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 811-21073
Bragg Capital Trust
(Exact name of registrant as specified in charter)
100 Queens Road Charlotte, NC 28204
(Address of principal executive offices)
(Zip code)
100 Queens Road Charlotte, NC 28204
(Name and address of agent for service)
Registrant's telephone number, including area code: 704-714-7711
Date of fiscal year end:
May 31
Date of reporting period:
May 31, 2006
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSRS in its regulatory, disclosure review, inspection and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSRS unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
ANNUAL REPORT
Bragg Capital Trust
Queens Road Value Fund
Queens Road Small Cap Value Fund
May 31, 2006
Board of Trustees
Phil Blount
Christopher Brady
Benton Bragg
Robert Carter
Timothy Ignasher
Steven Scruggs
Harold Smith
Investment Adviser
Bragg Financial Advisors, Inc.
100 Queens Road
Charlotte, NC 28204
Dividend Paying Agent,
Shareholders’ Servicing Agent,
Transfer Agent
Mutual Shareholder Services
8869 Brecksville Rd, Suite C
Brecksville, Ohio 44141
Custodian
US Bank, NA
425 Walnut Street
P.O. Box 1118
Cincinnati, OH 45201
Independent Auditors
Cohen Fund Audit Services, Ltd.
826 Westpoint Parkway Suite 1250
Westlake, Ohio 44145
Shares of the Queens Road Value and Queens Road Small Cap Value Fund are distributed by Queens Road Securities, L.L.C, an affiliate of the Investment Adviser. This report has been prepared for the general information of the shareholders. It is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. The Funds’ prospectus contains more complete information about the objectives, policies, expenses and risks of the Funds. The Funds are not bank deposits, not FDIC insured and may lose value. Please read the prospectus carefully before investing or sending money.
QUEENS ROAD FUNDS
MANAGERS COMMENTARY
May 31, 2006
Dear Fellow Shareholders:
For the fiscal 2006 year, the Queens Road Value Fund scored a total return of 10.03% and the Queens Road Small Cap Value Fund returned 8.31% (see each fund’s section below for more detailed performance information). We are pleased to report that both funds have produced positive returns in every fiscal year since inception. Although of course past performance does not guarantee future results, we believe our value-oriented, disciplined investment philosophy should continue to provide consistent above-average risk-adjusted performance.
Throughout the year the Federal Reserve continued to raise short-term interest rates. Its streak now stands at 16 straight quarters of 25 basis point increases. While many economists and investors are calling for the Fed to stop the rate hikes (and some are even proposing cuts), we don’t believe Fed chief Ben Bernanke has that flexibility. Despite slowing GDP growth, inflation is certainly on the rise, most likely due to the unprecedented expansionary monetary policy of the recent past. Prices for equities, commodities and real estate have increased at above-average rates over the past few years. So far high real growth in global output and increased productivity have done a great job in absorbing the easy money resulting from the policies of the world’s central banks, but Bernanke realizes inflation is far easier to start than to stop. In today’s environment, an inflationary period like the one we endured in the late 1970s and early 1980s would be disastrous. It was bad enough then, and that was before the proliferation of no-money-down, adjustable-rate mortgages. Therefore we expect the Fed will remain vigilant, and further rate increases may be forthcoming.
We believe that the slower economic growth we are starting to see will benefit higher-quality companies -- the very ones we try to identify and invest in. The market over the last three years has been led by more speculative companies, which is typical of where we are in the economic cycle. Corporate profit growth has been very strong for the past several years, but should slow with slowing GDP growth. While we never make macro predictions, we are sure that corporate earnings can’t grow at an above-average rate indefinitely! In a lower-growth environment, companies with cheaper valuations, stronger balance sheets, and more generous dividend policies should out-perform.
QUEENS ROAD FUNDS
MANAGERS COMMENTARY (CONTINUED)
MAY 31, 2006
Although this year’s commentary may seem gloomy, we remain skeptically optimistic. As realists, we know that trees do not grow to the sky, and earnings as well as equities’ returns will revert to the mean over time. While we closely watch the macro-picture, it does not drive our investment process. We continue to search for companies that are trading below our estimate of their intrinsic value, with strong balance sheets, effective managements, in attractive industries. We feel confident that a diversified portfolio of these investments will provide above-average long-term risk-adjusted returns.
As always, thank you for your support.
Sincerely,
Steve Scruggs, CFA
Benton Bragg, CFA
President, Portfolio Manager
Chairman
QUEENS ROAD VALUE FUND
FUND COMMENTARY
MAY 31, 2006
Manager’s Discussion
NOTE: In November 2005, the S&P/Barra Value Index was discontinued by Standard and Poor’s and replaced with the S&P500/Citigroup Value Index. Accordingly, the Fund has adopted the S&P 500/Citigroup Value Index as its primary benchmark.
The Queens Road Value Fund had a great year and was up 10.03% for the fiscal year ending 5/31/2006. However, we trailed our primary benchmark, the S&P500/Citigroup Value Index, which was up 15.32%. The Fund managed to outperform the S&P 500, which was up 8.64%. The Fund was underweight in the energy sector, which was by far the best performing sector over the last year. This was the main cause of our underperformance relative to the index.
The chart below shows the fund’s performance for the fiscal year ended 5/31/2006, along with the returns for the S&P500/Citigroup Value Index and the Standard and Poor’s 500 Index. The fund attempts to maintain a strong correlation with the S&P500/Citigroup Value Index by maintaining portfolio sector weights within reasonable parameters to the index. We try to outperform the index through security selection, investing only in those companies we believe have the best prospects for long-term performance.
QRVLX | S&P 500/Citigroup Value | S&P 500 | |
June 2005 | 1.08% | 0.70% | 0.14% |
July 2005 | 3.20% | 3.90% | 3.72% |
August 2005 | -0.59% | -0.38% | -0.91% |
September 2005 | 0.89% | 2.06% | 0.81% |
October 2005 | -2.35% | -1.36% | -1.67% |
November 2005 | 3.54% | 4.31% | 3.78% |
December 2005 | 0.29% | -0.76% | 0.03% |
January 2006 | 1.46% | 2.98% | 2.65% |
February 2006 | 1.37% | 1.08% | 0.27% |
March 2006 | 1.00% | 1.70% | 1.24% |
April 2006 | 1.34% | 2.79% | 1.34% |
May 2006 | -1.46% | -2.45% | -2.88% |
One Year | 10.03% | 15.32% | 8.64% |
QUEENS ROAD SMALL CAP VALUE FUND
FUND COMMENTARY
MAY 31, 2006
Manager’s Discussion
For the twelve month period ending 5/31/2006 the total return for the Queens Road Small Cap Value Fund was 8.31%. This compares with returns of 18.22% for the Russell 2000 Value Index and 18.24% for the Russell 2000 Index.
Part of the Fund’s underperformance was due to the Fund being underweight relative to its benchmark in the Energy sector which was by far the best performing sector in both the Russell 2000 Value Index and the Russell 2000 Index. Additionally, the Fund was overweight relative to its benchmarks in Consumer Discretionary stocks which fared poorly for the year thereby causing further underperformance.
Below is our month-by-month performance comparison with both the Russell 2000 Value Index and the Russell 2000 Index.
QRSVX | Russell 2000 Value | Russell 2000 | |
June 2005 | 3.36% | 4.42% | 3.86% |
July 2005 | 4.23% | 5.69% | 6.34% |
August 2005 | -3.19% | -2.30% | -1.85% |
September 2005 | 0.48% | -0.17% | 0.31% |
October 2005 | -4.35% | -2.51%% | -3.11% |
November 2005 | 3.05% | 4.06% | 4.85% |
December 2005 | 0.02% | -0.77% | -0.46% |
January 2006 | 3.14% | 8.27% | 8.97% |
February 2006 | -.041% | -.001% | -0.28% |
March 2006 | 4.59% | 4.84% | 4.85% |
April 2006 | -0.06% | 0.27% | -0.02% |
May 2006 | -2.76% | -4.14% | -5.62% |
One Year | 8.31% | 18.22% | 18.24% |
QUEENS ROAD VALUE FUND
PERFORMANCE ILLUSTRATION
MAY 31, 2006
Average Annual Total Return
For the Periods Ended May 31, 2006
Queens Road Value Fund S&P 500/Citigroup Value Index
1 Year
10.03% 14.03%
Since Inception 12.04% 10.61%
*Past performance is not predictive of future performance. The value of shares will fluctuate and will be worth more or less than their original cost at the time of redemption.
QUEENS ROAD SMALL CAP VALUE FUND
PERFORMANCE ILLUSTRATION
MAY 31, 2006
Average Annual Total Return
For the Periods Ended May 31, 2006
Queens Road Small Cap Value Russell 2000 Value Index
1 Year
8.31% 18.21%
Since Inception 16.89% 14.45%
*Past performance is not predictive of future performance. The value of shares will fluctuate and will be worth more or less than their original cost at the time of redemption.
QUEENS ROAD VALUE FUND
GRAPHICAL ILLUSTRATION
MAY 31, 2006
The following chart gives a visual breakdown of the Fund by the industry sectors the underlying securities represent as a percentage of the portfolio of investments.
QUEENS ROAD SMALL CAP VALUE FUND
GRAPHICAL ILLUSTRATION
MAY 31, 2006
The following chart gives a visual breakdown of the Fund by the industry sectors the underlying securities represent as a percentage of the portfolio of investments.
QUEENS ROAD VALUE FUND
SCHEDULE OF INVESTMENTS
MAY 31, 2006
Shares/Principal Amount | Market Value |
| % of Net Assets | |
COMMON STOCKS | ||||
Advertising Agencies | ||||
250 | Omnicom Group, Inc. | $ 23,778 | 0.48% | |
Aerospace & Defense | ||||
525 | Alliant Techsystems, Inc. * | 40,982 | ||
160 | Boeing Co. | 13,320 | ||
600 | United Technologies Corp. | 37,512 | ||
91,814 | 1.85% | |||
Apparel & Accessories | ||||
800 | Liz Claiborne, Inc. | 30,936 | ||
1,000 | V.F. Corp. | 62,930 | ||
93,866 | 1.90% | |||
Apparel Retail | ||||
1,400 | TJX Companies, Inc. | 33,194 | 0.67% | |
Beverages | ||||
830 | Brown Forman Corp. | 63,329 | 1.28% | |
Banks | ||||
1,400 | Bank of America Corp. | 67,760 | ||
235 | Wells Fargo & Co. | 15,597 | ||
83,357 | 1.69% | |||
Broadcasting & Cable TV | ||||
490 | CBS Corp. Class B | 12,696 | ||
1,290 | Comcast Corp. Class A * | 41,280 | ||
2,800 | Echostar Communications Corp. * | 83,804 | ||
137,780 | 2.79% |
* Non-income producing
The accompanying notes are an integral part of these financial statements.
Shares/Principal Amount | Market Value |
| % of Net Assets | |
COMMON STOCKS | ||||
Computer Hardware | ||||
800 | Dell, Inc. * | 20,304 | ||
2,600 | Hewlett Packard Co. | 84,188 | ||
104,492 | 2.11% | |||
Computer Storage & Peripherals | ||||
600 | Lexmark International, Inc. * | 34,350 | ||
2,500 | Seagate Technology | 58,375 | ||
92,725 | 1.87% | |||
Construction Materials | ||||
337 | Florida Rock Industries, Inc. | 17,726 | 0.36% | |
Data Processing Services | ||||
2,495 | Electronic Data Systems Corp. | 61,177 | 1.24% | |
Department Stores | ||||
90 | Federated Department Stores, Inc. | 6,555 | 0.13% | |
Diversified Financial Services | ||||
1,600 | Citigroup Corp. | 78,880 | 1.59% | |
Electric Utilities | ||||
2,400 | Duke Power Co. | 67,728 | ||
700 | Exelon Corp. | 39,627 | ||
3,000 | Northeast Utilities | 60,690 | ||
1,700 | Progress Energy, Inc. | 71,468 | ||
1,865 | Southern Co. | 59,624 | ||
299,137 | 6.05% |
* Non-income producing
The accompanying notes are an integral part of these financial statements.
Shares/Principal Amount | Market Value |
| % of Net Assets | |
COMMON STOCKS | ||||
Environmental Services | ||||
1,500 | Waste Connections, Inc. * | 57,675 | 1.17% | |
Fertilizers & Agricultural Chemicals | ||||
1,800 | Scotts Miracle-Gro Co. | 78,588 | 1.59% | |
Financials-Asset Management & Custody Banks | ||||
1,450 | T. Rowe Price Associates, Inc. | 114,695 | 2.32% | |
Fire Marine & Casualty Insurance | ||||
2,900 | Progressive Corp. | 79,315 | 1.60% | |
General Merchandise Stores | ||||
1,950 | Dollar Tree Stores, Inc. * | 51,539 | 1.04% | |
Health Care Distributors & Services | ||||
800 | Wellpoint Health Networks, Inc. * | 57,264 | 1.16% | |
Health Care Equipment | ||||
1,500 | Medtronic, Inc. | 75,735 | 1.53% | |
Housewares & Specialties | ||||
1,800 | Community Health Systems, Inc. * | 67,860 | ||
1,450 | HCA, Inc. | 64,453 | ||
132,313 | 2.68% |
* Non-income producing
The accompanying notes are an integral part of these financial statements.
QUEENS ROAD VALUE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 2006
Shares/Principal Amount | Market Value |
| % of Net Assets | |
COMMON STOCKS | ||||
Household Appliances | ||||
239 | Whirlpool Corp. | 21,491 | 0.43% | |
Household Products | ||||
1,100 | Clorox Co. | 69,509 | 1.41% | |
Housewares & Specialties | ||||
380 | Fortune Brands, Inc. | 28,120 | 0.57% | |
Investment Banking & Brokerage | ||||
945 | Morgan Stanley Group, Inc. | 56,341 | 1.14% | |
Industrial Conglomerates | ||||
2,650 | Tyco Laboratories, Inc. | 71,842 | 1.45% | |
Industrial Instruments for Measurement, Display and Control | ||||
1,150 | Danaher Corp. | 73,727 | 1.49% | |
Industrial Machinery | ||||
2,000 | Ingersoll Rand Co. Ltd. | 87,220 | 1.76% | |
Insurance Brokers | ||||
2,250 | Brown & Brown, Inc. | 68,558 | 1.39% | |
Insurance Agents, Brokers and Services | ||||
2,500 | Marsh & Mclennan Cos., Inc. | 70,075 | 1.42% |
* Non-income producing
The accompanying notes are an integral part of these financial statements.
QUEENS ROAD VALUE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 2006
Shares/Principal Amount | Market Value |
| % of Net Assets | |
COMMON STOCKS | ||||
Integrated Oil & Gas | ||||
1,000 | Exxon Mobil Corp. | 60,910 | 1.23% | |
Integrated Telecommunication Services | ||||
1,290 | Alltel Corp. | 79,786 | ||
2,584 | AT&T, Inc. | 67,339 | ||
2,600 | Century Telephone Enterprises, Inc. | 92,950 | ||
900 | China Netcom Group Corp. | 29,475 | ||
269,550 | 5.45% | |||
Internet Software & Services | ||||
1,000 | Intel Corp. | 18,020 | 0.36% | |
Leisure Products | ||||
2,700 | Hasbro, Inc. | 50,058 | 1.01% | |
Property & Casualty Insurance | ||||
6,063 | Aegon NV | 101,191 | ||
3,500 | Conseco, Inc. * | 84,315 | ||
1,035 | Metlife, Inc. | 53,271 | ||
1,300 | Torchmark Corp. | 76,544 | ||
315,321 | 6.38% | |||
Movies & Entertainment | ||||
4,500 | News Corp. | 85,815 | ||
5,500 | Time Warner, Inc. | 94,655 | ||
490 | Viacom, Inc. Class B * | 18,497 | ||
198,967 | 4.02% |
* Non-income producing
The accompanying notes are an integral part of these financial statements.
Shares/Principal Amount | Market Value |
| % of Net Assets | |
COMMON STOCKS | ||||
Multi-Sector Holdings | ||||
1,400 | Leucadia National Corp. | 89,656 | 1.81% | |
Multi-Utilities | ||||
2,100 | WPS Resources Corp. | 102,522 | 2.07% | |
Multi-Line Insurance | ||||
1,140 | American International Group, Inc. | 69,312 | 1.40% | |
Networking Equipment | ||||
1,000 | Motorola, Inc. | 21,090 | 0.43% | |
Oil & Gas Exploration & Production | ||||
200 | Apache Corp. | 12,976 | 0.26% | |
Packaged Foods | ||||
2,670 | Unilever NV | 60,422 | 1.22% | |
Personal Products | ||||
1,375 | Alberto Culver Co. Class B | 63,951 | 1.29% | |
Pharmaceuticals | ||||
1,000 | Glaxo Smithkline PLC | 55,300 | ||
1,850 | Johnson & Johnson | 111,407 | ||
1,820 | Merck & Co., Inc. | 60,587 | ||
4,000 | Pfizer, Inc. | 94,640 | ||
321,934 | 6.51% |
* Non-income producing
The accompanying notes are an integral part of these financial statements.
Shares/Principal Amount | Market Value |
| % of Net Assets | |
COMMON STOCKS | ||||
Publishing & Printing | ||||
420 | Gannett, Inc. | 22,684 | ||
800 | John Wiley & Sons | 27,864 | ||
50,548 | 1.02% | |||
Regional Banks | ||||
1,700 | BOK Financial Corp. | 83,453 | ||
2,650 | National City Corp. | 97,732 | ||
181,185 | 3.66% | |||
Real Estate Investment Trusts | ||||
745 | Simon Property Group | 59,324 | 1.20% | |
Reinsurance | ||||
1,100 | Renaissance RE Holdings | 49,555 | 1.00% | |
Restaurants | ||||
1,825 | McDonalds Corp. | 60,535 | 1.22% | |
State Commercial Banks | ||||
1,650 | Fifth Third Bancorp | 62,700 | 1.27% | |
Thrifts & Mortgage Finance | ||||
160 | Federal National Mortgage Association | 7,960 | 0.16% | |
Trading Companies & Distributors | ||||
700 | Grainger W.W., Inc. | 50,512 | 1.03% |
* Non-income producing
The accompanying notes are an integral part of these financial statements.
Shares/Principal Amount | Market Value |
| % of Net Assets | |
COMMON STOCKS | ||||
Wireless Telecommunication Services | ||||
1,586 | America Movil S.A. DE C.V. | 51,798 | 1.06% | |
Total for Common Stock (Cost - $4,316,174) | 4,610,623 | 93.22% | ||
CASH AND EQUIVALENTS | ||||
312,802 | First American Prime Obligation Fund CL A 4.28% ** | 312,802 | 6.33% | |
Total Investments | 4,923,425 | 99.55% | ||
(Cost $ 4,628,976) | ||||
| Other Assets Less Liabilities | 22,326 | 0.45 % | |
| ||||
Net Assets - 100.00% | $4,945,751 | 100.00% | ||
* Non-income producing
** Variable rate security; the coupon rate shown represents the rate at
May 31, 2006.
The accompanying notes are an integral part of these financial statements.
QUEENS ROAD SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS
MAY 31, 2006
Shares/Principal Amount | Market Value |
| % of Net Assets | |
COMMON STOCKS | ||||
Apparel & Accessories | ||||
2,992 | Hampshire Group, Ltd. * | $ 55,502 | 0.69% | |
Apparel Retail | ||||
3,550 | Stage Stores, Inc. | 115,553 | 1.44% | |
Application Software | ||||
12,780 | Intervideo, Inc. * | 130,484 | 1.62% | |
Auto Parts & Equipment | ||||
7,200 | Aftermarket Technology Corp. * | 174,816 | 2.17% | |
Catalog Retail | ||||
3,100 | Blair Corp. | 110,484 | 1.37% | |
Chemical & Allied Products | ||||
2,710 | FMC Corp. | 174,985 | 2.18% | |
Commercial Printing | ||||
3,525 | Banta Corp. | 174,347 | 2.17% | |
Computer Hardware | ||||
5,200 | Intergraph Corp. * | 184,860 | 2.30% | |
Computer Storage & Peripherals | ||||
4,000 | Hutchinson Technology, Inc. * | 92,920 | 1.16% |
* Non-income producing
The accompanying notes are an integral part of these financial statements.
QUEENS ROAD SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 2006
Shares/Principal Amount | Market Value |
| % of Net Assets | |
COMMON STOCKS | ||||
Construction & Engineering | ||||
2,000 | Perini Corp. * | 49,120 | 0.61% | |
Construction & Farm Machinery | ||||
1,926 | Oshkosh Truck Corp. | 101,789 | 1.27% | |
Distillers & Vintners | ||||
1,190 | Constellation Brands, Inc. * | 29,393 | 0.37% | |
Diversified Commercial Services | ||||
4,412 | VSE Corp. | 143,081 | 1.78% | |
Electric Utilities | ||||
4,250 | MGE Energy, Inc. | 131,495 | 1.64% | |
Electronic Equipment & Instruments | ||||
3,785 | MTS Systems Corp. | 158,024 | ||
2,099 | Rofin Sinar Technologies, Inc. * | 114,521 | ||
272,545 | 3.39% | |||
Food Retail | ||||
2,175 | Arden Group, Inc. | 212,367 | 2.64% | |
Footwear | ||||
3,000 | K-Swiss, Inc. Class A | 79,140 | 0.98% |
* Non-income producing
The accompanying notes are an integral part of these financial statements.
Shares/Principal Amount | Market Value |
| % of Net Assets | |
COMMON STOCKS | ||||
Gas Utilities | ||||
7,300 | Piedmont Natural Gas Co., Inc. | 177,463 | ||
3,300 | UGI Corp. | 76,758 | ||
254,221 | 3.16% | |||
Health Care Distributors & Services | ||||
4,220 | Owens & Minor, Inc. | 125,334 | 1.56% | |
Health Care Facilities | ||||
500 | Amsurg Corp. * | 12,045 | 0.15% | |
Home Furnishings | ||||
3,000 | Dorel Industries, Inc. * | 73,770 | ||
6,578 | Rent A Center, Inc. * | 156,425 | ||
230,195 | 2.86% | |||
Homebuilding | ||||
3,345 | Cavco Industries, Inc. * | 158,653 | 1.97% | |
Industrial Machinery | ||||
3,500 | Blyth, Inc. | 74,025 | ||
5,257 | Lancaster Colony Corp. | 204,865 | ||
278,890 | 3.47% | |||
Industrial Inorganic Chemicals | ||||
100 | Ampco Pittsburgh Corp. | 3,286 | ||
4,600 | Clarcor, Inc. | 144,670 | ||
147,956 | 1.84% |
* Non-income producing
The accompanying notes are an integral part of these financial statements.
Shares/Principal Amount | Market Value |
| % of Net Assets | |
COMMON STOCKS | ||||
Integrated Telecommunication Services | ||||
3,402 | Commonwealth Tel Enterprises, Inc. | 112,436 | 1.40% | |
Life & Health Insurance | ||||
12,500 | Phoenix Companies, Inc. | 177,250 | 2.21% | |
Multi-line Insurance | ||||
8,000 | Horace Mann Investors, Inc. | 134,000 | 1.67% | |
Natural Gas Distribution | ||||
4,480 | New Jersey Resources, Corp. | 201,242 | 2.50% | |
Networking Equipment | ||||
4,000 | Bel Fuse, Inc. Class B | 125,520 | ||
9,000 | Packeteer, Inc. * | 103,050 | ||
228,570 | 2.84% | |||
Oil & Gas Exploration & Production | ||||
4,000 | Saint Mary Land & Exploration Co. | 156,360 | 1.95% | |
Packaged Foods | ||||
4,231 | Sanderson Farms, Inc. | 129,553 | ||
7,626 | Smithfield Foods, Inc. * | 212,079 | ||
341,632 | 4.25% | |||
Personal Products | ||||
6,664 | CCA Industries, Inc. | 62,975 | ||
5,495 | Inter Parfums, Inc. | 98,415 | ||
161,390 | 2.01% |
* Non-income producing
The accompanying notes are an integral part of these financial statements.
Shares/Principal Amount | Market Value |
| % of Net Assets | |
COMMON STOCKS | ||||
Property & Casualty Insurance | ||||
6,950 | CNA Surety Corp. * | 119,332 | ||
2,185 | Commerce Group, Inc. | 123,999 | ||
243,331 | 3.03% | |||
Regional Banks | ||||
4,500 | Colonial Bancgroup, Inc. | 119,970 | ||
4,500 | First Midwest Bancorp, Inc. | 158,175 | ||
1,052 | Southside Bancshares, Inc. | 20,577 | ||
298,722 | 3.72% | |||
�� | ||||
Real Estate Investment Trusts | ||||
938 | Macerich Company | 64,637 | 0.80% | |
Reinsurance | ||||
5,000 | Endurance Specialty Holdings, Ltd. | 152,750 | ||
2,700 | Platinum Underwriters Holdings, Ltd. | 72,738 | ||
225,488 | 2.81% | |||
Semiconductors | ||||
1,187 | Omnivision Technologies, Inc. * | 34,779 | 0.43% | |
Services - Misc. Amusement & Recreation | ||||
3,455 | Aztar Corp. * | 179,176 | 2.23% | |
Specialty Chemicals | ||||
3,625 | Albemarle Corp. | 174,000 | 2.16% |
* Non-income producing
The accompanying notes are an integral part of these financial statements.
Shares/Principal Amount | Market Value |
| % of Net Assets | |
COMMON STOCKS | ||||
State Commerical Banks | ||||
3,150 | Central Pacific Financial Corp. | 113,306 | ||
1,900 | Penns Wood Bancorp, Inc. | 72,200 | ||
185,506 | 2.31% | |||
Thrifts & Mortgage Finance | ||||
2,901 | Anchor Bancorp Wisconsin, Inc. | 84,564 | ||
13,400 | Doral Financial Corp. | 101,036 | ||
185,600 | 2.31% | |||
Tires & Rubber | ||||
3,800 | Bandag, Inc. | 141,664 | 1.76% | |
Trucking | ||||
8,590 | Heartland Express, Inc. | 144,827 | ||
8,119 | Vitran Corp., Inc. * | 176,507 | ||
321,334 | 4.00% | |||
Wholesale-Apparel, Piece Goods & Notions | ||||
8,935 | Delta Apparel, Inc. | 155,201 | ||
3,000 | Weyco Group, Inc. | 61,230 | ||
216,431 | 2.69% | |||
Wireless Telecommunication Services | ||||
3,997 | USA Mobility, Inc. | 81,099 | 1.00% |
* Non-income producing
The accompanying notes are an integral part of these financial statements.
Shares/Principal Amount | Market Value |
| % of Net Assets | |
COMMON STOCKS | ||||
Total for Common Stock (Cost - $6,975,410) | 7,304,822 | 90.87% | ||
CASH AND EQUIVALENTS | ||||
830,380 | First American Prime Obligation Fund CL A 4.28% ** | 830,380 | 10.33% | |
Total Investments (Cost $7,805,790) | 8,135,202 | 101.20% | ||
| Liabilities in excess of other assets | (96,808) | (1.20)% | |
| ||||
Net Assets | $8,038,394 | 100.00% | ||
* Non-income producing
** Variable rate security; the coupon rate shown represents the rate at
May 31, 2006.
The accompanying notes are an integral part of these financial statements.
QUEENS ROAD FUNDS
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 2006
Value | Small Cap | |
Assets | ||
Investment Securities at Market Value | $4,923,425 | $8,135,202 |
(Cost $ 4,628,976 and $7,805,790) | ||
Cash | 6,900 | 14,909 |
Receivables: | ||
Dividends and Interest | 12,076 | 7,313 |
Shareholder Subscriptions | 7,600 | - |
Total Assets | 4,950,001 | 8,157,424 |
Liabilities | ||
Due to Advisor | 4,250 | 9,971 |
Payable for Securities Purchased | - | 109,059 |
Total Liabilities | 4,250 | 119,030 |
Net Assets | $4,945,751 | $8,038,394 |
Net Assets Consist of: | ||
Capital Paid In | 4,625,514 | 7,381,076 |
Accumulated Net Investment Income | 18,319 | 14,539 |
Accumulated Realized Gain | 7,469 | 313,367 |
Unrealized Appreciation in Value | ||
of Investments Based on Cost - Net | 294,449 | 329,412 |
Net Assets, for 349,140 and 465,395 Shares Outstanding (Unlimited number of shares authorized without par value) | $4,945,751 | $8,038,394 |
Net Asset Value Per Share ($4,945,751/349,140 shares) and ($8,038,394/465,395 shares) | $ 14.17 | $ 17.27 |
The accompanying notes are an integral part of these financial statements.
QUEENS ROAD FUNDS
STATEMENT OF OPERATIONS
For the year Ended May 31, 2006
Value | Small Cap | |
Investment Income: | ||
Dividends | $ 52,021 | $ 103,230 |
Interest | 6,829 | 13,229 |
Total Investment Income | 58,850 | 116,459 |
Expenses: | ||
Advisory fees | 27,884 | 88,993 |
Total Expenses | 27,884 | 88,993 |
Net Investment Income | 30,966 | 27,466 |
Realized and Unrealized Gain on Investments: | ||
Net Realized Gain on Investments | 7,469 | 355,448 |
Net Change In Unrealized Appreciation on Investments | 209,311 | 35,636 |
Net Realized and Unrealized Gain on Investments | 216,780 | 391,084 |
Net Increase in Net Assets from Operations | $ 247,746 | $ 418,550 |
The accompanying notes are an integral part of these financial statements.
QUEENS ROAD VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
6/1/2005 | 6/1/2004 | |
to | to | |
5/31/2006 | 5/31/2005 | |
From Operations: | ||
Net Investment Income | $ 30,966 | $ 10,678 |
Net Realized Gain on Investments | 7,469 | 26,269 |
Net Unrealized Appreciation on Investments | 209,311 | 22,804 |
Increase in Net Assets from Operations | 247,746 | 59,751 |
From Distributions to Shareholders: | ||
Net Investment Income | (12,647) | (15,418) |
Net Realized Gain from Security Transactions | (17,238) | (37,976) |
Change in Net Assets from Distributions | (29,885) | (53,394) |
From Capital Share Transactions: | ||
Proceeds From Sale of Shares | 3,396,940 | 947,379 |
Shares Issued on Reinvestment of Dividends | 13,656 | 38,618 |
Cost of Shares Redeemed | (70,390) | (138,634) |
Net Increase from Shareholder Activity | 3,340,206 | 847,363 |
Net Increase in Net Assets | 3,558,067 | 853,720 |
Net Assets at Beginning of Period | 1,387,684 | 533,964 |
Net Assets at End of Period | ||
(including accumulated undistributed net investment income of $18,319 and $4,740 respectively) | $ 4,945,751 | $ 1,387,684 |
Share Transactions: | ||
Issued | 246,396 | 72,097 |
Reinvested | 995 | 2,963 |
Redeemed | (4,974) | (10,931) |
Net increase (decrease) in shares | 242,417 | 64,129 |
Shares outstanding beginning of period | 106,723 | 42,594 |
Shares outstanding end of period | 349,140 | 106,723 |
The accompanying notes are an integral part of these financial statements.
QUEENS ROAD SMALL CAP VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
6/1/2005 | 6/1/2004 | |
to | to | |
5/31/2006 | 5/31/2005 | |
From Operations: | ||
Net Investment Income | $ 27,466 | $ 13,165 |
Net Realized Gain (Loss) on Investments | 355,448 | (214) |
Net Unrealized Appreciation on Investments | 35,636 | 129,814 |
Increase in Net Assets from Operations | 418,550 | 142,765 |
From Distributions to Shareholders: | ||
Net Investment Income | (12,927) | (15,582) |
Net Realized Gain from Security Transactions | (3,167) | (114,474) |
Return of Capital | 0 | (8,037) |
Change in Net Assets from Distributions | (16,094) | (138,093) |
From Capital Share Transactions: | ||
Proceeds From Sale of Shares | 5,330,028 | 2,686,443 |
Shares Issued on Reinvestment of Dividends | 7,905 | 58,209 |
Cost of Shares Redeemed | (1,275,691) | (145,002) |
Net Increase from Shareholder Activity | 4,062,242 | 2,599,650 |
Net Increase in Net Assets | 4,464,698 | 2,604,322 |
Net Assets at Beginning of Period | 3,573,696 | 969,374 |
Net Assets at End of Period | ||
(including accumulated undistributed net investment income of $14,539 and $0 respectively) | $8,038,394 | $ 3,573,696 |
Share Transactions: | ||
Issued | 317,019 | 163,528 |
Reinvested | 477 | 3,558 |
Redeemed | (75,677) | (9,584) |
Net increase (decrease) in shares | 241,819 | 157,502 |
Shares outstanding beginning of period | 223,576 | 66,074 |
Shares outstanding end of period | 465,395 | 223,576 |
The accompanying notes are an integral part of these financial statements.
QUEENS ROAD VALUE FUND
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout the period:
Year | Year | Year | Period | |||
Ended | Ended | Ended | Ended | |||
2006 | 2005 | 2004 | 2003* | |||
Net Asset Value - | ||||||
Beginning of Period | $13.00 | $12.54 | $10.74 | $10.00 | ||
Net Investment Income ** | 0.15 | 0.16 | 0.26 | 0.19 | ||
Net Gains or Losses on Securities | ||||||
(Realized and Unrealized) | 1.16 | 1.20 | 1.76 | 0.64 | ||
Total from Investment Operations | 1.31 | 1.36 | 2.02 | 0.83 | ||
Distributions | ||||||
(From net investment income) | (0.05) | (0.26) | (0.22) | (0.09) | ||
(From capital gains) | (0.08) | (0.64) | 0.00 | 0.00 | ||
Total from Distributions | (0.13) | (0.90) | (0.22) | (0.09) | ||
Net Asset Value - | ||||||
End of Period | $14.17 | $13.00 | $12.54 | $10.74 | ||
Total Return | 10.03% | 10.79% | (a) | 18.77% | 8.43% | (b) |
Ratios/Supplemental Data | ||||||
Net Assets - End of Period (Thousands) | $4,946 | $1,388 | $534 | $355 | ||
Net Assets Before Reimbursement | ||||||
Ratio of Expenses to Average Net Assets | 0.95% | 0.95% | 0.95% | 0.95% | (c) | |
Ratio of Net Investment Income to Average Net Assets | 1.05% | 0.89% | 1.22% | 1.10% | (c) | |
Net Assets After Reimbursement | ||||||
Ratio of Expenses to Average Net Assets | 0.95% | 0.57% | 0.00% | 0.00% | (c) | |
Ratio of Net Investment Income to Average Net Assets | 1.05% | 1.27% | 2.17% | 2.04% | (c) | |
Portfolio Turnover Rate | 6.54% | 54.53% | 36.79% | 1.73% | (c) |
(a)
Total return before the waiver of related party broker commissions of $332 is 10.79% (see note 3).
(b)
For a period of less than one year, total return is not annualized
(c) Annualized
* Commencement of Operations (June 13, 2002)
** Net investment income/loss per share amounts were calculated using the
average share method.
The accompanying notes are an integral part of these financial statements.
QUEENS ROAD SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout the period:
Year | Year | Year | Period | |||
Ended | Ended | Ended | Ended | |||
2006 | 2005 | 2004 | 2003 | |||
Net Asset Value - | ||||||
Beginning of Period | $15.98 | $14.67 | $10.80 | $10.00 | ||
Net Investment Income ** | 0.07 | 0.10 | 0.19 | 0.16 | ||
Net Gains or Losses on Securities | ||||||
(Realized and Unrealized) | 1.26 | 2.04 | 3.85 | 0.73 | ||
Total from Investment Operations | 1.33 | 2.14 | 4.04 | 0.89 | ||
Distributions | ||||||
(From net investment income) | (0.03) | (0.09) | (0.17) | (0.09) | ||
(From capital gains) | (0.01) | (0.68) | 0.00 | 0.00 | ||
(From return of capital) | 0.00 | (0.05) | 0.00 | 0.00 | ||
Total from Distributions | (0.04) | (0.82) | (0.17) | (0.09) | ||
Net Asset Value - | ||||||
End of Period | $17.27 | $15.98 | $14.67 | $10.80 | ||
Total Return | 8.31% | 14.38% | (a) | 37.52% | 9.02% | (b) |
Ratios/Supplemental Data | ||||||
Net Assets - End of Period (Thousands) | $8,038 | $3,574 | $969 | $382 | ||
Net Assets Before Reimbursement | ||||||
Ratio of Expenses to Average Net Assets | 1.35% | 1.35% | 1.35% | 1.35% | (c) | |
Ratio of Net Investment Income to Average Net Assets | 0.42% | 0.14% | 0.10% | 0.42% | (c) | |
Net Assets After Reimbursement | ||||||
Ratio of Expenses to Average Net Assets | 1.35% | 0.87% | 0.00% | 0.00% | (c) | |
Ratio of Net Investment Income to Average Net Assets | 0.42% | 0.62% | 1.45% | 1.76% | (c) | |
Portfolio Turnover Rate | 74.23% | 39.74% | 82.56% | 13.26% | (c) |
(a)
Total return before the waiver of related party brokerage commissions is 14.38% or $392.
(b) For a period of less than one year, total return is not annualized
(c) Annualized
* Commencement of Operations (June 13, 2002)
** Net investment income/loss per share amounts were calculated using the
average share method.
The accompanying notes are an integral part of these financial statements.
QUEENS ROAD VALUE FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2006
Note 1. Organization
��The Queens Road Value Fund (the “Fund”), a managed portfolio of the Bragg Capital Trust, is registered under the Investment Company Act of 1940, as amended, as a non-diversified, open-end management company. The Fund is one of a series of Funds of the Bragg Capital Trust, which also includes the Queens Road Small Cap Value Fund. The Fund’s investment objective is to seek growth of capital. It invests primarily in common stocks which are believed by the Advisor to be undervalued and have good prospects for capital appreciation. The Funds’ registration statement was declared effective on June 13, 2002 and operations began on that date.
Note 2. Significant Accounting Policies
The following is a summary of accounting policies followed by the Fund in the preparation of its financial statements.
Security Valuation: Securities, which are traded on a national securities exchange or on the NASDAQ over-the-counter market, are valued at the last quoted sales price. If there are no sales reported the Fund’s portfolio securities will be valued using the last reported bid price. Short-term obligations having remaining maturities of 60 days or less, are valued at amortized cost. Securities for which market quotations are not readily available are valued at fair value as determined in good faith by and under the direction of the Fund’s Board of Trustees.
Federal Income Taxes: The Fund’s policy is to continue to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to its shareholders. Therefore no provision for income taxes is required.
Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles 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 increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
QUEENS ROAD VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 2006
Other: The Fund follows industry practice and records security transactions on the trade date. The specific identification method is used for determining gains or losses for financial statement and income tax purposes. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as soon as information is available to the Fund. Interest income is recorded on an accrual basis. Discounts and premiums on securities purchased are amortized over the life of the Fund. Interest income is recorded on an accrual basis. Discounts and premiums on securities purchased are amortized over the life of the respective securities.
Distributions to shareholders: Distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date.
Note 3. Investment Advisory Fee and Other Transactions with Affiliates
The Fund retains Bragg Financial Advisors, Inc. (the “Advisor”) as its Investment Advisor. Under the terms of the management agreement, the Advisor provides investment management and administrative services for the Fund. For its services as Advisor, the Fund pays a fee, computed daily and payable monthly at the annual rate of .95% of the Fund’s average daily net asset value. For the year ended May 31, 2006, the Advisor earned $27,884. From these fees and its own resources the Advisor agreed to pay other operating expenses of the Fund including transfer agent fees, fund accountant fees, registration fees, custodial fees, and other ordinary expenses of the Fund. However the agreement does not require the Advisor to pay interest, taxes, brokerage commissions and extraordinary expenses of the Fund. The amount due to the Advisor at May 31, 2006 is $4,250.
Certain Trustees and officers of the Advisor are “interested persons” (as defined in the Investment Company Act of 1940) of the Trust. Each “non-interested” Trustee is entitled to receive an annual fee of $1,000 plus expenses for services relating to the Trust which is paid by the Advisor.
QUEENS ROAD VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 2006
Queens Road Securities (“QRS”) acts as the principal underwriter in the continuous public offering of the Fund’s shares. Certain officers of the Trust are also officers of QRS. QRS did not receive or waive any brokerage fees on executions of purchases and sales of the Fund’s portfolio investments during the period ended May 31, 2006.
Note 4. Capital Stock
At May 31, 2006, there were an unlimited number of shares authorized and 349,140 shares outstanding, each with no par value, and capital paid-in amounted to $4,625,514 for the Fund.
Note 5. Investment Transactions
For the year ended May 31, 2006, the cost of purchases and the proceeds from sales, other than short-term securities, aggregated $3,236,852 and $176,353, respectively. As of May 31, 2006, the gross unrealized appreciation for all securities totaled $424,410 and the gross unrealized depreciation for all securities totaled $129,960, for an unrealized appreciation of $294,449. The aggregate cost of securities for federal income tax purposes at May 31, 2006 was $4,628,976.
Note 6. Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended May 31, 2006 and 2005 were as follows:
Distributions paid from: | 2006 | 2005 |
Ordinary Income | $12,647 | $11,913 |
Short-Term Capital Gain | 0 | 10,619 |
Long-Term Capital Gain | 17,238 | 30,862 |
$29,885 | $53,394 |
As of May 31, 2006 the components of distributable earnings/ (accumulated losses) on a tax basis were as follows:
Undistributed Ordinary income/ (accumulated losses) | $18,319 |
Undistributed long-term capital gain | 7,469 |
Unrealized appreciation/ (depreciation) | 294,449 |
$320,237 |
QUEENS ROAD VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 2006
At May 31, 2006, the composition of unrealized appreciation (excess of value over tax cost) and depreciation (the excess of tax cost over value) on a taxis basis was as follows:
Appreciation | Depreciation | Net Appreciation (Depreciation) |
407,019 | (112,570) | 294,449 |
There were no differences between book-basis and tax-basis unrealized appreciation (depreciation).
Note 7. Control
The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a fund creates a presumption of control of the fund, under section 2 (a) (9) of the Investment Company Act of 1940. As of May 31, 2006, the Pershing for the benefit of its customers owned 96.71% of the Fund.
QUEENS ROAD SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2006
Note 1. Organization
The Queens Road Small Cap Value Fund (the “Fund”), a managed portfolio of the Bragg Capital Trust, (the “Trust”), is registered under the Investment Company Act of 1940, as amended, as a non-diversified, open-end management company. The Fund is one of a series of Funds of the Bragg Capital Trust, which also includes the Queens Road Value Fund. The Fund’s investment objective is to seek growth of capital. It invests primarily (under normal market conditions), at least 80% of its total assets in small capitalization (less than $2 billion market cap at the time of purchase) common stocks which are believed by the Advisor to be undervalued and have good prospects for capital appreciation. The Funds’ registration statement was declared effective on June 13, 2002 and operations began on that date.
Note 2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements.
Security Valuation: Securities, which are traded on a national securities exchange or on the NASDAQ over-the-counter market, are valued at the last quoted sales price. Investments for which no sale was reported are valued at the last bid price. Short-term obligations having remaining maturities of 60 days or less, are valued at amortized cost. Securities for which market quotations are not readily available are valued at fair value as determined in good faith by and under the direction of the Fund’s Board of Trustees.
Federal Income Taxes: The Fund’s policy is to continue to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to its shareholders. Therefore no provision for income taxes is required. The Fund intends to distribute its net long-term capital gains and its net short-term capital gains at least once a year.
Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles 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 increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
QUEENS ROAD SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 2006
Other: The Fund follows industry practice and records security transactions on the trade date. The specific identification method is used for determining gains or losses for financial statement and income tax purposes. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as soon as information is available to the Fund. Interest income is recorded on an accrual basis. Discounts and premiums on securities purchased are amortized over the life of the Fund. Interest income is recorded on an accrual basis. Discounts and premiums on securities purchased are amortized over the life of the respective securities.
Distributions to shareholders: Distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date.
Note 3. Investment Advisory Fee and Other Transactions with Affiliates
The Fund retains Bragg Financial Advisors, Inc. (the “Advisor”) as its Investment Advisor. Under the terms of the management agreement, the Advisor provides investment management and administrative services for the Fund. For its services as Advisor, the Fund pays a fee, computed daily and payable monthly at the annual rate of 1.35% of the Fund’s average daily net asset value. For the year ended May 31, 2006, the Advisor earned $88,993. From these fees and its own resources the Advisor agreed to pay other operating expenses of the Fund including transfer agent fees, fund accountant fees, registration fees, custodial fees, and other ordinary expenses of the Fund. However the agreement does not require the Advisor to pay interest, taxes, brokerage commissions and extraordinary expenses of the Fund. The amount owed to the advisor at May 31, 2006 is $9,971.
Certain Trustees and officers of the Trust are “interested persons” (as defined in the Investment Company Act of 1940) of the Trust. Each “non-interested” Trustee is entitled to receive an annual fee of $1,000 plus expenses for services relating to the Trust which is paid by the advisor.
Queens Road Securities (“QRS”) acts as the principal underwriter in the continuous public offering of the fund’s shares. Certain officers of the trust are also officers of (“QRS”). QRS did not receive or waive any brokerage fees on execution of purchases and sales of the fund’s investments during the year ended May 31, 2006.
Note 4. Capital Stock
At May 31, 2006, there were an unlimited number of shares authorized and 465,395 shares outstanding, each with no par value, and capital paid-in amounted to $7,381,076 for the Fund.
Note 5. Investment Transactions
For the year ended May 31, 2006, the cost of purchases and the proceeds from sales, other than short-term securities aggregated $7,987,382 and $4,542,716, respectively. The aggregate cost of securities for federal income tax purposes at May 31, 2006 was $7,805,790.
Note 6. Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended May 31, 2006 and 2005 were as follows:
Distributions paid from: | 2006 | 2005 |
Ordinary Income | $12,927 | $15,582 |
Short-Term Capital Gain | 0 | 57,234 |
Long-Term Capital Gain | 3,167 | 57,240 |
Return of Capital | 0 | 8,037 |
$16,094 | $138,093 |
As of May 31, 2006 the components of distributable earnings/ (accumulated losses) on a tax basis were as follows:
Undistributed Ordinary income/ (accumulated losses) | 87,211 |
Undistributed long-term capital gain/ (accumulated losses) | 240,695 |
Unrealized appreciation/ (depreciation) | 329,412 |
$657,318 |
At May 31, 2006, the composition of unrealized appreciation (excess of value over tax cost) and depreciation (the excess of tax cost over value) on a tax basis was as follows:
Appreciation | Depreciation | Net Appreciation (Depreciation) |
683,824 | (354,512) | 329,312 |
There were no differences between book-basis and tax-basis unrealized appreciation (depreciation).
Note 7. Control
The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a fund creates a presumption of control of the fund, under section 2 (a) (9) of the Investment Company Act of 1940. As of May 31, 2006, Pershing, LLC. for the benefit of its customers owned 80.51% of the Fund.
QUEENS ROAD VALUE FUND
EXPENSE ILLUSTRATION
MAY 31, 2006
Expense Example (Unaudited)
As a shareholder of the Queens Road Value Fund, you incur one type of cost: management fees. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds 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, December 1, 2005 through May 31, 2006.
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, 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 first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratios and an assumed rate of return of 5% per year before expenses, which are not the Funds’ actual returns. 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 these Funds 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.
Beginning Account Value | Ending Account Value | Expenses Paid During the Period* | |
12/1/2005 | 5/31/2006 | 12/1/2005 to 5/31/2006 | |
Actual | $1,000.00 | $1,040.33 | $4.83 |
Hypothetical (5% Annual Return before expenses) | $1,000.00 | $1,020.19 | $4.78 |
* Expenses are equal to the Fund's annualized expense ratio of .95%, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). |
QUEENS ROAD SMALL CAP VALUE FUND
EXPENSE ILLUSTRATION
MAY 31, 2006
Expense Example (Unaudited)
As a shareholder of the Queens Road Small Cap Value Fund, you incur one type of cost: management fees. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds 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, December 1, 2005 through May 31, 2006.
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, 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 first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratios and an assumed rate of return of 5% per year before expenses, which are not the Funds’ actual returns. 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 these Funds 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.
Beginning Account Value | Ending Account Value | Expenses Paid During the Period* | |
12/1/2005 | 5/31/2006 | 12/1/2005 to 5/31/2006 | |
Actual | $1,000.00 | $1,045.84 | $6.89 |
Hypothetical (5% Annual Return before expenses) | $1,000.00 | $1,018.20 | $6.79 |
* Expenses are equal to the Fund's annualized expense ratio of 1.35%, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). |
QUEENS ROAD VALUE FUND
AUDITORS OPINION
MAY 31, 2006
To The Shareholders and
Board of Trustees
Queens Road Value Fund
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of the Queens Road Value Fund, a series of the Bragg Capital Trust, as of May 31, 2006, and the related statement of operations for the year then ended, statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for the period indicated prior to May 31, 2004 were audited by another independent accounting firm which expressed an unqualified opinion on those highlights.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2006, by correspondence with the Fund’s custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Queens Road Value Fund, as of May 31, 2006, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the three years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Cohen Fund Audit Services, Ltd.
(f.k.a. Cohen McCurdy, Ltd.)
Westlake, Ohio
July 24, 2006
QUEENS ROAD SMALL CAP VALUE FUND
AUDITORS OPINION
MAY 31, 2006
To The Shareholders and
Board of Trustees
Queens Road Small Cap Value Fund
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of the Queens Road Small Cap Value Fund, a series of the Bragg Capital Trust, as of May 31, 2006, and the related statement of operations for the year then ended, statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for the period indicated prior to May 31, 2004 were audited by another independent accounting firm which expressed an unqualified opinion on those highlights.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2006, by correspondence with the Fund’s custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Queens Road Small Cap Value Fund, as of May 31, 2006, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the three years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Cohen Fund Audit Services, Ltd.
(f.k.a. Cohen McCurdy, Ltd.)
Westlake, Ohio
July 24, 2006
QUEENS ROAD FUNDS
ADDITIONAL INFORMATION
MAY 31, 2006 (UNAUDITED)
Proxy Voting - A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies during the most recent 12 month period, are available without charge upon request by (1) calling the Fund at (800) 595-3088 and (2) from Fund documents filed with the Securities and Exchange Commission ("SEC") on the SEC's website at www.sec.gov.
Portfolio Holdings - The Fund files a complete schedule of investments with the SEC for the first and third quarter of each fiscal year on Form N-Q. The Fund’s first and third fiscal quarters end on August 31 and February 28. The Form N-Q filing must be made within 60 days of the end of the quarter, and the Fund’s first Form N-Q was filed with the SEC on October 8, 2004. The Fund’s Forms N-Q are available on the SEC’s website at http://sec.gov, or they may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC (call 1-800-732-0330 for information on the operation of the Public Reference Room). You may also obtain copies by calling the Fund at 1-800-595-3088.
Approval of Advisory Contract – The Board of Trustees approves each fund’s investment advisory contract annually. The Board evaluates, among other things, the nature and extent of services provided, investment performance, the management fees, economies of scales, and fee levels which reflect these economies of scales. The Board noted that the Funds’ advisor provides investment advisory services on a unified pricing structure, which means the advisor bears the risk of costs exceeding the stated management expense ratio. Additionally, the stated management expense ratio is below average for each Fund’s peer group as reported by major independent mutual fund databases and management expenses are reduced as certain asset levels are reached. The Board also noted that because of the unified pricing structure and level of assets, the contract was not profitable to the advisor.
QUEENS ROAD FUNDS
TRUSTEES AND OFFICERS
MAY 31, 2006 (UNAUDITED)
Interested Trustees Name (Age) | Position with Fund | Term of Office and Length of Time Served | Principal Occupations During Past Five Years | Number of Portfolios in Fund Complex Overseen By Trustee | Other Directorships Held By Trustee |
Steve Scruggs, 37 | Trustee, President Secretary | Unlimited; 4 years | Bragg Financial Advisors, Portfolio Manager/CCO (2000- present) Reliance Insurance, Product Manager(1999-2000) | Two | None |
Benton Bragg, 38 | Trustee, Chairman Treasurer | Unlimited; 4 years | Bragg Financial Advisors, President, CEO (1996-present) | Two | None |
Independent Trustees |
|
|
|
| |
Philip Blount, 53 2 | Trustee | Unlimited; 4 years | Icons, Inc., President (2001- present) Marketing Merchandise Halo, Inc., Vice President (1996-2001) Marketing Merchandise | Two | None |
Christopher Brady, 351,2 | Trustee | Unlimited; 4 years | Brady Distributing, Vice President (1995-present) Machinery Distribution | Two | None |
Harold Smith, 412 | Trustee | Unlimited; 4 years | Raftelis Financial, Vice President (1996 – present) Public Finance Consulting | Two | None |
Timothy Ignasher, 441 | Trustee | Unlimited; 4 years | Scottish Bank, Vice President (1998 – present) Commercial Loan Officer | Two | None |
Robert Carter, 36 | Trustee | Unlimited; 1 years | Laureate Capital, Strategic Planning Analyst (2004 – Present) BB&T, Strategic Planning Analyst Winston Salem NC (2000 - 2004) | Two | None |
Steve Scruggs and Benton Bragg are Interested Trustees of the Funds (as that term is defined in Section 2(a)(19) of the Investment Company Act of 1940) by reason of their affiliation with the Funds’ adviser, Bragg Financial Advisers, Inc. and their affiliation as registered principals with the Funds’ underwriter, Queens Road Securities, LLC. Benton Bragg and Steve Scruggs are brothers-in-law.
(1)Member of the Audit Committee of the Board of Trustees, which makes recommendations regarding the selection of the Funds’ independent public accountants and meets with representatives of the accountants to determine the scope of and review the results of each audit.
(2)Member of the Nominating Committee of the Board of Trustees, which identifies qualified candidates and recommends nominees for election as Trustees.
The Statement of Additional Information has additional information about the Trustees and is available at without charge upon request by calling toll-free 1-800-595-3088.
Item 2. Code of Ethics.
(a)
As of the end of the period covered by this report, the registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party.
(b)
For purposes of this item, “code of ethics” means written standards that are reasonably designed to deter wrongdoing and to promote:
(1)
Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
(2)
Full, fair, accurate, timely, and understandable disclosure in reports and documents that a registrant files with, or submits to, the Commission and in other public communications made by the registrant;
(3)
Compliance with applicable governmental laws, rules, and regulations;
(4)
The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and
(5)
Accountability for adherence to the code.
(c)
Amendments:
During the period covered by the report, there have not been any amendments to the provisions of the code of ethics.
A copy of registrant's code of ethics will be provided to any person without charge, upon request. Please send requests to: Bragg Capital Trust
100 Queens Road
Charlotte, NC 28204
(d)
Waivers:
During the period covered by the report, the registrant has not granted any express or implicit waivers from the provisions of the code of ethics.
Item 3. Audit Committee Financial Expert.
(a)
The registrant’s board of trustees has determined that the registrant does not have an audit committee financial expert. This is because no one on the board of trustees is deemed to be a financial expert.
Item 4. Principal Accountant Fees and Services.
(a)
Audit Fees
FY 2005
$ 17,990
FY 2006
$ 19,175
(b)
Audit-Related Fees
Registrant
FY 2005
$ 0
FY 2006
$ 0
Nature of the fees:
Not applicable.
(c)
Tax Fees
Registrant
FY 2005
$ 2,585
FY 2006
$ 4,400
Nature of the fees:
For Excise Tax Return
(d)
All Other Fees
Registrant
FY 2005
$ 0
FY 2006
$ 0
Nature of the fees:
N/A
(e)
(1)
Audit Committee’s Pre-Approval Policies
The Audit Committee reviews the auditor engagement letter and recommends to the Board of Trustees whether or not to adopt the engagement letter and appoint the independent auditor to perform the services described in the engagement letter.
(2)
Percentages of Services Approved by the Audit Committee
Registrant
Audit-Related Fees:
100 %
Tax Fees:
100 %
All Other Fees:
0 %
(f)
During audit of registrant's financial statements for the most recent fiscal year, less than 50 percent of the hours expended on the principal accountant's engagement were attributed to work performed by persons other than the principal accountant's full-time, permanent employees.
(g)
The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant:
Registrant
FY2006
$ 4,440
FY2005
$ 2,585
(h)
The registrant's audit committee has considered whether the provision of non-audit services to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant, that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, is compatible with maintaining the principal accountant's independence.
Item 5. Audit Committee of Listed Companies. Not applicable.
Item 6. Schedule of Investments.
Not applicable – schedule filed with Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Funds. Not applicable.
Item 8. Portfolio Managers of Closed-End Funds. Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Funds. Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
The registrant has not adopted procedures by which shareholders may recommend nominees to the registrant's board of trustees.
Item 11. Controls and Procedures.
(a)
Based on an evaluation of the registrant’s disclosure controls and procedures as of May 16, 2005, the disclosure controls and procedures are reasonably designed to ensure that the information required in filings on Forms N-CSR is recorded, processed, summarized, and reported on a timely basis.
(b)
There were no significant changes in the registrant’s internal control over financial reporting that occurred during the registrant’s second fiscal half-year that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits.
(a)(1)
EX-99.CODE ETH. See Item 2.
(a)(2)
EX-99.CERT. Filed herewith.
(a)(3)
Any written solicitation to purchase securities under Rule 23c-1 under the Act (17 CFR 270.23c-1) 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)
EX-99.906CERT. Filed 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.
Bragg Capital Trust
By /s/Steven H. Scruggs, President
* Steven H Scruggs, President
Date August 8, 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/Benton S. Bragg, Treasurer
* Benton S Bragg, Treasurer
Date August 8, 2006
By /s/Steven H Scruggs, President
* Steven H Scruggs, President
Date August 8, 2006
* Print the name and title of each signing officer under his or her signature.