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 811-21399
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The Aegis Funds
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(Exact name of registrant as specified in charter)
1100 N. Glebe Road, Suite 1040, Arlington, VA 22201
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(Address of principal executive offices) (Zip code)
William S. Berno, 1100 N. Glebe Rd., Suite 1040, Arlington, VA 22201
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(Name and address of agent for service)
Registrant's telephone number, including area code: (703) 528-7788
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Date of fiscal year end: 12/31
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Date of reporting period: 06/30/05
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ITEM 1. REPORTS TO STOCKHOLDERS
Aegis High Yield Fund
Semi-Annual Report
June 30, 2005
Shareholders Letter August 12, 2005
To the Shareholders of the Aegis High Yield Fund:
We are pleased to present the Aegis High Yield Fund Semi-Annual Report for
the six months ended June 30, 2005.
We want to take this opportunity to welcome new shareholders to the Fund.
We appreciate your support. At any time, if you would like further
information about the Fund, please go to our website at www.aegisfunds.com
for a more detailed look at the high-yield bond market and the Fund s
investment approach. For your benefit, we will review the objectives and
strategy of the Fund.
The Aegis High Yield Fund seeks to earn consistent total returns in the
market that exceed our benchmark over periods of three to five years, while
striving for below-average risk compared to our peers. Our long-term
investment strategy is based on our total return objective. We use in-depth
fundamental analysis of issuers to identify bonds and build a portfolio with
the potential for capital
appreciation due to improved company performance, ratings upgrades, or better
industry conditions. We seek situations where Wall Street s appraisal of a
security value is more negative than we have determined based upon an
independent study of the facts. The bonds we purchase are not necessarily the
highest yielding issues in the market. Our goal is to maximize risk-adjusted
long-term total return.
For the six-month period ended June 30, 2005, the Aegis High Yield Fund posted
a total return of 1.70 percent, compared to a total return of 1.11 percent for
its benchmark, the Lehman U.S. Corporate High Yield Index. The Fund s closing
net asset value at the end of the period was $10.11 per share, and income
distributions of 20 cents per share were paid during the semi-annual period.
The Fund s SEC 30-day annualized yield was 6.03% as of June 30.
The Fund s portfolio was in a somewhat cautious position at mid-year, with a
weighted average portfolio maturity of somewhat less than four years and
portfolio duration of approximately 2.6 years. Financial statements for the
Fund s most recent operating period are included in this report.
As the year commenced, the high-yield bond market was trading (as it had for
a considerable portion of 2004) at yield levels very close to all-time lows.
In our February letter, we expressed caution toward the market. Weeks later,
General Motors announced a very disappointing profit outlook for 2005 and its
bonds were soon downgraded to junk status, a move that created much turmoil
in the high-yield market. Many highly leveraged market participants were
forced to sell securities to improve their liquidity and reduce the risk of
their trading positions. In the few weeks from early March to mid-May, the
yield on the Lehman index rocketed from 6.7% to 8.6% as market participants
dramatically revised their outlook for the investment fundamentals and
economic risks.
In late May, after both Moodys and Fitch announced decisions to maintain
Ford Motor Company at investment grade ratings, the market began a rally
that continued into the early days of August. The Lehman index is now
yielding around 7.7%. Nevertheless, the near-collapse of a few months ago
was an indication of how quickly and how far the high-yield market can
plunge from elevated levels.
Fortunately, the Fund was well-positioned for a correction and held up
relatively well in March and April. We were a buyer when bargains were
available and were able to make some attractive purchases during the period.
We also had to meet some share redemptions in the downturn, and the
combination of factors left us with a fully invested portfolio at June 30.
Thus we were able to participate in the recent rally without the drag of a
large cash position.
A more in-depth review of the Fund performance and outlook can be found
in the Advisors Report that is provided to you separately. Our decision to
use this particular format is a result of the Sarbanes-Oxley Act of 2002.
Under the Act, mutual fund officers are required to certify the entirety of
each Annual and Semi-Annual report. After some deliberation, we reached
the conclusion that we are not in a position to certify data provided by
third parties, nor will we certify any analysis and subjective conclusions
drawn from such data.
Nonetheless, we strongly feel that a thoughtful and detailed discussion of
current market conditions is important to our shareholders. Therefore,
please continue to anticipate reading this more editorial type of
commentary and analysis in the Advisors Report in the future.
We thank you for your continued investment in the Fund.
Aegis Financial Corporation
William S. Berno, CFA
Managing Director, Portfolio Manager
Note: All historical performance returns shown in this shareholders letter
for the Aegis High Yield Fund are pre-tax returns. Returns include
reinvestment of income and capital gains. 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.
About Your Fund s Expenses (Unaudited)
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, January 1, 2005 - June 30, 2005.
Actual expenses
The table below provides information about actual account values and actual
expenses.
Actual Hypothetical
(5% annual return before expenses)
Beginning Ending Expenses Ending Expenses
Account Value Account Value Paid During Account Value Paid During
Fund (01/01/2005) (06/30/2005)(1) Period (2) (06/30/2005) Period (2)
Aegis High
Yield Fund $1,000.00 $1,017.00 $6.00 $1,018.84 $6.01
(1) The actual ending account value is based on the actual total return
of the Fund for the period January 1, 2005 to June 30, 2005 after actual
expenses and will differ from the hypothetical ending account value which
is based on the Fund s actual expense ratio and a hypothetical annual
return of 5% before expenses. The actual cumulative returns at net asset
value for the period January 1, 2005 to June 30, 2005 were 1.70%.
(2) Expenses are equal to the Fund s annualized expense ratio (1.20%)
multiplied by the average account value over the period, multiplied
by 181/365 (to reflect the period between 01/01/2005 and 06/30/2005).
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 s actual expense ratio
and an assumed rate of return of 5% per year before expenses, which is not
the Fund s 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.
Portfolio Characteristics (Unaudited)
Industry Breakdown
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Corporate Bonds -- 100.2%
Industrial Cyclicals 11.1%
Retail and Wholesale 11.9%
Financial Services 6.9%
Transportation and Services 14.1%
Energy and Natural Resources 13.8%
Consumer Products 8.1%
Consumer Services 7.7%
Healthcare Products and Services 7.7%
Technology and Communication 18.9%
Short-Term Investments 6.4%
Other Liabilities (6.6%)
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Total Net Assets 100.0%
Credit Quality - % of Corporate Bonds
BBB or Higher 4%
BB 12%
B 59%
CCC 15%
Below CCC or unrated 10%
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Total 100%
Maturity (Or Most Likely Call) - % of Corporate Bonds
Less than 1 year 15%
1-3 years 53%
4-6 years 26%
7-10 years 3%
More than 10 years 3%
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Total 100%
Aegis High Yield Fund
Schedule of Portfolio Investments
June 30, 2005
(Unaudited)
Corporate Bonds - 100.2% Principal Amount Market Value
- ------------------------ ---------------- ------------
Industrial Cyclicals - 11.1%
Lyondell Chemical Co.
Sr. Sec. Deb. 9.875% due 5/1/07 20,000 $20,600
Resolution Performance
Sr. Sub. Notes 13.50% due 11/15/10 100,000 108,000
Delphi Corp.
Sr. Unsecured Notes 6.50% due 5/1/09 100,000 83,500
Tembec Industries Inc.
Sr. Notes 8.625% due 6/30/09 100,000 82,000
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294,100
Retail and Wholesale - 11.9%
Marsh Supermarkets Inc.
Sr. Sub. Notes 8.875% due 8/1/07 125,000 122,812
Ingles Markets Inc.
Sr. Sub. Notes 8.875% due 12/1/11 100,000 102,125
Finlay Fine Jewelry Corp.
Sr. Notes 8.375% due 6/1/12 100,000 90,625
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315,562
Financial Services - 6.9%
Ford Motor Credit
Notes 6.50% due 1/25/07 100,000 100,754
PMA Capital
Sr. Notes 8.50% due 6/15/18 80,000 81,280
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182,034
Transportation and Services - 14.1%
Williams Scotsman Inc.
Sr. Notes 9.875% due 6/1/07 100,000 100,500
Sea Containers Ltd.
Sr. Notes 7.875% due 2/15/08 100,000 98,000
Allied Waste N.A.
Sr. Notes 6.50% due 11/15/10 100,000 99,000
Great Lakes Dredge & Dock Corp.
Sr. Sub. Ntes 7.75% due 12/15/13 100,000 76,250
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373,750
Energy & Natural Resources - 13.8%
USEC Inc.
Sr. Notes 6.625% due 1/20/06 100,000 99,500
El Paso Coastal Corp.
Debentures 6.50% due 6/1/08 100,000 99,750
Southern Energy, Inc.
Sr. Notes 144A 7.90% due 7/15/09* 200,000 165,000
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364,250
Consumer Products - 8.1%
Tommy Hilfiger Corp.
Gtd. Notes 6.85% due 6/1/08 100,000 101,000
North Atlantic Trading Inc.
Sr. Notes 9.25% due 3/1/12 150,000 114,000
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215,000
Consumer Services - 7.7%
Mohegan Tribal Gaming Authority
Sr. Sub. Notes 6.375% due 7/15/09 100,000 102,500
Service Corp. Intl.
Sr. Unsec. Notes 6.50% due 3/15/08 100,000 102,750
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205,250
Healthcare Products and Services - 7.7%
Healthsouth Corp.
Sr. Notes 8.50% due 2/1/08 100,000 102,250
Biovail Corp.
Sr. Sub. Notes 7.875% due 4/1/10 100,000 102,750
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205,000
Technology and Communications - 18.9%
Nortel Networks Ltd.
Notes 6.125% due 2/15/06 100,000 101,125
GTE Hawaiian Telephone
Debentures 7.375% due 9/1/06 100,000 102,250
MCI Inc.
Notes 6.908% due 5/1/07 100,000 101,625
Unisys Corp.
Sr. Notes 7.875% due 4/1/08 100,000 101,500
Intelsat Ltd.
Sr. Notes 5.25% 11/1/08 100,000 94,000
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500,500
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Total Corporate Bonds - (Cost $2,692,907) 2,655,446
Investment Companies - 1.5%
Federated Prime Obligations Fund 38,909 38,909
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Total Investment Companies - (Cost $38,909) 38,909
Short-Term Investments - 4.9%
U. S. Treasury Bill due 7/7/05 130,000 129,940
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Total Short-Term Investments - (Cost $129,940) 129,940
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Total Investments - 106.6% (Cost $2,861,756) 2,824,295
Other Assets and Liabilities - (6.6%) (174,383)
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Net Assets - 100.0% $2,649,912
*Non-income producing security due to default or bankruptcy
144A - Represents a security sold under Rule 144A which is exempt from
registration and may be resold to qualified institutional buyers under
provisions of Rule 144A of the Securities Act of 1933, as amended.
See Notes to the financial statements.
Aegis High Yield Fund
Statement of Assets and Liabilities
June 30, 2005
(Unaudited)
Assets
Investments at market value (cost $2,861,756) $2,824,295
Cash 24,476
Interest and dividends receivable 47,029
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Total assets 2,895,800
Liabilities
Payable for fund shares redeemed 235,065
Accrued expenses 10,823
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Total liabilities 245,888
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Net assets (262,149 shares of beneficial interest
outstanding; unlimited number of shares
authorized; no par value) $2,649,912
Net assets consist of:
Paid-in capital $2,647,069
Undistributed net investment income 9,520
Accumulated net realized gain 30,784
Net unrealized depreciation (37,461)
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Net assets $2,649,912
Net asset value per share $10.11
See Notes to the financial statements
Aegis High Yield Fund
Statement of Operations
For the Six Months Ended June 30, 2005
(Unaudited)
Investment Income
Interest $101,861
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Total income 101,861
Expenses
Investment advisory fees 16,658
Transfer agency and administration fees 4,627
Registration fees 8,235
Custody fees 3,478
Printing and postage costs 381
Legal and accounting fees 11,978
Trustees fees 8,416
Insurance and other 4,713
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Gross expenses 58,486
Less: fees paid indirectly (125)
Less: fees reimbursed by investment advisor (36,150)
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Net expenses 22,211
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Net investment income 79,650
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Realized and unrealized gain (loss) on investments
Net realized gain on investments 28,750
Change in unrealized appreciation (depreciation) of
investments for the period (78,675)
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Net realized and unrealized loss on investments (49,925)
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Net increase in net assets resulting from operations $29,725
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See Notes to the financial statements.
Aegis High Yield Fund
Statement of Changes in Net Assets
For the Six Months Ended June 30, 2005
and Year Ended December 31, 2004
For the period ended
June 30, 2005 December 31, 2004
(Unaudited) -----------------
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Increase in net assets from operations:
Investment income - net $79,650 $59,660
Net realized gain on investments 28,750 2,431
Change in unrealized appreciation (78,675) 42,534
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Net increase in net assets
resulting from operations 29,725 104,625
Distributions
Investment income - net (70,130) (60,057)
Realized capital gains 0 0
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Total distributions (70,130) (60,057)
Capital share transactions*
Subscriptions 1,790,598 2,829,385
Distributions reinvested 69,923 60,057
Redemptions (2,204,190) (24)
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Total capital share transactions (343,669) 2,889,418
Total increase (decrease) in net assets (384,074) 2,933,986
---------- ---------
Net assets at beginning of year 3,033,986 100,000
Net assets at end of year $2,649,912 $3,033,986
---------- ----------
*Share information
Subscriptions 177,916 283,275
Distributions reinvested 6,953 6,011
Redemptions (222,004) (2)
--------- --------
Net increase (decrease) in shares (37,135) 289,284
See Notes to the financial statements.
Aegis High Yield Fund
Financial Highlights
(Unaudited)
The table below sets forth financial data for a share of the Fund
outstanding throughout each period. Figures for the period ended
June 30, 2005 are unaudited. Figures for the period ended
December 31, 2004 have been audited.
For the six months For the year ended
ended June 30, 2005 December 31, 2004*
------------------- ------------------
Per share data:
Net asset value - beginning of period $10.14 $10.00
Income from investment operations-
Net investment income 0.22 0.24
Net realized and unrealized
gain (loss) on investments (0.05) 0.14
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Total from investment operations 0.17 0.38
Less distributions declared to shareholders-
Net investment income (0.20) (0.24)
------- -------
Total distributions (0.20) (0.24)
Net asset value - end of period $10.11 $10.14
Total investment return 1.70%** 3.86%
Ratios (to average net assets)/supplemental data:
Expenses after reimbursement and 1.20%# 1.20%
fees paid indirectly
Expenses before reimbursement and 3.16%# 3.82%
fees paid indirectly (1)
Net investment income 4.30%# 2.69%
Portfolio turnover 30%# 21%
Net assets at end of period (000's) $2,650 $3,034
*Fund commenced operations January 1, 2004.
**Total return is not annualized.
#Annualized.
(1) Ratio after expense reimbursement, before fees paid indirectly, is
1.21% for the six months ended June 30, 2005 and 1.22% for the year
ended December 31, 2004.
See Notes to the financial statements.
Aegis High Yield Fund
Notes to Financial Statements
June 30, 2005
(Unaudited)
1. The Organization
Aegis High Yield Fund (the Fund) is registered under the Investment Company
Act of 1940 (the 1940 Act) as a diversified open-end management company.
The Fund is a series of The Aegis Funds, a Delaware statutory trust
established July 11, 2003. The Fund commenced operations January 1, 2004.
Through December 31, 2003, the Fund had no operations other than those matters
related to organization and registration as an investment company, the
registration of shares for sale under the Securities Act of 1933, and the
sale of 10,000 shares of the Fund at $10.00 per share on September 29, 2003
to William S. Berno. The sale was settled in the ordinary course of business
on September 29, 2003 with the transfer of $100,000.
The Fund s principal investment goal is to seek maximum total return with
an emphasis on high current income by investing primarily in a portfolio of
corporate bonds rated less than investment grade.
2. Summary of Significant Accounting Policies
Security valuation.
Investments in securities are valued based on market quotations or on data
furnished by an independent pricing service. 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 Trustees. In determining fair value,
the Board procedures consider all relevant qualitative and quantitative
factors available. These factors are subject to change over time and are
reviewed periodically. The values assigned to fair value investments are
based on available information and do not necessarily represent amounts that
might ultimately be realized, since such amounts depend on future developments
inherent in long-term investments. Further, because of the inherent
uncertainty of valuation, those estimated values may differ significantly from
the values that would have been used had a ready market for the investments
existed, and the differences could be material. At June 30, 2005, none of the
Fund s net assets were fair valued in accordance with the procedures adopted
by the Board. Where a security is traded in more than one market, which may
include foreign markets, the securities are generally valued on the market
considered by the Fund s advisor to be the primary market. The Fund will
value its foreign securities in U.S. dollars on the basis of the
then-prevailing currency exchange rates.
Cash.
Cash includes deposits held at the Fund s custodian in a variable rate account
at the applicable interest rate.
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 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 s custody charges. Custody expense in the statement
of operations is presented before the reduction for credits, which were
$125 for the period ended June 30, 2005.
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 monthly. 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 accordance 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 reporting period.
Actual results could differ from those estimates.
Other.
The Fund records security transactions based on the trade date. Interest
income is recognized on the accrual basis and includes accretion of
discounts and amortization of premiums.
In the normal course of business, the Fund enters into contracts that
contain a variety of representations, which provide general indemnifications.
The Fund s 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 (the Advisor) that
provides for fees to be computed at an annual rate of 0.90% of the Fund s
average daily net assets. The Agreement shall remain in force through
March 31, 2006 and may be renewed for additional one-year periods thereafter
if approved annually by a majority of the independent members of the Board.
The Agreement may be terminated at any time, without penalty, by the Fund on
sixty (60) days written notice or by the Advisor on ninety (90) days written
notice. The Fund
and the Advisor have also entered into an expense limitation agreement that
provides for an expense reimbursement from the Advisor if the Fund s expenses,
exclusive of taxes, interest, fees incurred in acquiring or disposing of
portfolio securities, and extraordinary expenses, exceed 1.20% of the Fund s
average daily net assets. During the six-month period ended June 30, 2005,
the Advisor reimbursed the Fund $36,150.
The Fund has agreed to repay the Advisor for amounts waived or reimbursed by
the Advisor pursuant to the expense limitation agreement provided that such
repayment does not cause the Fund s expenses, exclusive of taxes, interest,
fees incurred in acquiring or disposing of portfolio securities and
extraordinary expenses, to exceed 1.20% and the repayment is made within
three years after the year in which the Advisor incurred the expense. As of
June 30, 2005, there was $93,798 of fees available to be recovered no later
than December 31, 2007.
The Fund entered into an agreement with BGB Fund Services, Inc., effective
January 1, 2004 to provide fund accounting, administration, transfer agency
and shareholder services to the Fund at an annual rate of 0.25% of the
Fund s 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 $539 for the period ended June 30, 2005.
Certain officers and trustees of the Fund are also officers and directors
of the Advisor and BGB Fund Services, Inc. The Fund pays each trustee not
affiliated with the Advisor fees in cash or Fund shares of $1,000 for each
attended board meeting and $500 for each attended committee meeting.
4. Investment Transactions
Purchases and sales of investment securities, excluding accrued interest,
were $1,534,827 and $552,162, respectively, for the period ended
June 30, 2005. 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 period ended
June 30, 2005 were as follows:
Distributions paid from ordinary income $70,130
As of December 31, 2004, the components of net assets on a tax basis were
as follows:
Undistributed ordinary income $2,034
Unrealized appreciation 64,470
Unrealized depreciation (21,936)
Shares of beneficial interest 2,989,418
-------------
Total $3,033,986
Aegis High Yield Fund
Other Information
June 30, 2005
Fund Trustees and Officers
- --------------------------
Business Experience
and Trusteeships
Name, Age and Address Position During the Past 5 Years
- --------------------- -------- -----------------------
William S. Berno* (51) President, President and Managing
1100 North Glebe Road Trustee Director of Aegis Financial
Suite 1040 Corporation since 1994;
Arlington, Virginia 22201 President and Director of
the Aegis Value Fund, Inc.
since 1997; President and
Trustee of the Fund
since 2003.
Scott L. Barbee* (34) Treasurer, Treasurer and Managing
1100 North Glebe Road Trustee Director of Aegis Financial
Suite 1040 Corporation since 1997;
Arlington, Virginia 22201 Treasurer and Director of
the Aegis Value Fund, Inc.
since 1997; Treasurer and
Trustee of the Fund since
2003.
Edward P. Faberman (59) Trustee Attorney with the firm of
Wiley Rein & Fielding LLP Wiley Rein & Fielding LLP since
1776 K Street N.W. 2005; Attorney with the firm of
Washington, DC 20006 Ungaretti & Harris 1996-2005;
Director of Aegis Value Fund
Inc. since 1997; Trustee of the
Fund since 2003.
Eskander Matta (35) Trustee Senior 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 94111 Cordiant Communications,
2001-2002; Director of
Strategic Consulting,
Organic, Inc. 1999-2001;
Director of Aegis Value Fund
Inc. since 1997; Trustee of the
Fund since 2003.
Albert P. Lindemann III (43) Trustee Director, Faison Enterprises
Faison Enterprises since 2000; Director of the
121 West Trade Street Aegis Value Fund, Inc. since
Suite 2550 2000; Trustee of the Fund
Charlotte, North Carolina 28202 since 2003.
Fund Secretary
- --------------
Paul Gambal* (46) Secretary Chairman, Secretary and
1100 North Glebe Road Managing Director of
Suite 1040 Aegis Financial Corporation
Arlington, VA 22201 since 1994; Secretary of the
Aegis Value Fund, Inc. since
1997; Secretary of the Fund
since 2003.
* indicates persons who are affiliated with Aegis Financial Corporation,
the Advisor, and are therefore considered interested persons under the
Investment Company Act of 1940.
The Fund Statement of Additional Information includes additional information
about the Trustees and is available, without charge, by calling the Fund
toll-free phone number, (800)528-3780.
Form N-Q
The Fund files its complete schedule of portfolio holdings with the
U.S. Securities and Exchange Commission (the Commission) for the first and
third quarters of each fiscal year on Form N-Q. The Fund s Forms N-Q are
available on the Commission website at http://www.sec.gov. The Fund s
Form N-Q may be reviewed and copied at the Commission s Public Reference
Room in Washington, DC. Information on the operation of the Commission s
Public Reference Room may be obtained by calling 1-800-SEC-0330.
Code of Ethics
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.
Proxy Voting
A description of the policies and procedures that the Fund uses to
determine how to vote proxies relating to portfolio securities is available
by request, without charge, by calling the Fund toll-free telephone number
800-528-3780. Information regarding how the Fund voted proxies, if any,
relating to portfolio securities during the most recent 12-month period ended
June 30, 2005 is available upon request, without charge, by calling
800-528-3780. The Fund s proxy voting policies and procedures and voting
record are also available on the Commission s website at http://www.sec.gov.
Board Consideration of Investment Advisory Agreement
The Investment Advisory Agreement between the Trust, on behalf of the Fund,
and the Advisor was most recently renewed at a meeting of the Board held on
February 25, 2005. Unless terminated as specified in the Investment Advisory
Agreement, the Investment Advisory Agreement continues in effect for
successive periods of twelve months, provided such continuance is specifically
approved at least annually (a) by the vote of a majority of the Independent
Trustees, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the Board of Trustees or by vote of a majority of the
outstanding voting securities of the Fund. In connection with its consideration
of the adoption of the Investment Advisory Agreement, the Board of Trustees
requested, and the Advisor provided, information and data relevant to the
Board s consideration. The Board reviewed information on expense ratios and
management fees for certain comparable funds. The Board discussed the proposed
advisory fee of 0.90% of the Fund s average daily net assets and the Expense
Limitation Agreement between the Fund and the Advisor, pursuant to which the
Advisor has agreed through December 31, 2005 to limit its fee and/or reimburse
other expenses of the Fund to the extent necessary to limit the total operating
expenses of the Fund to an annual rate of 1.20% (as a percentage of the
average daily net assets of the Fund). The Board agreed that the proposed
fee structure is reasonable and fair to shareholders. They reviewed the past
performance of the Fund and the Advisor, and noted the range of investment
advisory and administrative services to be provided by the Advisor to the
Fund. The Board took note of the fact that the Advisor also has served as
investment advisor to another mutual fund affiliated with the Fund having
total assets of approximately $750 million, and they noted the level and
quality of service provided by the Advisor to that fund. They also took note
of the fact that the Fund is not subject to sales charges or Rule 12b-1 fees.
Based upon their review and consideration of these factors and other matters
deemed relevant by the Board in reaching an informed business judgment, a
majority of the Board of Trustees, including a majority of the
Independent Trustees, concluded that the terms of the Investment
Advisory Agreement are fair and reasonable and the Board voted to approve
the agreement.
Aegis High Yield Fund
1100 North Glebe Road, Suite 1040
Arlington, Virginia 22201
Phone: (800) 528-3780
Fax: (703) 528-1395
Internet: www.aegisfunds.com
Board of Trustees
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 Registered Public Accounting Firm
Briggs Bunting & Dougherty, LLP
Two Penn Center Plaza, Suite 820
Philadelphia, Pennsylvania 19102
Counsel
Seward & Kissel LLP
1200 G Street, N.W.
Washington, D.C. 20005
ITEM 11. CONTROLS AND PROCEDURES
(a) The registrant s principal executive officer and principal financial
officer have concluded that the registrant s disclosure controls and
procedures (as defined in Rule 30a-2(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's internal controls over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act)
that occurred during the second fiscal quarter of the period covered
by this report that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over
financial reporting.
Item 12. 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.
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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) The Aegis Funds
By (Signature and Title) /s/William S. Berno
William S. Berno, President
Date: August 26, 2005
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: August 26, 2005
By (Signature and Title) /s/Scott L. Barbee
Scott L. Barbee, Treasurer
Date: August 26, 2005