U.S.SECURTIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Post-effective amendment No. 3
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Name of Registrant as specified in Charter: AEGIS VALUE FUND, INC.
Address of principal office: 1100 North Glebe Road, Suite 1040
Arlington, VA 22201
(703) 528-7788
Name and Address of Agent for Service: Mr. Thomas C. Roberts
17521 Shenendoah Court
Ashton, MD 20861
It is proposed that this filing will become effective immediately upon filing
pursuant tp paragraph (b).
Title of Securities Being Registered: Common Stock, $0.001 par value
Pursuant to Rule 24f-2 of the Investment Company Act of 1940, the Registrant
has registered an indefinite number of shares by this Registration Statement.
This Prospectus contains important information about the Fund that you should
know before investing. Please read it carefully and retain it for future
reference.
The Aegis Value Fund seeks to achieve long-term capital appreciation through
a strategy of value investing in a portfolio of common stocks.
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.
AEGIS VALUE FUND, INC.
PROSPECTUS & APPLICATION
OCTOBER 29, 1999
AEGIS VALUE FUND, INC.
1100 North Glebe Road, Suite 1040
Arlington, Virginia 22201
Phone: 800-528-3780
Fax: 703-528-1395
www.aegisvaluefund.com
Table of Contents
About the Fund
Goal and Strategies 3
Principal Risks 4
Performance 8
Fees and Expenses 9
Management of the Fund 11
About Your Account
How to Purchase Shares 12
How to Redeem Shares 14
Dividends and Distributions 16
Tax Consequences 16
Shareholder Accounts and Services 17
Financial Highlights 19
For More Information 20
AEGIS VALUE FUND, INC.
Goal and Strategies
Goal
The Fund's principal investment goal is to seek long-term capital
appreciation.
Principal Investment Strategy
The Fund's portfolio will be primarily invested in common stocks that are
believed to be materially undervalued by the Fund's managers based on a
company's book value, revenues or cash flow and possess the potential for
significant capital appreciation. This investment style is commonly known
as a "deep value" portfolio strategy. Common stocks generally entitle the
holder to participate in a company's business operating results.
In choosing common stocks that are materially undervalued, the Fund's
manager focuses on companies that sell at prices well below the major stock
market average valuations in relation to their corporate book values,
revenues or cash flows. For example, if the broad market averages are
priced at three times book value and 14 times cash flow, the Fund will focus
on securities priced at much less than three times book value and/or much
less than 14 times cash flow. The Fund's portfolio, as a whole, will
typically fall in the bottom quartile of all U.S. stocks when comparing
share prices to company book value, revenues or cash flow.
Companies may become significantly undervalued due to an industry downturn,
unfavorable news, poor economic conditions, a stock market decline, tax-loss
selling or anticipated negative developments affecting a company. The Fund
will often invest in companies that are attempting to recover from business
setbacks or a cyclical downturn (commonly known as "turnaround situations").
Managers of the Fund will consider a variety of factors in choosing an
investment, such as industry conditions, strength of management, various
hidden asset values, significant market share for certain products, control
of product distribution networks, reputation within the industry, and likely
catalysts for realizing shareholder value.
Unlike most mutual fund managers, the Fund's managers will focus their
research more on a company's balance sheet and the quality of its operating
cash flow rather than reported earnings per share. Companies are analyzed
for their long-term "intrinsic value", meaning their ability to produce cash
from operations or the potential sale of assets. The Fund will often
purchase shares of companies which have minimal earnings per share, or may
even be reporting losses, if the Fund's managers believe that the shares are
trading at a significant discount to their intrinsic value on a longer-term
basis.
Many of the Fund's portfolio holdings are stocks of small capitalization
companies, which have a market capitalization of less than $1 billion.
Market capitalization is the total market value of a company's outstanding
stock. The Fund may invest up to 10% of its total assets in foreign
securities.
The Fund's goal is most suitable for long-term 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.
Temporary Investments
The Fund's managers may take a temporary defensive position when the
securities markets are experiencing excessive volatility or a prolonged
general decline, or when other adverse conditions exist. Under these
circumstances, the Fund may be unable to pursue its investment goal,
because it may not invest or may invest less in securities of companies that
the managers believe are undervalued in the marketplace relative to
underlying asset values.
Principal Risks
Because the stocks held by the Fund will fluctuate in price, the value of
your investment in the Fund will go up and down. This means that you could
lose money over short or even extended periods of time.
Stocks
While common stocks have historically outperformed other asset classes over
the long term, they tend to fluctuate more significantly in the shorter
term. These price fluctuations may result from factors affecting individual
companies, the company's industry, or the securities markets as a whole.
Value stocks in particular may not increase in value, as anticipated by the
manager, if other investors fail to recognize the company's value and bid up
its share price.
Smaller companies
Historically, smaller company securities have been more volatile in price
than larger company securities, especially in the shorter term. 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.
Value Investing
The Fund's policy of investing in securities that may be out of favor in the
stock market, as well as turnarounds, cyclical companies, companies
reporting poor earnings, and companies whose share prices have declined
sharply or that are not widely followed by other investors, differs from
the approach followed by many other mutual funds. There is always the
possibility that the managers of the Fund may be incorrect in their
assessment of a particular industry or company, or that the managers may not
buy these securities at their lowest possible prices or sell them at their
highest possible prices.
Also, at certain times, the market will have investment cycles when "growth"
stocks may significantly outperform the "value" stocks typically owned by
the Fund.
Cyclical stocks in which the Fund may invest tend to increase in value more
quickly during economic upturns than non-cyclical stocks, but they also tend
to lose value more quickly during economic downturns. Some companies which
are reporting poor earnings may have difficulty retaining existing customers
and suppliers, or have difficulty attracting new customers. They may also
have difficulty generating sufficient cash flow and obtaining additional
financing to maintain or expand their business operations.
Foreign Securities
The Fund may invest up to 10% of its total assets in foreign securities.
Foreign securities and American Depositary Receipts (ADR's) involve risks
that increase the potential for losses in the Fund.
Stock market movements in any country where the Fund has investments will
likely affect the value of the securities which the Fund owns in that
country. The movements will affect the Fund's share price and investment
performance. The political, economic, and social structures of some
countries may be less stable and more volatile than those in the United
States. The risks of foreign markets include currency fluctuations,
possible nationalization or expropriation of assets, extraordinary taxation
or exchange controls, political or social instability, unfavorable
diplomatic developments, and certain custody and settlement risks.
To the extent that the Fund's investments are denominated in foreign
currencies, changes in foreign currency exchange rates will affect the
value of securities owned by the Fund and the Fund's share price. Generally,
when the U.S. dollar rises in value against a foreign currency, an
investment in that country loses value because that currency is worth fewer
U.S. dollars. Devaluation of a foreign currency will also have a significant
impact on the value of securities denominated in that currency. Currency
markets generally are not as regulated as securities markets.
Euro
On January 1, 1999 the European Monetary Union introduced a new currency,
the euro, which will eventually replace the national currency for
participating member countries. Because this change to a single currency
is new and untested, the establishment of the euro may result in market
volatility. It will also make it difficult to predict the impact of the euro
on business and financial conditions in Europe, and their effect on the
Fund's investment performance.
Interest Rates
When interest rates rise, debt security prices fall and may sometimes cause
the stock market to decline. When interest rates fall, debt security prices
go up and may help the stock market climb.
Generally, interest rates rise during times of inflation or a growing
economy, and fall during an economic slowdown or recession. Because the
level of interest rates has an impact on corporate profits, changing
interest rates can affect the value of the Fund's securities and the Fund's
performance.
Year 2000
When evaluating current and potential portfolio positions, the Year 2000
problem ("Y2K"-a computer's inability to distinguish between the year 1900
and the year 2000 when it reads "00") is one of the factors considered by
the Fund's managers.
The managers will rely upon public filings and other statements made by
companies about their Year 2000 readiness.
Issuers in foreign countries may not have the same level of disclosure about
Year 2000 readiness as is required in the U.S. The managers, of course,
cannot audit each company and its suppliers to verify their Year 2000
readiness.
If a company in which the Fund is invested is adversely affected by Year
2000 problems, it is likely that the price of its stock will also be
adversely affected. Any decrease in the value of the Fund's portfolio
holdings will have a negative impact on the Fund's performance.
More detailed information about the Fund, its investment policies, risks and
management can be found in the Fund's Statement of Additional Information
(SAI).
Performance
Performance Returns
This bar chart and table show the variability of the Fund's returns, which
is one indicator of the risk of investing in the Fund.
Aegis Value Fund Performance History For Fiscal Years Ending August 31st
1998 1999
-17.90% 33.86%
Best and Worst Quarterly Returns
The Fund's best quarterly return since its inception May 15, 1998 was the
quarter ending 6/30/99: 19.33%. The Fund's worst quarterly return since
inception was the quarter ending 9/30/98: -9.10%.
As of September 30, 1999, the Fund's year-to-date total return was 12.05%.
Average Annual Total Returns
Returns calculated for the period ended December 31, 1998
Since inception
5/15/98
Aegis Value Fund 0.93%
Russell 2000 Value Index(1) -12.84%
(1) Source: Frank Russell Company. The unmanaged Russell 2000 Value Index is
selected from among the smaller companies in the Russell 3000 universe. It
includes companies with market capitalizations of at least $175 million,
contains approximately 700 securities, and excludes companies with high
price/book ratios and high forecasted growth rates. It includes reinvested
dividends. One cannot invest directly in an index, nor is an index
representative of the Fund's portfolio.
All performance assumes reinvestment of dividends and capital gains.
Fees and Expenses
Summary of Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None
Redemption Fee None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
Management Fees 1.20%
Distribution and Service (12b-1) Fees None
Other Expenses 1.43%(1)
Total Fund Operating Expenses (before waivers) 2.62%(1)
Footnote:
(1) The amount of "Other Expenses" does not reflect an agreement between the
Fund and the Fund's advisor to waive reimbursement and to absorb other
expenses which exceed 0.30% of net assets at the end of each quarter. The
Fund's advisor expects to continue the waiver for the current fiscal year;
however, it may discontinue the agreement at any time after August 31, 2000.
As a result of this waiver, other expenses are 0.30% and total fund
operating expenses are 1.50% for the most recent fiscal year.
Example
This example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods.
The example also assumes that your investment has a 5% return each year, and
that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your cost would be:
1 Year 3 Years 5 Years 10 Years
$270 $850 $1,490 $3,390
Performance Graph:
Performance for Fiscal Years Ending August 31st
(Assumes a $10,000.00 Lump Sum Investment on May 15, 1998)
8/31/98 8/31/99
Aegis Value Fund $8,210.00 $10,990.00
Russell 2000 Value Index $7,564.00 $ 8,629.00
Annual total returns for the period ended August 31, 1999
1 Year Since Inception (5/15/98)
Aegis Value Fund 33.86% 9.90%
Russell 2000 Value Index 14.08% -13.71%
(Past performance does not predict future performance)
Management
Investment Advisor
Berno, Gambal & Barbee, Inc., 1100 North Glebe Road, Suite 1040, Arlington,
Virginia 22201, is the Fund's investment advisor. The firm has operated as
a registered investment advisor since 1994, manages over $30 million in
private account portfolios, and has served as the Fund's manager since its
inception May 15, 1998.
Portfolio Managers
The three Managing Directors of Berno, Gambal & Barbee, Inc. (BGB) will
together oversee day-to-day Fund operations and by consensus will make all
Fund investment decisions.
William S. Berno, Managing Director, is a Chartered Financial Analyst, was a
co-founder of BGB in 1994 and has been employed by the firm for the past
five years. He has over twenty years' experience in the securities
industry. Mr. Berno took his degree from the University of Virginia in 1975,
and received an M.B.A. degree with distinction from the University of
Michigan in 1977.
Paul Gambal, Managing Director, was a co-founder of BGB in 1994 and has been
employed by the firm for the past five years. He has over fifteen years'
experience in the securities industry. Mr. Gambal graduated from Kenyon
College in 1982, and received his M.B.A. degree from The School of Business
and Public Management at George Washington University in 1992.
Scott L. Barbee, Managing Director, is a Chartered Financial Analyst, and
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 management boutique Donald Smith & Company
in Paramus, New Jersey. Mr. Barbee graduated from Rice University in 1993
and received an M.B.A. degree from the Wharton School at the University of
Pennsylvania in 1997.
Advisor Compensation
The Fund pays its manager a fee for managing the Fund's assets and making
its investment decisions. As compensation for its services, the Fund paid
BGB for the fiscal year ended August 31, 1999 an advisory fee of 1.20% of
the Fund's average net assets.
Year 2000 Problem
The services provided to the Fund by its investment advisor, custodian, and
other vendors depend upon the smooth functioning of their computer systems
and those of their outside service providers. Many computers currently use
a two digit date field to represent the calendar year, and unless these
systems are changed or modified, they cannot distinguish the year 1900 from
the year 2000 (commonly referred to as the "Year 2000" problem). This
specific problem may cause a computer system to crash or malfunction. Such
an event could have a negative impact on the Fund's trades, payments,
pricing and account services and therefore adversely affect the Fund's
operations.
Although there can be no assurance that there will be no adverse impact from
this "Year 2000" problem, the Fund's advisor and its custodian have advised
the Fund that they have been working on changes for the year 2000 and expect
their computer systems to be adapted in time for that event. Of course, the
Fund's ability to reduce the effects of the "Year 2000" problem is also very
much dependent upon the efforts of third parties over which the Fund and its
manager may have no control.
While the Fund's service vendors will incur expenses to upgrade their
computers, the Fund itself will incur no direct expenses related to the
"Year 2000" problem.
Your Account
How to Purchase Shares
The Fund's shares are sold without a sales charge. The price paid for shares
is the net asset value next determined following the receipt of the purchase
order in proper form by the Fund. "Proper form" is defined as including all
required account information and payment or instructions for payment by wire
or from a broker. The Fund reserves the right to reject any specific
purchase order, and the right to suspend the offering of Fund shares to new
investors. You may only purchases shares if the Fund is eligible for sale
in your state or jurisdiction.
Calculation of Net Asset Value
Net asset value per share is calculated at the close of regular trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern time) on each day
the Exchange is open for business. The net asset value per share is
determined by dividing the total closing market 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 may be carried at their fair value as
determined in good faith under procedures established and supervised by the
Board of Directors.
Foreign securities, if held in the form of American Depository Receipts, are
valued at the closing bid price of the ADR.
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 directly at the
Fund. 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. The Fund reserves the
right to change its investment minimums at any time.
All purchases must be made in U.S. dollars and checks must be drawn on U.S.
banks. The Fund will not accept a check endorsed over by a third party. A
charge of $25.00 will be imposed if any check used for the purchase of
shares is returned unpaid. Investors who purchase Fund shares by check may
not receive redemption proceeds until there is reasonable belief that the
check has cleared, which may take up to fifteen calendar days after payment
has been received.
To open a regular account at the Fund by mail, simply complete and return an
Account Application with a check made payable to Aegis Value Fund. If you
have any questions about the Fund or need assistance with your application,
please call the Fund at (800)528-3780. Certain types of investors, such as
trusts, corporations, associations, partnerships or estates may be required
to furnish additional documents when they open an account. These documents
may include corporate resolutions, trusts, wills, partnership agreements,
trading authorizations, powers of attorney, or other documents. Applications
and checks should be mailed to:
Aegis Value Fund, Inc.
1100 N. Glebe Road, Suite 1040
Arlington, VA 22201
To open a regular account at the Fund and then wire money for the initial
investment in the Fund, please complete and sign an Account Application,
then call the Fund at (800)528-3780 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 Investec Ernst & Company
Account #140-080-524
FBO: Aegis Value Fund
Account #228-00177-1-2
To open a retirement account or IRA with the Fund, please call the Fund's
office at (800)528-3780 and receive the necessary information and the
special retirement account application to establish your account.
Additional Purchases
To add money to an existing account at the Fund, make your check payable to
Aegis Value Fund, indicate your account number on the check, and mail it to
the Fund at the above address. If wiring funds to your Fund account,
be sure to wire for credit to Aegis Value Fund and include your name and
account number in the wiring instructions. Additional shares may also be
purchased through any existing brokerage account held by the investor.
Any purchase orders or funds received after 4:00 p.m. Eastern time will be
processed at the next day's closing net asset value. All shares (including
reinvested dividends and distributions) are issued in full and fractional
shares rounded to the third decimal place.
No share certificates will be issued except for shareholders who are
required by regulation to hold certificates. Instead, an account will be
established for each shareholder and all shares purchased will be held in
book entry form by the investor's brokerage firm or by the Fund, as the
case may be. Any transaction in an account, including reinvestment of
dividends and distributions, will be confirmed in writing to the shareholder.
How to Redeem Shares
Shareholders may redeem shares as described below on any day the Fund is
open for business. Shares will be redeemed at the next determined net asset
value after the Fund receives the redemption request in good form.
Redemption requests received after 4:00 p.m. Eastern time will be processed
at the next day's closing net asset value.
By Mail
To redeem shares held by the Fund in writing, send a request in good form to
the Fund at:
Aegis Value Fund, Inc.
1100 N. Glebe Road, Suite 1040
Arlington, VA 22201
A request "in good form" means that the request includes all of the following:
1. The name of the Fund and the shareholder's account number.
2. The amount of the transaction (specified in dollars or shares).
3. Signatures of all owners exactly as they are registered on the account.
4. Signatures guaranteed. The shareholder signatures must be guaranteed by an
"eligible guarantor institution" as such term is defined in Rule 17Ad-15
under the Securities and Exchange Act of 1934, which includes FDIC-insured
banks, brokerage firms, credit unions, or other eligible guarantor. A
notary public is not an acceptable guarantor.
5. Share certificates, if held by the shareholder.
6. Other supporting legal documentation that may be required, in the case of
trusts, corporations, associations, partnerships, estates, retirement
plans and certain other accounts.
If you have any questions about what is required for your redemption
request, please call the Fund at (800)528-3780.
Payment will normally be made by the Fund within one business day, but not
later than seven calendar days after receipt of the redemption request.
However, payment of redemption proceeds may be delayed until the purchase
check has cleared, or up to fifteen days from the date of purchase,
whichever occurs first.
In unusual circumstances, the Fund may temporarily suspend redemptions, or
postpone the payment of proceeds, as allowed by federal securities laws.
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.
You may transfer your shares from the street or nominee name account of one
broker-dealer to another, as long as both broker-dealers have an agreement
with the Fund. The transfer will be processed after the Fund receives
authorization in proper form from your delivering securities dealer.
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 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 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.
Dividends and Distributions
The Fund expects to declare and pay income dividends annually, generally in
December, representing substantially all of the Fund's net investment income.
Capital gains, if any, may be distributed annually by the Fund, also
generally in December. The amount of the Fund's distributions will vary and
there is no guarantee the Fund will pay dividends.
To receive a distribution, you must be a shareholder of the Fund on the
record date. The record dates for the Fund's distributions will vary.
Please keep in mind that if you invest in the Fund shortly before the record
date of a distribution, any distribution will lower the value of the Fund's
shares by the amount of the distribution and you will receive some of your
investment back in the form of a taxable distribution.
Distributions may be taken in cash or in additional shares at net asset
value. 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.
Tax Consequences
Generally, 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. 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 December and paid in January are taxable as if
paid on December 31. Each January, the Fund will mail a statement that
shows the tax status of the distributions you received for the previous year.
Sale of Shares
The redemption of shares of the Fund 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. The individual tax
rate on any gain from the sale of your shares depends on how long you have
held your shares. The Fund is not responsible for computing your capital
gains or capital losses on the redemption of shares.
Fund distributions and gains from the sale of Fund shares will generally be
subject to state and local income tax. Non-U.S. investors may be subject
to U.S. withholding and state tax. You should consult your own tax adviser
concerning the tax consequences of an investment in the Fund.
Backup Withholding
By law, some Fund shareholders may be subject to a 31% tax withholding on
reportable dividends, capital gains distributions, and redemption proceeds.
Generally, shareholders 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; or from
whom the IRS has instructed the Fund to withhold tax. In order to avoid
this withholding requirement, you 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.
Shareholder Account Services
Account Information
The Fund will establish an account for each shareholder purchasing shares
directly from the Fund, 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 management'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.
Financial Highlights
The financial highlights table is intended to help you understand the Fund's
financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned
(or lost) on an investment in the Fund, assuming reinvestment of all
dividends and distributions. This information has been audited by
Bish & Haffey, P.C., whose report, along with the Fund's financial statement
are included in the annual report, which is available upon request.
1998(3) 1999
Net Asset Value, $10.00 $8.21
Beginning of Period
Income from Investment Operations:
Net investment income 0.01 0.16
Net gain (loss) on securities (both (1.80) 2.62
realized and unrealized)
Total from Investment Operations (1.79) 2.78
Less Distributions:
Dividends from Net Investment Income 0.00 (0.08)
Distributions from Net Realized Gains 0.00 (0.04)
Total Distributions 0.00 (0.12)
Net Asset Value, End of Period $8.21 $10.87
Total Return (17.90%) 33.86%
Ratios/Supplemental Data
Net Assets, End of Period 845 1,481
(in thousands)
Ratio of Expenses to Average 1.50%(1) 1.50%
Daily Net Assets
Ratio of Net Income to Average 0.76%(1) 1.46%
Daily Net Assets
Portfolio Turnover Rate 6%(2) 33%
(1) Annualized
(2) Not Annualized
(3) Results for period from May 15, 1998 (inception) to August 31, 1998.
AEGIS VALUE FUND, INC.
1100 North Glebe Road, Suite 1040
Arlington, VA 22201
Phone: (800)528-3780
Fax: (703)528-1395
Internet: www.aegisvaluefund.com
FOR MORE INFORMATION:
You can learn more about the Aegis Value Fund in the following documents:
Annual/Semi-Annual Report to Shareholders
The annual shareholder report includes a discussion of recent market
conditions and Fund investment strategy, financial statements, detailed
performance information, portfolio holdings, and the auditor's report.
Semi-annual reports provide unaudited financial statements.
Statement of Additional Information (SAI)
The Statement of Additional Information (SAI) contains more information about
the Fund, its investments and policies. It is incorporated by reference (is
legally a part of this prospectus).
For a free copy of the current annual/semi-annual report or the SAI, please
call the Fund at (800)528-3780 or visit the Fund website at
www.aegisvaluefund.com.
You can also obtain information about the Fund by visiting the SEC's Public
Reference Room in Washington, D.C. (telephone 1-800-SEC-0330) or by sending
your request and a duplicating fee to the SEC's Public Reference Section,
Washington , D.C. 20549-6009. You can also visit the SEC's Internet site at
http://www.sec.gov.
Investment Company Act file #811-9174
AEGIS VALUE FUND, INC.
1100 North Glebe Road, Suite 1040
Arlington, Virginia 22201
Phone: (703)528-7788
Fax: (703)528-1395
Board of Directors
Scott L. Barbee
William S. Berno
Edward P. Faberman
Eskander Matta
William R. Morris III
Officers
William S. Berno, President
Scott L. Barbee, Treasurer
Paul Gambal, Secretary
Investment Advisor & Fund Agent
Berno, Gambal & Barbee, Inc.
1100 North Glebe Road, Suite 1040
Arlington, VA 22201
Custodian
Investec 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
AEGIS VALUE FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
DATED OCTOBER 29, 1999
This Statement of Additional Information supplements the current Prospectus
of Aegis Value Fund, Inc. (the "Fund") dated October 29, 1999. This
Statement of Additional Information does not present a complete picture of
the various topics discussed and should be read in conjunction with the
Prospectus. Although this Statement of Additional Information is not
itself a Prospectus, it is, in its entirety, incorporated by reference into
the Prospectus. A copy of the Prospectus may be obtained without charge by
contacting the Fund at 1100 N. Glebe Road, Suite 1040, Arlington, VA 22201
(800)528-3780. Please retain this document for future reference.
Page (1)
Table of Contents
Page
Fund History........................................... 3
Description of the Fund and Its Investments and Risks.. 3
Management of the Fund................................. 6
Principal Holders of Shares............................ 8
Investment Advisory Services........................... 8
Distributor............................................ 9
Custodian.............................................. 9
Independent Accountants................................ 10
Brokerage Allocation................................... 10
Description of Common Stock............................ 11
Purchase, Redemption, and Pricing of Shares............ 11
Tax Status............................................. 12
Underwriter............................................ 12
Performance Data....................................... 12
Financial Statements................................... 13
Page (2)
Fund History
Aegis Value Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940. The Fund was incorporated in the State of Maryland
on October 22, 1997 and commenced operations on May 15, 1998. A board of
five directors is responsible for overseeing the Fund's affairs.
Description of the Fund and Its Investments and Risks
The Fund is an open-end, diversified investment management company.
Shares of the Fund are sold and redeemed without any fees or sales charges;
therefore, the Fund is a "no-load" mutual fund.
The following investment policies and limitations supplement those set
forth in the Fund's prospectus. As stated in the prospectus, the Fund's
investment objective is to seek long-term capital appreciation through a
strategy of value investing in common stocks. Unless otherwise noted,
whenever an investment policy or limitation states a maximum percentage of
the Fund's assets that may be invested in any security or other asset or
sets forth a policy regarding quality standards, the percentage limitation
or standard will be determined immediately after giving effect to the Fund's
acquisition of the security or other asset. Accordingly, any subsequent
change in values, net assets or other circumstances will not be considered
in determining whether the investment complies with the Fund's investment
policies and limitations. It should be noted that Items 8 and 9 regarding
illiquid investments and borrowing will be applied at all times, and not
just at the initial time of the transaction.
The Fund's fundamental investment policies cannot be changed without the
approval of a "majority of the outstanding voting securities" (as defined
in the Investment Company Act of 1940) of the Fund. Except for the
fundamental investment restrictions set forth below, the investment
policies and limitations described in this Statement of Additional
Information are operating policies and may be changed by the Board of
Directors without shareholder approval. However, shareholders will be
notified prior to a material cahnge in opeating 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.
Page (3)
Description of the Fund and Its Investments and Risks (continued)
7) Invest in real property, real estate limited partnerships, or oil, gas
or mineral exploration and development programs; although the Fund may
invest in marketable securities which are secured by real estate and
securities of companies which invest in or deal in real estate, oil, gas
or minerals or sponsor such partnerships or programs.
8) The Fund will not invest more than 5% of the value of its net assets in
illiquid securities, including any private placements and Rule
144A securities. This percentage limitation will apply at all times, and
not just immediately after purchase.
9) Borrow money, except that the Fund may borrow money on a secured or
unsecured basis from banks as a temporary measure for extraordinary or
emergency purposes including, but not limited to, the purchase of its own
shares. Such temporary borrowings may not at any time exceed 5% of the
value of the Fund's net assets. No more than 10% of the value of the
Fund's net assets at any time may be pledged as collateral for such
temporary borrowings.
10) Buy or sell commodities, commodities futures contracts or commodities
option contracts.
11) Loan money, except by the purchase of debt obligations consistent with
the Fund's investment objective and policies. However, the Fund may loan
up to 25% of its assets to qualified brokers, dealers or institutions for
their use relating to short sales or other securities transactions
(provided that such loans are fully collateralized at all times). The
Fund currently intends to limit any such lending of portfolio securities
to no more than 5% of its net assets.
12) Issue senior securities, as defined in the Investment Company Act of
1940, or mortgage, pledge, hypothecate or in any manner transfer, as
security for indebtedness, any securities owned or held by the Fund except
as may be necessary in connection with borrowings mentioned in paragraph
(9) above, and then only to the extent there mentioned.
13) Invest more than 5% of the value of the Corporation's net assets in
securities of issuers which have been in continuous operation less than
three years.
14) Purchase or retain the securities of any issuer if, to the knowledge
of the Fund, any of the officers or directors of the Fund or its investment
advisor own individually more than one-half of one percent (0.50%) of the
securities of such issuer and together own more than 5% of the securities
of such issuer.
15) Underwrite securities of others, except to the extent the Fund may be
deemed to be an underwriter, under federal securities laws, in connection
with the disposition of portfolio securities.
16) Invest more than 10% of its net assets in the securities of other
investment companies, and then only as permitted under the Investment
Company Act of 1940.
17) Invest in securities restricted as to disposition under federal or
state securities laws.
Portfolio Turnover. The Fund makes long-term investments and does not
engage in short-term trading strategies. While the Fund's portfolio
turnover will vary from year to year based upon market conditions and
factors affecting the particular securities held in the portfolio, it is
anticipated that the Fund's average portfolio turnover will not exceed 50%
annually over periods of several years.
It is the operating policy of the Fund to hold its securities as long as
they remain undervalued, and to benefit from the lower transaction costs
and more favorable tax rates
Page (4)
Description of the Fund and Its Investments and Risks (continued)
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:
a. 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.
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 bemade
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 laon 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.
b. Foreign Securities. The Fund may invest up to 10% of its net assets
directly in foreign securities, although the Fund intends to limit its
investments in foreign securities to companies issuing U.S.
dollar-denominated American Depository Receipts (ADR's) or who otherwise
comply with SEC disclosure requirements.
Foreign securities will expose the Fund to certain risks not present in
domestic securities. These risks are discussed under "Investment Risks" in
the prospectus. In addition to these risks, many foreign markets have less
trading volume and less liquidity than the U.S. markets, and therefore
prices in foreign markets can be highly volatile.
Foreign markets may also have less protection for investors than the U.S.
markets. Foreign issuers may be subject to less government supervision.
It may also be difficult to enforce legal and shareholder rights in foreign
countries. There is no assurance that the Fund will be able to anticipate
these risks or counter their effects.
c. Lower-Rated Debt Securities. The Fund may purchase debt securities
rated within the four highest grades of Moody's Investor Service, Inc. or
Standard & Poor's Corporation. Debt securities in the fourth highest
rating category (BBB or Baa, the lowest investment grade
Page (5)
Description of the Fund and Its Investments and Risks (continued)
ratings) have speculative characteristics and changes in economic conditions
or other circumstances are more likely to lead to a weakened capacity to
make principal and interest payments than is the case with higher grade
bonds. It is the Fund's policy to promptly dispose of a bond whose rating
drops below investment grade.
d. 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 iinterests og 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.
Management of the Fund
Board of Directors. The operations of the Fund are supervised by its Board
of Directors, who are responsible for representing the interests of the
Fund's shareholders. The duties of the Fund's directors are established by
state and federal law. In general, directors have a duty to exercise care
and prudent business judgment in their oversight of the Fund. Directors
also have a duty to exercise loyalty to the Fund's shareholders which
requires them to act in good faith, avoid unfair dealing, and resolve any
conflicts of interest in favor of the the Fund and its shareholders.
The Fund's Board has five members, three of whom are independent of the
Fund's management. The two remaining directors are also directors of the
Fund's investment advisor; therefore they are not considered independent
directors for purposes of federal securities law.
Officers and Directors. The following information is given for each
officer and director of the Fund: (*indicates persons who are affiliated
with BGB, the Fund's investment advisor, and are therefore considered to be
"interested persons" under the Investment Company Act of 1940, Section
(2)(a))
Name, Address and Age Position Principal Occupation(s) for Past 5 Years
William S. Berno* (45) President, President and Managing Director of
1100 N. Glebe Rd., Director Berno, Gambal & Barbee, Inc. since
Suite 1040 1994; President and Director of the
Arlington, VA 22201 Fund since 1997.
Page (6)
Management of the Fund (continued)
Name, Address and Age Position Principal Occupation(s) for Past 5 Years
Scott L. Barbee* (28) Treasurer, Treasurer and Managing Director of
1100 N. Glebe Rd., Director Berno, Gambal & Barbee, Inc. since
Suite 1040 1997; Wharton School M.B.A. candidate
Arlington, VA 22201 1995-1997; Investment analyst with
Simmons & Co., investment bankers
serving the energy industry, 1993-95;
Treasurer and Director of the Fund
since 1997.
Paul Gambal* (40) Secretary Chairman, Secretary and Managing
1100 N. Glebe Rd., Berno, Gambal & Barbee, Inc. since
Suite 1040 1994; Director of Colonial Parking,
Arlington, VA 22201 Inc. since 1993; Secretary of the Fund
since 1997.
Edward P. Faberman (53) Director Attorney with the law firm of Ungaretti
Ungaretti & Harris & Harris since 1996; Vice President,
1747 Pennsylvania Ave. N.W Government Affairs of American Airlines
Suite 900 1991-1996. Director of the Fund since
Washington, D.C. 20006 1997.
Eskander Matta (28) Director Investment banker, Credit Suisse First
Credit Suisse First Boston Corp. Boston Corp. since 1996. Harvard
11 Madison Avenue School M.B.A candidate 1994-96. Research
New York, NY 10010 Associate with CSC Index, utility
industry consultants, 1993-94. Research
Associate, Mercer Management Consulting
1991-93. Director of the Fund since 1997.
William R. Morris, III (38) Chairman, Morris McNair & Associates,
Morris McNair & Associates, Inc. Inc., a commercial real estate services
888 17th Street, N.W. firm, since 1988. Director of the Fund
Suite 1150 since 1988. Director since 1997.
Washington, D.C. 20006
Page (7)
Management of the Fund (continued)
Compensation. The Fund does not pay any fees or compensation to its
officers, but directors who are not affiliated with the Fund's investment
advisor receive a fee of $500 for each meeting of the Fund's Board of
Directors which they attend. In addition, the Fund reimburses its
independent directors for reasonable travel or incidental expenses incurred
by them in connection with their attendance at Board meetings. The Fund
offers no retirement plan or other benefits to its directors.
For the Fund's fiscal year ended August 31, 1999, the following table
gives the compensation paid to each of the unaffiliated directors of the
Fund for their services:
Name and Position Aggregate Compensation from Fund
Edward P. Faberman, Director $1,000
Eskander Matta, Director $1,000
William R. Morris III, Director $1,000
Principal Holders of Shares
Principal Stockholders. As of October 15, 1999, the following persons were
known to the Fund to be beneficial owners of 5% or more of the outstanding
shares of the Fund:
Name and Address Percentage Ownership Type of Ownership
Investec Ernst & Company (1) 97.1% Record
One Battery Park Plaza
New York, NY 10004-1478
William S. Berno 11.2% Beneficial
1100 N. Glebe Rd., Suite 1040
Arlington, VA 22201
All officers and directors
as a group: 1.5% Record
18.7% Beneficial
(1) Investec Ernst & Company, a member of the NYSE and the Fund's
custodian, is a broker-dealer holding shares in "street name", for the
benefit of its brokerage customers including at such time clients of BGB
Securities, Inc., the Fund's affiliated broker-dealer.
Investment Advisory Services
Investment Advisor of the Fund. The Fund is managed by Berno, Gambal &
Barbee, Inc. ("BGB") under an Investment Advisory Agreement approved by the
Board of Directors and shareholders on March 11, 1998. BGB is a
value-oriented investment firm founded in 1994. William Berno, Paul Gambal
and Scott Barbee are the principal stockholders of the firm and are
therefore considered to be "controlling persons" of the Fund's investment
advisor.
Page (8)
Investment Advisory Services (continued)
Each of the principals of BGB serves as an officer and director of that
firm. William Berno serves as President and a director of BGB, and also
holds those same positions with the Fund. Scott Barbee serves as Treasurer
and a director of BGB, and also holds those same positions with the Fund.
Paul Gambal serves as Chairman, Secretary and a director of BGB, and also
holds the position of Secretary of the Fund.
Investment Advisory Fees. As compensation for its services to the Fund
under the Investment Advisory Agreement, BGB is entitled to receive an
annual advisory fee of 1.20% of the Fund's average net assets.
The Fund pays BGB its advisory fee on a monthly basis, computed based on
the average net assets for the preceding month. For the fiscal year ended
August 31, 1999, the Fund paid BGB total advisory fees of $15,642. For the
Fund's initial fiscal year ended August 31, 1998, the Fund paid BGB total
advisory fees of $1,013.
As a means of reducing the Fund's operating expense ratio in its early
periods of operation, BGB has agreed to absorb any other expenses of the
Fund which exceed 0.30% of the Fund's average net assets during the first
three fiscal years of the Fund's operation.
Advisory Services. Under the Investment Advisory Agreement, BGB determines
the composition of the Fund's portfolio and supervises the investment
management of the Fund. BGB also provides investment research and research
evaluation and makes and executes recommendations for the purchase and sale
of securities. BGB furnishes at its expense all personnel and office
equipment necessary for performance of its obligations under the Agreement
and pays the compensation and expenses of the officers and directors 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; expenses of shareholder meetings;
preparation, printing and distribution to existing shareholders of reports,
proxies and prospectuses.
Distributor
BGB, the Fund's investment advisor, 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 Investec Ernst & Company, a New York Stock Exchange member
firm and registered broker-dealer, as its custodian for cash and
securities. Investec Ernst does not participate in the management of the
Fund. The Fund has authorized Investec Ernst to deposit portfolio
securities in several central depository systems, as allowed by Federal
law. Investec 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. Investec Ernst & Company's mailing address is One Battery Park
Plaza, New York, NY 10004-1478.
Page (9)
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.
For its past two fiscal years, the Fund paid total brokerage commissions of
$5,351 in fiscal 1998 and $6,741 in fiscal 1999.
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.
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 Securities, Inc., 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
Securities, Inc. may serve as a broker for the Fund in any securities
transaction; however,in order for BGB Securities, Inc. to effect any
portfolio transaction for the Fund, the commissions, fees or other
remuneration received by BGB Securities, Inc. must be reasonable and fair
compared to the commissions, fees and 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 Securities, Inc. in any
transaction in which BGB Securities, Inc. acts as a principal. However,
BGB Securities, Inc. may serve as broker to the Fund in over-the-counter
transactions conducted on an agency basis.
Brokerage Selection. 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,
market information and quotes, or telecommunications services in the
selection of brokers to execute portfolio transactions.
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. Such
considerations involve judgment and experience, and are weighed by BGB in
determining the overall reasonableness of brokerage commissions paid.
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.
Page (10)
Brokerage Allocation (continued)
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 Securities, Inc. 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 Securities, Inc. effects brokerage transactions for the Fund
must be reviewed and approved at least annually by a majority of the
outside directors of the Fund.
Commission Payments. BGB Securities, Inc., a wholly-owned subsidiary of
the Fund's investment advisor, received $5,351 of brokerage commissions
from the Fund in fiscal 1998 and $6,741 during fiscal 1999. These
commissions represented 100% of the commissions paid by the Fund in each
fiscal year, and 100% of the aggregate dollar amount of brokerage
transactions effected during each fiscal year.
Capital Stock and Other Securities
Common Stock. The Fund will issue new common 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. The Fund has registered an
indefinite number of shares under Rule 24f-2 of the Investment Company Act
of 1940. Each share will have one vote and be freely transferable; shares
will also participate equally in any dividend distributions. 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. Shares of the Fund are offered at net asset value
directly by the Fund or through most brokerage accounts. There are no
sales charges (loads) or distribution fees. The Fund determines its net
asset value as described in the prospectus.
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, 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
Page (11)
Purchase, Redemption and Pricing of Shares (continued)
shareholder will usually incur brokerage costs in converting the securities
to cash. The method of valuing securities used to make the redemptions in
kind will be the same as the method of valuing 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. See "How
to Purchase Shares" and "How to Redeem Shares" 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.
Should the Fund not qualify as a "regulated investment company" under
Subchapter M, the Fund would be subject to federal income taxes on its
earnings whether or not such earnings were distributed to shareholders.
Payment of income taxes by the Fund would reduce the Fund's net asset value
and result in lower returns to the Fund's shareholders.
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.
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".
Page (12)
Calculation of Performance Data (continued)
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 to the Nth root (N representing the number of years in
the period) and is subtracted by the result, which is then expressed as a
percentage. The calculation assumes that all income and capital gains
distributions paid by the Fund have been reinvested at net asset value on
the reinvestment dates during the period.
Average annual and cumulative total returns may be quoted as a percentage
or as a dollar amount, and may be calculated for a single investment, a
series of investments, or a series of redemptions, over any time period.
Total returns and other performance information may be quoted numerically
or in a table, graph or similar illustration.
Historical Performance. The following table shows the Fund's total return
for the period from May 15, 1998, commencement of operations, to August 31,
1999, the end of the Fund's most recent fiscal year.
The table compares the Fund's total return to the record of the Russell 2000
Index and the Standard & Poor's 500 Composite Index (S&P 500) over the same
periods. The comparison to the Russell 2000 shows how the Fund's total
return compared to the record of a broad index of small capitalization
stocks. The S&P 500 comparison shows how the Fund's total return compared
to the record of a broad index of large capitalization stocks over the same
period.
The Fund has the ability to invest in securities not included in the
indices, and its investment portfolio may or may not be similar in
composition to the indices. Figures for the indices are based on the
prices of unmanaged groups of stocks, and, unlike the Fund, their returns
do not include the effect of paying trading costs and the other costs and
expenses of investing in a mutual fund.
Aegis Value Fund Russell 2000 S&P 500
Total Return for the year ended 33.86% 28.36% 39.82%
August 31, 1999
Annualized Total Return for the period
May 15, 1998 to August 31, 1999 7.59% -6.19% 16.09%
Financial Statements
The Aegis Value Fund, Inc. completed its latest fiscal year of operation on
August 31, 1999. Financial statements audited by the Fund's independent
accountants Bish & Haffey, P.C. and schedules of portfolio investments
included in the Annual Report to Shareholders of the Fund for the fiscal
year ended August 31, 1999 are incorporated herein by reference. To obtain
a copy of the Fund prospectus or the Annual Report to Shareholders, please
call (800)528-3780.
Page (13)
Aegis Value Fund, Inc.
Second Annual Report
August 31, 1999
Shareholders' Letter
October 20, 1999
Dear Shareholders:
We want to again welcome new shareholders of the Aegis Value Fund, Inc. in
its first full fiscal year of operation. We are very happy to have you
join us as investors in the Fund, and look forward to helping you achieve
consistent and satisfactory growth of your capital for many years into the
future.
As many of you will remember from last year, we wrote to you in our initial
annual report at a dark and gloomy time for the stock market. Your Fund's
shares had seen their net asset value decline by a disturbing 17.9% in the
brief period from inception on May 15, 1998 to August 31, 1998, with the
broad market hitting its actual bottom precisely on that date. It was a
good lesson in humility, but one which we hope not to repeat anytime soon!
This year we are pleased to inform you that your Fund has fully recovered
from that initial very awkward stumble and has been moving higher with what
we like to view as grace and aplomb. As of August 31, 1999, the net asset
value of your Fund's shares stood at $10.87, an increase of 32.40% from the
$8.21 figure a year ago. If we assume reinvestment of the Fund's 1998
distribution, then the total return for the Fund's fiscal year was 33.86%.
During the fiscal year, the Fund made an income distribution of 12 cents
per share, representing 8 cents of dividends and 4 cents of short-term
capital gains. The distribution was payable on December 21, 1998 to
shareholders of record as of December 18, 1998.
By the measure that counts the most-performance-we believe that your Fund
had a successful year. We measure ourselves against the benchmark of the
Russell 2000 index, which encompasses a broad base of smaller stocks.
Your Fund's 33.86% total return comfortably exceeded the Russell 2000's
total return of 28.36%.
However, the Fund somewhat lagged the Standard & Poor's 500 index, a
benchmark for large stocks. The S&P 500 had a total return of 39.82%.
Please keep in mind that the makeup of the S&P 500 index, primarily larger
growth stocks, is significantly different from the portfolio composition
and risk profile of your Fund. We provide the S&P 500 results to you
simply because they are so widely used in the mutual fund industry as a
performance benchmark.
The Fund's solid return for its fiscal year was primarily due to two
factors. First, we were fortunate to be starting from a very low base.
As we mentioned, we could hardly have picked a worse time to mark the end
of our first fiscal year. The market just plain got walloped in the last
few days of that period. By the time this fiscal year began, the abysmal
summer 1998 stock market had run its course and was ready for a nice
recovery. So the wind was at our backs.
Second, we found that the best bargains were available in the manufacturing
companies that had been severely hurt by the Asian economic situation. As
the year went on, the Asian problem receded and many of these companies saw
significant gains in their stock prices. This will probably be a common
theme for your Fund-capitalizing on unfounded fears in the market.
The groups which have lagged in the past year, financial and service
stocks, fortunately represent a relatively small portion of your Fund's
portfolio. Over the longer term, you should expect us to have a much
larger position in financial stocks, which are classic value investments.
We have been slow to invest in that area because interest rates have been
rising, and we are somewhat concerned about credit quality in today's
economy. So far, this caution has been proper.
While there are always potential dark clouds in the economic outlook, we
are relatively optimistic about the economy in the near future. We
believe that production has been somewhat retarded this year by
preparations for the "Y2K" problem, and that the incipient recovery in
Asia will boost demand for American goods. In addition, next year will be
helped by the "millenium" hoopla, and the presidential election would also
tend to argue for a healthy economy.
Our much bigger concern is the speculative nature of some segments of the
current stock market. Any thoughtful investor must weigh the possible
risks against the potential rewards in their investment process. We are
very uncomfortable with the level of, for lack of a better term,
"entitlement" which has been bred by this long bull market. Stock market
wealth is usually built in years, not days.
We have been in the market long enough to remember times when people were a
bit frightened to buy stocks and very anxious to sell them. Today, not
only is one considered foolish not to own stocks, but it seems the
"smartest" thing to do is to buy the stocks which have gone up the most!
This is really a 180 degree turnaround from 10-15 years ago.
It is our job as your Fund's managers to look for genuine bargains in the
market, and to pay at least as much attention to the risks as the potential
returns. You will be interested to know that we chose the name "Aegis"
because it is the Greek word for shield. The stock market will always go
up and down. We would like the Fund to lose less in a down market than go
up the most in a good market. That's what value investing is all about.
We hope to construct a portfolio that can weather any of the market's
potential storms.
To prove our point, die-hard bargain hunters will be pleased to know that
we have not chased the market's glamorous darlings. The Fund's portfolio
at September 30, 1999 had a weighted average ratio of price to book value
of 0.95 and price to revenues of 0.60. This placed the valuation of your
Fund's average holding in the bottom 12% of all U.S. stocks, comparable to
the valuations in the portfolio one year ago.
This "box" of stock characteristics (small and cheap) has been a very
lucrative sector over the years, and we are counting on the pattern
continuing in the future. Based on our research, we believe that our
companies are at least average in quality, even though they trade at big
discounts to the market. If they can eventually trade at the market's
average value, the Fund will have very healthy returns for you as an
investor.
And for us. Remember that your Fund's managers have a sizable portion of
our personal net worth invested with you in the Fund, and we strongly
believe that we should share in the risks as well as the rewards of your
investment. We are fellow shareholders, not just employees.
It's our feeling that smaller value stocks could perform exceptionally well
over the next several years, and we will do our best to take full
advantage. We are grateful for your confidence in us, and are delighted
that you have chosen to join us as investors in the Fund.
Sincerely,
BERNO, GAMBAL & BARBEE, INC.
William S. Berno
Paul Gambal
Scott L. Barbee
Managing Directors
Aegis Value Fund, Inc.
Schedule of Portfolio Investments
August 31, 1999
Common Stocks - 94.7% Shares Market Value
Industrial Cyclicals - 23.1%
Commonwealth Industries, Inc. 5,500 $ 79,062
Ethyl Corporation 11,000 58,437
LTV Corporation 6,000 34,500
P.H. Glatfelter Company 3,000 39,563
Quipp, Inc. 2,000 29,750
Ryerson Tull, Inc. 958 18,142
Stewart and Stevenson, Inc. 7,000 83,125
Sub Total 342,579
Finance and Real Estate - 16%
Acceptance Insurance Companies, Inc. 1,500 $ 19,875
Capital Transamerica Corporation 500 7,000
Castle and Cooke, Inc. 2,000 28,500
Crazy Woman Creek Bancorp, Inc. 1,600 19,300
First Union Real Estate Equity and
Mortgage Investments 15,000 80,625
Kranzco Realty Trust 1,500 17,625
PFF Bancorp, Inc. 1,000 19,875
Redwood Trust, Inc. 2,500 35,156
Sub Total 227,956
Services - 6.9%
International Shipholding Corporation 2,000 $ 23,375
Maritrans, Inc. 6,800 34,425
Medical Alliance, Inc. 4,000 45,000
Sub Total 102,800
Consumer Durables - 9.4%
Audiovox Corporation-Class A 5,000 70,625
TBC Corporation 9,500 68,281
Sub Total 138,906
Energy and Natural Resources - 9%
Asarco, Inc. 2,000 41,750
Lufkin Industries, Inc. 2,000 31,750
McMoran Exploration, Inc. 1,875 37,852
Offshore Logistics, Inc. 1,000 11,688
Sub Total 123,040
Textiles and Apparel - 5.3%
Angelica Corporation 3,000 37,125
Premiumwear, Inc. 8,100 41,513
Sub Total 78,638
Technology - 13.9%
CAM Data Systems, Inc. 3,000 24,375
Datatrak International 666 2,706
Electroglas, Inc. 1,000 19,250
Onix Systems, Inc. 9,500 57,000
Sparton Corporation 8,000 48,500
Spectrian Corporation (Delaware) 1,000 14,750
Speedfam International 1,500 14,812
Standard Microsystems, Inc. 3,000 24,750
Sub Total 206,143
Agriculture - 7.6%
Agco Corporation 2,000 20,750
The Andersons, Inc. 6,000 62,625
DIMON, Inc. 7,000 29,750
Sub Total 113,125
Retail and Entertainment - 4.9%
Bowl America Inc. - Class A 8,600 60,200
Marsh Supermarkets Inc. - Class B 1,000 13,000
Sub Total 73,200
Total - 94.7% (Identified Cost $1,323,901) $1,406,387
Rights and Warrants - 0.6%
Coast Federal Contingent Payment Rights 7,000 9,187
Total -0.6% (Identified Cost $47,737) $ 9,187
Cash - 4.6% $ 67,630
Dividends and interest receivable - 0.1% $ 1,407
Total Assets - 100.0% $ 1,484,611
The accompanying notes are an integral part of this financial statement.
Aegis Value Fund, Inc.
Statement of Assets and Liabilities
August 31, 1999
Assets
Investments in securities, at market value -
identified cost $1,371,638 $ 1,415,574
Cash 67,630
Dividends and interest receivable 1,407
Total assets (all current) 1,484,611
Liabilities
Due to investment advisor (Note 5) 3,602
Total liabilities (all current) 3,602
Net Assets
Net assets (equivalent to $10.87 per share based on
136,192.276 shares of capital stock outstanding)
(Note 6) $1,481,009
The accompanying notes are an integral part of this financial statement.
Aegis Value Fund, Inc.
Statement of Operations
For the Year Ended August 31, 1999
Investment Income
Income
Dividends $ 36,082
Interest 2,454
Total income $ 38,536
Expenses
Investment advisory fees 15,642
Insurance 3,911
Total expenses 19,553
Investment income - net 18,983
Realized and unrealized gain on investments
Net realized gain on investments 142,720
Change in unrealized appreciation of
investments for the period 162,209
Net gain on investments 304,929
Net increase in net assets resulting from operations $ 323,912
The accompanying notes are an integral part of this financial statement.
Aegis Value Fund, Inc.
Statement of Changes in Net Assets
For the Year Ended August 31, 1999
Increase in net asset from operations
Investment income - net $ 18,983
Net realized gain on investments 142,720
Changes in unrealized appreciation 162,209
Net increase in net assets resulting from operations $ 323,912
Distributions
Investment income - net $ -9,240
Realized capital gains -4,724
Total distributions $ -13,964
Capital share transactions
Issuances (53,785.394 shares) $ 517,540
Issuances in lieu of cash
distributions (1,477.712 shares) 13,964
Redemptions (21,983.694 shares) -205,409
Total share proceeds 326,095
Total increase in net assets $ 636,043
Net Assets
Beginning of fiscal year $ 844,966
End of fiscal year (including undstributed net
investment income of $10,382) $ 1,481,009
The accompanying notes are an integral part of this financial statement.
Aegis Value Fund, Inc.
Financial Highlights
For the Year Ended August 31, 1999
Per share data (for a share outstanding throughout the period):
Net asset value - beginning of period $ 8.21
Income from investment operations -
Net investment income $ 0.16
Net realized and unrealized gain on investments 2.62
Total from investment operations $ 2.78
Less distributions declared to shareholders
From investment income - net $ -0.08
From realized capital gains -0.04
Total distributions $ -0.12
Net asset value at end of period $ 10.87
Total return 33.86%
Ratios (to average net assets)/Supplemental data:
Expenses 1.50% (1)
Net investment income 1.46%
Portfolio turnover 33%
Average commission rate $0.05
Net assets at end of period (000's) $1,481
(1) The Fund's advisor has agreed to maintain total expenses of the Fund at
not more than 1.50% of the average daily net assets. To the extent actual
expenses were over this limitation, the net investment income per share and
ration would have been:
Net investment income $0.04
Ratios (to average net assets):
Expense ratio 2.62%
Net investment income 0.34%
The accompanying notes are an integral part of this financial statement.
Aegis Value Fund, Inc.
Notes to Financial Statements
August 31, 1999
1. Organization
Aegis Value Fund ("the Fund") is registered under the Investment Company Act
of 1940. The Fund was incorporated in the State of Maryland on October 22,
1997 and commenced operations on May 15, 1998. There was no operating
activity before May 15, 1998.
2. Summary of Significant Accounting Policies
Security valuation. Investments in securities traded on a national
securities exchange (or reported on the NASDAQ National Market System) are
stated at the last reported sales price on the day of valuation; other
securities traded in the over-the-counter market and listed securities for
which no sale was reported on that date are stated at the last quoted bid
price or the average of bid and ask price for NASDAQ National Market
securities. Short-term notes are stated at amortized cost, which is
equivalent to value. Restricte securities and other securities for which
quotations are not readily available are valued as determined by the Board
of Directors.
Federal income taxes. The Fund's policy is to comply with the requirements
of the Internal Revenue Code that are applicable to regulated investment
companies and to distribute all of its taxable income to shaeholders. There-
fore, no federal income tax provision is required.
Cash and cash equivalents. For purposes of the statements of cash flows, the
Fund considers all highly liquid investments to be cash equivalents.
Distributions to shareholders. Dividends to shareholders are recorded on the
ex-dividend date.
Organization costs. Organization costs consist of costs incurred to
establish the Fund and legally equip it to engage in business. The costs are
amortized using the straight-line method over a period of 60 months
beginning from the date operations commence. If any of the original shares
are redeemed by their holder prior to the end of the amortization period,
the redemption proceeds will be reduced by the pro rata share of the
unamortized organization costs as of the date of redemption. The pro rata
share by which the proceeds are reduced will be derived by dividing the
number of original shares redeemed by the total number of original shares
outstanding at the time of the redemption. Reimbursement of the registrant
for the amount of the pro rata share will nor be used in lieu of reduction
of redemption proceeds.
Offering costs. Offering costs represent costs associated with the sale of
the Fund's securities and costs incurred up to the date of filing its
Registration Statement with the U. S. Securities and Exchange Commission.
These costs were paid by the Fund's investment advisor.
Broker commissions. It is the Fund's policy to pay broker commissions at
a rate of five cents per share on its transactions.
Other. The Fund follows industry practice and records security transactions
on the trade date. Dividend income is recognized on the ex-dividend date,
and interest income is recognized on an accrual basis. Discounts and
premiums on securities purchased are amortized over the life of the
respective securities.
3. Investment Advisory and Custodian Agreements
The Fund pays advisory fees for investment management and advisory services
under a management agreement (Agreement) that provides for fees to be
computed at an annual rate of 1.20% of the Fund's average daily net assets.
The Agreement provides for an expense reimbursement from the investment
advisor if the Fund's expenses, exclusive of taxes, interest, fees incurred
in acquiring or disposing of portfolio securities, and extraordinary
expenses, exceed 1.50% of the Fund's avarage daily net assets for any full
fiscal year. The Agreement shall remain in force through March 11, 2000 and
may be renewed for additional two year periods thereafter.
The Fund has entered into an agreement with a custodian (Investec Ernst &
Company) to hold and administer securities and cash of the Fund. The
agreement may be terminated by either party on 90 days' written notice.
4. Investment Transactions
Purchases and sales of investment securities were $737,530 and $408,796,
respectively, for the year ended August 31, 1999. The specific
identification method is used to determine cost basis when calculating
realized gains and losses. As of August 31, 1999, the unrealized
appreciation on investments was $43,936; accumulated undistributed net
realized gains on investment transactions totaled $139,694.
5. Due to Investment Advisor
Certain officers and directors of the Fund are also officers and directors
of the investment advisor. The unpaid investment advisory fee accrued
through August 31, 1999 was $3,602. The investment advisor also paid
expenses on behalf of the Fund, consisting mostly of legal, accounting and
insurance costs.
6. Net Assets
Net assets consists of the following as of August 31, 1999:
Common stock ($0.001 par value, 100,000,000
shares authorized, 136,192.276 shares outstanding) $ 136
Paid-in capital 1,286,861
Undistributed investment income 10,382
Accumulated net realized gains (losses) 139,694
Unrealized appreciation of investments 43,936
Total $1,481,009
Aegis Value Fund, Inc.
Independent Auditor's Report
Bish & Haffey, P.C.
50 South Pickett Street
Suite 200
Alexandria, VA 22304
September 17, 1999
To the Shareholders and
Board of Directors of
Aegis Value Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
Aegis Value Fund, Inc., including the schedule of portfolio investments,
as of August 31, 1999, and the related statements of operations, cash
flows, changes in net assets, and the selected per share data and ratios
for the year then ended. The financial statements and per share data and
ratios are the responsibility of the Fund's management. Our responsibility
is to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement and per
share data and ratios are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statement. Our procedures included confirmation of
securities owned as of August 31, 1999, by correspondence with the custodian.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and selected per share data and
ratios referred to above present fairly, in all material respects, the
financial position of Aegis Value Fund, Inc. as of August 31, 1999, the
results of its operations, cash flows, changes in its net assets and the
selected per share data and ratios for the year then ended, in conformity
with generally accepted accounting principles.
Bish & Haffey, P.C.
Aegis Value Fund, Inc.
1100 North Glebe Road, Suite 1040
Arlington, VA 22201
Phone: (800)528-3780
Fax: (703)528-1395
Internet: www.aegisvaluefund.com
Board of Directors
Scott L. Barbee
William S. Berno
Edward P. Faberman
Eskander Matta
William R. Morris III
Officers
William S. Berno, President
Scott L. Barbee, Treasurer
Paul Gambal, Secretary
Investment Advisor
Berno, Gambal & Barbee, Inc.
1100 North Glebe Road, Suite 1040
Arlington, VA 22201
Custodian
Investec 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
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights", "Independent Accountants", and "Financial Statements", and
to the use of our report dated September 17, 1999 included in this
Registration Statement (Form N-1A Nos. 333-49241 and 811-9174) of Aegis
Value Fund, Inc.
/s/ Bish & Haffey, P.C.
Alexandria, VA
October 28, 1999
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
AEGIS VALUE FUND, INC. FINANCIAL STATEMENTS AND ANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD SEPTEMBER 1, 1998 (BEGINNING OF FISCAL YEAR)
TO OCTOBER 31, 1999 (END OF FISCAL YEAR)AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF THE FUND.
</LEGEND>
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<NAME> AEGIS VALUE FUND, INC.
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