N-CSR 1 fp0073601_ncsr.htm

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)

 

6862 Elm Street, Suite 830, McLean, VA 22101
(Address of principal executive offices) (Zip code)

 

Scott L. Barbee

6862 Elm Street, Suite 830, McLean, VA 22101
(Name and address of agent for service)

 

(703) 528-7788

Registrant's telephone number, including area code

 

Date of fiscal year end: December 31, 2021

 

Date of reporting period: December 31, 2021

 

 

 

Item 1. Reports to Stockholders.

 

(a)

 

 

 

 

AEGIS Value Fund

Class I (AVALX)

 

ANNUAL REPORT

December 31, 2021

 

 

Portfolio Manager’s Letter
Year Ended December 31, 2021
(Unaudited)

 

January 31, 2022

 

To the Shareholders of the Aegis Funds:

 

We are pleased to present the Aegis Value Fund’s Annual Report for the year ended December 31, 2021.

 

If at any time you would like further information about the Fund, please go to our website at www.aegisfunds.com for a more detailed look at our market commentary and the Fund’s performance record. We will briefly review the objective and strategy of the Fund.

 

The Aegis Value Fund seeks to achieve long-term, capital appreciation. Our strategy is to invest in a well-researched portfolio of small-cap equities trading at a fraction of their intrinsic worth. We believe the equity markets are often inefficient, and we employ a contrarian, company-focused approach, selecting each stock individually on its own merit. We purchase shares in companies when we judge share prices to be significantly undervalued relative to our assessment of fundamental value, focusing on stocks trading at low price-to-book or price-to- future cash flow ratios, segments of the market where we believe academic research shows historical returns have significantly outpaced the overall market. We often invest in companies when they are misunderstood, out of favor, or neglected, and generally hold these companies until share prices reach our estimate of intrinsic value.

 

 

Annualized

Performance as of 12/31/21

One
Year

Three
Year

Five
Year

Ten
Year

Since
Inception

Aegis Value Fund (AVALX)

37.67%

27.11%

14.88%

12.53%

10.99%

S&P SmallCap 600 Pure Value Index (Launched 12/16/05)*

46.50%

20.01%

7.16%

11.74%

N/A

S&P 500 Index

28.71%

26.07%

18.47%

16.55%

8.38%

 

 

*

The S&P SmallCap 600 Pure Value Index performance prior to December 16, 2005 cannot be shown since it relies on back-tested data. Performance data quoted represents past performance.

 

Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Please call 800-528-3780 to obtain performance data current to the most recent month-end. The Aegis Value Fund Class I has an annualized gross expense ratio of 1.55% and net annualized expense ratio, after fee waivers, of 1.50%. Please refer to the Fund’s most recent financial highlights table in this Annual Report, which contains a more recent net expense ratio. Under the waiver, the Advisor has contractually agreed to limit certain fees and/or reimburse certain of the Fund’s expenses through April 30, 2022.

 

The table does not reflect the deduction of taxes that a Shareholder would pay on Fund distributions or the redemption of Fund shares.

 

2

 

 

Aegis Value Fund

Class I

Net Assets

$179.6 Million

NAV / Share

$28.98

Net Expense Ratio

1.50%

Management Fee

1.20%

Distribution Fee (12b-1)

None

Redemption Fee

None

Income & capital gain distributions per share

None

 

From inception of the Aegis Value Fund’s Class I shares on May 15, 1998 through December 31, 2021, the Fund Class I shares have posted a cumulative gain of 1,074.57%. During the same period, the S&P 500 Index of large cap stocks posted a cumulative gain of 569.21%. For the twelve-month period ending December 31, 2021, the Fund Class I shares gained 37.67%, underperforming the S&P SmallCap 600 Pure Value Index, which increased 46.50%, while the S&P Index increased 28.71% over the same period.

 

Fund performance was most positively impacted by Resolute Forest Products (RFP), Amerigo Resources Ltd. (ARG.TO), and Interfor Corp. (IFP.TO), which contributed an estimated 10.0%, 7.7%, and 5.3% to Fund returns for the full year of 2021. Equinox Gold Corp. (EQX.TO), Minera Alamos Inc. (MAI.TO), and Fortuna Silver Mines Inc. (FVI.TO) most negatively impacted 2021 performance, costing the Fund an estimated 2.0%, 1.1%, and 0.9%.

 

A more in-depth review of the Fund’s performance, outlook and general market commentary can be found in the second half 2021 Manager’s Letter. For those of you who do not automatically receive our quarterly manager’s letters in the mail from your broker, they are available on our website at www.aegisfunds.com/library or by calling us at 800-528-3780. However, please be aware that these manager’s letters are not a part of the SEC-mandated Semi-Annual Report contained in this booklet. We thank you for your continued interest.

 

Aegis Financial Corporation

 

 

Scott L. Barbee, CFA
Portfolio Manager

 

3

 

 

Must be preceded or accompanied by Prospectus.

 

Opinions expressed are subject to change at any time, are not guaranteed and should not be considered investment advice.

 

Any recommendation made in this report may not be suitable for all investors. This presentation does not constitute a solicitation or offer to purchase or sell any securities.

 

Mutual fund investing involves risk. Principal loss is possible. Investments in foreign securities involve greater volatility and political, economic and currency risks and differences in accounting methods. Investments in small and mid-cap companies involve additional risks such as limited liquidity and greater volatility. Investment concentration in a particular sector involves risk of greater volatility and principal loss. Value stocks may fall out of favor with investors and underperform growth stocks during given periods.

 

S&P SmallCap 600 Pure Value Index: An index that seeks to measure stocks that exhibit strong value characteristics, and weights them by score. Constituents are drawn from the S&P SmallCap 600 Index, a market capitalization weighted index that seeks to measure the small-cap segment of the U.S. equity market.

 

S&P 500 Index: An index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe. One cannot invest directly in an index.

 

Price-to-Book: A ratio used to compare a stock’s market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter’s book value per share.

 

Price-to-Future Cash Flow: A measure of the market’s expectations of a firm’s future financial health. Because this measure deals with cash flow, the effects of depreciation and other non-cash factors are removed.

 

An investment cannot be made directly in an index.

 

Fund holdings, sector allocations, and geographic allocations are subject to change and are not a recommendation to buy or sell any security. Please see the schedule of portfolio investments provided in this report for the complete listing of Fund holdings.

 

Quasar Distributors, LLC is the distributor for the Aegis Value Fund. No other products mentioned in the commentary are distributed by Quasar.

 

 

4

 

 

About Your Fund’s Expenses
December 31, 2021

(Unaudited)

 

Important Note

 

As a shareholder of the Fund, you incur ongoing costs, including advisory fees and other Fund expenses. Class I shares of the Fund charge no sales load. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the 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 period, July 1, 2021 – December 31, 2021, for the Aegis Value Fund Class I.

 

Actual expenses

 

The table below provides information about actual account values and actual expenses.

 

Hypothetical example for comparison purposes

 

The below table 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, and do not reflect any transactional cost, such as sales charges (loads), or redemption fees (if applicable). Therefore, the hypothetical section of the tables is useful in comparing ongoing cost only and will not help you determine the relative total cost of owning different funds. In addition, if these transactional costs were included, your cost would have been higher.

 

 

 

Actual

Hypothetical
(5% annual return
before expenses)

 

Beginning
Account
Value
7/1/21

Ending
Account
Value

12/31/21

Expenses
Paid During
Period

Ending
Account
Value
12/31/21

Expenses
Paid During
Period

Aegis Value Fund Class I

$1,000.00

$1,021.90(1)

$7.65(2)

$1,017.64

$7.64(2)

 

 

(1)

The ending account value is based on the actual total return of the Fund for the period July 1, 2021 to December 31, 2021 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.

(2)

Expenses are equal to the Fund’s annualized expense ratio (1.50%) multiplied by the average account value over the period, multiplied by 184/365 (to reflect the period between 7/1/2021 – 12/31/2021).

 

 

 

5

 

 

Key Statistics (Unaudited)

 

Result of a Hypothetical $10,000 Investment in Aegis Value Fund
(assumes investment made on December 31, 2011)

 

 

The growth of $10,000 chart reflects the performance of a hypothetical $10,000 investment made in the Fund for the period noted. It assumes the reinvestment of dividends and capital gains but does not reflect the deduction of taxes that a shareholder would pay on dividends or capital gain distributions. This chart does not imply any future performance.

 

Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Please call 800-528-3780 to obtain performance data current to the most recent month-end.

 

6

 

 

Aegis Value Fund

Portfolio Characteristics

December 31, 2021
(Unaudited)

 

Industry Breakdown

 

 

% of the Fund’s Net Assets

Common Stocks

   

97.6%

Consumer Discretionary

 

0.7%

 

Textiles, Apparel & Luxury Goods

0.7%

   

Energy

 

23.5%

 

Energy Equipment & Services

6.4%

   

Oil, Gas & Consumable Fuels

17.1%

   

Financials

 

3.8%

 

Banks

0.8%

   

Consumer Finance

2.4%

   

Insurance

0.6%

   

Industrials

 

0.1%

 

Commercial Services & Supplies

0.1%

   

Materials

 

69.5%

 

Metals & Mining

     

Diversified Metals & Mining

20.4%

   

Gold, Silver & Precious Metals & Minerals

23.6%

   

Mining Services

6.3%

   

Steel

0.6%

   

Paper & Forest Products

18.6%

   

Warrants

   

0.1%

Materials

 

0.1%

 

Metals & Mining

     

Gold, Silver & Precious Metals & Minerals

0.1%

   

Other Assets in Excess of Liabilities

   

2.3%

Total Net Assets

   

100.0%

 

 

7

 

 

Aegis Value Fund

Schedule of Portfolio Investments

December 31, 2021

 

 

Country

 

Shares

   

Value

 

Common Stocks — 97.6%

                 

Consumer Discretionary — 0.7%

                 

Textiles, Apparel & Luxury Goods — 0.7%

                 

Delta Apparel, Inc. (1)

      43,159     $ 1,283,549  

Energy — 23.5%

                 

Energy Equipment & Services — 6.4%

                 

AKITA Drilling Ltd. - Class A (1)

CAD

    5,945,285       4,418,015  

Deep Down, Inc. (1)(3)

      766,584       475,282  

Essential Energy Services Ltd. (1)

CAD

    1,428,583       440,450  

Exterran Corp. (1)

      500,549       1,491,636  

Tidewater, Inc. (1)

      118,102       1,264,873  

Valaris Ltd. (1)(2)

      87,363       3,145,068  

Wolverine Energy & Infrastructure, Inc. (1)

CAD

    795,692       122,661  
                11,357,985  

Oil, Gas & Consumable Fuels — 17.1%

                 

Adams Resources & Energy, Inc.

      135,976       3,781,492  

ARC Resources Ltd.

CAD

    311,558       2,832,457  

Ardmore Shipping Corp. (1)(2)

      333,082       1,125,817  

Hallador Energy Company (1)

      742,434       1,826,388  

International Petroleum Corp. (1)

CAD

    1,558,870       8,712,764  

MEG Energy Corp. (1)

CAD

    999,584       9,245,530  

Seplat Petroleum Development Company plc (4)

GBP

    2,761,270       3,133,668  
                30,658,116  

Total Energy

              42,016,101  

Financials — 3.8%

                 

Banks — 0.8%

                 

Bank of Cyprus Holdings plc (1)

GBP

    1,315,577       1,517,152  
                   

Consumer Finance — 2.4%

                 

EZCORP, Inc. (1)

      589,504       4,344,644  
                   

Insurance — 0.6%

                 

Conifer Holdings, Inc. (1)

      430,026       997,660  

Total Financials

              6,859,456  

Industrials — 0.1%

                 

Commercial Services & Supplies — 0.1%

                 

Green Impact Partners, Inc. (1)

CAD

    37,006       175,529  
                   

 

 

The accompanying notes are an integral part of these financial statements.

 

8

 

 

Aegis Value Fund

Schedule of Portfolio Investments

December 31, 2021

 

 

Country

 

Shares

   

Value

 

Materials — 69.5%

                 

Metals & Mining — 50.9%

                 

Diversified Metals & Mining — 20.4%

                 

Amerigo Resources Ltd. (3)

CAD

    17,032,738     $ 19,659,115  

Base Resources Ltd.

AUD

    2,581,525       629,191  

Excelsior Mining Corp. (1)

CAD

    2,483,258       804,882  

Kenmare Resources plc

GBP

    2,148,598       13,494,173  

Solitario Zinc Corp. (1)

      620,433       310,154  

Trevali Mining Corp. (1)

CAD

    1,371,632       1,865,060  
                36,762,575  

Gold, Silver & Precious Metals & Minerals — 23.6%

               

African Gold Group, Inc. (1)

CAD

    3,900,000       400,806  

Argonaut Gold, Inc. (1)

CAD

    2,218,224       4,208,655  

Big River Gold Ltd. (1)(4)

AUD

    1,493,339       247,743  

Dundee Precious Metals, Inc.

CAD

    556,525       3,440,472  

Equinox Gold Corp. (1)(7)

CAD

    738,563       4,997,904  

Erdene Resource Development Corp. (1)

CAD

    5,192,386       1,765,071  

GoldQuest Mining Corp. (1)

CAD

    2,849,300       292,825  

IAMGOLD Corp. (1)(2)

      1,458,328       4,564,567  

Lion One Metals Ltd. (1)(7)

CAD

    1,589,524       1,319,420  

Loncor Gold, Inc. (1)(7)

CAD

    2,142,858       1,118,057  

Minera Alamos, Inc. (1)(7)

CAD

    18,954,538       8,016,663  

Mundoro Capital, Inc. (1)(7)

CAD

    1,851,852       300,114  

Orezone Gold Corp. (1)

CAD

    6,251,618       5,930,623  

Revival Gold, Inc. (1)

CAD

    2,801,405       1,373,075  

Superior Gold, Inc. (1)

CAD

    4,715,639       2,833,223  

TriStar Gold, Inc. (1)

CAD

    351,164       56,910  

Troilus Gold Corp. (1)(6)

CAD

    2,773,220       1,622,343  
                42,488,471  

Mining Services — 6.3%

                 

Capital Ltd. (4)

GBP

    4,046,698       4,639,039  

Geodrill Ltd. (3)

CAD

    3,956,698       6,599,971  
                11,239,010  

Steel — 0.6%

                 

Universal Stainless & Alloy Products, Inc. (1)

      133,238       1,051,248  

Total Metals & Mining

              91,541,304  

Paper & Forest Products — 18.6%

                 

Canfor Pulp Products, Inc. (1)

CAD

    174,467       922,712  

Conifex Timber, Inc. (1)(3)

CAD

    2,246,913       3,676,912  

Interfor Corp.

CAD

    461,500       14,779,529  

Mercer International, Inc.

      264,447       3,170,720  

Resolute Forest Products, Inc.

      602,559       9,201,076  

 

 

The accompanying notes are an integral part of these financial statements.

 

9

 

 

Aegis Value Fund

Schedule of Portfolio Investments

December 31, 2021

 

 

Country

 

Shares

   

Value

 

Materials — 69.5% (Continued)

                 

Paper & Forest Products — 18.6% (Continued)

                 

West Fraser Timber Co Ltd. (2)

      17,101     $ 1,630,751  
                33,381,700  

Total Materials

              124,923,004  

Total Common Stocks (Cost $132,201,965)

              175,257,639  
                   

Warrants — 0.1%

                 

Materials — 0.1%

                 

Metals & Mining — 0.1%

                 

Gold, Silver & Precious Metals & Minerals — 0.1%

                 

Loncor Gold, Inc. - Exercise Price: C$0.95, 07/14/2022 (5)(6)(7)

CAD

    1,071,429       50,906  

Troilus Gold Corp. - Exercise Price: C$1.50, 06/28/2023 (4)(6)

CAD

    850,000       104,154  

Total Warrants (Cost $0)

              155,060  
                   

Total Investments — 97.7% (Cost $132,201,965)

    175,412,699  

Other Assets in Excess of Liabilities — 2.3%

    4,151,743  

Net Assets — 100.0%

  $ 179,564,442  

 

 

Percentages are stated as a percent of net assets.

 

(1)

Non-income producing security.

(2)

Foreign security denominated in U.S. Dollars.

(3)

Affiliated Company - The fund is owner of more than 5% of the outstanding voting securities. See Note 6 for additional information.

(4)

Level 2 Security.

(5)

Level 3 Security which was fair valued in accordance with the policies and procedures approved by the Board of Trustees. As of December 31, 2021, the value of these securities was $50,906 which represents 0.0% of total net assets.

(6)

Illiquid Security. As of December 31, 2021, the value of these securities was $155,060, which represents 0.1% of total net assets.

(7)

All or a portion of this security may be deemed restricted under Rule 144A.

 

AUD - Australian Dollar

CAD - Canadian Dollar

GBP - British Pound Sterling

 

plc - Public Limited Company

 

 

The accompanying notes are an integral part of these financial statements.

 

10

 

 

Aegis Value Fund

Schedule of Portfolio Investments

December 31, 2021

 

For purposes of this report, the securities in the portfolio have been organized by their respective GICS code. The fund does not rely exclusively on GICS Industry classifications for purposes of its industry concentration policy. For example, within the Metals & Mining sector, the Fund utilizes the GICS Sub-Industry classifications, or aggregates thereof as shown above, for purposes of determining compliance with its industry concentration policy. In addition, in cases where a holding has been judged to be misclassified by GICS, or has not been classified by GICS, the Fund uses a Fund-determined GICS framework classification.

 

The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor Financial Services LLC (“S&P”). GICS is a service mark of MSCI and S&P and has been licensed for use by U.S. Bank Global Fund Services.

 

The accompanying notes are an integral part of these financial statements.

 

11

 

 

Aegis Value Fund

Statement of Assets and Liabilities

December 31, 2021

 

Assets

       

Investments in unaffiliated securities, at value (cost $112,236,706)

  $ 145,001,419  

Investments in affiliated securities*, at value (cost $19,965,259)

    30,411,280  

Total investments in securities, at value (cost $132,201,965)

    175,412,699  

Cash

    17,629  

Receivable for Fund shares sold

    4,337,350  

Receivable for investments securities sold

    330,275  

Interest and dividends receivable

    73,277  

Prepaid assets

    40,735  

Total Assets

    180,211,965  

Liabilities

       

Payable for investment securities purchased

    390,115  

Payable to Investment Adviser

    139,222  

Payable for Fund shares redeemed

    14,649  

Accrued Trustee and chief compliance officer fees

    14,004  

Other payables

    89,533  

Total liabilities

    647,523  

Net Assets

  $ 179,564,442  

Net assets consist of:

       

Paid-in captial

    137,290,201  

Total distributable earnings

    42,274,241  

Net Assets

  $ 179,564,442  
         

Net Assets

    179,564,442  

Authorized (Par value $0.001 per share)

    100,000,000  

Outstanding Shares

    6,196,403  

Net asset value per share

  $ 28.98  

 

 

*

Please refer to Note 6 for additional details.

 

The accompanying notes are an integral part of these financial statements.

 

12

 

 

Aegis Value Fund

Statement of Operations

For the Year Ended December 31, 2021

 

Investment Income

       

Dividends from unaffiliated companies#

  $ 2,887,324  

Dividends from affiliated companies (Note 6)##

    289,390  

Total investment income

    3,176,714  

Expenses

       

Investment advisory fees (Note 3)

    2,184,755  

Fund servicing fees

    163,098  

Transfer agent & custody fees

    112,217  

Printing and postage fees

    37,877  

Registration fees

    41,513  

Legal fees

    56,513  

Director fees

    14,000  

Chief compliance officer fees (Note 3)

    40,038  

Audit fees

    23,498  

Insurance fees

    28,243  

Gross Expenses

    2,701,752  

Expenses recouped (Note 3)

    97,287  

Expenses waived (Note 3)

    (68,095 )

Net Expenses

    2,730,944  

Net Investment Income

    445,770  

Realized and Unrealized Gain on Investments and Foreign Currency Transactions

       

Net realized gain (loss) from:

       

Investments in unaffiliated companies

    14,971,919  

Investments in affiliated companies (Note 6)

    (212,558 )

Investments in foreign currency transactions

    (14,072 )

Net realized gain on investments and foreign currency transactions

    14,745,289  

Change in unrealized appreciation on:

       

Investments in unaffiliated companies

    10,786,758  

Investments in affiliated companies (Note 6)

    11,404,092  

Investments in foreign currency translations

    279  

Net change in unrealized appreciation on investments

    22,191,129  

Net Realized and Unrealized Gain on Investments and Foreign Currency Transactions

    36,936,418  

Net Increase in Net Assets Resulting from Operations

  $ 37,382,188  

 

 

#

Net of foreign taxes withholding of $154,016.

##

Net of foreign taxes withholding of $40,017.

 

The accompanying notes are an integral part of these financial statements.

 

13

 

 

Aegis Value Fund

Statements of Changes in Net Assets

 

   

Year Ended
December 31,
2021

   

Year Ended
December 31,
2020

 

Operations:

               

Net investment gain (loss)

  $ 445,770     $ (852,166 )

Net realized gain (loss) on investments and foreign currency transactions

    14,745,289       (14,520,119 )

Net change in unrealized appreciation on investments

    22,191,129       32,959,733  

Net increase in net assets resulting from operations

    37,382,188       17,587,448  

Distributions

               

Net dividends and distributions to shareholders

          (7,790,854 )

Net decrease in assets resulting from distributions paid

          (7,790,854 )

Capital share transactions

               

Subscriptions

    136,487,354       9,993,633  

Distributions reinvested

          5,970,772  

Redemptions

    (117,854,713 )     (17,325,352 )

Net Increase (Decrease) in net assets resulting from capital share transactions

    18,632,641       (1,360,947 )

Total Increase in Net Assets

    56,014,829       8,435,647  
                 

Net Assets

               

Beginning of year

    123,549,613       115,113,966  

End of year

  $ 179,564,442     $ 123,549,613  
                 

Share information

               

Subscriptions

    4,649,937       554,996  

Distributions reinvested

          292,255  

Redemptions

    (4,322,524 )     (1,056,212 )

Net increase (decrease) in shares

    327,413       (208,961 )

Beginning shares

    5,868,990       6,077,951  

Ending shares

    6,196,403       5,868,990  

 

 

The accompanying notes are an integral part of these financial statements.

 

14

 

 

Aegis Value Fund

Financial Highlights

 

The table below sets forth financial data for a share outstanding in Class I throughout each year:

 

   

Years Ended December 31,

 
   

2021

   

2020

   

2019

   

2018

   

2017

 
                                         

Per Share Data

                                       

Net asset value, beginning of year

  $ 21.05     $ 18.94     $ 15.44     $ 19.67     $ 16.76  

Income from investment operations:

                                       

Net investment income (loss)(1)

    0.07       (0.15 )     (0.20 )     (0.11 )     (0.22 )

Net realized and unrealized gain (loss) on investments

    7.86       3.65       4.15       (3.17 )     3.13  

Total from investment operations

    7.93       3.50       3.95       (3.28 )     2.91  

Less distributions to shareholders from:

                                       

Net investment income

          (0.44 )     (0.05 )            

Net realized capital gains

          (0.95 )     (0.40 )     (0.95 )      

Total distributions

          (1.39 )     (0.45 )     (0.95 )      

Net asset value, end of year

  $ 28.98     $ 21.05     $ 18.94     $ 15.44     $ 19.67  

Total investment return

    37.67 %     18.72 %     25.66 %     (17.02 )%(2)     17.36 %(2)

Ratios (to average net assets)/Supplemental data:

                                       

Expenses after reimbursement/recovery

    1.50 %     1.50 %     1.50 %     1.50 %     1.50 %

Expenses before reimbursement/recovery

    1.48 %     1.55 %     1.63 %     1.52 %     1.53 %

Net investment gain (loss)

    0.25 %     (0.86 )%     (1.18 )%     (0.57 )%(3)     (1.31 )%

Portfolio turnover

    40 %     41 %     30 %     62 %     15 %

Net assets at end of year (000’s)

  $ 179,564     $ 123,550     $ 115,114     $ 97,720     $ 130,086  

 

 

(1)

Per share net investment loss was calculated prior to tax adjustments, using average shares method.

(2)

Includes adjustments made to the NAV in accordance with accounting principles generally accepted in the United States and, consequently, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset values and returns for shareholder transactions.

(3)

Resolute Forest Products, Inc. paid a special dividend on December 6, 2018 in the amount of $611,550. The net investment loss excluding this special dividend would have been (1.04)%.

 

The accompanying notes are an integral part of these financial statements.

 

15

 

 

Notes to Financial Statements

December 31, 2021

 

1. The Organization

 

The Aegis Funds (comprised of the Aegis Value Fund) (the “Fund”) is registered under the Investment Company Act of 1940 (the “1940 Act”) as a diversified openend management investment company. The Fund currently offers one class of shares, Class I shares. The Fund’s Class I shares commenced operations May 15, 1998. The Fund’s 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 a company’s book value, revenues, or cash flow.

 

2. Summary of Significant Accounting Policies

 

As an investment company, as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Update 2013-08, the Fund follows accounting and reporting guidance under FASB Accounting Standards Codification Topic 946, “Financial Services – Investment Companies”.

 

Security valuation. Investments in securities are valued based on market quotations or on data furnished by an independent pricing service. 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’s 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 close price, or the average of bid and ask price for NASDAQ National Market securities. Short- term (less than 60 days maturity) notes are stated at amortized cost, which is equivalent to value. Restricted securities, securities for which market quotations are not readily available, and securities with market quotations that Aegis Financial Corporation (the “Advisor”) does not believe are reflective of market value are valued at fair value as determined by the Advisor under the supervision of the Board of Trustees (the “Board”). 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. 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 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.

 

16

 

 

Notes to Financial Statements

December 31, 2021

 

2. Summary of Significant Accounting Policies – (continued)

 

In accordance with accounting principles generally accepted in the United States of America (“GAAP”), fair value is defined as the price that the Fund would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. GAAP establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Fund’s investments. The inputs are summarized in the three broad levels listed below:

 

 

Level 1 – quoted prices in active markets for identical securities. An active market for the security is a market in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis. A quoted price in an active market provides the most reliable evidence of fair value.

 

 

Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.), quoted prices for identical or similar assets in markets that are not active, and inputs that are derived principally from or corroborated by observable market data. An adjustment to any observable input that is significant to the fair value may render the measurement a Level 3 measurement.

 

 

Level 3 – significant unobservable inputs, including the Fund’s own assumptions in determining the fair value of investments.

 

Common stocks, preferred stocks and warrants. Securities traded or dealt in one or more domestic securities exchanges, excluding the National Association of Securities Dealers’ Automated Quotation System (“NASDAQ”), and not subject to restrictions against resale shall be valued on the business day as of which such value is being determined at the close of the exchange representing the principal market for such securities at the last quoted sales price or in the absence of a sale, at the mean of the last bid and asked prices. Securities traded or dealt in the NASDAQ and not subject to restrictions against resale shall be valued in accordance with the NASDAQ Official Closing Price. Securities traded on the NASDAQ Stock Market for which there were no transactions on a particular day are valued at the mean of the last bid and asked

 

17

 

 

Notes to Financial Statements

December 31, 2021

 

2. Summary of Significant Accounting Policies – (continued)

 

prices. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized in Level 1 of the fair value hierarchy. Stocks traded on inactive markets or valued by reference to similar instruments are categorized in Level 2.

 

Rule 2a-5. In December 2020, the SEC adopted a new rule providing a framework for fund valuation practices (“Rule 2a-5”). Rule 2a-5 establishes requirements for determining fair value in good faith for purposes of the 1940 Act. Rule 2a-5 will permit fund boards to designate certain parties to perform fair value determinations, subject to board oversight and certain other conditions. Rule 2a-5 also defines when market quotations are “readily available” for purposes of the 1940 Act and the threshold for determining whether a fund must fair value a security. In connection with Rule 2a-5, the SEC also adopted related recordkeeping requirements and is rescinding previously issued guidance, including with respect to the role of a board in determining fair value and the accounting and auditing of fund investments. The Funds will be required to comply with the rules by September 8, 2022. Management is currently assessing the potential impact of the new rules on the Fund’s financial statements.

 

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2021:

 

   

Level 1

   

Level 2

   

Level 3

   

Total

 

Common Stocks

                               

Consumer Discretionary

  $ 1,283,549     $     $     $ 1,283,549  

Energy

    38,882,433       3,133,668             42,016,101  

Financials

    6,859,456                     6,859,456  

Industrials

    175,529                   175,529  

Materials

    120,036,222       4,886,782             124,923,004  

Warrants

                               

Materials

          104,154       50,906       155,060  

Total

  $ 167,237,189     $ 8,124,604     $ 50,906     $ 175,412,699  

 

When market quotations are not readily available, any security or other asset is valued at its fair value as determined in good faith under procedures approved by the Board. If events occur that will affect the value of the Fund’s portfolio securities before the net asset value (“NAV”) has been calculated (a “significant event”), the security will generally be priced using a fair value procedure. The Board has adopted specific procedures for valuing portfolio securities and delegated the responsibility of fair value determinations to the Valuation Committee. Some of the factors that may be

 

18

 

 

Notes to Financial Statements

December 31, 2021

 

2. Summary of Significant Accounting Policies – (continued)

 

considered by the Valuation Committee in determining fair value are fundamental analytical data relating to the investment; the nature and duration of any restriction on disposition; trading in similar securities of the same issuer or comparable companies; information from broker-dealers; and an evaluation of the forces that influence the market in which the securities are purchased or sold.

 

The following is a summary of quantitative information about significant unobservable valuation inputs for the Fund approved by the Valuation Committee for Level 3 Fair Value Measurements for investments held as of December 31, 2021:

 

Investments

 

Fair Value as of
December 31,
2021

   

Valuation
Technique

   

Unobservable
Inputs

   

Weighted
Average

   

Range

 

Loncor Gold, Inc. - Warrant, Exercise Price: C$0.95, 07/14/2022

  $ 50,906       Black Scholes Option Pricing Model       Pricing Model       N/A     $ 0.0475  

 

The following is a reconciliation of the Fund’s Level 3 assets for which significant unobservable inputs were used to determine fair value for the year ended December 31, 2021:

 

Fair Value Measurement Using Significant Unobservable Inputs (Level 3)

 

Investments in
Securities

 

Beginning Balance as of December 31, 2020

  $ 63,794  

Change in unrealized appreciation

    (12,888 )

Ending Balance as of December 31, 2021

  $ 50,906  

Change in unrealized appreciation still held as of December 31, 2021

  $ 50,906  

 

Foreign risk and currency translation. The Fund may invest directly in foreign securities. Financial market fluctuations in any country where the Fund has investments will likely affect the value of the securities that the Fund owns in that country. These movements will affect the Fund’s share price and investment performance. The political, economic, and social structures of some countries may be less stable and more volatile than those in the United States. The risks of foreign markets include currency fluctuations, possible nationalization or expropriation of assets, extraordinary taxation or exchange controls, political or social instability, unfavorable diplomatic developments, and certain custody and settlement risks. In addition to these risks, many foreign markets have less trading volume and less liquidity than the U.S. markets, and therefore prices in foreign markets can be highly volatile.

 

19

 

 

Notes to Financial Statements

December 31, 2021

 

2. Summary of Significant Accounting Policies – (continued)

 

Foreign markets may also have less protection for investors than the U.S. markets. Foreign issuers may be subject to less government supervision. It may also be difficult to enforce legal and shareholder/bondholder rights in foreign countries. There is no assurance that the Fund will be able to anticipate these risks or counter their effects.

 

The accounting records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the current rate of exchange to determine the value of investments, assets and liabilities. Purchases and sales of securities, and income and expenses are translated at the prevailing rate of exchange on the respective date of these transactions. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from fluctuations arising from changes in market prices of securities held. These fluctuations are included with the net realized and unrealized gains or losses from investments.

 

Reported net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at each reporting period, resulting from changes in the exchange rate. These fluctuations are included with the net realized and unrealized gains or losses from investments.

 

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 that results in no tax cost to the Fund. Therefore, no federal income tax provision is required.

 

Distributions to shareholders. Distributions to the Fund’s 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 for the Fund. Net realized gains from investment transactions, if any, will be distributed to shareholders annually.

 

20

 

 

Notes to Financial Statements

December 31, 2021

 

2. Summary of Significant Accounting Policies – (continued)

 

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 conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent 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.

 

Security Transactions, Income and Expenses. 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. The specific identification method is used to determine book and tax cost basis when calculating realized gains and losses. 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’s understanding of the applicable country’s tax rules and rates.

 

Indemnifications. 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.

 

Covid-19. The global outbreak of COVID-19 (commonly referred to as “coronavirus”) has disrupted economic markets and the prolonged economic impact is uncertain. The ultimate economic fallout from the pandemic, and the long-term impact on economies, markets, industries and individual issuers, are not known. The operational and financial performance of the issuers of securities in which the Fund invests depends on future developments, including the duration and spread of the outbreak, and such uncertainty may in turn adversely affect the value and liquidity of the Fund’s investments, impair the Fund’s ability to satisfy redemption requests, and negatively impact the Fund’s performance.

 

21

 

 

Notes to Financial Statements

December 31, 2021

 

2. Summary of Significant Accounting Policies – (continued)

 

Significant Concentrations. The Fund maintains a demand deposit in excess of Federal Deposit Insurance Company (“FDIC”) Insurance limits. As a result, the Fund is exposed to credit risk in the event of insolvency or other failure of the institution to meet its obligations. The Fund manages this risk by dealing with a major financial institution and monitoring its credit worthiness.

 

Rule 18f-4. On October 28, 2020, the SEC adopted new regulations governing the use of derivatives by registered investment companies (“Rule 18f-4”). Rule 18f-4 will impose limits on the amount of derivatives a Fund can enter into, eliminate the asset segregation framework currently used by funds to comply with Section 18 of the 1940 Act, and require funds whose use of derivatives is greater than a limited specified amount to establish and maintain a comprehensive derivatives risk management program and appoint a derivatives risk manager. Funds will be required to comply with Rule 18f-4 by August 19, 2022. Management currently anticipates Rule 18f-4 will not have a material impact on the Fund.

 

3. Advisory Fees and Other Transactions with Affiliates

 

The Fund entered into an investment management and advisory services agreement (the “Agreement”) with the Advisor that provides for fees to be computed at an annual rate of 1.20% of the Fund’s average daily net assets. The Agreement shall remain in force through December 31, 2021 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. During the year ended December 31, 2021, the Fund incurred $2,184,755 in investment advisory fees. The Fund and the Advisor have also entered into an expense limitation agreement which shall remain in force through April 30, 2022, that provides for an advisory fee waiver and 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, exceeds 1.50% for the Class I Shares, of the Fund’s average daily net assets. During the year ended December 31, 2021, the Advisor waived fees in the amount of $68,095 and recovered fees of $97,287.

 

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 1.50% for Class I Shares and the repayment is made within three years from the month in which the Advisor incurred the expense. As of December 31, 2021, there

 

22

 

 

Notes to Financial Statements

December 31, 2021

 

3. Advisory Fees and Other Transactions with Affiliates – (continued)

 

was $225,486 waiver of fees available to be recovered no later than December 31, 2024, of which, $79,773, $77,618, and $68,095 are recoverable no later than December 31, 2022, 2023 and 2024, respectively for the Fund.

 

Certain officers and Trustees of the Fund are also officers of the Advisor. The Fund pays each Trustee not an officer of the Advisor fees in cash or Fund shares of $1,000 for each attended board meeting for the Fund and $500 for each attended audit committee meeting for the Fund. In addition, the Fund reimburses the Advisor for chief compliance officer services, a yearly amount of $40,000 paid on a quarterly basis.

 

4. Investment Transactions

 

Purchases and sales of long-term investment securities (excluding short-term investments) for the Fund are presented below for the year ended December 31, 2021.

 

   

Purchases

   

Sales

 

Aegis Value Fund

  $ 89,333,455     $ 66,837,726  

 

5. Distributions to Shareholders and Tax Components of Net Assets

 

As of December 31, 2021, the components of accumulated earnings (losses) for income tax purposes were as follows:

 

Tax cost of Investments

  $ 132,360,509  

Unrealized appreciation of Investments

    62,485,624  

Unrealized depreciation of Investments

    (19,433,155 )

Net unrealized appreciation

    43,052,469  

Unrealized depreciation of foreign currency

     

Undistributed ordinary income

    431,698  

Undistributed long term gain

     

Distributable earnings

    431,698  

Other accumulated loss

    (1,209,926 )

Total accumulated earnings

  $ 42,274,241  

 

The difference between cost amounts for financial statement and federal income tax purposes is due primarily to timing differences in recognizing certain gains and losses in securities transactions.

 

The differences between book-basis and tax-basis unrealized appreciations are attributable primarily to PFIC mark to market adjustments and wash sales.

 

23

 

 

Notes to Financial Statements

December 31, 2021

 

5. Distributions to Shareholders and Tax Components of Net Assets – (continued)

 

As of December 31, 2021, the Fund has capital loss carryforwards in the amount of $1,209,926, of which short-term capital loss carryforwards amounts to $808,536 and long-term capital loss carryforwards amounts to $401,390. The Fund did utilize short-term capital loss carryovers in the amount of $2,681,321, and long-term capital loss carryovers of $10,963,995 during the year ended December 31, 2021.

 

As of December 31, 2021, the Fund did not defer on a tax basis, any qualified late year losses.

 

On the Statement of Assets and Liabilities, as a result of permanent book to tax differences, certain amounts have been reclassified for the year ended December 31, 2021. The reclassifications were primarily a result of net operating losses and prior year tax return true-up amounts.

 

Total Distributable Earnings  $165,194 
Paid In Capital  $(165,194)

 

The tax components of dividends paid during the year ended December 31, 2021 and the year ended December 31, 2020 were as follows:

 

Year Ended
December 31, 2021
   Year Ended
December 31, 2020
 
Ordinary
Income
   Long-Term
Capital Gains
   Total   Ordinary
Income
   Long-Term
Capital Gains
   Long-Term
Capital Gains
 
$   $   $   $2,597,700   $5,193,154   $7,790,854 

 

GAAP requires an evaluation of tax positions taken (or expected to be taken) in the course of preparing the Fund’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as an interest expense in the Statement of Operations.

 

GAAP requires management of the Fund to analyze all open tax years, as defined by IRS statute of limitations for all major jurisdictions, including federal tax authorities and certain state tax authorities. Open tax years include the tax years ended December 31, 2018 through December 31, 2021. As of and during the year ended December 31, 2021, the Fund did not have a liability for any unrecognized tax benefits. The Fund files U.S. Federal income and excise tax returns, as required. The Fund’s Federal

 

24

 

 

Notes to Financial Statements

December 31, 2021

 

5. Distributions to Shareholders and Tax Components of Net Assets – (continued)

 

income tax returns are subject to examination by the IRS for a period of three fiscal years after they are filed. The Fund has no examination in progress and is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.

 

6. Investments in Affiliated Companies*

 

Investments representing 5% or more of the outstanding voting securities of a portfolio company result in that company being considered an affiliated company, as defined in the 1940 Act. The aggregate value of all securities of affiliated companies held in the Aegis Value Fund as of December 31, 2021 amounted to $30,411,280, representing 16.94% of net assets. A summary of affiliated transactions for the period ended December 31, 2021 is as follows:

 

   

Share Balance
December 31,
2020

   

Additions

   

Deductions

   

Share Balance
December 31,
2021

 

Amerigo Resources Ltd.

    17,032,738                   17,032,738  

Conifex Timber, Inc. (1)

    N/A       797,000             2,246,913  

Deep Down, Inc.

    766,584                   766,584  

Geodrill Ltd.

    3,956,698                   3,956,698  

Conifer Holdings, Inc. (2)

    499,321       20,420       (89,715 )     N/A  

 

   

Value
December 31,
2020

   

Acquisitions

   

Dispositions

   

Corporate
Actions

 

Amerigo Resources Ltd.

    10,704,840                    

Conifex Timber, Inc. (1)

    N/A       1,378,476              

Deep Down, Inc.

    328,098                    

Geodrill Ltd.

    4,849,123                    

Conifer Holdings, Inc. (2)

    1,642,766       59,189       (373,946 )      

Total

  $ 17,524,827     $ 1,437,665     $ (373,946 )   $  

 

 

25

 

 

Notes to Financial Statements

December 31, 2021

 

6. Investments in Affiliated Companies* – (continued)

 

   

Realized Gain
(Loss)

   

Change in
Unrealized
Appreciation
(Depreciation)

   

Value
December 31,
2021

   

Dividend
Income

 

Amerigo Resources Ltd.

          8,954,275     $ 19,659,115       226,765  

Conifex Timber, Inc. (1)

          669,576       3,676,912        

Deep Down, Inc.

          147,184       475,282        

Geodrill Ltd.

          1,750,848       6,599,971       62,625  

Conifer Holdings, Inc. (2)

    (212,558 )     (117,791 )     N/A        

Total

  $ (212,558 )   $ 11,404,092     $ 30,411,280     $ 289,390  

 

 

*

As a result of the Aegis Value Fund’s beneficial ownership of common stock of these companies, regulators require that the Fund state that it may be deemed an affiliate of the respective issuer. The Fund disclaims that the “affiliated persons” are affiliates of the Distributor, Advisor, Funds or any other client of the Advisor.

(1)

This security was not affiliated at December 31, 2020.

(2)

This security was no longer affiliated as of December 31, 2021.

 

7. Control Ownership

 

The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a fund creates presumption of control of the fund pursuant to Section 2(a)(9) of the 1940 Act. As of December 31, 2021, Pershing LLC. held approximately 33.26% of the Aegis Value Fund for the benefit of its customers.

 

8. Subsequent Events

 

In connection with the preparation of the financial statements of the Fund as of and for the year ended December 31, 2021, events and transactions subsequent to December 31, 2021 have been evaluated by management for possible adjustment and/or disclosure. Management has determined that there were no material events that would require disclosure in the Fund’s financial statements.

 

26

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees of The Aegis Funds
and the Shareholders of Aegis Value Fund

 

Opinion on the Financial Statements

 

We have audited the accompanying statement of assets and liabilities of Aegis Value Fund, a series of shares of beneficial interest in The Aegis Funds (the “Fund”), including the schedule of portfolio investments, as of December 31, 2021, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the five-year period then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2021, and the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended and its financial highlights for each of the years in the five-year period then ended, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities law and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risk of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian, brokers, or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included

 

27

 

 

evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

 

BBD, LLP

 

We have served as the auditor of The Aegis Funds since 2004.

 

Philadelphia, Pennsylvania
February 25, 2022

 

28

 

 

Trustees and Officers

(Unaudited)

 

Name, Year of Birth, and Address

Position(s) Held with the Fund

Term of Office and Length of Time Served

Principal Occupation During Past 5 Years

Number of Portfolios in Fund Complex Overseen by Trustee

Other Directorships Held by Trustee During the Past 5 Years

Independent Trustees*

Eskander Matta

Born: 1970

c/o Aegis Financial Corporation

6862 Elm Street,

Suite 830

McLean, VA 22101

Trustee

Since 2003

Chief Executive Officer of Tasharina Corporation (an eCommerce business services firm) since 2012;

1

 

Andrew R. Bacas

Born: 1958

c/o Aegis Financial Corporation

6862 Elm Street,

Suite 830

McLean, VA 22101

Trustee

Since August 2016

President, Jefferson Management Consultants, Inc. (a commercial real estate investment and advisory firm) since 2006.

1

 

Jordan F. Nasir

Born: 1969

c/o Aegis Financial Corporation

6862 Elm Street,

Suite 830

McLean, VA 22101

Trustee

Since February 2018

Fund Manager of Mizuho Gulf Capital Partners (a private equity firm) since September 2017; Managing Partner of Catalyst Partners Ltd (a private equity firm) (2015-2017).

1

Board Member, Mizuho Gulf Capital Partners, Ltd., (2017 – present); Board Member, Gulf Japan Food Fund (2017 – present).

 

 

 

 

29

 

 

Trustees and Officers

(Unaudited)

 

Name, Year of Birth, and Address

Position(s) Held with the Fund

Term of Office and Length of Time Served

Principal Occupation During Past 5 Years

Number of Portfolios in Fund Complex Overseen by Trustee

Other Directorships Held by Trustee During the Past 5 Years

Interested Trustee**

Scott L. Barbee

Born: 1971

c/o Aegis Financial Corporation

6862 Elm Street,

Suite 830

McLean, VA 22101

President Trustee Treasurer Secretary

Since 2009 Since 2003 2003 – 2008 2006 – 2008

President of Aegis Financial Corporation since 2009.

1

Director of Donald Smith & Co. (SEC-registered investment adviser) since 2014; Director of The Barbee Family Foundation since 2012; Director of The Donald & Paula Smith Family Foundation since 2014.

David A. Giannini

Born: 1953

c/o Aegis Financial Corporation

6862 Elm Street,

Suite 830

McLean, VA 22101

Trustee

Since 2006

Vice President of Scarsdale Equities, LLC (institutional equity sales and research team) since 2006.

1

Director of Petrowolf Resources (2013 – Present). Director of Select Sands Corporation (industrial silica product company) (2016 – 2018).

 

 

 

 

30

 

 

Trustees and Officers

(Unaudited)

 

Name, Year of Birth, and Address

Position(s) Held with the Fund

Term of Office and Length of Time Served

Principal Occupation During Past 5 Years

Number of Portfolios in Fund Complex Overseen by Trustee

Other Directorships Held by Trustee During the Past 5 Years

Officer of the Fund who is not also a Trustee

Justin P. Harrison

Born: 1973

c/o Aegis Financial Corporation

6862 Elm Street,

Suite 830

McLean, VA 22101

Chief Compliance Officer, Treasurer, and Secretary

Since November 2018

Chief Operating Officer and Chief Compliance Officer of Aegis Financial Corporation since 2018; Interim Chief Financial Officer of SquirrelWerkz (a cyber-economic threat intelligence products and services company) (2018); Senior Analyst, Sheffield Asset Management, LLC (an investment management firm) (2017-2018).

N/A

N/A

 

 

*

The “Independent Trustees” are those Trustees that are not considered “interested persons” of the Trust, as that term is defined in the 1940 Act.

**

Mr. Barbee is considered to be an “Interested Trustee” because of his affiliation with the Advisor. Mr. Giannini is considered to be an “Interested Trustee” due to his employer’s business relationship with the Advisor.

 

The Fund’s Statement of Additional Information includes additional information about Fund Trustees and is available, without charge, by calling the Fund’s toll-free phone number, (800) 528-3780.

 

31

 

 

Other Information

(Unaudited)

 

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 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’s toll-free phone number, 800-528-3780.

 

Fund Holdings

 

The complete schedules of the Fund’s 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 the Fund’s holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT Part F within 60 days after the end of the period. Copies of the Fund’s Form N-PORT Part F are available without charge, upon request, by contacting the Fund at 800-528-3780 and on the SEC’s website at http://www.sec.gov. You may also review and copy Form N-PORT Part F at the SEC’s Public Reference Room in Washington, DC. For more information about the operation of the Public Reference Room, please call the SEC at 1-800-SEC-0330.

 

Tax Designation

 

For the year ended December 31, 2021, certain dividends paid by the Fund may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The percentage of dividends declared from ordinary income designated as qualified dividend income was as follows:

 

Aegis Value Fund

0.00%

 

For corporate shareholders, the percent of ordinary income distributions qualifying for the corporate dividends received deduction for the year ended December 31, 2021was as follows:

 

Aegis Value Fund

0.00%

 

 

32

 

 

Other Information

(Unaudited)

 

The percentage of income that is designated as qualified interest income which may be exempt from U.S tax withholding when paid to non-U.S. Shareholders was as follows:

 

Aegis Value Fund

0.00%

 

Operation and Effectiveness of Liquidity Risk Management Program

(Unaudited)

 

Draft disclosure regarding the operation and effectiveness of the Program during the Review Period, to be included in the Fund’s next report to shareholders:

 

Pursuant to Rule 22e-4 under the Investment Company Act of 1940, the Fund has adopted and implemented a liquidity risk management program (the “Program”) designed to assess and manage the risk that the Fund could not meet requests to redeem Fund shares without significant dilution of remaining investors’ interests in the Fund. In assessing, managing and reviewing liquidity risk under the Program, the Fund considers a variety of factors, including its investment strategy, portfolio investments, portfolio concentration, cash flow projections, redemption policy and redemption history.

 

The Program requires the Fund to, among other things, (1) periodically classify (no less frequently than monthly) its investments into specific liquidity categories; (2) determine and monitor compliance with a minimum level of Fund net assets invested in “highly liquid investments” (as defined under Rule 22e-4); (3) monitor compliance with a 15% limit for the acquisition of “illiquid investments” (as defined under Rule 22e-4); and (4) periodically assess (no less frequently than annually) the Fund’s liquidity risk based on certain factors.

 

During the 12-month period ended September 30, 2021 (the “Review Period”), there were no liquidity events that materially affected the Fund’s performance or ability to timely meet redemptions without dilution to remaining investors’ interests in the Fund.

 

The Chief Compliance Officer of the Fund, which the Board has designated to administer the Program, prepared a written report that addressed the operation of the Program and assessed the Program’s adequacy and effectiveness of implementation during the Review Period (the “Report”). The Board reviewed and accepted the Report, which reflected that the Program is reasonably designed to assess and manage the Fund’s liquidity risk and that during the Review Period the Program operated adequately and effectively in managing the Fund’s liquidity risk.

 

 

33

 

 

Aegis Mutual Funds Privacy Notice

(This information is not part of the Report)

 

FACTS

WHAT DOES AEGIS FUNDS DO WITH YOUR PERSONAL INFORMATION?

       

WHY?

Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.

       

WHAT?

The types of personal information we collect and share depend on the product or service you have with us. This information can include:

 

● Social Security number and other information including address and date of birth

● Asset and income

● Account balances and account transactions

When you are no longer our customer, we continue to share your information as described in this notice.

       

HOW?

All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons. The Aegis Funds chooses to share; and whether you can limit this sharing.

       

Reasons we can share your personal information

Does The Aegis
Funds share?

Can you limit this sharing?

For our everyday business purposes—
such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus

Yes

No

For our marketing purposes—
to offer our products and services to you

Yes

No

For joint marketing with other financial companies

No

We don’t share

For our affiliates’ everyday business purposes—
information about your transactions and experiences

Yes

No

For our affiliates’ everyday business purposes
information about your creditworthiness

No

We don’t share

For nonaffiliates to market to you

No

We don’t share

Questions?

Call 800-528-3780 or go to www.aegisfunds.com

 

 

34

 

 

Aegis Mutual Funds Privacy Notice

(This information is not part of the Report)

 

Who we are

Who is providing this Notice?

The Aegis Funds

What we do

How does The Aegis Funds protect my personal information?

To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings.

How does The Aegis Funds collect your personal information?

We collect your personal information, for example, when you

 

● open an account or perform transactions

● make a transfer or tell us where to send money

● tell us about your personal financial information

Why can’t I limit all sharing?

Federal law gives you the right to limit only

 

● sharing for affiliates’ everyday business purposes—information about your creditworthiness

● affiliates from using your information to market to you

● sharing for nonaffiliates to market to you

State laws and individual companies may give you additional rights to limit sharing.

Definitions

Affiliates

Companies related by common ownership or control. They can be financial and nonfinancial companies.

 

Our affiliates include Aegis Financial Corporation.

Nonaffiliates

Companies not related by common ownership or control. They can be financial and nonfinancial companies.

 

The Aegis Funds does not share with nonaffiliates so they can market to you.

Joint marketing

A formal agreement between nonaffiliated financial companies that together market financial products or services to you.

 

See Other important information.

Other important information

Non-affiliates with whom we may share information (except to permit them to market to you) can include financial companies, such as custodians, transfer agents, registered representatives and financial advisors, and nonfinancial companies, such as fulfillment, proxy voting and class action service providers.

 

 

35

 

 

 

The Aegis Funds

c/o U.S. Bank Global Fund Services, LLC
615 East Michigan Street
Milwaukee, Wisconsin 53202
Phone: (800) 528-3780
www.aegisfunds.com

 

Board of Trustees

Scott L. Barbee
David A. Giannini
Eskander Matta
Jordan F. Nasir
Andrew Bacas

 

Officers

Scott L. Barbee, President
Justin P. Harrison, Treasurer/Secretary/
Chief Compliance Officer

 

Investment Advisor

Aegis Financial Corporation
6862 Elm Street, Suite 830
McLean, Virginia 22101

 

Custodian

U.S. Bank, N.A.
Custody Operations
1555 North RiverCenter Drive, Suite 302 Milwaukee, Wisconsin 53212

 

Administrator, Transfer Agent and Fund Accountant

U.S. Bank Global Fund Services, LLC
615 East Michigan Street
Milwaukee, Wisconsin 53202

 

Independent Registered Public Accounting Firm

BBD, LLP
1835 Market Street, 3rd Floor
Philadelphia, Pennsylvania 19103

 

Counsel

Seward & Kissel, LLP
901 K Street N.W.
Washington, DC 20001

 

 

 

(b)Not applicable

 

Item 2. Code of Ethics.

 

The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer and principal financial officer. The registrant has not made any substantive amendments to its code of ethics during the period covered by this report. The registrant has not granted any waivers from any provisions of the code of ethics during the period covered by this report. A copy of the registrant’s Code of Ethics is incorporated herein by reference to its Form N-CSR filed on March 4, 2016.

 

Item 3. Audit Committee Financial Expert.

 

The registrant’s board of trustees has determined that it does not have an audit committee financial expert serving on its audit committee. At this time, the registrant believes that the experience provided by each member of the audit committee together offers the registrant adequate oversight for the registrant’s level of financial complexity.

 

Item 4. Principal Accountant Fees and Services.

 

The registrant has engaged its principal accountant to perform audit services, audit-related services, tax services and other services during the past two fiscal years. “Audit services” refer to performing an audit of the registrant's 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. “Audit-related services” refer to the assurance and related services by the principal accountant that are reasonably related to the performance of the audit. “Tax services” refer to professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. There were no “Other services” provided by the principal accountant. The following table details the aggregate fees billed or expected to be billed for each of the last two fiscal years for audit fees, audit-related fees, tax fees and other fees by the principal accountant.

 

  FYE  12/31/2021 FYE  12/31/2020
Audit Fees $20,000 $20,000
Audit-Related Fees $0 $0
Tax Fees $3,500 $3,500
All Other Fees $0 $0

 

The audit committee has adopted pre-approval policies and procedures that require the audit committee to pre-approve all audit and non-audit services of the registrant, including services provided to any entity affiliated with the registrant.

 

 

 

The percentage of fees billed by BBD, LLP applicable to non-audit services pursuant to waiver of pre-approval requirement were as follows:

 

  FYE  12/31/2021 FYE  12/31/2020
Audit-Related Fees 0% 0%
Tax Fees 0% 0%
All Other Fees 0% 0%

 

All of the principal accountant’s hours spent on auditing the registrant’s financial statements were attributed to work performed by full-time permanent employees of the principal accountant.

 

The following table indicates the non-audit fees billed or expected to be billed by the registrant’s accountant for services to the registrant and to the registrant’s investment adviser (and any other controlling entity, etc.—not sub-adviser) for the last two years. The audit committee of the board of trustees has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser is compatible with maintaining the principal accountant's independence and has concluded that the provision of such non-audit services by the accountant has not compromised the accountant’s independence.

 

Non-Audit Related Fees FYE  12/31/2021 FYE  12/31/2020
Registrant $3,500 $3,500
Registrant’s Investment Adviser $0 $0

 

The registrant has not been identified by the U.S. Securities and Exchange Commission as having filed an annual report issued by a registered public accounting firm branch or office that is located in a foreign jurisdiction where the Public Company Accounting Oversight Board is unable to inspect or completely investigate because of a position taken by an authority in that jurisdiction.

 

The registrant is not a foreign issuer

 

Item 5. Audit Committee of Listed Registrants.

 

Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934).

 

Item 6. Investments.

 

Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form.

 

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

 

Not applicable to open-end investment companies.

 

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

 

Not applicable to open-end investment companies.

 

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

 

Not applicable to open-end investment companies.

 

Item 10. Submission of Matters to a Vote of Security Holders.

 

Not Applicable.

 

 

 

Item 11. Controls and Procedures.

 

(a)The registrant’s President and Treasurer have reviewed the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the registrant and by the registrant’s service provider.

 

(b)There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.

 

Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies

 

Not applicable to open-end investment companies.

 

Item 13. Exhibits.

 

(a)(1) Any code of ethics or amendment thereto that is the subject of the disclosure required by Item 2, to the extent that the Registrant intends to satisfy Item 2 requirements through filing an exhibit. Incorporated by reference to the registrant’s Form N-CSR filed March 4, 2016.

 

(2) A separate certification for each principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

 

(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable to open-end investment companies.

 

(4) Change in the registrant’s independent public accountant. There was no change in the registrant’s independent public accountant for the period covered by this report.

 

(b)Certifications pursuant to section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.

 

 

 

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.

 

  By (Signature and Title) /s/ Scott L. Barbee  
    Scott L. Barbee, President  
       
  Date 3/4/22  

 

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/ Scott L. Barbee  
    Scott L. Barbee, President  
       
  Date 3/4/22  
       
  By (Signature and Title) /s/ Justin P. Harrison  
    Justin P. Harrison, Treasurer  
       
  Date 03/04/2022