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)
1031 South Caldwell Street, Suite 200 Charlotte, NC 28203
(Address of principal executive offices)(Zip code)
1031 South Caldwell Street, Suite 200 Charlotte, NC 28203
(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, 2011
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, 2011
SHAREHOLDER LETTER
May 31, 2011 (UNAUDITED)
Dear Fellow Shareholders:
For the fiscal year ending May 31, 2011, the Queens Road Value Fund returned 18.92% and the Queens Road Small Cap Value Fund returned 19.78% (see each Funds section below for more detailed performance information).
Stocks climbed a wall of worry and posted another year of very strong results. Despite a fairly dismal economic landscape sluggish economic growth, the unsustainable federal deficit, increasingly desperate monetary policy -- corporate earnings continue to grow and stock prices continue to rise. As companies trim costs, top-line growth also seems to be picking up, due largely to price increases and also to a cheaper dollar. Its nice to see earnings continue to grow, but until unemployment comes down and consumer spending picks up we cant imagine this positive trend can continue much longer.
In our view, the positive corporate earnings and market performance do not truly reflect the underlying reality of the economy -- the positive trends are an illusion created by a 0% fed funds rate and trillion dollar deficits. You would think a pump primed so vigorously would be gushing by now; however, economic growth continues to lag. It will be interesting to see the effects on markets of the end of QE2 (the second round of quantitative easing monetary stimulus), as well as the impact of the budget deal, if one can be reached. As of this writing the risk of default by the U.S. government seems all too real, unless agreement can be reached on the debt ceiling, spending cuts and revenue increases.
As is typical in our letters, we point out the things that make us worry. Fortunately, these arent the things we dwell on in managing the Queens Road Funds. We remain focused on analyzing individual companies, the ones in our portfolios and ones we may add. Fortunately, there are many well-managed companies trading at reasonable valuations in attractive industries. While our ability to make macro predictions is just as bad (or good) as everyone elses, we have a successful track record of putting together individual investments in a conservative portfolio that generate attractive risk-adjusted returns, particularly in turbulent markets. Past performance is no guarantee of future performance, but we are going to continue to do what we have always done.
As always, we appreciate your investment in the Queens Road Funds.
Sincerely,
Steve Scruggs, CFA
Portfolio Manager, Chairman
Benton Bragg, CFA
President
Queens Road Value Fund
Managers Commentary May 31, 2011
The Queens Road Value Fund was up 18.92% for the fiscal year ending 5/31/2011. Our primary benchmark, the S&P500/Citi Value Index, which was up 23.17% and the S&P 500 was up 25.95%.
Among the best performing stocks in our portfolio were Leucadia National, media giant CBS, and network storage firm EMC. Cisco and Hewlett Packard were two of our worst performing investments. Over the course of the year we held more cash than normal, which caused a drag on performance.
The chart below shows the Funds performance for the fiscal year ended 5/31/2011, along with the returns for the S&P500/Citi Value Index and the Standard and Poors 500 Index. We try to outperform the index through security selection, investing only in those companies we believe trade at attractive valuations and have the best prospects for long-term performance.
| QRVLX | S&P 500/Citi Value | S&P 500 |
June 2010 | -2.41% | -5.73% | -5.23% |
July 2010 | 3.83% | 7.08% | 7.01% |
August 2010 | -2.95% | -4.68% | -4.51% |
September 2010 | 5.82% | 7.74% | 8.92% |
October 2010 | 2.71% | 2.59% | 3.80% |
November 2010 | -1.09% | -0.46% | 0.01% |
December 2010 | 3.92% | 8.22% | 6.68% |
January 2011 | 1.22% | 3.23% | 2.37% |
February 2011 | 2.94% | 3.69% | 3.43% |
March 2011 | 0.59% | -0.22% | 0.04% |
April 2011 | 3.42% | 2.53% | 2.96% |
May 2011 | -0.14% | -1.83% | -1.13% |
One Year | 18.92% | 23.17% | 25.95% |
Queens Road Small Cap Value Fund
Managers Commentary May 31, 2011
For the twelve-month period ending 5/31/2011 the total return for the Queens Road Small Cap Value Fund was 19.78%. This compares with returns of 22.91% for the Russell 2000 Value Index and 29.75% for the Russell 2000 Index.
The funds best performers for the year were Robbins & Myers, Chart Industries, and Darling International. Among our worst-performing investments were Tellabs, Radio Shack and specialty vehicle maker Oshkosh Corp. Over the course of the year we held more cash than normal, which caused a drag on performance.
Below is our month-by-month performance comparison with both the Russell 2000 Value Index and the Russell 2000 Index. We try to outperform the index through security selection, investing only in those companies we believe trade at attractive valuations and have the best prospects for long-term performance.
| QRSVX | Russell 2000 Value | Russell 2000 |
June 2010 | -5.62% | -8.73% | -7.75% |
July 2010 | 5.84% | 7.14% | 6.87% |
August 2010 | -5.29% | -7.52% | -7.40% |
September 2010 | 9.27% | 10.74% | 12.46% |
October 2010 | 2.50% | 3.87% | 4.09% |
November 2010 | 3.29% | 2.54% | 3.47% |
December 20010 | 5.25% | 8.31% | 7.94% |
January 2011 | -0.50% | 0.05% | -0.26% |
February 2011 | 3.44% | 5.08% | 5.48% |
March 2011 | 1.56% | 1.39% | 2.59% |
April 2011 | 0.91% | 1.62% | 2.64% |
May 2011 | -1.48% | -1.79% | -1.87% |
One Year | 19.78% | 22.91% | 29.75% |
Queens Road Value Fund
Cumulative Performance Comparison $10,000 Investment Since Inception* (Unaudited)
May 31, 2011
S&P 500/Citi Value Index $ 15,913
Queens Road Value Fund $ 17,177
Average Annual Total Return
For the Periods Ended May 31, 2011
Queens Road Value Fund S&P 500/Citi Value Index
1 Year 18.92% 23.17%
3 Year (0.84)% (1.23)%
5 Year 1.82% 1.12%
Since Inception 6.19% 5.30%
Annual Operating Expense 0.95% **
**As disclosed in the Fund's Prospectus.
*The Queens Road Value Fund commenced operations on June 13, 2002. 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
PORTFOLIO ILLUSTRATION
MAY 31, 2011
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, 2011 |
|
Shares | Fair Value | ||
COMMON STOCKS - 79.26% | |||
Aerospace & Defense - 1.22% | |||
3,600 | United Technologies Corp. | $ 315,972 | |
Alternative Carriers - 0.73% | |||
5,166 | Time Warner, Inc. | 188,197 | |
Apparel & Accessories - 1.35% | |||
3,500 | V.F. Corp. | 348,845 | |
Banks - 0.20% | |||
2,000 | US Bancorp | 51,200 | |
Broadcasting & Cable TV - 2.22% | |||
20,490 | CBS Corp. Class B | 572,696 | |
Computer Communications Equipment - 1.95% | |||
30,000 | Cisco Systems Inc. | 504,000 | |
Computer Hardware - 5.17% | |||
30,000 | Dell Inc. * | 482,400 | |
7,000 | Hewlett-Packard Co. | 261,660 | |
3,500 | International Business Machine, Inc. | 591,255 | |
1,335,315 | |||
Computer Storage & Peripherals - 2.20% | |||
20,000 | EMC Corp. * | 569,400 | |
Converted Paper & Paperboard Products (No Containers/Boxes) - 1.32% | |||
5,000 | Kimberly Clark Corp. | 341,500 | |
Electric Utilites - 6.28% | |||
20,900 | Duke Energy Corp. | 391,875 | |
13,000 | Exelon Corp. | 544,050 | |
10,700 | Progress Energy, Inc. | 509,534 | |
4,400 | Southern Co. | 176,352 | |
1,621,811 | |||
Environmental Services - 1.50% | |||
10,000 | Waste Management, Inc. | 388,800 | |
* Non-income producing security during the period. | |||
The accompanying notes are an integral part of these financial statements. | |||
Finance Services - 1.60% | |||
8,000 | American Express Co. | 412,800 | |
Financials-Asset Management & Custody Banks - 3.60% | |||
14,500 | Bank of New York Co. Inc. | 407,595 | |
3,900 | T. Rowe Price Group, Inc. | 246,870 | |
6,000 | State Street Corp. | 274,620 | |
929,085 | |||
Food & Kindred Products - 3.29% | |||
9,000 | Kraft Foods Inc. Class A | 314,730 | |
16,400 | Unilever PLC ADR | 534,476 | |
849,206 | |||
Healthcare Distributors & Services - 1.30% | |||
4,300 | WellPoint, Inc. | 336,131 | |
Household Products - 3.89% | |||
5,900 | Clorox Co. | 415,832 | |
8,800 | Procter & Gamble Co. | 589,600 | |
1,005,432 | |||
Housewares & Specialties - 1.60% | |||
6,380 | Fortune Brands, Inc. | 412,977 | |
Industrial Conglomerates - 1.44% | |||
3,162 | Covidien Ltd. PLC | 173,910 | |
4,000 | Tyco International Ltd. | 197,400 | |
371,310 | |||
Industrial Instruments For Measurement, Display And Control - 0.49% | |||
2,300 | Danaher Corp. | 125,419 | |
Industrial Machinery - 1.97% | |||
10,200 | Ingersoll-Rand Co. Ltd. PLC | 508,980 | |
Integrated Oil & Gas - 1.52% | |||
4,700 | Exxon Mobil Corp. | 392,309 | |
Integrated Telecommunication Services - 3.10% | |||
21,100 | AT&T, Inc. | 665,916 | |
10,000 | Windstream Corp. | 134,500 | |
800,416 | |||
* Non-income producing security during the period. | |||
ADR - American Depositary Receipt | |||
PLC - Public Limited Company | |||
The accompanying notes are an integral part of these financial statements. | |||
Internet Software & Services - 2.35% | |||
16,000 | Intel Corp. | 360,160 | |
15,000 | Yahoo! Inc. * | 248,250 | |
608,410 | |||
Movies & Entertainment - 4.27% | |||
11,500 | Microsoft Corp. | 287,615 | |
44,500 | News Corp. Class A | 816,130 | |
1,103,745 | |||
Multi-Sector Holdings - 2.58% | |||
18,800 | Leucadia National Corp. | 666,648 | |
National Commercial Banks - 1.51% | |||
9,000 | JPMorgan Chase & Co. | 389,160 | |
Pharmaceutical Preperation - 0.56% | |||
5,000 | Bristol Myers Squibb Co. | 143,800 | |
Pharmaceuticals - 7.89% | |||
9,000 | GlaxoSmithkline, PLC ADR | 391,140 | |
7,050 | Johnson & Johnson | 474,395 | |
13,820 | Merck & Co., Inc. | 507,885 | |
31,000 | Pfizer, Inc. | 664,950 | |
2,038,370 | |||
Property & Casualty Insurance - 4.21% | |||
3 | Berkshire Hathaway Inc. Class A * | 356,325 | |
21,400 | Progressive Corp. | 463,310 | |
4,300 | Travelers Companies, Inc. | 266,944 | |
1,086,579 | |||
Ship & Boat Building & Repairing - 1.15% | |||
4,000 | General Dynamics Corp. | 296,880 | |
Restaurants - 1.33% | |||
4,225 | McDonalds Corp. | 344,506 | |
Services-Electronic Information - 1.79% | |||
11,900 | Thomson Reuters Corp. | 463,743 | |
Surgical & Medical Instruments & Apparatus - 1.86% | |||
5,100 | 3M Co. | 481,338 | |
Systems Software - 1.82% | |||
24,000 | Symantec Corp. * | 469,200 | |
TOTAL FOR COMMON STOCKS (Cost $16,331,992) - 79.26% | $ 20,474,180 | ||
* Non-income producing security during the period. | |||
ADR - American Depositary Receipt | |||
PLC - Public Limited Company | |||
The accompanying notes are an integral part of these financial statements. | |||
EXCHANGE TRADED FUND - 1.74% | |||
Gold & Silver Ores - 1.74% | |||
30,000 | iShares Gold Trust * (Cost $295,769) | 449,700 | |
SHORT TERM INVESTMENTS - 18.85% | |||
4,867,969 | Invesco Short Term Investment Prime Portfolio 0.10% ** (Cost $4,867,969) | 4,867,969 | |
TOTAL INVESTMENTS (Cost $21,495,730) - 99.85% | $ 25,791,849 | ||
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.15% | 39,053 | ||
NET ASSETS - 100.00% | $ 25,830,902 | ||
* Non-income producing security during the period. | |||
** Variable rate security; the coupon rate shown represents the yield at May 31, 2011. | |||
The accompanying notes are an integral part of these financial statements. |
| Queens Road Value Fund |
|
Statement of Assets and Liabilities | ||
| May 31, 2011 |
|
Assets: | ||
Investments, at Fair Value (Cost $21,495,730) | $ 25,791,849 | |
Receivables: | ||
Dividends and Interest | 60,825 | |
Total Assets | 25,852,674 | |
Liabilities: | ||
Accrued Management Fees (Note 3) | 21,282 | |
Shareholder Redemptions | 490 | |
Total Liabilities | 21,772 | |
Net Assets | $ 25,830,902 | |
Net Assets Consist of: | ||
Paid In Capital | 23,091,199 | |
Accumulated Undistributed Net Investment Income | 124,577 | |
Accumulated Undistributed Realized Loss on Investments | (1,680,993) | |
Unrealized Appreciation in Value of Investments | 4,296,119 | |
Net Assets, for 1,819,188 Shares Outstanding (Unlimited number | ||
of shares authorized with a par value of $0.001) | $ 25,830,902 | |
Net Asset Value, Offering and Redemption Price Per Share ($25,830,902/1,819,188) | $ 14.20 | |
The accompanying notes are an integral part of these financial statements. |
| Queens Road Value Fund |
|
Statement of Operations | ||
| For the year ended May 31, 2011 |
|
Investment Income: | ||
Dividends (net of foreign witholding taxes of $2,106) | $ 462,344 | |
Interest | 5,589 | |
Total Investment Income | 467,933 | |
Expenses: | ||
Advisory Fees (Note 3) | 206,939 | |
Total Expenses | 206,939 | |
Net Investment Income | 260,994 | |
Realized and Unrealized Gain (Loss) on Investments: | ||
Realized Gain on Investments | 184,462 | |
Net Change in Unrealized Appreciation on Investments | 3,423,612 | |
Net Realized and Unrealized Gain on Investments | 3,608,074 | |
Net Increase in Net Assets Resulting from Operations | $ 3,869,068 | |
The accompanying notes are an integral part of these financial statements. |
Queens Road Value Fund | |||
Statements of Changes in Net Assets | |||
|
|
|
|
Year | Year | ||
Ended | Ended | ||
5/31/2011 | 5/31/2010 | ||
Increase (Decrease) in Net Assets From Operations: | |||
Net Investment Income | $ 260,994 | $ 174,734 | |
Net Realized Gain (Loss) on Investments | 184,462 | (1,219) | |
Net Change in Unrealized Appreciation on Investments | 3,423,612 | 2,244,357 | |
Net Increase in Net Assets Resulting from Operations | 3,869,068 | 2,417,872 | |
Distributions to Shareholders From: | |||
Net Investment Income | (207,168) | (174,854) | |
Realized Gains | - | - | |
Net Change in Net Assets from Distributions | (207,168) | (174,854) | |
Capital Share Transactions: | |||
Proceeds from Sale of Shares | 5,640,267 | 4,757,991 | |
Shares Issued on Reinvestment of Dividends | 147,855 | 112,260 | |
Cost of Shares Redeemed | (1,401,855) | (1,754,299) | |
Net Increase in Net Assets from Shareholder Activity | 4,386,267 | 3,115,952 | |
Net Assets: | |||
Net Increase in Net Assets | 8,048,167 | 5,358,970 | |
Beginning of Period | 17,782,735 | 12,423,765 | |
End of Period (Including Accumulated Undistributed Net Investment | |||
Income of $124,577 and $72,131, Respectively) | $ 25,830,902 | $ 17,782,735 | |
Share Transactions: | |||
Shares Sold | 438,999 | 401,912 | |
Shares Issued on Reinvestment of Dividends | 11,244 | 9,031 | |
Shares Redeemed | (106,976) | (145,716) | |
Net Increase in Shares | 343,267 | 265,227 | |
Outstanding at Beginning of Period | 1,475,921 | 1,210,694 | |
Outstanding at End of Period | 1,819,188 | 1,475,921 | |
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. | |||||||
For the Years Ended | |||||||
5/31/2011 | 5/31/2010 | 5/31/2009 | 5/31/2008 | 5/31/2007 | |||
Net Asset Value, at Beginning of Period | $ 12.05 | $ 10.26 | $ 15.13 | $ 16.65 | $ 14.17 | ||
Income From Investment Operations: | |||||||
Net Investment Income * | 0.16 | 0.13 | 0.20 | 0.27 | 0.33 | ||
Net Gain (Loss) on Securities (Realized and Unrealized) | 2.11 | 1.79 | (4.88) | (1.30) | 2.46 | ||
Total from Investment Operations | 2.27 | 1.92 | (4.68) | (1.03) | 2.79 | ||
Distributions from: | |||||||
Net Investment Income | (0.12) | (0.13) | (0.19) | (0.27) | (0.21) | ||
Capital Gains | - | - | - | *** | (0.22) | (0.10) | |
Total Distributions | (0.12) | (0.13) | (0.19) | (0.49) | (0.31) | ||
Net Asset Value, at End of Period | $ 14.20 | $ 12.05 | $ 10.26 | $ 15.13 | $ 16.65 | ||
Total Return ** | 18.92% | 18.64% | (30.90)% | (6.34)% | 19.83% | ||
Ratios/Supplemental Data: | |||||||
Net Assets at End of Period (Thousands) | $ 25,831 | $ 17,783 | $ 12,424 | $ 11,524 | $ 9,730 | ||
Ratio of Expenses to Average Net Assets | 0.95% | 0.95% | 0.95% | 0.95% | 0.95% | ||
Ratio of Net Investment Income to Average Net Assets | 1.20% | 1.08% | 1.83% | 1.75% | 2.12% | ||
Portfolio Turnover | 14.66% | 6.39% | 37.64% | 14.05% | 8.66% | ||
* Net Investment Income 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. | |||||||
*** Amount is less than $0.005 | |||||||
The accompanying notes are an integral part of these financial statements. |
QUEENS ROAD VALUE FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2011
Note 1. Organization
The Queens Road 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 Small Cap Value Fund. The Funds 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.
Federal Income Taxes: The Funds 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, if any, at least once a year.
As of and during the year ended May 31, 2011, the Fund did not have a liability for any unrecognized tax benefits. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense on the statement of operations. During the year, the Fund did not incur any interest or penalties. The Fund is not subject to examination by the U.S. federal tax authorities for the tax years before 2007.
Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of 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 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. For the year ended May 31, 2011, the Fund reclassified permanent book/tax differences of $1,380 from accumulated undistributed net investment income to accumulated undistributed realized loss on investments.
Security Valuation: Securities, including common stocks and exchange traded funds, which are traded on a national securities exchange are valued at the last quoted sales price, and generally classified as a Level 1 investment. Investments in mutual funds, including money market funds, are valued at the ending net asset value provided by the funds, and generally classified as a Level 1 investment. If there are no sales reported, the Funds 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, and generally classified as a Level 2 investment. 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 Trusts Board of Trustees, and generally classified as a Level 3 investment.
In accordance with GAAP, fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP also establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability. The three-tier hierarchy of inputs is summarized below.
| |
| Level 1 quoted prices in active markets for identical investments |
| |
| Level 2 other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| |
| Level 3 significant unobservable inputs (including the Funds own assumptions in determining the fair value of investments) |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following table summarizes the valuation of the Funds investments by the above fair value hierarchy levels as of May 31, 2011:
Assets (b) | Level 1 | Level 2 | Level 3 | Total |
Common Stocks | $ 20,474,180 | - | - | $ 20,474,180 |
Exchange Traded Fund | 449,700 | - | - | 449,700 |
Short-Term Investments | 4,867,969 | - | - | 4,867,969 |
Total | $ 25,791,849 | - | - | $ 25,791,849 |
(b) Refer to the Funds Schedule of Investments for a listing of securities by security type and industry.
The Fund did not hold any Level 3 assets during the year ended May 31, 2011. The Fund recognizes significant transfers between fair value hierarchy levels at the end of the reporting period. There were no significant transfers between levels for the year ended May 31, 2011.
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 0.95% of the Funds average daily net asset value. For the year ended May 31, 2011, the Advisor earned $206,939. 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, 2011, is $21,282.
Certain employees and officers of the Advisor are also 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 Funds 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 Funds portfolio investments during the year ended May 31, 2011.
Note 4. Capital Stock
At May 31, 2011, there were an unlimited number of shares authorized and 1,819,188 shares outstanding, each with a par value of $0.001, and paid-in capital amounted to $23,091,199 for the Fund.
Note 5. Investment Transactions
For the year ended May 31, 2011, the cost of purchases and the proceeds from sales, other than short-term securities, aggregated $4,205,644 and $2,595,275, respectively.
Note 6. Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended May 31, 2011, and May 31, 2010 was as follows:
Distributions paid from: | May 31, 2011 | May 31, 2010 |
Ordinary Income | $207,168 | $174,854 |
$207,168 | $174,854 |
As of May 31, 2011, the components of distributable earnings on a tax basis were as follows:
Undistributed Ordinary Income | $ 124,577 |
Undistributed Capital Losses | (1,674,350) |
Unrealized Appreciation | 4,289,476 |
Net Total | $ 2,739,703 |
At May 31, 2011, 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) |
$4,595,522 | $(306,046) | $4,289,476 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) at May 31, 2011, resulted from wash sales and adjustments from a grantor trust.
The aggregate cost of securities for federal income tax purposes at May 31, 2011, was $21,502,373.
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, 2011, Pershing, LLC., for the benefit of its customers, owned 98.73% of the Fund.
Note 8. Capital Loss Carryforwards
At May 31, 2011, the Fund had available for federal tax purposes an unused capital loss carryforward of $1,674,350, of which $466,279 expires in 2017 and $1,208,071 expires in 2018. To the extent that these carryforwards are used to offset future capital gains, it is possible that the amount which is offset will not be distributed to shareholders.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of
Bragg Capital Trust
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Bragg Capital Trust (the Funds), comprising the Queens Road Value Fund and the Queens Road Small Cap Value Fund, as of May 31, 2011, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
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, 2011, by correspondence with the 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 each of the Funds constituting the Bragg Capital Trust, comprising the Queens Road Value Fund and the Queens Road Small Cap Value Fund, as of May 31, 2011, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
COHEN FUND AUDIT SERVICES, LTD.
Westlake, Ohio
August 1, 2011
Queens Road Value Fund | |||
Expense Illustration | |||
May 31, 2011 (Unaudited) | |||
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, 2010 through May 31, 2011. | |||
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 ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds 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, 2010 | May 31, 2011 | December 1,2010 to May 31,2011 | |
Actual | $1,000.00 | $1,109.11 | $5.00 |
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 0.95%, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). |
QUEENS ROAD VALUE FUND
TRUSTEE TABLE
MAY 31, 2011 (UNAUDITED)
Information about Trustees who are interested persons of the Trust as defined under the 1940 Act, and each Trustees of the Trust, including their principal occupations during the past five years, is as follows:
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, 42 | Trustee, President Secretary | Unlimited; 8 years | Bragg Financial Advisors, Portfolio Manager/CCO (2000- present) Reliance Insurance, Product Manager(1999-2000) | Two | None |
Benton Bragg, 43 | Trustee, Chairman Treasurer | Unlimited; 8 years | Bragg Financial Advisors, President, CEO (1996-present) | Two | None |
Steve Scruggs and Benton Bragg are Interested Trustees of the Fund (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 Advisor, Bragg Financial Advisors, Inc. and their affiliation as registered principals with the Funds underwriter, Queens Road Securities, LLC. Benton Bragg and Steve Scruggs are brothers-in-law.
Independent 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 |
Philip Blount, 56 2 | Trustee | Unlimited; 8 years | Icons, Inc., President (2001- present) Marketing Merchandise Halo, Inc., Vice President (1996-2001) Marketing Merchandise | Two | None |
Christopher Brady, 401,2 | Trustee | Unlimited; 8 years | Resort Capital Partners, Vice President (2009-present) Hospitality Financial Advisory Brady Distributing, Vice President (1995-2009) Machinery Distribution | Two | None |
Harold Smith, 452 | Trustee | Unlimited; 8 years | Raftelis Financial, Vice President (1996 present) Public Finance Consulting | Two | None |
Timothy Ignasher, 501 | Trustee | Unlimited; 8 years | Citizens South Bank, Exec Vice President (2008 present) Colony Signature Bank, Exec. Vice President (2007-2008) Scottish Bank, Vice President (1998 2007) Commercial Loan Officer | Two | None |
(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.
QUEENS ROAD VALUE FUND
ADDITIONAL INFORMATION
MAY 31, 2011 (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 Funds 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 Funds first Form N-Q was filed with the SEC on October 8, 2004. The Funds Forms N-Q are available on the SECs website at http://sec.gov, or they may be reviewed and copied at the SECs 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.
Advisory Renewal Agreement - At a Board meeting held on August 12, 2010, the Trustees unanimously approved the continuance of the Investment Advisory Agreement between Bragg Financial Advisors, Inc and the Bragg Capital Trust. In reaching this decision the Trustees reviewed and discussed information provided by the Advisor describing the investment performance of each series of the Fund with its respective peer group. The Trustees considered the following factors to be of fundamental importance in their consideration of whether to approve the continuance of the Funds Contract: (i) the Advisors value investing experience and track record; (ii) the history of portfolio manager managing the series of the Fund; (iii) the integrity and high ethical standards of the Advisor; (iv) the consistency of the Advisors approach to managing the Fund, (v) each series above average performance since inception, and (vi) each series below average expense ratio relative to its peer group.
The Trustees considered the nature, extent and quality of services the Advisor has previously provided to the Fund based on a review of information provided by the Advisor. In addition, the Trustees took into account information furnished throughout the year at regular Board meetings, including reports on investment performance, shareholder services, distribution services, regulatory compliance, and other services provided to the Fund. The Trustees concluded that they had a reasonable belief that the nature, extent and quality of services provided to the Fund was appropriate.
The Trustees also reviewed and discussed information provided by the Advisor comparing the expense ratio of each series of the Fund with the expense ratios of funds in each series respective peer group. The source of the information provided by the Advisor was Morningstar Associates, LLC an independent third party specializing in mutual fund data and analytics. The cost to the Advisor for providing the services under the terms of the contract was discussed. The estimated aggregate cost of the services provided was compared to the amount paid to the Advisor under the terms of the contract. Upon review and discussion of this information, the Trustees concluded that the cost of services provided and any expected profits to the Advisor were reasonable.
The Trustees reviewed and considered the cost structure to the Advisor for providing services under the terms of the contract. The Trustees determined that as the Funds assets increase to certain levels economies of scale would be realized. The Trustees also considered the contracts stipulation that management fee percentage payout would be reduced as certain asset levels of the Funds were achieved. The Trustees concluded that reasonable economies of scale would be realized under the terms of the contract.
The Advisor had no other Advisory contracts with other investment companies or other types of clients that were comparable in services provided under the terms of the contract and therefore the Trustees could not rely on any comparisons between the Funds contract and other investment management contracts entered into by the Advisor. Based on the foregoing, the Trustees voted unanimously to renew the contract.
Queens Road Small Cap Value Fund
Cumulative Performance Comparison $10,000 Investment Since Inception* (UNAUDITED)
May 31, 2011
Russell 2000 Value Index $20,104
Queens Road Small Cap Value Fund $25,416
Average Annual Total Return
For the Periods Ended May 31, 2011
Queens Road Small Cap Value Fund Russell 2000 Value Index
1 Year 19.78% 22.91%
3 Year 7.72% 4.41%
5 Year 6.47% 3.00%
Since Inception 10.96% 8.10%
Annual Operating Expenses 1.24% **
** As disclosed in the Fund's Prospectus.
* The Queens Road Small Cap Value Fund commenced operations on June 13, 2002. 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 FUND
PORTFOLIO ILLUSTRATION
MAY 31, 2011
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 |
|
Schedule of Investments | |||
|
| May 31, 2011 |
|
Shares | Fair Value | ||
COMMON STOCKS - 77.25% | |||
Aircraft Parts & Auxiliary Equipment - 0.73% | |||
21,200 | Ducommun, Inc. | $ 416,156 | |
Apparel & Other Finished Products of Fabrics & Similar Matter - 1.51% | |||
20,000 | G-III Apparel Group, Ltd. * | 858,400 | |
Computer Peripheral Equipment, NEC - 1.29% | |||
58,300 | Imation Corp. * | 566,676 | |
18,900 | Radisys Corp. * | 163,107 | |
729,783 | |||
Construction & Farm Machinery - 1.59% | |||
32,626 | Oshkosh Corp. * | 903,740 | |
Computer Storage Devices - 0.50% | |||
30,000 | Xyratex Ltd. * | 286,350 | |
Crude Petroleum & Natural Gas - 0.25% | |||
20,000 | Vaalco Energy, Inc. * | 142,000 | |
Electric Utilites - 0.91% | |||
12,350 | MGE Energy, Inc. | 514,254 | |
Fats & Oils - 2.02% | |||
60,000 | Darling International, Inc. * | 1,149,000 | |
Fire, Marine & Casulty Insurance - 3.90% | |||
30,000 | Harleysville Group, Inc. | 960,900 | |
60,700 | Hilltop Holdings, Inc. * | 597,895 | |
10,900 | RLI Corp. | 656,725 | |
2,215,520 | |||
Food Retail - 0.52% | |||
3,317 | Arden Group, Inc. Class A | 296,805 | |
Footwear - 1.02% | |||
52,400 | K-Swiss Inc. Class A * | 577,972 | |
Gas Utilities - 3.03% | |||
33,900 | Piedmont Natural Gas Co., Inc. | 1,066,833 | |
20,000 | UGI Corp. | 655,600 | |
1,722,433 | |||
* Non-income producing securities during the period. | |||
The accompanying notes are an integral part of these financial statements. | |||
Healthcare Distributors & Services - 1.90% | |||
31,080 | Owens & Minor, Inc. | 1,075,368 | |
Healthcare Supplies - 0.88% | |||
2,703 | Atrion Corp. | 499,623 | |
Home Health Care Services - 0.73% | |||
6,100 | Chemed Corp. | 412,177 | |
In Vitro & In Vivo Diagnostic Substances - 2.03% | |||
55,000 | Immucor, Inc. * | 1,151,150 | |
Industrial Machinery - 5.42% | |||
14,978 | Chart Industries, Inc. * | 727,631 | |
20,875 | Graco, Inc. | 1,055,440 | |
43,202 | Hurco Companies, Inc. * | 1,293,036 | |
3,076,107 | |||
Information Technology, Electronic Manufacturing Services - 2.96% | |||
25,400 | Park Electrochemical Corp. | 764,794 | |
55,100 | TTM Technologies, Inc. * | 912,456 | |
1,677,250 | |||
Insurance Brokers - 1.31% | |||
40,000 | American Safety Insurance Holdings Ltd. * | 741,200 | |
Measuring & Controlling Devices, NEC - 2.21% | |||
24,500 | Cubic Corp. | 1,255,380 | |
Mining & Quarrying of Nonmetallic Minerals - 0.95% | |||
128,650 | Usec, Inc. * | 537,757 | |
Multi-Line Insurance - 0.86% | |||
30,000 | Horace Mann Educators Corp. | 489,600 | |
Natural Gas Distribution - 4.29% | |||
28,520 | New Jersey Resources Corp. | 1,314,202 | |
20,000 | South Jersey Industries, Inc. | 1,119,400 | |
2,433,602 | |||
Networking Equipment - 0.44% | |||
12,850 | Bel Fuse, Inc. Class B | 251,474 | |
Office Services & Supplies - 1.30% | |||
10,000 | United Stationers, Inc. | 740,200 | |
Orthopedic, Prosthetic & Surgical Appliances & Supplies - 1.91% | |||
30,000 | Steris Corporation | 1,082,700 | |
* Non-income producing securities during the period. | |||
The accompanying notes are an integral part of these financial statements. | |||
Packaged Foods - 1.55% | |||
20,000 | Sanderson Farms, Inc. | 878,200 | |
Personal Products - 1.24% | |||
31,700 | Inter Parfums, Inc. | 706,276 | |
Pharmaceutical Preparations - 1.76% | |||
77,600 | Prestige Brands Holdings Inc. * | 1,001,816 | |
Primary Smelting & Refining of Nonferrous Metals - 0.68% | |||
29,100 | Horsehead Holding Corp. * | 388,194 | |
Property & Casualty Insurance - 1.55% | |||
12,500 | Proassurance Corp. * | 878,875 | |
Publishing & Printing - 1.71% | |||
35,545 | Scholastic Corp. | 968,246 | |
Pumps & Pumping Equipment - 1.19% | |||
15,300 | Robbins & Meyers, Inc. | 674,118 | |
Reinsurance - 0.43% | |||
6,000 | Endurance Specialty Holdings, Ltd. | 243,660 | |
Retail-Miscellaneous Shopping Goods Stores - 1.23% | |||
50,000 | Big 5 Sporting Goods Corp. | 475,000 | |
59,800 | Books-A-Million Inc. | 225,446 | |
700,446 | |||
Retail - Radio, TV & Consumer Electronics Stores - 2.04% | |||
73,500 | Radioshack Corp. | 1,158,360 | |
Retail-Women's Clothing Stores - 2.30% | |||
48,000 | Cato Corp. Class A | 1,306,560 | |
Semi-Conductors & Related Devices - 0.62% | |||
30,000 | Micrel, Inc. | 353,100 | |
Services-Advertising - 0.43% | |||
8,400 | Valassis Communications, Inc. * | 243,852 | |
Services-Computer Integrated Systems Design - 0.98% | |||
20,000 | Unisys Corp. * | 559,000 | |
Services-Computer Processing & Data Preparation - 2.58% | |||
22,300 | Acxiom Corp. * | 306,625 | |
23,000 | DST Systems, Inc. | 1,156,210 | |
1,462,835 | |||
* Non-income producing securities during the period. | |||
The accompanying notes are an integral part of these financial statements. | |||
Services-Engineering Services - 1.55% | |||
20,000 | URS Corp. * | 881,200 | |
Services-Personal Services - 1.89% | |||
20,000 | Unifirst Corp. | 1,072,400 | |
Specialized Consumer Services - 1.19% | |||
18,400 | Plantronics, Inc. | 673,072 | |
Sugar & Confectionery Products - 1.23% | |||
39,203 | Imperial Sugar Co. | 696,637 | |
Systems Software - 0.94% | |||
82,916 | Pervasive Software Inc. * | 534,808 | |
Telephone & Telegraph Apparatus - 1.71% | |||
10,000 | Adtran, Inc. | 428,600 | |
118,000 | Tellabs, Inc. | 539,260 | |
967,860 | |||
Wholesale-Apparel, Piece Goods & Notions - 1.65% | |||
56,435 | Delta Apparel, Inc. * | 938,514 | |
Wholesale-Computer & Peripheral Equipment & Software - 2.34% | |||
28,000 | Tech Data Corp. * | 1,326,360 | |
TOTAL FOR COMMON STOCKS (Cost $34,422,557) - 77.25% | $ 43,850,390 | ||
CLOSED-END MUTUAL FUND - 1.83% | |||
46,900 | Central Fund of Canada Limited *** | 1,040,242 | |
TOTAL FOR CLOSED-END MUTUAL FUND (Cost $622,900) - 1.83% | 1,040,242 | ||
SHORT TERM INVESTMENTS - 20.94% | |||
11,882,416 | Invesco Short Term Investment Prime Portfolio 0.10% ** (Cost $11,882,416) | 11,882,416 | |
TOTAL INVESTMENTS (Cost $46,927,873) - 100.02% | $ 56,773,048 | ||
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.02)% | (10,704) | ||
NET ASSETS - 100.00% | $ 56,762,344 | ||
* Non-income producing securities during the period. | |||
** Variable rate security; the coupon rate shown represents the yield at May 31, 2011. | |||
*** Passive foreign investment company (PFIC) | |||
The accompanying notes are an integral part of these financial statements. |
| Queens Road Small Cap Value Fund |
|
Statement of Assets and Liabilities | ||
| May 31, 2011 |
|
Assets: | ||
Investments, at Fair Value (Cost $46,927,873) | $ 56,773,048 | |
Receivables: | ||
Shareholder Subscriptions | 34,500 | |
Dividends and Interest | 18,091 | |
Total Assets | 56,825,639 | |
Liabilities: | ||
Accrued Management Fees (Note 3) | 60,927 | |
Shareholder Redemptions | 2,368 | |
Total Liabilities | 63,295 | |
Net Assets | $ 56,762,344 | |
Net Assets Consist of: | ||
Paid In Capital | $ 43,874,448 | |
Accumulated Undistributed Net Investment Loss | (272,940) | |
Accumulated Undistributed Realized Gain on Investments | 3,315,661 | |
Unrealized Appreciation in Value of Investments | 9,845,175 | |
Net Assets, for 2,746,246 Shares Outstanding | $ 56,762,344 | |
(Unlimited number of shares authorized with a par value of $0.001) | ||
Net Asset Value Per Share, Offering and Redemption Price ($56,762,344/2,746,246 shares) | $ 20.67 | |
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, 2011 |
|
Investment Income: | ||
Dividends (net of foreign witholding taxes of $70) | $ 364,578 | |
Interest | 11,584 | |
Total Investment Income | 376,162 | |
Expenses: | ||
Advisory Fees (Note 3) | 566,626 | |
Total Expenses | 566,626 | |
Net Investment Loss | (190,464) | |
Realized and Unrealized Gain on Investments: | ||
Realized Gain on Investments | 4,524,695 | |
Net Change in Unrealized Appreciation on Investments | 3,815,968 | |
Net Realized and Unrealized Gain on Investments | 8,340,663 | |
Net Increase in Net Assets Resulting from Operations | $ 8,150,199 | |
The accompanying notes are an integral part of these financial statements. |
Queens Road Small Cap Value Fund | |||
Statements of Changes in Net Assets | |||
|
|
|
|
Years Ended | |||
5/31/2011 | 5/31/2010 | ||
Increase (Decrease) in Net Assets From Operations: | |||
Net Investment Loss | $ (190,464) | $ (115,633) | |
Net Realized Gain on Investments | 4,524,695 | 1,137,216 | |
Net Change in Unrealized Appreciation on Investments | 3,815,968 | 5,700,042 | |
Net Increase in Net Assets Resulting from Operations | 8,150,199 | 6,721,625 | |
Distributions to Shareholders From: | |||
Net Investment Income | - | - | |
Realized Gains | (1,361,671) | - | |
Net Change in Net Assets from Distributions | (1,361,671) | - | |
Capital Share Transactions: | |||
Proceeds from Sale of Shares | 16,998,730 | 13,226,755 | |
Shares Issued on Reinvestment of Dividends | 987,070 | - | |
Cost of Shares Redeemed | (5,381,561) | (3,257,179) | |
Net Increase in Net Assets from Shareholder Activity | 12,604,239 | 9,969,576 | |
Net Assets: | |||
Net Increase in Net Assets | 19,392,767 | 16,691,201 | |
Beginning of Period | 37,369,577 | 20,678,376 | |
End of Period (Including Accumulated Undistributed Net Investment | |||
Loss of $272,940 and $81,672, respectively) | $ 56,762,344 | $ 37,369,577 | |
Share Transactions: | |||
Shares Sold | 873,116 | 811,945 | |
Shares Issued on Reinvestment of Dividends | 49,354 | - | |
Shares Redeemed | (278,656) | (192,901) | |
Net Increase in Shares | 643,814 | 619,044 | |
Outstanding at Beginning of Period | 2,102,432 | 1,483,388 | |
Outstanding at End of Period | 2,746,246 | 2,102,432 | |
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. | |||||||
For the Years Ended | |||||||
5/31/2011 | 5/31/2010 | 5/31/2009 | 5/31/2008 | 5/31/2007 | |||
Net Asset Value, at Beginning of Period | $ 17.77 | $ 13.94 | $ 17.16 | $ 19.47 | $ 17.27 | ||
Income From Investment Operations: | |||||||
Net Investment Income/(Loss) * | (0.08) | (0.06) | 0.05 | 0.12 | 0.10 | ||
Net Gain/(Loss) on Securities (Realized and Unrealized) | 3.57 | 3.89 | (3.18) | (1.53) | 2.90 | ||
Total from Investment Operations | 3.49 | 3.83 | (3.13) | (1.41) | 3.00 | ||
Distributions from: | |||||||
Net Investment Income | - | - | (0.07) | (0.10) | (0.11) | ||
Capital Gains | (0.59) | - | - | *** | (0.80) | (0.69) | |
Return of Capital | - | - | (0.02) | - | - | ||
Total from Distributions | (0.59) | - | (0.09) | (0.90) | (0.80) | ||
Net Asset Value, at End of Period | $ 20.67 | $ 17.77 | $ 13.94 | $ 17.16 | $ 19.47 | ||
Total Return ** | 19.78% | 27.47% | (18.14)% | (7.15)% | 17.90% | ||
Ratios/Supplemental Data: | |||||||
Net Assets at End of Period (Thousands) | $ 56,762 | $ 37,370 | $ 20,678 | $ 12,975 | $ 9,835 | ||
Ratio of Expenses to Average Net Assets | 1.24% | 1.24% | 1.35% | 1.35% | 1.35% | ||
Ratio of Net Investment Income/(Loss) to Average Net Assets | (0.42)% | (0.38)% | 0.41% | 0.69% | 0.56% | ||
Portfolio Turnover | 38.32% | 30.79% | 35.64% | 24.60% | 64.65% | ||
* 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. | |||||||
*** Amount is less than $0.005 | |||||||
The accompanying notes are an integral part of these financial statements. |
QUEENS ROAD SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2011
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 Funds 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.
Federal Income Taxes: The Funds 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, if any, at least once a year.
As of and during the year ended May 31, 2011, the Fund did not have a liability for any unrecognized tax benefits. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense on the statement of operations. During the year, the Fund did not incur any interest or penalties. The Fund is not subject to examination by the U.S. federal tax authorities for the tax years before 2007.
Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of 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 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. For the year ended May 31, 2011, the Fund reclassified permanent book/tax differences of $804 from accumulated undistributed net investment loss to accumulated undistributed realized gain on investments.
Security Valuation: Securities, including common stocks and exchange traded funds, which are traded on a national securities exchange or on the NASDAQ over-the-counter market, are valued at the last quoted sales price, and generally classified as a Level 1 investment. Investments in mutual funds, including money market funds and closed-end funds, are valued at the ending net asset value provided by the funds, and generally classified as a Level 1 investment. If there are no sales reported, the Funds 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, and generally classified as a Level 2 investment. 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 Trusts Board of Trustees, and generally classified as a Level 3 investment.
In accordance with GAAP, fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP also establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability. The three-tier hierarchy of inputs is summarized below.
| |
| Level 1 quoted prices in active markets for identical investments |
| |
| Level 2 other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| |
| Level 3 significant unobservable inputs (including the Funds own assumptions in determining the fair value of investments) |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following table summarizes the valuation of the Funds investments by the above fair value hierarchy levels as of May 31, 2011:
Assets (b) | Level 1 | Level 2 | Level 3 | Total |
Common Stocks | $ 43,850,390 | - | - | $ 43,850,390 |
Closed-End Mutual Fund | 1,040,242 | - | - | 1,040,242 |
Short-Term Investments | 11,882,416 | - | - | 11,882,416 |
Total | $ 56,773,048 | - | - | $ 56,773,048 |
(b) Refer to the Funds Schedule of Investments for a listing of securities by security type and industry.
The Fund did not hold any Level 3 assets during the year ended May 31, 2011. The Fund recognizes significant transfers between fair value hierarchy levels at the end of the reporting period. There were no significant transfers between levels for the year ended May 31, 2011.
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 1.24% of the Funds average daily net asset value. For the year ended May 31, 2011, the Advisor earned $566,626. 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, 2011 is $60,927.
Certain employees and officers of the Advisor are also 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 Funds 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 Funds investments during the year ended May 31, 2011.
Note 4. Capital Stock
At May 31, 2011, there were an unlimited number of shares authorized and 2,746,246 shares outstanding, each with a par value of $.001, and paid-in capital amounted to $43,874,448 for the Fund.
Note 5. Investment Transactions
For the year ended May 31, 2011, the cost of purchases and the proceeds from sales, other than short-term securities aggregated $21,153,071 and $14,268,478, respectively.
Note 6. Distributions to Shareholders
The tax character of distributions paid during fiscal years ended May 31, 2011, and May 31, 2010, was as follows:
Distributions paid from: | May 31, 2011 | May 31, 2010 |
Short-Term Capital Gain | $ 233,195 | $ - |
Long-Term Capital Gain | 1,128,476 | - |
$ 1,361,671 | $ - |
As of May 31, 2011, the components of distributable earnings on a tax basis were as follows:
Undistributed Ordinary Income | $ 965,791 |
Undistributed Capital Gains | 2,574,883 |
Unrealized Appreciation | 9,347,222 |
Net Total | $ 12,887,896 |
At May 31, 2011, 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) |
$10,336,077 | $(988,855) | $9,347,222 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) at May 31, 2011 resulted from wash sales and income recognized from PFICs.
The aggregate cost of securities for federal income tax purposes at May 31, 2011 was $47,425,826.
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, 2011, Pershing, LLC., for the benefit of its customers, owned 61.13% of the Fund.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of
Bragg Capital Trust
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Bragg Capital Trust (the Funds), comprising the Queens Road Value Fund and the Queens Road Small Cap Value Fund, as of May 31, 2011, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
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, 2011, by correspondence with the 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 each of the Funds constituting the Bragg Capital Trust, comprising the Queens Road Value Fund and the Queens Road Small Cap Value Fund, as of May 31, 2011, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
COHEN FUND AUDIT SERVICES, LTD.
Westlake, Ohio
August 1, 2011
Queens Road Small Cap Value Fund | |||
Expense Illustration | |||
May 31, 2011 (Unaudited) | |||
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, 2010 through May 31, 2011. | |||
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 ratio and an assumed rate of return of 5% per year before expenses, | |||
which is not the Funds 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, 2010 | May 31, 2011 | December 1,2010 to May 31,2011 | |
Actual | $1,000.00 | $1,043.94 | $6.32 |
Hypothetical | |||
(5% Annual Return before expenses) | $1,000.00 | $1,018.75 | $6.24 |
* Expenses are equal to the Fund's annualized expense ratio of 1.24%, 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
TRUSTEE TABLE
MAY 31, 2011 (UNAUDITED)
Information about Trustees who are interested persons of the Trust as defined under the 1940 Act, and each Trustees of the Trust, including their principal occupations during the past five years, is as follows:
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, 42 | Trustee, President Secretary | Unlimited; 8 years | Bragg Financial Advisors, Portfolio Manager/CCO (2000- present) Reliance Insurance, Product Manager(1999-2000) | Two | None |
Benton Bragg, 43 | Trustee, Chairman Treasurer | Unlimited; 8 years | Bragg Financial Advisors, President, CEO (1996-present) | Two | None |
Steve Scruggs and Benton Bragg are Interested Trustees of the Fund (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 Advisor, Bragg Financial Advisors, Inc. and their affiliation as registered principals with the Funds underwriter, Queens Road Securities, LLC. Benton Bragg and Steve Scruggs are brothers-in-law.
Independent 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 |
Philip Blount, 56 2 | Trustee | Unlimited; 8 years | Icons, Inc., President (2001- present) Marketing Merchandise Halo, Inc., Vice President (1996-2001) Marketing Merchandise | Two | None |
Christopher Brady, 401,2 | Trustee | Unlimited; 8 years | Resort Capital Partners, Vice President (2009-present) Hospitality Financial Advisory Brady Distributing, Vice President (1995-2009) Machinery Distribution | Two | None |
Harold Smith, 452 | Trustee | Unlimited; 8 years | Raftelis Financial, Vice President (1996 present) Public Finance Consulting | Two | None |
Timothy Ignasher, 501 | Trustee | Unlimited; 8 years | Citizens South Bank, Exec Vice President (2008 present) Colony Signature Bank, Exec. Vice President (2007-2008) Scottish Bank, Vice President (1998 2007) Commercial Loan Officer | Two | None |
(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.
QUEENS ROAD SMALL CAP VALUE FUND
ADDITIONAL INFORMATION
MAY 31, 2011 (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 Funds 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 Funds first Form N-Q was filed with the SEC on October 8, 2004. The Funds Forms N-Q are available on the SECs website at http://sec.gov, or they may be reviewed and copied at the SECs 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.
Advisory Renewal Agreement At a Board meeting held on August 12, 2010, the Trustees unanimously approved the continuance of the Investment Advisory Agreement between Bragg Financial Advisors, Inc and the Bragg Capital Trust. In reaching this decision the Trustees reviewed and discussed information provided by the Advisor describing the investment performance of each series of the Fund with its respective peer group. The Trustees considered the following factors to be of fundamental importance in their consideration of whether to approve the continuance of the Funds Contract: (i) the Advisors value investing experience and track record; (ii) the history of portfolio manager managing the series of the Fund; (iii) the integrity and high ethical standards of the Advisor; (iv) the consistency of the Advisors approach to managing the Fund, (v) each series above average performance since inception, and (vi) each series below average expense ratio relative to its peer group.
The Trustees considered the nature, extent and quality of services the Advisor has previously provided to the Fund based on a review of information provided by the Advisor. In addition, the Trustees took into account information furnished throughout the year at regular Board meetings, including reports on investment performance, shareholder services, distribution services, regulatory compliance, and other services provided to the Fund. The Trustees concluded that they had a reasonable belief that the nature, extent and quality of services provided to the Fund was appropriate.
The Trustees also reviewed and discussed information provided by the Advisor comparing the expense ratio of each series of the Fund with the expense ratios of funds in each series respective peer group. The source of the information provided by the Advisor was Morningstar Associates, LLC an independent third party specializing in mutual fund data and analytics. The cost to the Advisor for providing the services under the terms of the contract was discussed. The estimated aggregate cost of the services provided was compared to the amount paid to the Advisor under the terms of the contract. Upon review and discussion of this information, the Trustees concluded that the cost of services provided and any expected profits to the Advisor were reasonable.
The Trustees reviewed and considered the cost structure to the Advisor for providing services under the terms of the contract. The Trustees determined that as the Funds assets increase to certain levels economies of scale would be realized. The Trustees also considered the contracts stipulation that management fee percentage payout would be reduced as certain asset levels of the Funds were achieved. The Trustees concluded that reasonable economies of scale would be realized under the terms of the contract.
The Advisor had no other Advisory contracts with other investment companies or other types of clients that were comparable in services provided under the terms of the contract and therefore the Trustees could not rely on any comparisons between the Funds contract and other investment management contracts entered into by the Advisor. Based on the foregoing, the Trustees voted unanimously to renew the contract.
Board of Trustees
Benton Bragg
Steve Scruggs
Phil Blount
Tim Ignasher
Chris Brady
Harold Smith
Investment Adviser
Bragg Financial Advisors, Inc.
1031 Caldwell Street, Suite 200
Charlotte, NC 28203
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.
800 Westpoint Parkway, Suite 1100
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 registrants 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 2010
$ 20,000
FY 2011
$ 24,150
(b)
Audit-Related Fees
Registrant
FY 2010
$ 0
FY 2011
$ 0
Nature of the fees:
Not applicable.
(c)
Tax Fees
Registrant
FY 2010
$ 5,000
FY 2011
$ 5,000
Nature of the fees:
1120-RIC & Excise Tax Return
(d)
All Other Fees
Registrant
FY 2010
$ 1,150
FY 2011
$ 0
Nature of the fees:
Out of pocket expenses and consents
(e)
(1) Audit Committees 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
FY2010
$ 0
FY2011
$ 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 Registrants disclosure controls and procedures as of a date within 90 days of filing date of this Form N-CSR, the principal executive officer and principal financial officer of the Registrant have concluded that the Registrant's disclosure controls and procedures are reasonably designed to ensure that the information required in filings on Form N-CSR is recorded, processed, summarized, and reported by the filing date, except as disclosed below. These internal controls and procedures include processes and controls designed to ensure that information required to be disclosed is accumulated and communicated to the Registrants management, including the Registrants principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Controls and procedures over the accounting for corporate actions and related pricing of the Registrant's corporate action-effected securities were found to be not operating effectively and have been corrected as described below.
(b)
There were no significant changes in the registrants internal control over financial reporting that occurred during the registrants second fiscal half-year that have materially affected, or are reasonably likely to materially affect, the registrants 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 9, 2011
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 9, 2011
By /s/Steven H Scruggs, President
* Steven H Scruggs, President
Date August 9, 2011
* Print the name and title of each signing officer under his or her signature.
I, Steven H. Scruggs, certify that:
1. I have reviewed this report on Form N-CSR of Bragg Capital Trust ;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: August 9, 2011
/s/ Steven H. Scruggs
Steven H. Scruggs
President
I, Benton S. Bragg, certify that:
1. I have reviewed this report on Form N-CSR of Bragg Capital Trust ;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: August 9, 2011
/s/ Benton S. Bragg
Benton S. Bragg
Treasurer
EX-99.906CERT
CERTIFICATION
Steven H. Scruggs, Chief Executive Officer, and Benton S. Bragg, Chief Financial Officer of the Bragg Capital Trust(the Registrant), each certify to the best of his or her knowledge that:
1.
The Registrants periodic report on Form N-CSR for the period ended May 31, 2011 (the Form N-CSR) fully complies with the requirements of Sections 15(d) of the Securities Exchange Act of 1934, as amended; and
2.
The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
Chief Executive Officer
Chief Financial Officer
Bragg Capital Trust
Bragg Capital Trust
/s/Steven H. Scruggs
/s/Benton S. Bragg
Steven H Scruggs
Benton S Bragg
Date: August 9, 2011
Date: August 9, 2011
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Bragg Capital Trust and will be retained by the Trust and furnished to the Securities and Exchange Commission (the Commission) or its staff upon request.
This certification is being furnished to the Commission solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Form N-CSR filed with the Commission.
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