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, 2007
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
Queens Road Value Fund
Queens Road Small Cap Value Fund
Each a series of the
Bragg Capital Trust
May 31, 2007
Managers Commentary May 31, 2007
Dear Fellow Shareholders:
For the fiscal year ending May 31, 2007, the Queens Road Value Fund returned 19.8% and the Queens Road Small Cap Value Fund returned 17.9% (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 investment philosophy should continue to provide attractive risk-adjusted performance over the long term.
During the first nine months of our fiscal year the equity indexes mostly continued their strong performance of the preceding several years. During this time risk premiums narrowed and lower-quality stocks continued to out-perform higher-quality ones. This changed around the end of February of this year. After a steep sell-off on the Shanghai stock exchange and the revealing of some significant sub-prime mortgage market problems, an abrupt shift occurred. Risk premiums increased and the relative performance of our funds improved as the market rewarded stocks of conservative, less risky companies. The year, which had started out poorly for the funds, finished strongly. We are not surprised by this result. The discipline in our portfolio management strategy will at times cause us to underperform our benchmarks and our peers, particularly during strong upward market surges. However, we believe that over a complete economic cycle this discipline of s ticking with the steady performers will result in superior returns. As we have always maintained, these funds are intended for long-term, buy-and-hold investors.
After several years of unabated appreciation, housing prices have leveled off and many excesses in the mortgage market have been brought to light. We believe these problems are systematic and widespread and will take some time to work through. Additionally, the debt market for leveraged buyout firms has taken a turn south. As financing has become less available, these firms have become less active acquirers and what has been referred to as “the private equity premium” has been drained from the market. We expect the credit constriction we’re experiencing will continue to affect the housing market and LBO activity and is likely to have some impact on the general economy. On a brighter note: except for the housing market the consumer appears to be doing quite well. Unemployment remains very low by historical measures and inflation appears to be in check. We’re always surprised at the durability of our economy; history has shown time an d time again that it can take great strains and maintain equilibrium amidst the turmoil.
We continue to have difficulty finding investments for the funds that meet our strict valuation requirements and therefore you’ll notice our cash position in both funds remains high. While we do not like to sit on cash, we would rather do that than add new positions that we don’t think are good long-term investments. The recent market sell-off has created some buying opportunities and we are diligently working to identify attractive investments.
As always, thank you for your support.
Sincerely,
Steve Scruggs, CFA
Benton Bragg, CFA
President, Portfolio Manager
Chairman
Queens Road Value Fund
Managers Commentary May 31, 2007
The Queens Road Value Fund had a good year and was up 19.83% for the fiscal year ending 5/31/2007. However, we trailed our primary benchmark, the S&P500/Citi Value Index, which was up 24.74%. and the S&P 500, which was up 22.79%.
Some of our best performing investments were EMC, America Movil, and Leucadia. Exceptionally poor performance from Lexmark and Conseco detracted from our overall performance.
The chart below shows the fund’s performance for the fiscal year ended 5/31/2007, along with the returns for the S&P500/Citi Value Index and the Standard and Poor’s 500 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/Citi Value | S&P 500 | |
June 2006 | -0.28% | 0.34% | 0.14% |
July 2006 | 1.77% | 1.00% | 0.62% |
August 2006 | 1.53% | 1.53% | 2.38% |
September 2006 | 2.88% | 2.66% | 2.58% |
October 2006 | 1.86% | 3.33% | 3.26% |
November 2006 | 2.35% | 1.79% | 1.90% |
December 2006 | 1.46% | 2.41% | 1.40% |
January 2007 | 0.90% | 1.76% | 1.51% |
February 2007 | -0.95% | -1.69% | -1.96% |
March 2007 | 0.45% | 1.30% | 1.12% |
April 2007 | 3.26% | 4.20% | 4.43% |
May 2007 | 3.10% | 3.82% | 3.49% |
One Year | 19.83% | 24.74% | 22.79% |
Queens Road Small Cap Value Fund
Managers Commentary May 31, 2007
For the twelve month period ending 5/31/2007 the total return for the Queens Road Small Cap Value Fund was 17.90%. This compares with returns of 20.28% for the Russell 2000 Value Index and 18.92% for the Russell 2000 Index.
Our investments in Allied Defense, Gevity HR, and St. Marys Land & Exploration did not fare well, as each was down significantly. Among the fund’s best performers for the year were VSE Corp, Hurco, and FMC. Performance was also aided by several of our portfolio companies that were acquired including Aztar, Bandag, Banta, Commonwealth Telephone, and Lesco.
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 2006 | -0.46% | 1.23% | 0.64% |
July 2006 | -2.15% | -1.39% | -3.25% |
August 2006 | 3.27% | 2.99% | 2.96% |
September 2006 | 0.92% | 0.98% | 0.83% |
October 2006 | 2.17% | 5.09% | 5.76% |
November 2006 | 1.17% | 2.85% | 2.63% |
December 2006 | 0.43% | 0.87% | 0.33% |
January 2007 | 0.46% | 1.50% | 1.67% |
February 2007 | 0.86% | -1.23% | -0.79% |
March 2007 | 2.89% | 1.21% | 1.07% |
April 2007 | 1.98% | 1.04% | 1.80% |
May 2007 | 5.24% | 3.67% | 4.10% |
One Year | 17.90% | 20.43% | 18.92% |
Queens Road Value Fund
Performance Illustration May 31, 2007
Cumulative Performance Comparison $10,000 Investment Since Inception*
May 31, 2007
S&P 500/Citi Index $18,612
Queens Road Value Fund
$18,812
Average Annual Total Return
For the Periods Ended May 31, 2007
Queens Road Value Fund S&P 500/Citi Value Index
1 Year
19.83% 24.76%
Since Inception 13.47% 13.23% &nb sp;
*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, 2007
Cumulative Performance Comparison $10,000 Investment Since Inception*
May 31, 2007
Russell 2000 Value Index $21,226
Queens Road Small Cap Value
$21,901
Average Annual Total Return
For the Periods Ended May 31, 2007
Queens Road Small Cap Value | Russell 2000 Value Index | |
1 Year | 17.90% | 20.43% |
Since Inception | 16.97% | 16.24% |
*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, 2007
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, 2007
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, 2007
Shares | Value | ||
COMMON STOCKS - 89.15% | |||
Advertising - 0.27% | |||
250 | Omnicom Group, Inc. | $ 26,325 | |
Aerospace & Defense - 1.14% | |||
160 | Boeing Company | 16,094 | |
525 | Alliant Techsystems, Inc. * | 53,025 | |
600 | United Technologies Corp. | 42,330 | |
111,449 | |||
Alternative Carriers - 1.65% | |||
7,500 | Time Warner, Inc. | 160,275 | |
Apparel & Accessories - 1.73% | |||
800 | Liz Claiborne, Inc. | 27,752 | |
1,500 | V.F. Corp. | 140,670 | |
168,422 | |||
Beverages - 1.28% | |||
1,830 | Brown Forman Corp. | 124,916 | |
Financials-Asset Management & Custody Banks - 0.73% | |||
1,400 | Bank of America Corp. | 70,994 | |
Broadcasting & Cable TV - 1.49% | |||
2,800 | Echostar Communications * | 128,968 | |
490 | CBS Corp. Class B | 16,297 | |
145,265 | |||
Computer Hardware - 1.99% | |||
2,600 | Hewlett-Packard Company | 118,846 | |
2,800 | Dell Computer Corp. * | 75,348 | |
194,194 | |||
Computer Storage & Peripherals - 2.58% | |||
10,000 | EMC Corporation * | 168,900 | |
600 | Lexmark International Group * | 31,158 | |
2,500 | Seagate Technology | 51,475 | |
251,533 | |||
Data Processing Services - 0.74% | |||
2,495 | Electronic Data Systems Corp. | 71,881 | |
Diversified Financial Services - 1.85% | |||
3,300 | Citigroup Corp. | 179,817 | |
Electric & Other Services Combined - 1.21% | |||
2,100 | Integrys Energy Group, Inc. | 117,390 | |
Electric Utilites - 4.25% | |||
700 | Exelon Corp. | 54,600 | |
1,865 | Southern Co. | 67,159 | |
3,000 | Northeast Utilities | 91,230 | |
5,900 | Duke Power Co. | 115,286 | |
1,700 | Progress Energy, Inc. | 85,153 | |
413,428 | |||
Environmental Services - 0.71% | |||
2,250 | Waste Connections, Inc. * | 69,345 | |
Fertilizers & Agricultural Chemicals - 0.85% | |||
1,800 | The Scotts Miracle-Gro Co. | 82,872 | |
Financials-Asset Management & Custody Banks - 3.09% | |||
1,500 | Legg Mason, Inc. | 151,545 | |
2,900 | T. Rowe Price Associates, Inc. | 148,915 | |
300,460 | |||
General Merchandise Stores - 0.85% | |||
1,950 | Dollar Tree Stores, Inc. * | 82,504 | |
Health Care Distributors & Services - 0.67% | |||
800 | Wellpoint Health Networks, Inc. * | 65,128 | |
Health Care Equipment - 0.82% | |||
1,500 | Medtronic, Inc. | 79,755 | |
Health Care Facilities - 1.76% | |||
4,500 | Community Health Systems * | 171,540 | |
Household Products - 1.31% | |||
1,900 | Clorox Co. | 127,566 | |
Housewares & Specialties - 1.15% | |||
1,380 | Fortune Brands, Inc. | 111,476 | |
Investment Banking & Brokerage - 0.83% | |||
945 | Morgan Stanley Group, Inc. | 80,363 | |
Industrial Conglomerates - 1.59% | |||
4,650 | Tyco Laboratories, Inc. | 155,124 | |
Industrial Instruments For Measurement, Display And Control - 0.87% | |||
1,150 | Danaher Corp. | 84,525 | |
Industrial Machinery - 1.58% | |||
3,000 | Ingersoll-Rand Co. Ltd. | 153,990 | |
Insurance Brokers - 0.35% | |||
1,300 | Brown & Brown, Inc. | 33,878 | |
Insurance Agents, Brokers, And Services - 0.84% | |||
2,500 | Marsh & Mclennan Cos., Inc. | 82,075 | |
Integrated Oil & Gas - 1.45% | |||
1,700 | Exxon Mobil Corp. | 141,389 | |
Integrated Telecommunication Services - 4.43% | |||
900 | China Netcom Group Corp. | 46,152 | |
3,584 | AT&T Inc | 148,162 | |
1,290 | Alltel Corp. | 88,391 | |
2,600 | Century Telephone Enterprises, Inc. | 128,492 | |
1,333 | Windstream Corp. | 20,022 | |
431,219 | |||
Internet Software & Services - 1.37% | |||
6,000 | Intel Corp. | 133,080 | |
Leisure Products - 0.89% | |||
2,700 | Hasbro, Inc. | 86,805 | |
Life & Health Insurance - 7.74% | |||
10,180 | Aegon NV | 208,173 | |
2,035 | Metlife Inc. | 138,380 | |
3,500 | Conseco, Inc. * | 68,985 | |
1,800 | Torchmark Corp. | 126,198 | |
4,000 | Aflac, Inc. | 211,440 | |
753,176 | |||
Metalworking Machinery & Equipment - 1.94% | |||
2,000 | Black & Decker Corp. | 188,860 | |
Movies & Entertainment - 2.98% | |||
5,500 | Microsoft Corp. | 168,795 | |
4,500 | News Corp. | 99,405 | |
490 | Viacom, Inc. Class B * | 22,011 | |
290,211 | |||
Multi-Sector Holdings - 1.91% | |||
5,200 | Leucadia National Corp. | 186,368 | |
Multi-Line Insurance - 2.33% | |||
3,140 | American International Group, Inc. | 227,148 | |
Oil & Gas Exploration & Production - 1.00% | |||
1,200 | Apache Corp. | 96,900 | |
Oil & Gas Refining & Marketing - 0.33% | |||
1,200 | Spectra Energy Corp | 31,956 | |
Packaged Foods - 1.43% | |||
4,670 | Unilever NV | 139,166 | |
Personal Products - 1.63% | |||
6,375 | Alberto-Culver Class B | 158,355 | |
Pharmaceuticals - 6.27% | |||
2,000 | Glaxo Smithkline, PLC | 104,360 | |
3,050 | Johnson & Johnson | 192,973 | |
2,820 | Merck & Co., Inc. | 147,909 | |
6,000 | Pfizer, Inc. | 164,940 | |
610,182 | |||
Property & Casualty Insurance - 2.82% | |||
11,900 | Progressive Corp. | 274,295 | |
Publishing & Printing - 1.81% | |||
420 | Gannett, Inc. | 24,704 | |
3,300 | John Wiley & Sons, Inc. | 151,305 | |
176,009 | |||
Reginal Banks - 1.89% | |||
2,650 | National City Corp. | 91,664 | |
1,700 | BOK Financial Corp. | 92,276 | |
183,940 | |||
Real Estate Investment Trusts - 0.83% | |||
745 | Simon Property Group | 80,445 | |
Reinsurance - 1.27% | |||
2,100 | Renaissance Re Holdings Ltd. | 123,249 | |
Restaurants - 1.73% | |||
3,325 | Mcdonalds Corp. | 168,079 | |
Semiconductors - 1.26% | |||
4,000 | Maxim Integrated Products, Inc. | 123,000 | |
Specialty Stores - 0.13% | |||
1,375 | Sally Beauty Holdings, Inc. * | 12,609 | |
Steel Pipe & Tubes - 0.59% | |||
500 | Allegheny Technologies, Inc. | 57,795 | |
Systems Software - 0.62% | |||
3,000 | Symantec Corp. * | 59,970 | |
Trading Companies & Distributors - 0.62% | |||
700 | W.W. Grainger, Inc. | 61,635 | |
Wireless Telecommunication Services - 0.99% | |||
1,586 | America Movil S.A.B. de C.V. | 96,032 | |
State Commercial Banks - 0.71% | |||
1,650 | Fifth Third Bancorp | 69,894 | |
TOTAL FOR COMMON STOCKS (Cost $7,222,515) - 89.15% | $ 8,678,257 | ||
SHORT TERM INVESTMENTS - 9.14% | |||
890,073 | AIM Short Term Investment Company Prime Portfolio 5.25% ** (Cost $890,073) | 890,073 | |
TOTAL INVESTMENTS (Cost $8,112,588) - 98.29% | 9,568,330 | ||
OTHER ASSETS LESS LIABILITIES - 1.71% | 161,834 | ||
NET ASSETS - 100.00% | $ 9,730,164 | ||
* Non-income producing securities during the period. | |||
** Variable rate security; the coupon rate shown represents the yield at May 31, 2007. | |||
The accompanying notes are an integral part of these financial statements. | |||
Queens Road Small Cap Value Fund
Schedule of Investments May 31, 2007
Shares | Value | ||
COMMON STOCKS - 88.19% | |||
Aerospace & Defense - 0.84% | |||
9,000 | Allied Defense Group, Inc. * | $ 82,350 | |
Agricultural Products-Livestock & Animal Specialties - 2.24% | |||
4,300 | Sadia S.A. ADR | 220,590 | |
Apparel Retail - 1.26% | |||
5,925 | Stage Stores, Inc. | 123,833 | |
Auto Parts & Equipment - 1.13% | |||
3,700 | Aftermarket Technology Corp. * | 110,889 | |
Chemicals & Allied Products - 0.60% | |||
710 | FMC Corp. | 59,399 | |
Construction & Farm Machinery - 2.15% | |||
3,426 | Oshkosh Truck Corporation | 211,350 | |
Data Processing Services - 2.09% | |||
9,800 | Gevity HR, Inc. | 205,800 | |
Diversified Commercial Services - 2.95% | |||
4,300 | VSE Corp. | 289,562 | |
Electric Utilites - 1.47% | |||
4,250 | MGE Energy, Inc. | 144,160 | |
Electronic Equipment & Instruments - 1.47% | |||
15,600 | PAR Technology Corp. * | 144,924 | |
Food Retail - 3.20% | |||
4,674 | Village Super Market, Inc. | 201,823 | |
861 | Arden Group, Inc. | 112,378 | |
314,201 | |||
Footwear - 2.06% | |||
7,000 | K-Swiss Inc. Class A | 203,070 | |
Gas Utilities - 4.12% | |||
7,300 | Piedmont Natural Gas Co., Inc. | 193,742 | |
7,300 | UGI Corp. | 210,240 | |
403,982 | |||
Health Care Distributors & Services - 1.16% | |||
3,220 | Owens & Minor, Inc. | 114,310 | |
Health Care Supplies - 1.85% | |||
2,002 | Atrion Corp. | 182,342 | |
Home Furnishings - 1.15% | |||
4,173 | Rent A Center, Inc. * | 113,088 | |
Housewares & Specialties - 1.69% | |||
3,790 | Lancaster Colony Corp. | 166,040 | |
Industrial Conglomerates - 0.33% | |||
400 | Teleflex, Inc. | 32,120 | |
Industrial Machinery - 2.35% | |||
4,842 | Hurco Companies, Inc. * | 231,254 | |
Information Technology, Electronic Manufacturing Services - 1.99% | |||
6,091 | TTM Technologies, Inc. * | 67,366 | |
4,600 | Park Electrochemical Corp. | 128,110 | |
195,476 | |||
Life & Health Insurance - 2.32% | |||
14,500 | Phoenix Companies, Inc. | 228,230 | |
Multi-Line Insurance - 2.43% | |||
10,700 | Horace Mann Educators Corp. | 238,824 | |
Natural Gas Distribution - 2.50% | |||
4,480 | New Jersey Resources Corp. | 245,414 | |
Networking Equipment - 2.25% | |||
3,899 | Bel Fuse Class B | 141,611 | |
7,802 | Packeteer, Inc. * | 80,049 | |
221,660 | |||
Office Services & Supplies - 2.30% | |||
3,371 | United Stationers, Inc. * | 226,160 | |
Oil & Gas Exploration & Production - 3.59% | |||
5,000 | Saint Mary Land & Exploration Co. | 186,800 | |
6,000 | Encore Acquisition Co. * | 165,300 | |
352,100 | |||
Packaged Foods - 5.32% | |||
7,626 | Smithfield Foods, Inc. * | 245,100 | |
6,474 | Sanderson Farms, Inc. | 278,317 | |
523,417 | |||
Personal Products - 1.89% | |||
7,000 | Inter Parfums, Inc. | 185,850 | |
Property & Casualty Insurance - 3.65% | |||
7,350 | CNA Surety Corp. * | 150,234 | |
3,700 | Proassurance Corp. * | 209,124 | |
359,358 | |||
Regional Banks - 2.33% | |||
6,241 | First Midwest Bancorp, Inc. | 229,606 | |
Reinsurance - 4.36% | |||
5,500 | Platinum Underwriters Holdings, Ltd. | 189,420 | |
6,000 | Endurance Specialty Holdings, Ltd. | 238,980 | |
428,400 | |||
Services-Advertising - 1.82% | |||
10,000 | Valassis Communications, Inc. * | 179,100 | |
Services-Computer Integrated Systems Design - 2.20% | |||
31,300 | Merge Technologies, Inc. * | 216,596 | |
Services-Computer Processing & Data Preparation - 1.41% | |||
5,000 | Acxiom Corp. | 139,000 | |
Specialty Chemicals - 2.59% | |||
15,500 | American Pacific Corp. * | 255,130 | |
Steel - 2.19% | |||
8,000 | Cleco Corp. | 215,840 | |
Surgical & Medical Instruments & Apparatus - 0.89% | |||
5,494 | Angiodynamics, Inc. * | 87,080 | |
Thrifts And Mortgage Finance - 0.84% | |||
2,901 | Anchor Bancorp Wisconsin, Inc. | 83,056 | |
Trucking - 1.65% | |||
8,019 | Vitran Corp. * | 162,625 | |
Wholesale-Apparel, Piece Goods & Notions - 3.16% | |||
10,735 | Delta Apparel, Inc. | 179,167 | |
5,100 | Weyco Group, Inc. | 132,090 | |
311,257 | |||
State Commercial Banks - 2.40% | |||
2,776 | Penns Wood Bancorp, Inc. | 95,050 | |
4,150 | Central Pacific Financial Corp. | 140,810 | |
235,860 | |||
TOTAL FOR COMMON STOCKS (Cost $7,082,473) - 88.19% | $ 8,673,303 | ||
REAL ESTATE INVESTMENT TRUSTS - 0.85% | |||
938 | Macerich Company | 83,670 | |
TOTAL FOR REAL ESTATE INVESTMENT TRUSTS (Cost $44,116) - 0.85% | $ 83,670 | ||
SHORT TERM INVESTMENTS - 8.99% | |||
884,567 | AIM Short Term Investments Company Prime Portfolio 5.25% ** (Cost $884,567) | 884,567 | |
TOTAL INVESTMENTS (Cost $8,011,156) - 98.03% | $ 9,641,540 | ||
OTHER ASSETS LESS LIABILITIES - 1.97% | 193,322 | ||
NET ASSETS - 100.00% | $ 9,834,862 | ||
* Non-income producing securities during the period. | |||
** Variable rate security; the coupon rate shown represents the yield at May 31, 2007. | |||
ADR - American Depository Receipt | |||
The accompanying notes are an integral part of these financial statements. | |||
Queens Road Value Fund
Statement of Assets and Liabilities May 31, 2007
Assets: | ||
Investments, at Value (Cost $8,112,588) | $ 9,568,330 | |
Receivables: | ||
Securities Sold | 148,869 | |
Dividends and Interest | 25,055 | |
Total Assets | 9,742,254 | |
Liabilities: | ||
Accrued Management Fees | 7,698 | |
Payable for Shareholder Redemptions | 4,392 | |
Total Liabilities | 12,090 | |
Net Assets | $ 9,730,164 | |
Net Assets Consist of: | ||
Paid In Capital | $ 8,213,772 | |
Accumulated Undistributed Net Investment Income | 68,480 | |
Accumulated Undistributed Realized Loss on Investments | (7,830) | |
Unrealized Appreciation in Value of Investments | 1,455,742 | |
Net Assets, for 584,483 Shares Outstanding | $ 9,730,164 | |
(Unlimited number of shares authorized without par value) | ||
Net Asset Value Per Share ($9,730,164/584,483) | $ 16.65 | |
The accompanying notes are an integral part of these financial statements. | ||
Queens Road Small Cap Value Fund
Statement of Assets and Liabilities May 31, 2007
Assets: | ||
Investments, at Value (Cost $8,011,156) | $ 9,641,540 | |
Receivables: | ||
Securities Sold | 194,579 | |
Dividends and Interest | 9,722 | |
Total Assets | 9,845,841 | |
Liabilities: | ||
Accrued Management Fees | 10,979 | |
Total Liabilities | 10,979 | |
Net Assets | $ 9,834,862 | |
Net Assets Consist of: | ||
Paid In Capital | $ 8,061,942 | |
Accumulated Undistributed Net Investment Income | 6,983 | |
Accumulated Undistributed Realized Gain on Investments | 135,553 | |
Unrealized Appreciation in Value of Investments | 1,630,384 | |
Net Assets, for 505,020 Shares Outstanding | $ 9,834,862 | |
(Unlimited number of shares authorized without par value) | ||
Net Asset Value Per Share ($9,834,862/505,020 shares) | $ 19.47 | |
The accompanying notes are an integral part of these financial statements. |
Queens Road Value Fund
Statement of Operations For The Year Ended May 31, 2007
Investment Income: | ||
Dividends (net of foreign witholding taxes of $1,996) | $ 166,596 | |
Interest | 56,167 | |
Total Investment Income | 222,763 | |
Expenses: | ||
Advisory Fees (Note 3) | 68,920 | |
Total Expenses | 68,920 | |
Net Investment Income | 153,843 | |
Realized and Unrealized Gain on Investments: | ||
Realized Gain on Investments | 32,220 | |
Net Change in Unrealized Appreciation on Investments | 1,161,293 | |
Net Realized and Unrealized Gain on Investments | 1,193,513 | |
Net Increase in Net Assets from Operations | $ 1,347,356 | |
The accompanying notes are an integral part of these financial statements. | ||
Queens Road Small Cap Value Fund
Statement of Operations For The Year Ended May 31, 2007
Investment Income: | ||
Dividends | $ 120,513 | |
Interest | 45,579 | |
Total Investment Income | 166,092 | |
Expenses: | ||
Advisory Fees (Note 3) | 117,234 | |
Total Expenses | 117,234 | |
Net Investment Income | 48,858 | |
Realized and Unrealized Gain on Investments: | ||
Realized Gain on Investments | 153,421 | |
Net Change in Unrealized Appreciation on Investments | 1,300,972 | |
Net Realized and Unrealized Gain on Investments | 1,454,393 | |
Net Increase in Net Assets from Operations | $ 1,503,251 | |
The accompanying notes are an integral part of these financial statements. |
Queens Road Value Fund
Statements of Changes in Net Assets
For the Years | |||
Ended | |||
5/31/2007 | 5/31/2006 | ||
Increase (Decrease) in Net Assets From Operations: | |||
Net Investment Income | $ 153,843 | $ 30,966 | |
Net Realized Gain on Investments | 32,220 | 7,469 | |
Unrealized Appreciation on Investments | 1,161,293 | 209,311 | |
Net Increase in Net Assets Resulting from Operations | 1,347,356 | 247,746 | |
Distributions to Shareholders From: | |||
Net Investment Income | (103,682) | (12,647) | |
Realized Gains | (47,519) | (17,238) | |
Net Change in Net Assets from Distributions | (151,201) | (29,885) | |
Capital Share Transactions: | |||
Proceeds from Sale of Shares | 3,854,300 | 3,396,940 | |
Shares Issued on Reinvestment of Dividends | 60,840 | 13,656 | |
Cost of Shares Redeemed | (326,882) | (70,390) | |
Net Increase in Net Assets from Shareholder Activity | 3,588,258 | 3,340,206 | |
Net Assets: | |||
Net Increase in Net Assets | 4,784,413 | 3,558,067 | |
Beginning of Year | 4,945,751 | 1,387,684 | |
End of Year (Including Accumulated Undistributed Net Investment | |||
Income of $68,480 and $18,319, Respectively) | $ 9,730,164 | $ 4,945,751 | |
Share Transactions: | |||
Shares Sold | 252,457 | 246,396 | |
Shares Issued on Reinvestment of Dividends | 3,893 | 995 | |
Shares Redeemed | (21,007) | (4,974) | |
Net Increase in Shares | 235,343 | 242,417 | |
Outstanding at Beginning of Year | 349,140 | 106,723 | |
Outstanding at End of Year | 584,483 | 349,140 | |
The accompanying notes are an integral part of these financial statements. | |||
Queens Road Small Cap Value Fund
Statements of Changes in Net Assets
For the Years | |||
Ended | |||
5/31/2007 | 5/31/2006 | ||
Increase (Decrease) in Net Assets From Operations: | |||
Net Investment Income | $ 48,858 | $ 27,466 | |
Net Realized Gain on Investments | 153,421 | 355,448 | |
Unrealized Appreciation on Investments | 1,300,972 | 35,636 | |
Net Increase in Net Assets Resulting from Operations | 1,503,251 | 418,550 | |
Distributions to Shareholders From: | |||
Net Investment Income | (56,414) | (12,927) | |
Realized Gains | (331,235) | (3,167) | |
Net Change in Net Assets from Distributions | (387,649) | (16,094) | |
Capital Share Transactions: | |||
Proceeds from Sale of Shares | 1,946,869 | 5,330,028 | |
Shares Issued on Reinvestment of Dividends | 169,042 | 7,905 | |
Cost of Shares Redeemed | (1,435,045) | (1,275,691) | |
Net Increase in Net Assets from Shareholder Activity | 680,866 | 4,062,242 | |
Net Assets: | |||
Net Increase in Net Assets | 1,796,468 | 4,464,698 | |
Beginning of Year | 8,038,394 | 3,573,696 | |
End of Year (Including Accumulated Undistributed Net Investment | $ 9,834,862 | $ 8,038,394 | |
Income of $6,983 and $14,539, Respectively) | |||
Share Transactions: | |||
Shares Sold | 111,052 | 317,019 | |
Shares Issued on Reinvestment of Dividends | 9,660 | 477 | |
Shares Redeemed | (81,087) | (75,677) | |
Net Increase in Shares | 39,625 | 241,819 | |
Outstanding at Beginning of Year | 465,395 | 223,576 | |
Outstanding at End of Year | 505,020 | 465,395 | |
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
6/13/2002 * | ||||||||
For the Years Ended | to | |||||||
5/31/2007 | 5/31/2006 | 5/31/2005 | 5/31/2004 | 5/31/2003 | ||||
Net Asset Value, at Beginning of Year | $ 14.17 | $ 13.00 | $ 12.54 | $ 10.74 | $ 10.00 | |||
Income From Investment Operations: | ||||||||
Net Investment Income (Loss) ** | 0.33 | 0.15 | 0.16 | 0.26 | 0.19 | |||
Net Gain (Loss) on Securities (Realized and Unrealized) | 2.46 | 1.15 | 1.20 | 1.76 | 0.64 | |||
Total from Investment Operations | 2.79 | 1.30 | 1.36 | 2.02 | 0.83 | |||
Distributions from: | ||||||||
Net Investment Income | (0.21) | (0.05) | (0.26) | (0.22) | (0.09) | |||
Capital Gains | (0.10) | (0.08) | (0.64) | 0.00 | 0.00 | |||
(0.31) | (0.13) | (0.90) | (0.22) | (0.09) | ||||
Net Asset Value, at End of Year | $ 16.65 | $ 14.17 | $ 13.00 | $ 12.54 | $ 10.74 | |||
Total Return *** | 19.83% | 10.03% | 10.79% | (a) | 18.77% | 8.43% | ||
Ratios/Supplemental Data: | ||||||||
Net Assets at End of Year (Thousands) | $ 9,730 | $ 4,946 | $ 1,388 | $ 534 | $ 355 | |||
Before Reimbursement | ||||||||
Ratio of Expenses to Average Net Assets | 0.95% | 0.95% | 0.95% | 0.95% | 0.95% | (b) | ||
Ratio of Net Investment Income to Average Net Assets | 2.12% | 1.05% | 0.89% | 1.22% | 1.10% | (b) | ||
After Reimbursement | ||||||||
Ratio of Expenses to Average Net Assets | 0.95% | 0.95% | 0.57% | 0.00% | 0.00% | (b) | ||
Ratio of Net Investment Income to Average Net Assets | 2.12% | 1.05% | 1.27% | 2.17% | 2.04% | (b) | ||
Portfolio Turnover | 8.66% | 6.54% | 54.53% | 36.79% | 1.73% | (b) | ||
* Commencement of Operations | ||||||||
** Net Investment Income/Loss per share amounts were calculated using the average share method. | ||||||||
*** Total return in the above table represents the rate that the investor would have earned or lost on an investment in the fund assuming reinvestment of dividends | ||||||||
and is not annualized for periods of less than one year. | ||||||||
(a) Total return before the waiver of related party broker commissions of $332 is 10.79% (see note 3). | ||||||||
(b) Annualized | ||||||||
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
6/13/2002 * | ||||||||
For the Years Ended | to | |||||||
5/31/2007 | 5/31/2006 | 5/31/2005 | 5/31/2004 | 5/31/2003 | ||||
Net Asset Value, at Beginning of Year | $ 17.27 | $ 15.98 | $ 14.67 | $ 10.80 | $ 10.00 | |||
Income From Investment Operations: | ||||||||
Net Investment Income ** | 0.10 | 0.07 | 0.10 | 0.19 | 0.16 | |||
Net Gain on Securities (Realized and Unrealized) | 2.90 | 1.26 | 2.04 | 3.85 | 0.73 | |||
Total from Investment Operations | 3.00 | 1.33 | 2.14 | 4.04 | 0.89 | |||
Distributions from: | ||||||||
Net Investment Income | (0.11) | (0.03) | (0.09) | (0.17) | (0.09) | |||
Capital Gains | (0.69) | (0.01) | (0.68) | 0.00 | 0.00 | |||
Return of Capital | 0.00 | 0.00 | (0.05) | 0.00 | 0.00 | |||
Total from Distributions | (0.80) | (0.04) | (0.82) | (0.17) | (0.09) | |||
Net Asset Value, at End of Year | $ 19.47 | $ 17.27 | $ 15.98 | $ 14.67 | $ 10.80 | |||
Total Return *** | 17.90% | 8.31% | 14.38% | (a) | 37.52% | 9.02% | ||
Ratios/Supplemental Data: | ||||||||
Net Assets at End of Year (Thousands) | $ 9,835 | $ 8,038 | $ 3,574 | $ 969 | $ 382 | |||
Before Reimbursement | ||||||||
Ratio of Expenses to Average Net Assets | 1.35% | 1.35% | 1.35% | 1.35% | 1.35% | (b) | ||
Ratio of Net Investment Income to Average Net Assets | 0.56% | 0.42% | 0.14% | 0.10% | 0.42% | (b) | ||
After Reimbursement | ||||||||
Ratio of Expenses to Average Net Assets | 1.35% | 1.35% | 0.87% | 0.00% | 0.00% | (b) | ||
Ratio of Net Investment Income to Average Net Assets | 0.56% | 0.42% | 0.62% | 1.45% | 1.76% | (b) | ||
Portfolio Turnover | 64.65% | 74.23% | 39.74% | 82.56% | 13.26% | (b) | ||
* Commencement of Operations | ||||||||
** Net Investment Income/Loss per share amounts were calculated using the average share method. | ||||||||
*** Total return in the above table represents the rate that the investor would have earned or lost on an investment in the fund assuming reinvestment of dividends | ||||||||
and is not annualized for periods of less than one year. | ||||||||
(a) Total return before the waiver of related party brokerage commissions of $392 is 14.38%. | ||||||||
(b) Annualized | ||||||||
The accompanying notes are an integral part of these financial statements. | ||||||||
Bragg Capital Trust
Queens Road Value Fund
Notes to Financial Statements
May 31, 2007
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.
On July 13, 2006, the Financial Accounting Standards Board (“FASB”) released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken, or expected to be taken, in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implicati ons of FIN 48 and its impact, if any, on the Fund’s financial statements and has not yet been determined.
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.
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. The treatment for financial reporting purposes of distributions made to shareholders during the year from net investment income or net realized capital gains may differ from their ultimate treatment for federal income taxes purposes. These differences are caused primarily by differences in the timing of the recognition of certain components of income, expense or realized capital gain for federal income tax purposes. Where such differences are permanent in nature, they are reclassified in the components of the net assets based on their ultimate characterization for federal income tax purposes. Any such reclassifications will have no effect on net assets, results of operations or net asset value per share of the Fund. There were no reclassifications for the year ende d May 31, 2007.
Fair Value Measurements: In September 2006, FASB issued Statement on Financial Accounting Standards (SFAS) No. 157 “Fair Value Measurements.” This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and requires additional disclosure about fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The changes to current generally accepted accounting principles from the application of this Statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. As of May 31, 2007, the Fund does not believe that the adoption of SFAS No. 157 will impact the amounts reported in the financial statements, however, additional disclosures may be required about the i nputs used to develop the measurements and the effect of certain of the measurements reported on the statements of changes in net assets for a fiscal period.
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, 2007, the Advisor earned $68,920. 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, 2007 is $7,698.
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 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 year ended May 31, 2007.
Note 4. Capital Stock
At May 31, 2007, there were an unlimited number of shares authorized and 584,483 shares outstanding, each with no par value, and paid-in capital amounted to $8,213,772 for the Fund.
Note 5. Investment Transactions
For the year ended May 31, 2007, the cost of purchases and the proceeds from sales, other than short-term securities, aggregated $3,416,056 and $541,936, respectively. As of May 31, 2007, the gross unrealized appreciation for all securities totaled $1,500,589 and the gross unrealized depreciation for all securities totaled $49,547, for an unrealized appreciation of $1,451,042. The aggregate cost of securities for federal income tax purposes at May 31, 2007 was $8,117,288. The difference between book basis and tax-basis unrealized appreciation (depreciation) is due to Post-October losses of $4,700.
Note 6. Distributions to Shareholders
The tax character of distributions paid during the years ended May 31, 2007 and 2006 were as follows:
Distributions paid from: | May 31, 2007 | May 31, 2006 |
Ordinary Income | $103,682 | $12,647 |
Short-Term Capital Gain | 6,105 | 0 |
Long-Term Capital Gain | 41,414 | 17,238 |
$151,201 | $29,885 |
As of May 31, 2007 the components of distributable earnings/ (accumulated losses) on a tax basis were as follows:
Undistributed Ordinary income/ (accumulated losses) | $65,350 |
Unrealized appreciation/ (depreciation) | 1,451,042 |
$1,516,392 |
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, 2007, Pershing, LLC., for the benefit of its customers, owned 98.41% of the Fund.
Bragg Capital Trust
Queens Road Small Cap Value Fund
Notes to Financial Statements
May 31, 2007
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.
On July 13, 2006, the Financial Accounting Standards Board (“FASB”) released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken, or expected to be taken, in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implicati ons of FIN 48 and its impact, if any, on the Fund’s financial statements and has not yet been determined.
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.
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. 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. The treatment for financial reporting purposes of distributions made to shareholders during the year from net investment income or net realized capital gains may differ from their ultimate treatment for federal income taxes purposes. These differences are caused primarily by differences in the timing of the recognition of certain components of income, expense or realized capital gain for federal income tax purposes. Where such differences are permanent in nature, they are reclassified in the components of the net assets based on their ultimate characterization for federal income tax purposes. Any such reclassifications will have no effect on net assets, results of operations or net asset value per share of the Fund. There were no reclassifications for the year ende d May 31, 2007.
Fair Value Measurements: In September 2006, FASB issued Statement on Financial Accounting Standards (SFAS) No. 157 “Fair Value Measurements.” This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and requires additional disclosure about fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The changes to current generally accepted accounting principles from the application of this Statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. As of May 31, 2007, the Fund does not believe that the adoption of SFAS No. 157 will impact the amounts reported in the financial statements, however, additional disclosures may be required about the i nputs used to develop the measurements and the effect of certain of the measurements reported on the statements of changes in net assets for a fiscal period.
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, 2007, the Advisor earned $117,234. 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, 2007 is $10,979.
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, 2007.
Note 4. Capital Stock
At May 31, 2007, there were an unlimited number of shares authorized and 505,020 shares outstanding, each with no par value, and paid-in capital amounted to $8,061,942 for the Fund.
Note 5. Investment Transactions
For the year ended May 31, 2007, the cost of purchases and the proceeds from sales, other than short-term securities aggregated $5,070,172 and $5,072,416, respectively. The aggregate cost of securities for federal income tax purposes at May 31, 2007 was $8,011,156.
Note 6. Distributions to Shareholders
The tax character of distributions paid during the years ended May 31, 2007 and 2006 were as follows:
Distributions paid from: | May 31, 2007 | May 31, 2006 |
Ordinary Income | $56,414 | $12,927 |
Short-Term Capital Gain | 72,657 | 0 |
Long-Term Capital Gain | 258,578 | 3,167 |
$387,649 | $16,094 |
As of May 31, 2007 the components of distributable earnings/ (accumulated losses) on a tax basis were as follows:
Undistributed Ordinary income/ (accumulated losses) | $ 6,998 |
Undistributed long-term capital gain/ (accumulated losses) | 135,538 |
Unrealized appreciation/ (depreciation) | 1,630,384 |
$1,772,920 |
At May 31, 2007, 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) |
1,728,775 | (98,391) | 1,630,384 |
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, 2007, Pershing, LLC., for the benefit of its customers, owned 87.85% of the Fund.
Queens Road Value Fund
Auditors Opinion May 31, 2007
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and
Board of Trustees of
Queens Road Value Fund
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the Queens Road Value Fund, a series of the Bragg Capital Trust, as of May 31, 2007, 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 four 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 audits 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, 2007 by correspondence with the Fund’s custodian and broker. 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, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years then ended, and the financial highlights for each of the four years then ended, in conformity with accounting principles generally accepted in the United States of America.
COHEN FUND AUDIT SERVICES, LTD.
Westlake, Ohio
July 19, 2007
Queens Road Small CapValue Fund
Auditors Opinion May 31, 2007
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and
Board of Trustees of
Queens Road Small Cap Value Fund
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the Queens Road Small Cap Value Fund, a series of the Bragg Capital Trust, as of May 31, 2007, 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 four 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 audits 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, 2007 by correspondence with the Fund’s custodian and broker. 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, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years then ended, and the financial highlights for each of the four years then ended, in conformity with accounting principles generally accepted in the United States of America.
COHEN FUND AUDIT SERVICES, LTD.
Westlake, Ohio
July 19, 2007
Queens Road Value Fund
Expense Illustration (Unaudited) May 31, 2007
Expense Example | |||||
As a shareholder of the Queens Road Value Fund, you incur ongoing costs which typically consist of management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with 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, 2006 through May 31, 2007. | |||||
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 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 this 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. | |||||
Beginning Account Value | Ending Account Value | Expenses Paid During the Period * | |||
December 1, 2006 | May 31, 2007 | December 1, 2006 to May 31, 2007 | |||
Actual | $1,000.00 | $1,199.01 | $5.21 | ||
Hypothetical (5% Annual | |||||
Return before expenses) | $1,000.00 | $1,020.20 | $4.78 | ||
* Expenses are equal to the Fund's annualized expense ratio of 0.95%, 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 (Unaudited) May 31, 2007
Expense Example | |||||
As a shareholder of the Queens Road Small Cap Value Fund, you incur ongoing costs which typically consist of management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with 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, 2006 through May 31, 2007. | |||||
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 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 this 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. | |||||
Beginning Account Value | Ending Account Value | Expenses Paid During the Period * | |||
December 1, 2006 | May 31, 2007 | December 1, 2006 to May 31, 2007 | |||
Actual | $1,000.00 | $1,179.05 | $7.34 | ||
Hypothetical (5% Annual | |||||
Return before expenses) | $1,000.00 | $1,018.19 | $6.80 | ||
* 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). | |||||
Bragg Capital Trust
Queens Road Value Fund
Additional Information
May 31, 2007 (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.
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, 38 | Trustee, President Secretary | Unlimited; 4 years | Bragg Financial Advisors, Portfolio Manager/CCO (2000- present) Reliance Insurance, Product Manager(1999-2000) | Two | None |
Benton Bragg, 39 | Trustee, Chairman Treasurer | Unlimited; 4 years | Bragg Financial Advisors, President, CEO (1996-present) | Two | None |
Independent Trustees |
|
|
|
| |
Philip Blount, 52 2 | Trustee | Unlimited; 4 years | Icons, Inc., President (2001- present) Marketing Merchandise Halo, Inc., Vice President (1996-2001) Marketing Merchandise | Two | None |
Christopher Brady, 361,2 | Trustee | Unlimited; 4 years | Brady Distributing, Vice President (1995-present) Machinery Distribution | Two | None |
Harold Smith, 412 | Trustee | Unlimited; 4years | Raftelis Financial, Vice President (1996 – present) Public Finance Consulting | Two | None |
Timothy Ignasher, 451 | Trustee | Unlimited; 4 years | Scottish Bank, Vice President (1998 – present) Commercial Loan Officer | 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.
Bragg Capital Trust
Queens Road Small Cap Value Fund
Additional Information
May 31, 2007 (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.
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, 38 | Trustee, President Secretary | Unlimited; 4 years | Bragg Financial Advisors, Portfolio Manager/CCO (2000- present) Reliance Insurance, Product Manager(1999-2000) | Two | None |
Benton Bragg, 39 | Trustee, Chairman Treasurer | Unlimited; 4 years | Bragg Financial Advisors, President, CEO (1996-present) | Two | None |
Independent Trustees |
|
|
|
| |
Philip Blount, 52 2 | Trustee | Unlimited; 4 years | Icons, Inc., President (2001- present) Marketing Merchandise Halo, Inc., Vice President (1996-2001) Marketing Merchandise | Two | None |
Christopher Brady, 361,2 | 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, 451 | Trustee | Unlimited; 4 years | Scottish Bank, Vice President (1998 – present) Commercial Loan Officer | 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.
Board of Trustees
Benton Bragg
Steve Scruggs
Phil Blount
Tim Ignasher
Chris Brady
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.
This report contains certain forward looking statements which are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Forward looking statements generally include words such as “believes”, “expects”, “anticipates” and other words of similar import. Such risks and uncertainties include, among other things, the Risk Factors noted in the Funds’ filings with the Securities and Exchange Commission. The Funds undertake no obligation to update any forward looking statement.
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 2006
$ 18,975
FY 2007
$ 19,600
(b)
Audit-Related Fees
Registrant
FY 2006
$ 0
FY 2007
$ 0
Nature of the fees:
Not applicable.
(c)
Tax Fees
Registrant
FY 2006
$ 2,000
FY 2007
$ 5,000
Nature of the fees:
For Excise Tax Return
(d)
All Other Fees
Registrant
FY 2006
$ 0
FY 2007
$ 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
FY2007
$ 0
FY2006
$ 0
(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, 2007, 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 6, 2007
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 6, 2007
By /s/Steven H Scruggs, President
* Steven H Scruggs, President
Date August 6, 2007
* Print the name and title of each signing officer under his or her signature.