (SEP)
as described in section 408(k) an Individual's tax deduction for his/her
Employer's contribution to this Trust can not be in excess of the lesser of
fifteen percent (15%) or twenty four thousand dollars ($24,000) or such limits
as prescribed by law of the Individual's Compensation for any taxable year.
4.2 Contributions made to this Trust shall be in cash. Grantor will specify
investments to be made with contributions. All contributions so received
together with the income therefrom and any other increment thereon
(hereinafter referred to as the "Trust") shall be held, managed and
administered by the Trustee pursuant to the terms of this Trust without
distinction between principal and income and without liability for the payment
of interest thereon. The Trustee shall not be responsible for the computation
and collection of any contributions under the Trust and shall be under no duty
to determine whether the amount of any contribution is in accordance with the
Trust.
4.3 Except in the case of a rollover contribution as that term is described
in Article VII, the Trustee will only accept cash and will not accept
contributions on behalf of the Grantor in excess of $2000 or $4000 if a
Spousal IRA, or such limits as may be prescribed by law for any taxable year.
In the case of a SEP as described in Section 408(k), the Trustee will not
accept Employer contributions on behalf of the Individual Grantor in excess of
$24,000 or such limits as may be prescribed by law for any taxable year.
4.4 Contributions made to this Trust by the Grantor shall be made to, or for
the account of, the Trustee no later than April 15 of the year following the
year to which the contribution relates. Contributions by an Employer to a SEP
must be made no later than three and one half months after the close of the
Trust Year.
4.5 Contributions made to this Trust by or for a Grantor shall be fully
vested and nonforfeitable at all times.
4.6 The Grantor shall direct the Trustee with respect to the investment of
all contributions and the earnings therefrom under the Trust. Such direction
shall be limited to securities obtainable through the Brokerage Firm
designated in the Application (or any other stockbroker selected by the
Grantor and approved by the Trustee) "over the counter" or on a recognized
exchange without any duty to diversify.
The Trustee may leave earnings on any securities so obtained with the
Brokerage Firm designated in the Application (or any other stockbroker
selected by the Grantor and approved by the Trustee) for reinvestment in
accordance with the instructions of the Grantor. Notwithstanding the above,
Grantor may direct contributions and earnings to be placed in a savings
account or a Certificate of Deposit with an institution approved by the
Trustee. See Article IX for Investments and Administration.
4.7 A Grantor shall not make contributions to this Trust in or after the
taxable year during which the Grantor attains age 70 1/2; however,
contributions can be made for the spouse under age 70 1/2.
4.8 If a Grantor makes a contribution to this Trust which exceeds the lesser
of one hundred percent (100%) of Compensation or two thousand dollars ($2000)
or four thousand dollars ($4000) if a Spousal IRA (but not to exceed $2000 to
any one account) or the lesser of fifteen percent (15%) or twenty four
thousand dollars ($24,000) if a SEP or such limits as may be prescribed by law
and it is deemed that the portion of such contribution which exceeds these
limitations is not deductible for Federal income tax purposes, then the
non-deductible portion may be withdrawn by the Grantor. Such withdrawal must
be made prior to April 15 on which the Grantor is required to file his/her
Federal income tax return.
4.9 Any income earned on the nondeductible portion of such contributions must
be withdrawn by the Grantor at the same time.
ARTICLE V-DISABILITY BENEFITS
If a Grantor becomes disabled prior to age 59 1/2, such Grantor is entitled
to his/her entire interest which shall be paid to the Grantor becoming
disable within the meaning of Code section 72(m)(7).
ARTICLE VI-DISTRIBUTION
6.1 Unless the Grantor dies, is disabled (as defined in section 72(m) of the
Code), or reaches age 59 1/2, any amount which is distributed from the account
(and is not rolled over into another trust as described in Code Section 408d3)
is subject to a 10% non-deductible penalty tax as described in Code Section
72(t).
The Trustee must receive from the Grantor a statement certifying any
exception to the penalty tax as described in Code Section 72t2.
Notwithstanding any provision of this Agreement to the contrary, the
distribution of an individual's interest shall be made in accordance with the
minimum distribution requirements of section 408a6 or section 408b3 of the
Code and the regulations thereunder, including the incidental death benefit
provision of section 1.401(a)(9)-2 of the proposed regulations, all of which
are herein incorporated by reference.
6.2 The Grantor's entire interest in the account must be distributed, or
begin to be distributed, by the Grantor's required beginning date, which is
the April 1 following the calendar year in which the Grantor reaches
age 70 1/2. For each succeeding year, a distribution must be made on or
before December 31. By the required beginning date, the Grantor may elect to
have the balance in the account distributed in one of the following forms:
(a) a single sum payment;
(b) equal or substantially equal payments over the life of the Grantor;
(c) equal or substantially equal payments over the lives of the Grantor
and his or her designated Beneficiary;
(d) equal or substantially equal payments over a specified period that
may not be longer than the Grantor's life expectancy;
(e) equal or substantially equal payments over a specified period that
may not be longer than the joint life and last survivor expectancy of the
Grantor and his/her designated Beneficiary.
Notwithstanding that distributions may have commenced pursuant to one of
the above options, the Grantor may receive a distribution of the balance in
the Trust at any time upon written notice to the Trustee.
The amount to be distributed each year, beginning with the first calendar
year for which distributions are required and then for each succeeding
calendar year, shall not be less than the quotient obtained by dividing the
individual's benefit by the lesser of (1) the applicable life expectancy or
(2) if the individual's spouse is not the designated beneficiary, the
applicable divisor determined from the table set forth in Q&A-4 or Q&A-5, as
applicable, of section 1.401(a)(9)-2 of the proposed Income Tax Regulations.
Distributions after the death of the individual shall be distributed
using the applicable life expectancy as the relevant divisor without regard
to proposed regulations section 1.401(a)(9)-2.
6.3 If, in any taxable year after which a Grantor attains the age of 70 1/2,
all or a portion of the entire interest of the Grantor is less than the
minimum amount required to be distributed under this Article during such year,
a fifty percent (50%) nondeductible excise tax, payable by the Individual,
shall be imposed on the amount by which the minimum amount required to be
distributed during such year exceeds the amount actually distributed during
the year.
6.4 Subject to the provisions hereof, the Trustee shall, from time to time on
the written directions of the Grantor in accordance with the provisions of the
Trust, make distributions out of the Trust to such Individuals, in such
manner, in such amounts, and for such purposes as may be specified in such
directions.
6.5 The Trustee shall not be liable to the proper application of any part of
the Trust if distributions are made in accordance with the written directions
of the Individual as herein provided, nor shall the Trustee be responsible for
the adequacy of the Trust to meet and discharge any and all distributions and
liabilities.
6.6 An individual may satisfy the minimum distribution requirements under
sections 408a6 and 408b3 of the Code by receiving a distribution from one IRA
that is equal to the amount required to satisfy the minimum distribution
requirements for two or more IRAs. For this purpose, the owner of two or more
IRAs may use the "alternative method" described in Notice 88-38, 1988-1
C.B. 524, to satisfy the minimum distribution requirements described above.
6.7 If the Grantor fails to receive any of the methods of distribution
described above on or before the first day of April following the calendar
year in which he/she attains the age of 70 1/2, distribution to the Grantor
will be made prior to the close of such taxable year by a single sum payment.
6.8 Life expectancy is computed by use of the expected return multiples in
Tables V and VI of section 1.72-9 of the Income Tax Regulations. Unless
otherwise elected by the individual by the time distributions are required to
begin, life expectancies shall be recalculated annually. Such election shall
be irrevocable by the individual and shall apply to all subsequent years.
The life expectancy of a non-spouse beneficiary may not be recalculated.
Instead, life expectancy will be calculated using the attained age of such
beneficiary during the calendar year in which the individual attains age
70 1/2, and payments for subsequent years shall be calculated based on such
life expectancy reduced by one for each calendar year which has elapsed since
the calendar year life expectancy was first calculated.
6.9 If the Grantor dies before his or her entire interest is distributed, the
entire remaining interest will be distributed as follows:
(a) If the Grantor dies on or after distributions have begun under
Article 6.2, the entire remaining interest must be distributed at least as
rapidly as provided under Article 6.2.
(b) If the Grantor dies before distributions have begun under Article
6.2, the entire remaining interest must be distributed as elected by the
Grantor or, if the Grantor has not so elected, as elected by the Beneficiary
or Beneficiaries as follows:
1. by December 31st of the year containing the fifth anniversary
of the Grantor's death; or
2. in equal or substantially equal payments over the life or life
expectancy of the designated Beneficiary or Beneficiaries starting by
December 31st of the year following the year of the Grantor's death. If,
however, the Beneficiary is the Grantor's surviving spouse, then this
distribution is not required to begin before December 31st of the year in
which the Grantor would have turned 70 1/2.
(c) If the Beneficiary is the Grantor's surviving spouse, the spouse may
treat this account as his/her own IRA. This election will deem to have been
made if such spouse makes a regular IRA contribution, makes a rollover to or
from such account, or fails to elect any of the above options.
(d) Life expectancy is computed by use of the expected return multiples
in Tables V and VI of section 1.72-9 of the Income Tax Regulations. For
purposes of distributions beginning after the individual's death, unless
otherwise elected by the surviving spouse by the time distributions are
required to begin, life expectancies shall be recalculated annually. Such
election shall be irrevocable by the surviving spouse and shall apply to all
subsequent years.
In the case of any other designated beneficiary, life expectancies shall
be calculated using the attained age of such beneficiary during the calendar
year in which distributions are required to begin pursuant to this section,
and payments for any subsequent calendar year shall be calculated based on
such life expectancy reduced by one for each calendar year which has elapsed
since the calendar year life expectancy was first calculated.
(e) Distributions under this section are considered to have begun if the
distributions are made on account of the individual reaching his or her
required beginning date. If the individual receives distributions prior to
the required beginning date and the individual dies, distributions will not
be considered to have begun.
ARTICLE VII-ROLLOVER CONTRIBUTIONS
7.1 The Trustee may accept additional cash contributions on behalf of the
Grantor for a tax year of the Grantor. The total cash contributions are
limited as described in Article 4.1 unless the contribution is a rollover
contribution described in Code Section 402c (but only after December 31,
1992), 403a4, 403b8, 408d3, or any employer contribution to a simplified
employee pension plan described in section 408k.
7.2 If this Trust or an employee's individual retirement account forming
part of the employer's retirement trust has been disqualified because the
Individual and/or his/her Beneficiary engaged in a prohibited transaction as
defined in Act Section 406, this Trust or such employee's account may not be
rolled over to another individual retirement trust.
7.3 Only cash or other property from a plan as described above may be rolled
over from such plan to this Trust.
7.4 If cash or other property attributable to contributions made by an
employee to a plan meeting the requirements of Section 401a of the Code is
rolled over from such plan to this Trust, such cash or property shall be
treated as an excess contribution and shall be subject to the excise tax on
excess contributions.
7.5 In the event of rollovers from this Trust to another individual
retirement trust meeting the requirements of Section 408(a) of the Code or to
an Annuity Contract meeting the requirements of Section 408(b) of the Code,
such rollovers shall only be made once a year.
7.6 A Grantor may rollover or transfer the entire interest, annuity contract,
cash surrender values of insurance policies to another individual retirement
trust meeting the requirements of Section 408(a) of the Code or to an annuity
contract meeting the requirements of Section 408(b) of the Code.
7.7 Such rollover must be completed within sixty (60) days after the day on
which the Grantor receives the payment or distribution.
ARTICLE VIII-DESIGNATION OF BENEFICIARY
8.1 Grantor shall designate a Beneficiary in the Application. Grantor may
change the designation by filing a written notice with the Trustee.
8.2 Such Beneficiary shall be entitled to the Grantor's entire interest in
the event of death of the Grantor prior to complete distribution of the entire
interest.
8.3 If the designation of a Beneficiary has not been made by the Grantor at
the time of the death of the Grantor, the Beneficiary shall be the spouse of
the Grantor, or if there is no spouse living at the time of the Grantor's
death, the Beneficiary shall be the estate of the Grantor.
8.4 If the Beneficiary designated to receive payments hereunder is declared
incapacitated or incompetent, the Trustee may make such payment to a court
appointed guardian or legally appointed representative. The receipt of such
payment by these individuals shall be a full and complete discharge to the
Trustee for any sums so paid.
8.5 If the Trustee is unable to make a payment to a Beneficiary hereunder
within six months after any such payment is due, because the Trustee cannot
ascertain the whereabouts or the identity of the Beneficiary by mailing to the
last known address shown on the Trustee's records, and such Beneficiary has
not written claim for such payment before the expiration of said six-month
period, then the Trustee may deposit the Beneficiary's funds in a special
savings account or money market mutual fund established in the name of the
Trustee for such Beneficiary.
ARTICLE IX-INVESTMENTS AND ADMINISTRATION
9.1 The Trustee shall have the power and authority in the administration of
this Trust to do all acts, including by way of illustration, but not in
limitation of the powers conferred by law, the following:
(a) Pursuant to the Grantor's directions or agent, to invest and
reinvest all or any part of the Trust in securities obtainable through the
Brokerage Firm designated in the Application, either "over the counter" or on
a recognized exchange, and to invest in mutual funds, savings media and any
lawful trust investment which is administratively acceptable to the Trustee
without any duty to diversify and without regard to whether such property is
authorized by the laws of any jurisdiction for trust investment.
(b) To hold part or all of the Trust Fund uninvested or, pursuant to
directions of the Grantor to place the same in a savings account approved by
the Trustee or purchase a Certificate of Deposit with an institution approved
by the Trustee. However, the Trustee may, but need not, establish a program
under which cash deposits in excess of a minimum set by it will periodically
be invested in a savings account or money market mutual fund without direction
of the Grantor or his/her agent and the terms of any such program may be
determined and altered at the discretion of the Trustee.
(c) To employ suitable agents and counsel and to pay their reasonable
expenses and compensations.
(d) To vote in person or by proxy upon securities held by the Trustee
and to delegate its discretionary powers.
(e) Pursuant to the Grantor's directions or agent, to write covered
listed call options against existing positions and to liquidate or close such
option contracts and the purchase of put options on existing long positions
(the same securities cannot be used to simultaneously cover more than one
position) to exercise conversion privileges or rights to subscribe for
additional securities and to make payments therefore.
(f) To consent to or participate in dissolutions, reorganizations,
consolidations, mergers, sales, leases, mortgages, transfers or other changes
affecting securities held by the Trustee.
(g) To leave any securities or cash for safekeeping or on deposit, with
or without interest, with such banks, brokers and other custodians as the
Trustee may select, and to hold any securities in bearer form or in the name
of the banks, brokers and other custodians or in the name of the Trustee
without qualification or description or in the name of any nominee.
(h) To invest contributions for Grantor through the facilities of the
Brokerage Firm designated in the Application (or equivalent facilities
maintained by any other stockbroker selected by the Individual and approved by
the Trustee).
(i) The Brokerage Firm named in the Application is designated by the
Grantor with authority to provide the Trustee with instructions, via
confirmations or otherwise, implementing his/her directions to the Brokerage
Firm to purchase and sell securities for his/her account. Prior to the entry
of any orders to purchase or sell securities in this account, Grantor shall
approve beforehand all such orders and direct the Brokerage Firm to implement
his/her instructions. Grantor authorizes the Trustee to honot trades within
his/her account without obligation to verify prior authorizations of such
trades. The Brokerage Firm shall receive advices of available cash in this
account and shall forward confirmation of purchases and sales to the Trustee.
Selling short and executing purchases in an amount greater than available cash
are prohibited transactions. Investments in life insurance and collectibles
are not permitted. All investments outside of the brokerage account shall be
accompanied by additional written instructions.
9.2 Notwithstanding anything to the contrary contained in this Trust, the
Trustee shall not make any investment or dispose of any investment held in the
Trust, except upon the direction of the Grantor or his/her agent. No
investment will be made in life insurance contracts nor will any assets be
commingled.
9.3 The Trustee shall be under no duty to question any such direction of the
Individual, to review any securities or other property held in the Trust, or
to make suggestions to the Individual with respect to the investment,
retention or disposition of any assets held in the Trust.
9.4 In accordance with Section 404c under the Act and being that the Grantor
exercises control over his/her assets in this Trust which provides for his/her
individual account; such Grantor or their Beneficiary shall not be deemed to
be a fiduciary by reason of such exercise, and no person who is otherwise a
fiduciary shall be liable under this Trust for any loss, or by reason of any
breach, which results from such Grantor's exercise of control.
9.5 The Grantor may appoint in writing an Investment Manager or Managers to
manage (including power to acquire and dispose of) any assets of this Trust.
Any such Investment Manager shall be registered as an Investment Adviser
under the Investment Advisers Act of 1940. If investment of the Trust is to
be directed by an Investment Manager, the Grantor shall deliver to the Trustee
a copy of the instruments appointing the Investment Manager and evidencing the
Investment Manager's acceptance of such appointment, an acknowledgement by the
Investment Manager that it is a fiduciary of the Trust, and a certificate
evidencing the Investment Manager's current registration under said Act. The
Trustee shall be fully protected in relying upon such instruments and
certificate until otherwise notified in writing by the Grantor.
The Trustee shall follow the directions of the Investment Manager
regarding the investment and reinvestment of the Trust, or such portion
thereof as shall be under management by the Investment Manager. The Trustee
shall be under no duty or obligation to review any investment to be acquired,
held or disposed of pursuant to such directions nor to make any
recommendations with respect to the disposition or continued retention of any
such investment or the exercise or non-exercise of the powers.
Therefore, and in accordance with Section 405d1 under the Act the Trustee
shall have no liability or responsibility for acting or not acting pursuant to
the direction of, or failing to act in the absence of any direction from, the
Investment Manager, unless the Trustee knows that by such action or failure to
act it would be itself committing or participating in a breach of fiduciary
duty by the Investment Manager.
The Grantor hereby agrees to indemnify the Trustee and hold it harmless
from and against any claim or liability which may be asserted against the
Trustee by reason of its acting or not acting pursuant to any direction from
the Investment Manager or failing to act in the absence of any such direction.
The Investment Manager at any time and from time to time may issue orders
for the purchase or sale of securities directly to a broker; and in order to
facilitate such transaction, the Trustee upon request shall execute and
deliver appropriate trading authorizations. Written notification of the
issuance of each such order shall be given promptly to the Trustee by the
Investment Manager, and the execution of each such order shall be confirmed by
written advice via confirms or otherwise to the Trustee by the broker.
In the event that an Investment Manager should resign or be removed by
the Grantor, the Grantor shall manage the investments pursuant to this
Agreement unless and until the Trustee shall be notified of the appointment
of another Investment Manager with respect thereto as provided in this
Article.
The Trustee shall be under no duty to question any such direction of the
Grantor or Investment Manager, to review any securities or other property held
in the Trust, or to make suggestions to the Grantor, or Investment Manager,
with respect to the investment, retention or disposition of any assets held in
the Trust Fund.
9.6 Notwithstanding anything herein contained to the contrary, the Trustee
shall not lend any part of the corpus or income of the Trust to, pay any
compensation for personal services rendered to the Trust to, make any part of
its services available on a preferential basis to, or acquire for the Trust
any property, other than cash, from or sell any property to any Grantor, or to
any member of a Grantor's family, or to a corporation controlled by any
Grantor through the ownership directly or indirectly of 50 percent or more of
the total combined voting power of all classes of stock entitled to vote or 50
percent or more of the total value of shares of all classes of stock of such
corporation.
9.7 All contributions made by the Grantor and all investments made with such
contributions and the earnings thereon shall be credited to an account
maintained for him/her by the Trustee.
Such account shall reflect the amounts contributed by the Individual.
With respect to investments of contributions and the earnings thereon the
account maintained by the Trustee may consist of copies of regularly issued
broker statements to the Trustee.
9.8 Within 90 days from the close of each Trust Year, the Trustee shall
render an accounting valuating the assets at fair market value, to the
Individual which account may consist of copies of regularly issued
broker-dealer statements to the Trustee and copies of insurance company
summary account statements supplied to the Trustee. In the absence of the
filing in writing with the Trustee by the Grantor of exceptions or objections
to any such account within sixty (60) days after the mailing of such
accounting, the Grantor shall be deemed to have approved such account; and in
such case, or upon the written approval of the Grantor of any such account,
the Trustee shall be released, relieved and discharged with respect to all
matters and things set forth in such account as though such account had been
settled by the decree of a court of competent jurisdiction.
No person other than the Grantor may require an accounting or bring any
action against the Trustee with respect to the Trust or its actions as
Trustee.
The Trustee shall have the right at any time to apply to a court of
competent jurisdiction for judicial settlement of its accounts, for
determination of any questions of construction which may arise, or for
instructions. The only necessary party defendant to such action shall be the
Grantor except that the Trustee may, if it so elects, bring in as party
defendant any other person or persons.
9.9 The Trustee shall be fully protected in acting upon any instrument,
certificate, or paper believed by it to be genuine and to be signed or
presented by the proper person or persons, and the Trustee shall be under no
duty to make any investigation or inquiry as to any statement contained in any
such writing but may accept the same as conclusive evidence of the truth and
accuracy of the statements therein contained.
9.10 The Trustee shall be under no duty to question any direction of a
Grantor or his/her agent with respect to investments, to review any securities
or other property held in trust or to make suggestions to the Grantor or
his/her agent with respect to investment. The Trustee will not be liable for
any loss which may result by reason of investments made in accordance with the
directions of a Grantor or his/her agent.
9.11 Whenever the services of a stockbroker or a dealer are required, the
Trustee shall engage the Brokerage Firm designated in the Application
provided, however, the Trustee may in its discretion appoint another
stockbroker or dealer selected by the Grantor to handles investments in
securities under the Trust.
9.12 The surviving spouse and/or Beneficiary shall be bound by Article IX and
Trust regarding investments and administration of their interest. Provided
however should the Beneficiary be a minor or in the discretion of the Trustee
of unsound mind, the Trustee will liquidate the interest of such Beneficiary
and hold such interest in an interest bearing account or money market account
until distributed.
ARTICLE X-TRUSTEE COMPENSATION
10.1 The Trustee shall be paid such reasonable compensation as shall from
time to time be communicated to the Grantor by the Trustee, and such
compensation shall be chargeable to the Grantor. The Grantor hereby covenants
and agrees to pay the same.
10.2 The Trustee shall charge against the Grantor any taxes paid by it which
may be imposed upon the Trust or the income thereof or upon which the Trustee
is required to pay, as well as all expenses of administration of the Trust
including commissions and fees, including attorney fees. The Grantor hereby
covenants and agrees to pay the same.
10.3 In the even the Grantor shall at any time fail to pay the Trustee's
compensation, taxes and expenses, within a reasonable time after demand for
such payment has been made by the Trustee on the Grantor, the Trustee will
charge the Trust such fees, taxes and expenses and may liquidate such of the
assets of the Trust for such purposes as in its sole discretion it shall
determine. The custodian will collect such fees, taxes and expenses for the
Trustee as so directed by the Trustee.
Notwithstanding the provisions of Article IX hereof all payments under
this Article X and the liquidations of assets to obtain funds therefor may be
made without the approval or direction of the Grantor. If the Trust is not
sufficient to satisfy these fees, taxes and expenses, then the Trustee will
charge the Grantor for such unpaid fees, taxes and expenses.
ARTICLE XI-AMENDMENT AND TERMINATION
11.1 Each Grantor who adopts this Trust delegates to the Trustee the power
to amend this Trust, including any retroactive amendments, by submitting a
copy of such amendments to each Grantor, but only after receiving a favorable
ruling or determination letter from the Commissioner of Internal Revenue
Service that the Trust, as amended, continues to meet the requirements of
Section 408 of the Code. Each Individual shall be deemed to have consented to
any and all such amendments.
The Grantor shall be permitted to revoke this Trust in writing within a
period not to exceed seven (7) days after the date that this Trust was adopted
by the Grantor. In the event of such revocation, the Trustee will return the
entire account plus any Trustee fees as soon as practical.
11.2 An Individual or the Trustee shall not have the right to amend or
terminate this Trust in such a manner as would cause or permit all or part of
the entire interest of the Grantor to be diverted for purposes other than
their exclusive benefit or their Beneficiary. No Grantor shall have the right
to sell, assign, discount or pledge as collateral for a loan any asset of this
Trust.
11.3 An Individual shall have the right to terminate or partially terminate
this Trust, at any time and from time to time, by delivering to the Trustee a
signed copy of a statement of termination.
11.4 The Trustee may resign at any time upon thirty days' notice to the
Grantor. The Trustee may be removed at any time by the Grantor upon thirty
days' written notice to the Trustee. Upon resignation or removal of the
Trustee, the Grantor shall appoint a successor Trustee which shall have the
same powers and duties as are conferred upon the Trustee hereunder, and in
default thereof, such successor Trustee may be appointed by a court of
competent jurisdiction.
Upon the delivery by the resigning or removed Trustee to its successor
Trustee of all property of the Trust, less such reasonable amount as it shall
deem necessary to provide for its expenses, compensation and any taxes or
advances chargeable or payable out of the Trust, the successor Trustee shall
thereupon have the same powers and duties as are conferred upon the Trustee.
11.5 No successor Trustee shall have any obligation or liability with respect
to the acts or omissions of its predecessors.
The actual appointment and qualification of a successor Trustee to whom
the Trust assets may be transferred are conditions which must be fulfilled
before the resignation or removal of the Trustee shall become effective. The
transfer of the trust assets shall be made coincidentally with an accounting
by the resigned or removed Trustee and such resigned or removed Trustee shall
endorse, transfer, convey and deliver to the successor Trustee all of the
funds, securities or other property then held by it under the Trust, together
with such records as may be reasonably required in order that the successor
Trustee may properly administer the Trust.
Notwithstanding any provision in this Article XI to the contrary, the
Trustee shall have the right to resign if the Grantor fails to timely pay the
Trustee's compensation, taxes and expenses as described in Article X. If the
Grantor does not appoint a successor Trustee within 30 days upon receipt of a
resignation notice, the Trustee shall distribute all amounts remaining in the
Trust Fund, less any amounts withheld for Trustee fees, taxes, and expenses,
to the Grantor.
11.6 This Agreement and the Trust created hereby will be terminated in the
case of complete distribution of the Trust.
11.7 The Trustee shall not have the right to modify or to amend this Trust
retroactively in such a manner as to deprive any Grantor or his/her
Beneficiary of any benefit to which he/she may be entitled under this Trust
by reason of contributions made prior to the modification or amendment, unless
such modification or amendment is necessary to conform this Trust to, or
satisfy the conditions of, any law, governmental regulation or ruling; or to
permit this Trust to meet the requirements of Section 408 of the Code.
11.8 If the Trustee receives any claim to assets held in the Trust which is
adverse to the Grantor's interest or the interest of his/her Beneficiary, and
the Trustee in its absolute discretion decides the claim is, or may be,
meritorious, the Trustee may withhold distribution until the claim is resolved
or until instructed by a court of competent jurisdiction. As an alternative,
the Trustee may deposit all or any portion of the assets in the Trust into the
court. Deposit with the court shall relieve the Trustee of any further
obligation with respect to the assets deposited. The Trustee has the right to
be reimbursed from the funds deposited with the court for legal fees and costs
incurred. Such reimbursement may be made without the approval or direction of
the Grantor.
ARTICLE XII-MISCELLANEOUS
12.1 Notwithstanding anything to the contrary contained in this Trust or in
any amendment thereto no part of the Trust, other than such part as is
required to pay taxes and administration expenses, shall be used for, or
diverted to, purposes other than for the exclusive benefit of the Individuals,
their Beneficiaries, or estates. The Trust account is established for the
exclusive benefit of the individual or his or her beneficiaries.
12.2 The Trustee shall not be liable for any act or omission made in
connection with the Trust except for its intentional misconduct or negligence.
Any required notice regarding the Trust will be considered effective when the
Trustee mails it to the last address of the intended recipient which is
contained in the Trustee's records. Any notice to be given to the Trustee
will be considered effective when the Trustee actually receives it. The
Grantor and/or Beneficiaries must notify the Trustee of any change of address.
12.3 The terms and conditions of this Trust shall be applicable without
regard to the community property laws of any state.
12.4 If the Grantor is married, the Compensation of the Grantor and any
contributions made to this Trust under Article IV shall be determined without
regard to the Compensation of the spouse of the Grantor.
12.5 Words used in the masculine shall apply to the feminine where
applicable, and wherever the context of this Trust indicates the plural shall
be read as the singular, and the singular as the plural.
12.6 The captions of Articles in this Trust are included for convenience only
and shall not be considered a part of, or an aid to, the construction of this
Trust.
12.7 The Grantor agrees that all controversies between the Grantor and/or
Beneficiaries and the Trustee and/or any of its officers, directors, or
employees present or former concerning or arising from (i) any retirement
account maintained with the Trustee by the Grantor; (ii) any transaction
involving the Grantor's account, whether or not such transaction occurred in
such account or accounts; or (iii) the construction, performance or breach of
this agreement between us, whether such controversy arose prior, on or
subsequent to the date hereof, shall be determined by arbitration under the
commercial arbitration rules of the American Arbitration Association. Any
disputes as to the arbitrability of a matter or the manner of such arbitration
shall be determined in such arbitration. Such arbitration shall be held in
Wilmington, Delaware.
Arbitration Disclosures: arbitration is final and binding on the
parties; the parties are waiving their right to seek remedies in Court,
including the right to jury trial; pre-arbitration discovery is generally more
limited than and different from court proceedings; the arbitrators' award is
not required to include factual findings or legal reasoning, and any party's
right to appeal or to seek modification of rulings by the arbitrators is
strictly limited; the panel of arbitrators will consist of arbitrators for
American Arbitration Association; the arbitration will be under the commercial
arbitration rules of the American Arbitration Association; the arbitration
shall be held in Wilmington, Delaware; and any disputes as to such arbitration
or the manner thereof shall be determined in such arbitration.
12.8 The determination that any provision of this Trust Agreement is not
enforceable in accordance with its terms in a particular jurisdiction shall
not affect the validity or enforceability of the remaining provisions of this
Trust Agreement generally or in any other jurisdiction or as to any other
parties, but rather such unenforceable provisions shall be stricken or
modified in accordance with such determination only as to such parties and
this Trust Agreement, as so modified, shall continue to bind the specific
parties involved therein and otherwise all other parties in unmodified form.
12.9 All contributions to the Trustee shall be deemed to take place in the
State of Delaware.
12.10 This Trust may be executed in any number of counterparts, each one of
which shall be deemed to be the original although the others shall not be
produced.
