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
The Aegis Funds
(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 Road, 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: 12/31
Date of reporting period: 6/30/06
Item 1. Reports to Stockholders
Aegis High Yield Fund
Semi-Annual Report
June 30, 2006
Shareholder Letter August 9, 2006
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, 2006.
We want to take this opportunity to welcome all of our new shareholders
to the Fund. At any time, if you would like further information about
the Fund, please go to our website at www.aegishighyieldfund.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 Aegis High Yield 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 s 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.
The Fund commenced investment operations as of January 1, 2004. For
the six- months ended June 30, 2006, the Aegis High Yield Fund posted
a total return of 6.07 percent, compared to a total return of
3.14 percent for its benchmark, the Lehman U.S. Corporate High Yield
Index. The Fund s annualized total return since inception is 6.52%
versus 6.77% for the Lehman Index.
The Fund s closing net asset value at the end of the period was $10.44
per share, an increase from $10.17 at the beginning of the year, and
the Fund paid investment income distributions of $0.34 per share
during the six months. At June 30, 2006, the Fund s SEC-calculated
30-day portfolio yield was 7.16%.
The Fund s portfolio remained in a somewhat cautious position at
June 30, 2006, with a weighted average portfolio maturity of less
than four years and approximately 87% of its portfolio invested in
securities with maturities of less than six years. The Fund s cash
position was approximately 7% of its portfolio value.
Our view of the economic outlook has changed little in the past six
months. We continue to be concerned about a period of slower growth,
rising defaults, and pressures on corporate profits resulting from
higher commodity costs. We believe that the yields on corporate bonds
will continue to widen over Treasury yields as investors become more
cautious and therefore quality-conscious. Fortunately, some of these
economic risks are already being reflected in the yields we are seeing
in the market, as the Lehman Index yield has increased from 8.25% to
8.58% during the past six months.
The portfolio gains in the first half of 2006 were driven by strong
market appreciation from a portion of our portfolio, combined with a
fortuitous lack of exposure to some of the problem areas of the
market, such as homebuilders and paper producers. The Fund also paid
an average current yield of approximately 6.6% throughout the period.
The net result of these factors was an overall portfolio return that
substantially outdistanced the benchmark Lehman Index.
We continue to look for a few selected situations that have strong
potential for capital gains as part of our strategy to emphasize total
return as well as current income in the Fund portfolio. At the same
time, we maintain our ongoing focus on capital preservation in 2006.
The bulk of the portfolio is in shorter-term maturities whose primary
purpose is to provide a competitive income stream. We maintain our
belief that better opportunities will be presented at some point in
the 2007-2008 timeframe. Until we see much more attractive yields
available, we do not intend to be more aggressive with the Fund s
portfolio.
A more in-depth review of the Fund s performance and outlook can be
found in the Advisor s Report that is posted on the Fund website. 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 background data provided by outside 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 Advisor s Report in the future.
If you do not have Internet access, please call the Fund at 800-528-3780
for a copy.
We are pleased to have you as an investor in the Fund, and thank you
for your support.
Aegis Financial Corporation
William S. Berno, CFA
Managing Director, Portfolio Manager
Note: All historical performance returns shown in this shareholder 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, 2006 - June 30, 2006.
Actual expenses
The table below provides information about actual account values and
actual expenses.
Actual Hypothetical
(5% annualized return
before expenses)
Actual
Beginning Ending Expenses Ending Expenses
Account Value Account Value Paid During Account Value Paid During
(01/01/2006) (06/30/2006)* Period # (06/30/2006) Period #
Fund
====
Aegis
High Yield $1,000.00 $1,060.70 $6.13 $1,019.05 $6.01
Fund
*The actual ending account value is based on the actual total return of
the Fund for the period January 1, 2006 to June 30, 2006 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 return at net asset
value for the period January 1, 2006 to June 30, 2006 was 6.07%.
#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 01/01/2006 and 6/30/2006).
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.
Key Statistics
Results of a $10,000 Investment
[Line chart showing the growth of a $10,000 investment for the Fund
and the index]
Period ending Aegis High Yield Fund Lehman HY Index
- ------------- --------------------- ---------------
January 1, 2004 $10,000 $10,000
March 31, 2004 $ 9,970 $10,234
June 30, 2004 $10,031 $10,136
September 30, 2004 $10,111 $10,627
December 31, 2004 $10,386 $11,113
March 31, 2005 $10,396 $10,934
June 30, 2005 $10,563 $11,236
September 30, 2005 $10,951 $11,340
December 31, 2005 $11,037 $11,417
March 31, 2006 $11,408 $11,746
June 30, 2006 $11,707 $11,776
Average Annual Total Returns (As of June 30, 2006)
Aegis High Yield Fund Lehman HY Index
Trailing 1 Year 10.83% 4.80%
Since inception 6.52% 6.77%
(January 1, 2004)
Returns on both Aegis High Yield Fund and Lehman Index assume reinvest-
ment of all dividends and distributions. Fund returns are after all
expenses. Past performance is not predictive of future results. The
returns shown do not reflect the deduction of taxes a shareholder
would pay on the redemption of Fund shares or Fund distributions.
Portfolio Characteristics (Unaudited)
Industry Breakdown
==================
Corporate Bonds 91.1%
- ---------------
Consumer Products 5.1%
Consumer Services 8.3%
Cosmetics & Toiletries 5.3%
Energy & Natural Resources 4.2%
Financial Services 11.5%
Food & Beverage Products 4.0%
Health Care 4.2%
Independent Power Producers 7.2%
Industrial Services 11.9%
Retail and Wholesale 13.3%
Technology and Communications 12.3%
Transportation 3.8%
Short-Term Investments 0.2%
Other Assets and Liabilities 8.7%
-----
Total Net Assets 100.0%
Credit Quality - % of Corporate Bonds
==============
BB 24%
B 44%
CCC or other 32%
------
Total 100%
Maturity (Or Most Likely Call) - % of Corporate Bonds
========
Less than 1 year 9.8%
1-3 years 38.0%
4-6 years 39.6%
7-10 years 12.6%
------
Total 100.0%
Aegis High Yield Fund
Schedule of Portfolio Investments
June 30, 2006
(Unaudited)
Principal Market
Amount Value
--------- ------
Corporate Bonds - 91.1%
Consumer Products - 5.1%
No. Atlantic Trading, Inc. Sr. Notes, 9.25%, 3/1/12 $150,000 $121,500
Consumer Services - 8.3%
Mohegan Tribal Gaming Authority
Sr. Subord. Notes, 6.375%, 7/15/09 100,000 97,875
Service Corp. International
Sr. Unsec. Notes, 6.50%, 3/15/08 100,000 99,750
-------
197,625
Cosmetics & Toiletries - 5.3%
Del Laboratories, Inc., 8.00%, 2/01/12 153,000 127,946
Energy & Natural Resources - 4.2%
El Paso Corp. Debentures, 144A, 6.50%, 6/1/08 (1) 100,000 99,750
Financial Services - 11.5%
Ford Motor Credit Notes, 6.50%, 1/25/07 100,000 99,841
GMAC Sr. Unsec. Notes, 5.85%, 1/14/09 100,000 95,915
PMA Capital Sr. Notes, 8.50%, 6/15/18 80,000 80,400
-------
276,156
Food & Beverage Products - 4.0%
Dole Foods Co., 8.625%, 5/1/09 100,000 96,000
Health Care - 4.2%
Biovail Corp. Sr. Subord. Notes, 7.875%, 4/1/10 100,000 101,750
Independent Power Producers - 7.2%
Calpine Corp, 7.75%, 6/1/15, * 200,000 72,000
Reliant Energy, Inc., 9.50%, 7/15/13 100,000 101,000
-------
173,000
Industrial Services - 11.9%
Alliance One Intl. Inc., 11.00%, 5/15/12 100,000 95,500
Allied Waste N.A. Sr. Notes, 6.50%, 11/15/10 100,000 97,000
Great Lakes Dredge & Dock Corp.
Sr. Subord. Notes, 7.75%, 12/15/13 100,000 92,625
-------
285,125
Retail and Wholesale - 13.3%
Finlay Fine Jewelry Corp. Sr. Notes, 8.375%, 6/1/12 100,000 87,500
Ingles Mkts, Inc. Sr. Subord. Notes, 8.875%, 12/1/11 100,000 105,125
Marsh Supermarkets, Inc.
Sr. Subord. Notes, 8.875%, 8/1/07 125,000 124,843
-------
317,468
Technology and Communications - 12.3%
GTE Hawaiian Telephone Debentures, 7.375%, 9/1/06 100,000 100,500
Intelsat Ltd. Sr. Notes, 5.25%, 11/1/08 100,000 94,500
Unisys Corp. Sr. Notes, 7.875%, 4/1/08 100,000 100,500
-------
295,500
Transportation - 3.8%
Sea Containers Ltd. Sr. Notes, 7.875%, 2/15/08 100,000 90,500
---------
Total Corporate Bonds (Cost $2,220,811) 2,182,320
Investment Companies - 0.2%
Federated Prime Obligations Fund 5,305 5,305
------
Total Investment Companies (Cost $5,305) 5,305
---------
Total Investments - 91.3% - (Cost $2,226,116) 2,187,625
Other Assets and Liabilities - 8.7% 207,630
---------
Net Assets 100.0% $2,395,255
* Non-income producing security due to default or bankruptcy.
(1) 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 accompanying Notes to the Financial Statements.
Aegis High Yield Fund
Statement of Assets and Liabilities
June 30, 2006
(Unaudited)
Assets
Investment securities at value (cost $2,226,116) $2,187,625
Cash 161,178
Interest and dividends receivable 46,993
----------
Total assets 2,395,796
Liabilities
Accrued expenses 541
-----
Total liabilities 541
Net Assets $2,395,255
Net assets consist of:
Paid-in capital $2,312,764
Undistributed net investment income 14,653
Accumulated net realized gain 106,329
Net unrealized depreciation (38,491)
----------
Net Assets $2,395,255
Capital Shares
Authorized Unlimited
Outstanding 229,397
Net Asset value per share $10.44
======
See accompanying Notes to the Financial Statements.
Aegis High Yield Fund
Statement of Operations
For the Six Months Ended June 30, 2006
(Unaudited)
Investment Income
Interest income $97,495
--------
Total investment income 97,495
Expenses
Investment advisory fees 10,276
Transfer agency and administration fees 10,160
Registration fees 6,126
Custody fees 2,817
Printing and postage fees 1,622
Legal fees 3,740
Audit fees 16,240
Trustee fees 9,320
Insurance fees 1,254
Miscellaneous fees 945
-------
Total expenses before waiver 62,500
Waiver of fees (48,799)
-------
Net expenses 13,701
-------
Net investment income 83,794
-------
Realized and unrealized gain/(loss) on investments
Net realized gain/(loss) on investments 106,329
Change in unrealized appreciation/(depreciation) of
investments for the period (53,398)
-------
Net realized and unrealized gains/(losses) on investments 52,931
-------
Net increase/(decrease) in net assets
resulting from operations $136,725
See accompanying Notes to the Financial Statements.
Aegis High Yield Fund
Statement of Changes in Net Assets
For the Six Months Ended June 30, 2006
(Unaudited)
Six Months Ended Year Ended
June 30, 2006 December 31, 2005
(Unaudited)
---------------- -----------------
Increase/(decrease) in net assets from operations
Net investment income/(loss) $83,794 $164,313
Net realized gain/(loss) from investment 106,329 13,921
Change in unrealized
appreciation/(depreciation) (53,398) (27,627)
-------- ---------
Net increase/(decrease) in net assets
resulting from operations 136,725 150,607
-------- ---------
Distributions
Net investment income (75,481) (160,007)
Net realized gain from investments 0 (13,921)
-------- ---------
Total distributions to shareholders (75,481) (173,928)
Capital share transactions*
Subscriptions 687,911 2,422,128
Distributions reinvested 70,337 164,109
Redemptions (1,132,517) (2,888,622)
----------- -----------
Total capital share transactions (374,269) (302,385)
----------- -----------
Net increase/(decrease) in net assets (313,025) (325,706)
----------- -----------
Net assets at beginning of period 2,708,280 3,033,986
----------- -----------
Net assets at end of period $2,395,255 $2,708,280
----------- -----------
*Share information
Subscriptions 66,237 239,535
Distributions reinvested 6,791 16,151
Redemptions (109,862) (288,739)
----------- -----------
Net increase/(decrease) in shares (36,834) (33,053)
See accompanying Notes to the Financial Statements.
Aegis High Yield Fund
Financial Highlights
(Unaudited)
The table below sets forth financial data for a share outstanding of
the Fund throughout the period:
For six months For period ended
Ended June 30, 2006 December 31,
(Unaudited) 2005 2004
----------- ---- ----
Per share data:
Net asset value, beginning of period $10.17 $10.14 $10.00*
Income from investment operations:
Net investment income 0.38 0.56 0.24
Net realized and unrealized gains/(losses)
on investments 0.23 0.06(a) 0.14
----- ----- -----
Total from investment operations 0.61 0.62 0.38
----- ----- -----
Less distributions declared
to shareholders:
Net investment income (0.34) (0.54) (0.24)
Net realized capital gain/(loss) 0.00 (0.05) 0.00
----- ----- -----
Total distributions (0.34) (0.59) (0.24)
----- ----- -----
Net asset value - end of period $10.44 $10.17 $10.14
====== ====== ======
Total investment return 6.07%** 6.26% 3.86%
Ratios (to average net assets)/supplemental data:
Expenses after reimbursement 1.20%# 1.20% 1.20%
Expenses before reimbursement 5.47%# 3.91% 3.82%
Net investment income 7.34%# 5.06% 2.69%
Portfolio turnover 28%** 31% 21%
Net assets at end of period (000's) $2,395 $2,708 $3,034
====== ====== ======
*Fund commenced operations January 1, 2004.
** Not annualized.
# Annualized
(a) The amount shown for the year ended December 31, 2005 for a
share outstanding throughout the year does not accord with the aggregate
net losses on investments for that period because of the sales and
repurchase of Fund shares in relation to fluctuating market value of
the investments of the Fund.
See accompanying Notes to the Financial Statements
Aegis High Yield Fund
Notes to Financial Statements
June 30, 2006
(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, 2006, none of the
Fund s assets were fair valued. 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 and Excise Taxes. The Fund s policy is to comply with
the requirements of Subchapter M of the Internal Revenue Code that
are applicable to regulated investment companies and to distribute
substantially all investment company taxable income and net capital
gain to shareholders in a manner which results in no tax cost to the
Fund. Therefore, no federal income tax provision is required.
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.
The character of distributions made during the year from net investment
income or net realized gain may differ from the characterization for
federal income tax purposes due to differences in the recognition of
income, expense and gain/(loss) items for financial statement and tax
purposes. Where appropriate, reclassifications between net asset
accounts are made for such differences that are permanent in nature.
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, 2007 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, 2006, the Advisor reimbursed the Fund $48,799.
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, 2006
there was $194,539 of fees available to be recovered no later than
December 31, 2009, of which $57,648, $88,092, and $48,799 are
recoverable through December 31, 2007, 2008 and 2009, respectively.
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. Effective
August 14, 2006, UMB Fund Services, Inc. succeeded BGB Fund Services
as fund administrator, providing services to the Fund at an annual
rate of 0.10% of the Fund s average daily net assets subject to a
minimum annual fee of $40,000.
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 long term investment securities, excluding
short term investments, were $488,980 and $950,302 respectively, for
the six month period ended June 30, 2006. 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
At June 30, 2006, gross unrealized appreciation and depreciation of
investments, based on cost for federal income tax purposes were as
follows:
Cost of Investments $2,226,116
----------
Gross Unrealized Appreciation $15,707
Gross Unrealized Depreciation (54,198)
------
Net Unrealized Appreciation (Depreciation)
($38,491)
As of December 31, 2005, the components of accummulated earnings on
a tax basis were as follows:
Undistributed ordinary income $6,340
Undistributed long-term gains 0
-----
Tax accumulated earnings $6,340
-----
Accumulated capital and other losses 0
Unrealized appreciation (depreciation) on investments $14,907
-------
Total accumulated earnings (deficit) $21,247
=======
The tax components of dividends paid during the years ended
December 31, 2005 and 2004 were as follows:
2005 2004
---- ----
Distributions paid from ordinary income $160,007 $60,057
Distributions paid from long-term capital gains 13,921 0
-------- -------
Total Distributions $173,928 $60,057
On July 13, 2006, the Financial Accounting Standards Board (FASB)
released FASB Interpretation No. 48 Accounting for Uncertainty in
Income Taxes (FIN 48). FIN 48 provides guidance for how uncertain
tax positions should be recognized, measured, presented and disclosed
in the financial statements. FIN 48 requires the evaluation of tax
positions taken or expected to be taken in the course of preparing the
Fund s tax returns to determine whether the tax positions are
more-likely-than-not of being sustained by the applicable tax
authority. Tax positions not deemed to meet the more-likely-than-not
threshold would be recorded as a tax benefit or expense in the current
year. Adoption of FIN 48 is required for fiscal years beginning after
December 15, 2006 and is to be applied to all open tax years as of the
effective date. At this time, management is evaluating the
implications of FIN 48 and its impact in the financial statements
has not yet been determined.
Aegis High Yield Fund
Other Information (Unaudited)
June 30, 2006
Board Consideration of Investment Advisory Agreement
The Investment Advisory Agreement between the Fund and the Advisor was
most recently renewed at a meeting of the Board held on March 10, 2006.
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 Directors, cast in person at a meeting called for the purpose
of voting on such approval, and (b) by the Board of Directors 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 Directors 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, 2006 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 has also served as investment advisor
to another mutual fund affiliated with the Fund 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 Directors,
including a majority of the Independent Directors, concluded that the
terms of the Investment Advisory Agreement are fair and reasonable and
the Board voted to approve the agreement.
Fund Trustees and Officers
Business Experience
and Trusteeships
Name, Age and Address Position During the Past 5 Years
- --------------------- -------- -----------------------
William S. Berno* (52) 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* (35) 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 (60) Trustee Attorney with the firm of
Wiley Rein & Fielding Wiley Rein & Fielding since
1776 K Street N.W. 2005; Attorney with the
Washington, D.C. 20006 firm of Ungaretti & Harris,
1996-2005; Director of the
Aegis Value Fund, Inc. since
1997; Trustee of the Fund
since 2003.
Eskander Matta (36) Trustee Senior VP of Enterprise
Wells Fargo & Co. Internet Services, Wells
550 California Street Fargo & Co. since 2002;
2nd Floor Director of Strategic
San Francisco, California 94111 Consulting with Cordiant
Communications, 2001-2002;
Director of the Aegis
Value Fund Inc. since 1997;
Trustee of the Fund since
2003.
Albert P. Lindemann III (44) Trustee President and founder of
201 N. Tryon St. Redan Capital Partners (real
Suite 2680 estate investments) since
Charlotte, North Carolina 28202 2006. Real estate analyst
with Faison Enterprises,
2000-2006; Director of the
Aegis Value Fund, Inc. since
2000; Trustee of the Fund
since 2003.
David A. Giannini (53) Trustee Institutional equity sales
30 Rockefeller Plaza and research with Scarsdale
Suite 4250 Equities since 2006;
New York, NY 10112 Institutional equity sales
and research with Sanders
Morris Harris, 1997-2006.
Director of the Aegis Value
Fund since 2006; Trustee of
the Fund since 2006.
Paul Gambal* (47) 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.
Skyler S. Showell* (32) Chief Chief Compliance Officer of
1100 North Glebe Road Compliance Aegis Financial Corporation
Suite 1040 Officer since 2003; Compliance
Arlington, VA 22201 Consultant, 2002-2003; Law
student, 2001; Chief
Compliance Officer of the
Fund since 2004.
*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 s Statement of Additional Information includes additional
information about the Trustees and is available, without charge, by
calling the Fund s 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 s 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, 2006 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 U.S. Securities and Exchange Commission (SEC) website at
http://www.sec.gov.
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.
Fund Holdings:
The complete schedules of Fund holdings for the second and fourth
quarters of each fiscal year are contained in the Fund s semi-annual
and annual shareholder reports, respectively. The Fund files complete
schedules of Fund holdings with the SEC for the first and third
quarters of each fiscal year on Form N-Q within 60 days after the
end of the period. Copies of the Fund s Form N-Q are available without
charge, upon request, by contacting the Fund at 1-800-528-3780 and on
the SEC s website at http://www.sec.gov. You may also review and copy
Form N-Q at the SEC s Public Reference Room in Washington, D.C. For
more information about the operation of the Public Reference Room,
please call the SEC at 1-800-SEC-0330.
Aegis High Yield Fund
1100 North Glebe Road, Suite 1040
Arlington, Virginia 22201
Phone: (800) 528-3780
Internet: www.aegisfunds.com
Board of Trustees
Scott L. Barbee
William S. Berno
Edward P. Faberman
Albert P. Lindemann III
Eskander Matta
David A. Giannini
Officers
William S. Berno, President
Scott L. Barbee, Treasurer
Paul Gambal, Secretary
Skyler S. Showell, Chief Compliance Officer
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 2. Code of Ethics
Not applicable to semi-annual reports.
Item 3. Audit Committee Financial Expert
Not applicable to semi-annual reports.
Item 4. Principal Accountant Fees and Services
Not applicable to semi-annual reports.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Schedule of Investments
The schedule of investments in securities of unaffiliated issuers is
included as part of the report to shareholders filed under Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for
Closed-End Management Investment Companies
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment
Companies
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management
Investment Company and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
Not applicable.
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-3(c) under the Investment Company Act
of 1940, as amended) are effective based on their evaluation of these
disclosure controls and procedures 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 Investment
Company Act of 1940, as amended) that occurred during the first fiscal
half-year 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
Not applicable to semi-annual reports.
(a)(2) Certification for each principal executive and principal
financial officer of the registrant as required by Rule 30a-2(a)
under the Act (17 CFR 270.30a-2(a)) (Exhibits (a) and (b)).
(a)(3) Any written solicitation to purchase securities under Rule 23c-1
under the Investment Company Act of 1940, as amended, that was sent or
given during the period covered by the report by or on behalf of the
registrant to 10 or more persons.
Not applicable.
(b) Certifications required by Rule 30a-2(b) under the Act (17 CFR
270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange
Act (17 CFR 240.13a-14(b) or 240.15d-14(b)), and Section 1350 of
Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350)--
filed as an attachment to this filing (Exhibits (c) and (d)).
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.
The Aegis Funds
By: /s/ William S. Berno
William S. Berno, President
Date: September 6, 2006
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: /s/ William S. Berno
William S. Berno, President
Date: September 6, 2006
By: /s/ Scott L. Barbee
Scott L. Barbee, Treasurer
Date: September 6, 2006