UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-09174
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Aegis Value Fund, Inc.
- ----------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
1100 N. Glebe Road, Suite 1040, Arlington, VA 22201
- ----------------------------------------------------------------------------
(Address of principal
executive offices) (Zip code)
William S. Berno, 1100 N. Glebe Rd., Suite 1040, Arlington, VA 22201
- ----------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (703) 528-7788
-------------------------
Date of fiscal year end: 08/31
------------------
Date of reporting period: 08/31/04
-----------------
ITEM 1. REPORTS TO STOCKHOLDERS
Aegis Value Fund, Inc.
Seventh Annual Report
August 31, 2004
Shareholders Letter
October 1, 2004
To the shareholders of the Aegis Value Fund:
We are pleased to present the Aegis Value Fund annual report for
the year ended August 31, 2004.
We take this opportunity to welcome new shareholders to the Fund and
provide a brief overview of the objectives and strategy of the Fund.
The Aegis Value Fund seeks to achieve long-term, above market returns
while minimizing risk of capital loss. Our strategy is to invest in
well-researched, small-cap equities trading at a fraction of their
intrinsic worth. We believe the equity markets are often inefficient,
and we are contrarian, bottom-up stock selectors. We generally
buy stocks trading at low price-to-book and price-to-earnings ratios,
a segment of the market where academic research shows historical
returns to be significantly higher than the overall market. We look
for indications of strong corporate governance and ethical
stewardship as evidenced by high insider ownership, proper use of
corporate profits including bargain-priced share repurchases, and
appropriate executive salary and options levels. We tend to
purchase companies when they are misunderstood, out of favor, or
neglected, and hold these companies until share prices reach our
estimates of intrinsic value.
Since inception of the Aegis Value Fund on May 15, 1998,
performance has been strong relative to benchmark indices.
The Fund has posted a cumulative gain of 159.1 percent through
September 30, 2004, compared to cumulative gains of 68.0 percent
in our primary small-cap benchmark, the Russell 2000 Value Index.
During this period, the Russell 2000 Index of small-cap stocks
posted cumulative gains of 31.7 percent, and the S&P 500 posted
cumulative gains of 10.4 percent.*
For the year ended August 31, 2004, the Aegis Value
Fund posted a gain of 16.6 percent, versus a gain of 19.5 percent
for the Russell 2000 Value Index. The Russell 2000 Index returned
11.4 percent, while the S&P 500 Index returned 11.5 percent.
The Fund performance was affected by a broad rise in valuation of
small-cap value stocks. We believe this broad rise in valuation may
have been driven at least in part by the decisions of many equity
investors to increase their positions in small-cap value stocks
following the excellent performance of the sector in recent years.
During rises in valuation of small-cap value stocks, our investment
strategy has historically slightly underperformed our benchmark
index. Conversely, when values of small-cap value stocks have
declined, we have historically outperformed our benchmark index.*
We believe the rise in valuations this year was quite broad: many
sectors of the stock market rose in valuation. The breadth of this
rise left us with fewer than usual opportunities to invest in
securities trading at low price-to-book multiples. Rather than
respond to rising valuations by purchasing stocks at higher
valuation measures, we have responded by conserving cash,
anticipating better future investment opportunities. Because cash
returns have been below benchmark index returns during the period,
this decision was a factor in our performance versus the benchmark.
As you are probably aware, we regularly review whether to accept
new investors to the Fund. Due to the recent, sustained reduction
in deep value investment opportunities, we have determined to
close the Fund to new investors as of November 30th, 2004.
For more detailed commentary and analysis of the Fund performance
and our outlook on the investing climate, please read our annual
Advisors Report dated August 31, 2004.
There are a few changes shareholders will notice in this years
report.
First, the Fund has changed independent auditors. We are grateful
for the work done by PricewaterhouseCoopers LLP in 2002 and 2003.
However, they informed us this year that due to increased audit
requirements resulting from the Sarbanes-Oxley Act, they have
shifted their practice to focus on larger clients. Therefore the
Fund Board of Directors has approved the selection of an
auditing firm that is better matched to our size.
Second, we have changed the name of our investment advisory firm.
Formerly we were known as Berno, Gambal & Barbee, Inc. Today we
are known as Aegis Financial Corporation. Our new name reflects
the primary importance of our mutual fund operations. We would
like to reassure you that only our name has changed: our
investment philosophy and our key investment professionals
remain in place.
We look forward to serving as your investment partner in the
coming year.
Aegis Financial Corporation
Scott L. Barbee, CFA
Managing Director, Portfolio Manager
* - Aegis Value Fund one-year, three year,
five year, and since inception (5/15/1998) average annual
returns for the period ending September 30, 2004 are 16.0%,
16.9%, 18.5%, and 16.1% respectively. Returns include
reinvestment of dividends and capital gains. Russell 2000 Value
Index one-year, three-year, five-year, and since inception
(AVALX-5/15/1998) average annual returns for the period ending
September 30, 2004 are 25.7%, 17.7%, 14.7%, and 8.5%. Past
performance is no guarantee of future results. Share prices will
fluctuate, so that shares may be worth more or less than their
original cost when redeemed. All historical performance returns
shown in this shareholders letter for the Aegis Value Fund Inc.
are pre-tax returns.
Important Note:
As a shareholder of the Fund, you incur ongoing costs,
including management fees and other Fund expenses. This
example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these
costs with ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire
semi-annual period, March 1, 2004 - August 31, 2004.
Actual expenses
The table below provides information about actual account
values and actual expenses.
[All figures in the following table are for the Aegis Value Fund]
Actual
Beginning Account Value (03/01/2004)
$1,000.00
Ending Account Value (08/31/2004)[1]
$1,006.90
Expenses Paid During Period[2]
$7.57
Hypothetical
Ending Account Value (08/31/2004)
$1,017.60
Expenses Paid During Period[2]
$7.61
[1] The actual ending account value is based on the
actual total return of the Fund for the period
March 1, 2004 to August 31, 2004 after actual
expenses and will differ from the hypothetical ending
account value which is based on the Fund actual
expense ratio and a hypothetical annual return of 5%
before expenses. The actual cumulative return at net
asset value for the period March 1, 2004 to August 31,
2004 was 0.69%.
[2] Expenses are equal to the Fund annualized expense
ratio (1.5%) multiplied by the average account value
over the period, multiplied by 184/366 (to reflect the
period between 03/01/2004 and 08/31/2004).
You may use the information in this table, together with
the amount you invested, to estimate the expenses that
you paid over the period. Simply divide your account
value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by
the number in the table under the heading entitled
Actual Expenses Paid During Period to estimate the
expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table above also provides information about hypothetical
account values and hypothetical expenses based on the Fund
actual expense ratio and an assumed rate of return of 5% per
year before expenses, which is not the Fund actual return.
The hypothetical account values and expenses may not be used
to estimate the actual ending account balance or expenses
you paid for the period. You may use this information to
compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder
reports of the other funds.
Please note that the expenses shown in the table are meant
to highlight your ongoing costs only. The Fund is a pure
no-load fund and does not charge any sales charges (loads),
distribution or service fees, or redemption fees.
Key statistics
Results of a $10,000 Investment
[The graph shows the return in dollars of a $10,000
investment in the Aegis Value Fund for the period
5/15/98-8/31/04 compared with the return of the Russell
2000 Value Index for the same period]
Aegis Value Fund Russell 2000 Value Index
5/15/98 $10,000 $10,000
8/31/98 $8,210 $7,564
8/31/99 $10,990 $8,629
8/31/00 $11,964 $9,811
8/31/01 $16,517 $11,581
8/31/02 $17,756 $10,933
8/31/03 $21,949 $13,521
8/31/04 $25,585 $16,157
Average Annual Total Returns (As of August 31, 2004)
AVALX Rus. 2000 Val.
Trailing 5 Year 18.4% 13.4%
Trailing 3 Year 15.7% 11.7%
Trailing 1 Year 16.6% 19.5%
Since inception (May 15, 1998) 16.1% 7.9%
Industry Breakdown
% of Fund assets
Common Stocks
Finance and Real Estate 13.5%
Agriculture 6.0%
Energy & Natural Resources 5.9%
Retail and Entertainment 5.6%
Industrial Cyclicals 4.6%
Transportation 3.4%
Textiles and Apparel 2.1%
Wholesale and Distribution 1.0%
Consumer Non-Durables 1.0%
Consumer Durables 0.8%
Technology 0.6%
Basic Materials 0.6%
Commercial Services 0.0%
Preferred Stocks 0.3%
Warrants 0.1%
Cash and Short-Term Investment 54.0%
Other Assets 0.5%
------
Total Assets 100.0%
Aegis Value Fund, Inc.
Schedule of Portfolio Investments
August 31, 2004
Common Stock - 45.3% Shares Market
Value
Industrial Cyclicals - 4.6%
Allied Defense Group, Inc.* 210,200 $3,815,130
American Pacific Corp.*(1) 670,534 4,995,478
Ampco-Pittsburgh Corporation 65,000 859,950
Commonwealth Industries, Inc. 47,996 404,126
International Aluminum Corp. 32,300 927,333
Pope & Talbot, Inc. 109,100 2,010,713
Quipp, Inc.* (1) 78,300 1,054,701
RTI International Metals Inc.* 148,600 2,212,654
Ryerson Tull, Inc. - Class A 951,700 15,170,098
Steel Technologies Inc. 30,743 614,860
Stewart & Stevenson Inc. 33,900 566,469
----------
32,631,512
Wholesale and Distribution - 1.0%
Nash Finch Company 244,276 7,213,470
----------
7,213,470
Finance and Real Estate - 13.6%
Acceptance Insurance Companies, Inc.* 229,400 2,523
Allmerica Financial Corp.* 224,000 6,496,000
Amnet Mortgage Inc.* 363,685 2,836,743
Boykin Lodging Company * 100,000 837,000
California First National Bank Corp. 531,330 6,947,140
First Union Real Estate Equity and
Mortgage Investment SBI* 1,039,800 3,098,604
Medallion Financial Corp. 11,400 96,786
Meristar Hospitality Inc.* 653,800 3,765,888
The MIIX Group Inc.* 720,000 126,000
PMA Capital Corp.
- Class A*(1) 1,608,951 11,343,105
Prime Group Realty
Trust*(1) 2,158,700 12,390,938
Prime Hospitality Corp.* 1,923,200 23,116,864
PXRE Group Ltd. 590,000 13,711,600
SCPIE Holdings, Inc.(1) 975,000 8,716,500
SWS Group Inc. 117,300 1,718,445
-----------
95,204,136
Textiles and Apparel - 2.1%
Delta Apparel, Inc. 171,000 4,215,150
Delta Woodside
Industries*(1) 428,700 385,830
Haggar Corporation 195,863 3,680,266
Nitches, Inc.* 37,620 198,634
Quaker Fabric
Corporation(1) 845,085 5,704,324
Tandy Brands Accessories 56,978 773,191
----------
14,957,395
Transportation - 3.4%
Air France ADR* 436,700 6,646,574
International Shipholding Corp.* 95,700 1,320,660
MAIR Holdings, Inc.* 359,680 2,970,957
Maritrans, Inc. 73,800 1,111,428
National RV Holdings* 276,300 3,669,264
Sea Containers Ltd. - Class A 507,500 8,018,500
----------
23,737,383
Energy & Natural Resources - 5.9%
Alliant Energy Corp. 160,000 4,158,400
Atwood Oceanics Inc.* 155,000 6,474,350
Avista Corporation 45,800 818,904
Global Industries, Inc.* 747,217 3,997,611
Horizon Offshore Inc.* 1,222,024 684,333
Idacorp Inc. 80,800 2,353,704
PNM Resources, Inc. 255,000 5,449,350
Reliant Resources Inc.* 1,125,900 11,213,964
USEC Inc. 740,500 6,309,060
----------
41,459,676
Commercial Services - 0.0%
LQ Corporation* 52,115 104,230
---------
104,230
Agriculture - 6.0%
The Andersons, Inc. 324,351 5,741,013
Dimon Inc.(1) 2,381,200 13,668,088
Imperial Sugar*(1) 565,300 7,857,670
Seaboard Corporation 1,330 707,627
Standard Commercial
Corporation (1) 936,800 14,333,040
----------
42,307,438
Consumer Durables - 0.8%
Bassett Furniture Industries, Inc. 306,654 5,765,095
----------
5,765,095
Technology - 0.6%
Audiovox Corporation - Class A* 120,934 1,965,178
IDT Corporation* 10,000 146,200
IDT Corporation - Class B* 86,000 1,292,580
Integrated Telecom Express
Inc.*(2) 308,300 30,830
Printware, Inc.*(2) 32,000 0
Technology Solutions Company* 828,594 828,594
---------
4,263,382
Retail and Entertainment - 5.7%
Books-A-Million Inc.(1) 858,822 5,951,636
Bowl America Inc. - Class A 9,481 135,578
Duckwall-ALCO Stores, Inc.* 140,100 2,416,725
Luby's, Inc.*(1) 2,032,300 13,209,950
Marsh Supermarkets, Inc. - Class B 205,206 2,296,255
Nathan's Famous, Inc.* 132,400 808,964
ShopKo Stores, Inc. 176,500 2,986,380
Toys R Us, Inc.* 703,100 11,418,344
Ultimate Electronics, Inc.* 200,614 473,450
----------
39,697,282
Basic Materials - 0.6%
NewMarket Corp.* 185,360 3,835,098
----------
3,835,098
Consumer Non-Durables - 1.0%
CPAC, Inc.(1) 306,998 1,617,572
Head N.V. 1,881,000 4,984,650
National Presto Industries, Inc. 15,000 610,500
----------
7,212,722
------------
Total Common Stocks - (Cost $254,417,537) $318,388,819
------------
[See explanation of footnotes below]
Preferred Stocks - 0.3%
Glenborough Realty 7.75%
Convertible Preferred 9,633 $242,270
La Quinta Properties 9%
Series A Preferred 76,800 1,977,600
---------
Total Preferred Stocks - (Cost $1,841,600) 2,219,870
---------
Warrants - 0.1%
Air France ADW* 397,000 408,910
---------
Total Warrants - (Cost $627,260) 408,910
---------
Investment Companies - 2.5%
Federated Prime Obligations Fund 17,502,282 17,502,282
----------
Total Investment Companies
- (Cost $17,502,282) 17,502,282
----------
Short-Term Investments - 50.8% Face Value Market Value
U. S. Treasury Bill due 9/2/04 $65,000,000 64,995,892
U. S. Treasury Bill due 9/9/04 55,000,000 54,984,088
U. S. Treasury Bill due 9/16/04 52,000,000 51,973,314
U. S. Treasury Bill due 9/23/04 30,000,000 29,975,427
U. S. Treasury Bill due 9/30/04 50,000,000 49,945,950
U. S. Treasury Bill due 10/7/04 65,000,000 64,914,408
U. S. Treasury Bill due 10/14/04 40,000,000 39,937,092
-----------
Total Short-Term Investments
- (Cost $356,726,171) 356,726,171
-----------
Total Investments - 99.0%
- (Cost $631,114,850)# 695,246,052
-----------
Other Assets and Liabilities - 1.0% 6,990,978
-----------
Net Assets - 100.0% $702,237,030
============
Footnotes:
Definitions of Abbreviations:
SBI: Shares of Beneficial Interest
ADR: American Depository receipts
ADW: American Depositary Warrants
* Non-income producing securities
# Aggregate cost for tax purposes of $631,114,850
(1) The fund owns more than 5% of outstanding securities
- see Note 7
(2) Company is in liquidation and security is
being fair valued by the Fund Board of Directors.
See page 13 for notes to the financial statements.
Aegis Value Fund, Inc.
Statement of Assets and Liabilities
August 31, 2004
Assets
Investments in unaffiliated issuers
at market value (cost $537,751,088) $594,017,220
Investments in affiliated companies
at market value (cost $93,363,762) 101,228,832
Cash 5,758,815
Receivable for fund shares sold 2,089,276
Interest and dividends receivable 443,554
Other assets 51,475
------------
Total assets 703,589,172
------------
Liabilities
Payable for investment securities purchased 739,101
Payable for fund shares redeemed 535,602
Accrued expenses 77,439
----------
Total liabilities 1,352,142
----------
Net assets (40,000,408 shares of $0.001 par
value capital stock outstanding;
100,000,000 shares authorized) $702,237,030
============
Net assets consist of:
Capital stock at par value $40,000
Paid-in capital 608,294,661
Accumulated net realized gain 29,771,167
Net unrealized appreciation 64,131,202
------------
Net assets $702,237,030
============
Net asset value per share $17.56
------
See page 13 for notes to the financial statements
Aegis Value Fund, Inc.
Statement of Operations
for the Year Ended August 31, 2004
Investment Income
Dividends from unaffiliated companies $1,554,243
Dividends from affiliated companies 2,097,253
Interest 2,491,516
----------
Total income 6,143,012
----------
Expenses
Investment advisory fees 6,362,381
Transfer agency and administration fees 1,325,496
Registration fees 105,649
Custody fees 47,007
Printing and postage costs 47,365
Legal and accounting fees 47,300
Directors fees 14,292
Insurance and other 39,063
----------
Gross expenses 7,988,553
Less: fees paid indirectly (21,451)
Less: fees reimbursed by investment advisor (14,227)
----------
Net expenses 7,952,875
----------
Net investment loss (1,809,863)
----------
Realized and unrealized gain on investments
Net realized gain on investments
- unaffiliated companies 37,078,702
Net realized gain on investments
- affiliated companies 128,908
Change in unrealized appreciation of
investments for the year 29,039,201
----------
Net realized and unrealized gain
on investments 66,246,811
----------
Net increase in net assets resulting
from operations $64,436,948
===========
See page 13 for notes to the financial statements
Aegis Value Fund
Statement of Changes in Net Assets
For the Years Ended August 31
2004 2003
---- ----
Increase in net assets from
operations
Net investment income (loss) $(1,809,863) $569,250
Net realized gain on investments 37,207,610 5,791,605
Change in unrealized appreciation 29,039,201 38,255,796
---------- ----------
Net increase in net assets
resulting from operations 64,436,948 44,616,651
---------- ----------
Distributions
Investment income - net (288,823) (264,495)
Realized capital gains (10,802,270) (6,480,141)
------------ -----------
Total distributions (11,091,093) (6,744,636)
------------ -----------
Capital share transactions*
Subscriptions 551,631,825 189,367,956
Distributions reinvested 10,198,864 6,417,295
Redemptions (207,138,493) (94,165,592)
Total capital share
transactions 354,692,196 101,619,659
------------ ------------
Total increase in net assets 408,038,051 139,491,674
Net assets at beginning of year 294,198,979 154,707,305
------------ ------------
Net assets at end of year $702,237,030 $294,198,979
============ ============
Undistributed net investment
income at end of year $0 $288,823
=== ============
* - Share information
Subscriptions 32,480,885 14,037,728
Distributions reinvested 617,364 511,727
Redemptions (12,158,873) (7,396,560)
----------- -----------
Net increase 20,939,376 7,152,895
=========== ===========
See page 13 for notes to the financial statements
Aegis Value Fund, Inc.
Financial Highlights
For the Years Ended August 31
The table below sets forth the financial data for a share
of the Fund outstanding throughout each year presented:
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
Per share data:
Net asset value
- beginning of
year $15.44 $12.99 $12.12 $9.72 $10.87
Income from investment operations-
Net investment
income (loss) (0.06) 0.04 0.01(2) 0.09 0.23
Net realized and
unrealized gain on
investments 2.59 2.92 0.90 3.25 0.47
----- ----- ----- ----- -----
Total from
investment
operations 2.53 2.96 0.91 3.34 0.70
----- ----- ----- ----- -----
Less distributions declared to shareholders-
Net investment
income (0.01) (0.02) --(3) (0.18) (0.15)
Net realized
capital gains (0.40) (0.49) (0.04) (0.76) (1.70)
----- ----- ----- ----- -----
Total
distributions (0.41) (0.51) (0.04) (0.94) (1.85)
----- ----- ----- ----- -----
Net asset value
- end of year $17.56 $15.44 $12.99 $12.12 $9.72
====== ====== ====== ====== =====
Total investment
return 16.6% 23.7% 7.5% 37.8% 8.9%
Ratios (to average net assets)/supplemental data:
Expenses after reimbursement and
fees paid
indirectly (1) 1.50% 1.50% 1.50% 1.50% 1.50%
Expenses before reimbursement and
fees paid
indirectly 1.51% 1.56% 1.54% 2.27% 2.82%
Net investment
income (loss) (0.34)% 0.31% 0.04% 0.89% 2.22%
Portfolio turnover 27% 15% 29% 10% 50%
Net assets at end
of year (000's) $702,237 $294,199 $154,707 $23,202 $1,520
(1)Ratio after expense reimbursement, before fees paid
indirectly, is 1.50% in 2004, 1.51% in 2003 and 1.52%
in 2002
(2)Based on average shares outstanding during the period
(3)Less than $0.01
See page 13 for notes to the financial statements
Aegis Value Fund, Inc.
Notes to Financial Statements
August 31, 2004
1. The Organization
Aegis Value Fund, Inc. (the Fund) is registered under
the Investment Company Act of 1940 as a diversified
open-end management company. The Fund was incorporated
October 22, 1997 in the State of Maryland and commenced
operations May 15, 1998. The Fund principal investment
goal is to seek long-term capital appreciation by
investing primarily in common stocks that are believed to
be significantly undervalued relative to the market based
on company book value, revenues, or cash flow. Refer
to a current Prospectus for additional information about
the Fund.
2. Summary of Significant Accounting Policies
Security valuation:
Investments in securities traded on a national securities
exchange (or reported on the NASDAQ National Market) are
stated at the last reported sales price or a market
official close 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. Restricted
securities and other securities for which market
quotations are not readily available are valued at fair
value as determined by the Board of Directors.
Federal income taxes:
The Fund's policy is to continue to comply with the
requirements of the Internal Revenue Code that are
applicable to regulated investment companies and to
distribute all its taxable income to shareholders.
Therefore, no federal income tax provision is required.
Expenses paid indirectly:
Credits earned on temporarily uninvested cash balances
at the custodian are used to reduce the Fund custody
charges. Custody expense in the statement of operations
is presented before the reduction for credits, which
were $21,451 for the year ended August 31, 2004.
Distributions to shareholders:
Distributions to Fund shareholders, which are determined
in accordance with income tax regulations, are recorded
on the ex-dividend date. Distributions of net investment
income, if any, are made at least annually. Net realized
gains from investment transactions, if any, will be
distributed to shareholders at least annually.
Use of estimates:
The preparation of financial statements in conformity
with accounting principles generally accepted in the
United States of America requires management to make
estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the
financial statements and the reported amounts of
revenues and expenses during the period. Actual
results could differ from those estimates.
Other:
The Fund records security transactions based on the
trade date. Dividend income is recognized on the
ex-dividend date, and interest income is recognized
on the accrual basis and includes accretion of
discounts and amortization of premiums.
Withholding taxes on foreign dividends have been
provided for in accordance with the Fund
understanding of the applicable country tax rules
and rates.
In the normal course of business, the Fund enters
into contracts that contain a variety of
representations, which provide general
indemnifications. The Fund maximum exposure
under these arrangements is unknown as this would
involve future claims that may be made against the
Fund that have not yet occurred. However, based on
experience, the Fund expects the risk of loss to be
remote.
3. Advisory Fees and Other Transactions with Affiliates
The Fund entered into an investment management and
advisory services agreement (the Agreement) with
Aegis Financial Corporation, formerly Berno, Gambal
& Barbee, Inc. (the Advisor) that provides for
fees to be computed at an annual rate of 1.20% of
the Fund average daily net assets. The Agreement
provides for an expense reimbursement from the
Advisor if the Fund expenses, exclusive of taxes,
interest, fees incurred in acquiring or disposing
of portfolio securities, and extraordinary
expenses, exceed 1.50% of the Fund average daily
net assets. The Agreement shall remain in force
through March 31, 2005 and may be renewed for
additional two-year periods thereafter. Either
party may terminate the Agreement anytime upon
sixty (60) days written notice to the other party.
During the year ended August 31, 2004, the Advisor
reimbursed the Fund $14,227.
As part of the expense limitation agreement, the
Fund has agreed to repay the Advisor for amounts
waived or reimbursed by the Advisor provided that
such repayment does not cause the Fund expenses,
exclusive of taxes, interest, fees incurred in
acquiring or disposing of portfolio securities,
and extraordinary expenses, to exceed 1.50% and
the repayment is made within three years after
the year in which the Advisor incurred the
expense. The fees reimbursed by the Advisor
subject to recapture in varying amounts under
this Agreement at August 31, 2004 are $133,494.
The Fund has an agreement with BGB Fund Services,
Inc. to provide fund accounting, administration,
transfer agency and shareholder services to the
Fund at an annual rate of 0.25% of the Fund
average daily net assets.
BGB Securities, Inc., a registered broker/dealer,
executes portfolio transactions on behalf of the
Fund. Brokerage commissions paid to BGB
Securities amounted to $273,413 for the year
ended August 31, 2004.
Certain officers and directors of the Fund are
also officers and directors of the Advisor, BGB
Fund Services, Inc. and BGB Securities, Inc.
The Fund pays each director not affiliated with
the Advisor fees in cash or Fund shares for
attended board and committee meetings.
4. Investment Transactions
Purchases and sales of investment securities
were $131,067,494 and $69,743,168, respectively,
for the year ended August 31, 2004. The
specific identification method is used to
determine tax cost basis when calculating
realized gains and losses.
5. Distributions to Shareholders and Tax
Components of Net Assets
The tax character of distributions paid during
the years ended August 31, 2004 and 2003 were
as follows:
2004 2003
Distribution paid from:
Ordinary income $2,164,116 $6,215,644
Long-term capital gain 8,926,977 528,992
---------- ----------
$11,091,093 $6,744,636
=========== ==========
As of August 31, 2004, the components of net
assets on a tax basis were as follows:
Undistributed ordinary income $ 11,234
Undistributed long-term gain 29,759,933
Unrealized appreciation 81,658,555
Unrealized depreciation (17,527,353)
Shares of capital stock 608,334,661
-----------
Total $702,237,030
============
Temporary book/tax differences are a result of
differing treatments of short-term capital gains.
6. Reclassification of Permanent Differences
Primarily as a result of differing book/tax
treatment of net investment loss, on August 31,
2004, undistributed net investment income was
increased by $1,809,863 and accumulated net
realized gain was decreased by $1,809,863. This
reclassification had no effect on the net assets
of the Fund.
7. Investments in Affiliated Companies
An affiliated company is a company in which the
Fund has ownership of at least 5% of the voting
securities. Companies which are affiliates of
the Fund at fiscal year-end are noted in the Fund's
schedule of portfolio investments. Transactions
during the period with companies which are or
were affiliates are as follows:
Value Value
Beginning Sales Dividend End
of Period Purchases Proceeds Income of Period
American
Pacific
Corp. $5,807,430 - $386,066 $296,730 $4,995,478
Books
- -A-
Million,
Inc. 2,919,995 - - 128,823 5,951,636
CPAC,
Inc. 1,851,198 - - 85,959 1,617,572
Delta
Woodside
Indust
- -ries 1,328,970 - - - 385,830
Dimon,
Inc. 3,941,280 12,113,989 - 452,175 13,668,088
Head NV 4,175,820 - - - 4,984,650*
Imperial
Sugar - 6,861,905 - - 7,857,670
Lubys,
Inc. 4,746,140 274,215 - - 13,209,950
PMA
Capital - 7,994,353 - - 11,343,105
Prime
Realty
Group
Trust - 13,443,188 - - 12,390,938
Quaker
Fabric
Corp. 2,600,015 3,649,140 - 61,262 5,704,324
Quipp,
Inc. 995,976 - - - 1,054,701
SCPIE
Holdings 8,077,342 1,992,335 - 822,692 8,716,500
Standard
Commercial
Corp. 8,190,000 8,434,138 - 249,612 14,333,040
--------- --------- ----- -------- ----------
Total $44,634,166 $54,763,263 $386,066 $2,097,253 $106,213,482
=========== =========== ======== ========== ============
* No longer an affiliate at August 31, 2004.
8. Change of Independent Registered Public Accounting Firm
On July 28, 2004, Briggs, Bunting & Dougherty, LLP (BBD) was
selected to replace PriceWaterhouseCoopers LLP (PWC) as the
Fund's independent registered public accounting firm for the
2004 fiscal year. The Trust's selection of BBD was approved by
both the Audit Committee and the Board of Directors.
PWC had served as the principal independent registered public
accounting firm for the years ending August 31, 2003 and 2002.
PWC's report on the Fund's financial statements as of August 31,
2003 did not contain an adverse opinion or a disclaimer of
opinion and was not qualified or modified as to uncertainty,
audit scope or accounting principles. At the financial
statements' date and through the date of the engagement of BBD,
there were no disagreements between the Fund and PWC on any
matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures, which
such disagreements, if not resolved to the satisfaction of PWC,
would have caused it to make reference to the subject matter
of the disagreement in connection with its reports on the
financial statements for such years.
Report Of Independent Registered Public Accounting Firm
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, 2004, and the
related statement of operations, the statement of changes in
net assets and the financial highlights for the year then
ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. The
statement of changes in net assets for the year ended August
31, 2003 and the financial highlights for each of the four
years in the period then ended have been audited by other
auditors, whose reports expressed an unqualified opinion on
such financial statements and financial highlights.
We conducted our audit in accordance with the standards of
the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included
confirmation of securities owned as of August 31, 2004 by
correspondence with the custodian and brokers. 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 financial
highlights referred to above present fairly, in all
material respects, the financial position of Aegis Value
Fund, Inc. as of August 31, 2004, the results of its
operations, the changes in its net assets and its
financial highlights for the year then ended, in
conformity with accounting principles generally accepted
in the United States of America.
Briggs, Bunting & Dougherty, LLP
Philadelphia, Pennsylvania
September 29, 2004
Aegis Value Fund, Inc.
Fund Directors and Secretary
August 31, 2004
Fund Directors
Business Experience
and Directorships
Name, Age and Address Position During the Past 5 Years
- --------------------- -------- -----------------------
William S. Berno*(50) President, President and Managing
1100 North Glebe Road Director Director of Aegis Financial
Suite 1040 Corporation since 1994;
Arlington, VA 22201 President and Director of
the Fund since 1997
Scott L. Barbee*(33) Treasurer, Treasurer and Managing
1100 North Glebe Road Director Director of Aegis Financial
Suite 1040 Corporation since 1997;
Arlington, VA 22201 Treasurer and Director of
the Fund since 1997
Edward P. Faberman(57) Director Attorney with the firm of
Ungaretti & Harris Ungaretti & Harris since
1500 K Street N.W. 1996; Director of the Fund
Suite 250 since 1997
Washington, DC 20005
Eskander Matta(33) Director VP of Enterprise Internet
Wells Fargo & Co. Services, Wells Fargo & Co.
550 California Street since 2002; Director of
2nd Floor Strategic Consulting with
San Francisco, CA Cordiant Communications,
94111 2001-2002; Director of
Strategic Consulting,
Organic, Inc. 1999-2001;
Investment banker,
CSFirst Boston, 1996-99;
Director of the Fund
since 1997
Albert P.
Lindemann III(41) Director Director, Faison
Faison Enterprises Enterprises, since 2000;
121 West Trade Street Real estate development,
Suite 2550 Trammell Crow Co., 1995-
Charlotte, NC 28202 2000; Director of the Fund
since 2000
Fund Secretary
Paul Gambal*(45) Secretary Chairman, Secretary and
1100 North Glebe Road Managing Director of
Suite 1040 Aegis Financial Corporation
Arlington, VA 22201 since 1994; Secretary
of the Fund since 1997
* Indicates persons who are affiliated with Aegis Financial
Corporation, the Fund investment advisor, and are
therefore considered to be interested persons under the
Investment Company Act of 1940, Section (2)(a).
The Fund Statement of Additional Information includes
additional information about Fund directors and is available,
without charge, by calling the Fund toll-free phone number,
(800)528-3780.
A description of the policies and procedures that the Fund uses
to determine how to vote proxies relating to portfolio securities
is available, without charge, by calling the Fund toll-free
phone number, (800)528-3780.
The Fund has adopted a code of ethics applicable to its
principal executive officer and principal financial officer.
A copy of this code is available, without charge,
by calling the Fund toll-free phone number, (800)528-3780.
Aegis Value Fund, Inc.
1100 North Glebe Road, Suite 1040
Arlington, Virginia 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
Albert P. Lindemann III
Eskander Matta
Officers
William S. Berno, President
Scott L. Barbee, Treasurer
Paul Gambal, Secretary
Investment Advisor
Aegis Financial Corporation
1100 North Glebe Road, Suite 1040
Arlington, Virginia 22201
Custodian
UMB Bank, n.a.
928 Grand Boulevard
Kansas City, Missouri 64106
Independent Auditors
Briggs, Bunting & Dougherty, LLP
Two Penn Center Plaza, Suite 820
Philadelphia, PA 19102-1732
Counsel
Dechert Price & Rhoads
1775 I Street, N.W.
Washington, DC 20006
ITEM 2. CODE OF ETHICS
(a)The Registrant, as of the end of the period covered by this report,
has adopted a code of ethics that applies to the Registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the
Registrant or a third party.
(b)There have been no amendments, during the period covered by this
report, to a provision of the code of ethics that applies to the
Registrants principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are
employed by the Registrant or a third party, and that relates to any
element of the code of ethics description.
(c)The Registrant has not granted any waivers, including an implicit
waiver, from a provision of the code of ethics that applies to the
Registrants principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the Registrant or a third party, that relates to one or more of the
items set forth in paragraph (b) of this item's instructions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1)The Registrant does not have an audit committee financial expert
serving on its audit committee.
(a)(2)Not applicable.
(a)(3)Registrants Audit Committee has determined that it will retain
the services of an independent expert when and if such need arises.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) AUDIT FEES: The aggregate fees billed for each of the last two fiscal
years for professional services rendered by the principal accountant for
the audit of the registrant annual financial statements or services that
are normally provided by the accountant in connection with statutory and
regulatory filings or engagements for those fiscal years are
$17,500 in 2004 and $18,500 in 2003.
(b) AUDIT-RELATED FEES: The aggregate fees billed in each of the last two
fiscal years for assurance and related services by the principal accountant
that are reasonably related to the performance of the audit of the
registrant financial statements and are not reported under
paragraph (a) of this Item are NONE.
(c) TAX FEES: The aggregate fees billed in each of the last two fiscal
years for professional services rendered by the principal accountant for
tax compliance, tax advice, and tax planning are $1,500 in 2004
and $20,800 in 2003.
Tax Fees represent tax compliance services and tax consultation provided
in connection with the preparation of the Registrants federal
income tax and excise tax returns and compliance with IRS regulations.
(d) ALL OTHER FEES: The aggregate fees billed in each of the last two
fiscal years for products and services provided by the principal
accountant, other than the services reported in
paragraphs (a) through (c) of this Item are NONE.
(e)(1) Disclose the audit committee pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
Audit Committee Pre-Approval Policy. All services to be performed for
the Registrant by Briggs Bunting & Dougherty, LLP must be pre-approved by
the audit committee. All services performed during 2003 and 2004 were
pre-approved by the committee.
(e)(2) The percentage of services described in each of
paragraphs (b) through (d) of this Item that were approved by the
audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X are as follows:
(b) Not applicable
(c) 100%
(d) Not applicable
(f) The percentage of hours expended on the principal accountants
engagement to audit the registrants financial statements for the most
recent fiscal year that were attributed to work performed by persons
other than the principal accountants full-time, permanent
employees was NONE.
(g) The aggregate non-audit fees billed by the registrants accountant
for services rendered to the registrant, and rendered to the registrants
investment adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under
common control with the adviser that provides ongoing services to the
registrant for each of the last two fiscal years of the registrant
was NONE in 2004 and $27,000 in 2003.
(h) The registrants audit committee of the board of directors has
considered whether the provision of non-audit services that were rendered
to the registrants investment adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the investment
adviser that provides ongoing services to the registrant that were not
pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X is compatible with maintaining the principal
accountants independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Investments in securities of unaffiliated issuers is included as part
of the reports to stockholders filed under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS
Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 10. CONTROLS AND PROCEDURES
(a)The registrants principal executive officer and principal financial
officer have concluded that the registrant disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company
Act of 1940, as amended are effective based on their evaluation of
these controls and procedures as of a date within 90 days of the filing
date of this document.
(b)There were no changes in the registrant internal controls over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act)
that occurred during the registrant last fiscal half-year (the
registrant second fiscal half-year in the case of an annual report)
that has materially affected, or is reasonably likely to materially
affect, the registrant internal control over financial reporting.
Item 11. Exhibits.
(a)(1) Code of ethics, or any amendment thereto, that is the subject
of disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 are attached hereto.
- --------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
(Registrant)Aegis Value Fund, Inc.
By (Signature and Title)* /s/William S. Berno
William S. Berno, President
Date: November 4, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By (Signature and Title)* /s/William S. Berno
William S. Berno, President
Date: November 4, 2004
By (Signature and Title)* /s/Scott L. Barbee
Scott L. Barbee, Treasurer
Date: November 4, 2004