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 811-21291
Bertolet Capital Trust
(Exact name of registrant as specified in charter)
1414 Sixth Avenue, Suite 900
New York, NY 10019
(Address of principal executive offices) (Zip code)
John E. Deysher
1414 Sixth Ave., Suite 900,
New York, NY 10019
(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 508-4537
Date of fiscal year end: December 31
Date of reporting period: June 30, 2008
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-CSR 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-CSR 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.
Pinnacle Value Fund
Semi-Annual Report
June 30, 2008
Pinnacle Value Fund Semi Annual Report June 30, 2008
Dear fellow Shareholders,
It’s now official. With most of the major indexes down 20% from their highs set last fall, it appears we are in a bear market. The carnage has been widespread with very few sectors unscathed. This reflects the economic woes which we are all well aware of - slowing growth, higher gasoline and food prices, tumbling housing values, an unstable financial system, falling consumer confidence and contracting credit availability. The last expansion was built on the back of widespread credit expansion (which fueled rising asset prices) and credit contraction is having a sobering effect. How bad will it get?
We’re not sure but with the S&P 500 trading at a robust 21X earnings, 2.5X book value and yielding 2.3%, the downside could be substantial.
Total Return YTD 2008 2007 2006 2005 2004
Pinnacle Value Fund (9.5)% 15.4% 13.2% 8.5% 19.6%
Russell 2000* (9.4) (1.5) 18.4 4.6 18.3
S&P 500* (11.9)% 5.6% 15.8% 4.9% 10.9%
* Includes dividend reinvestment. Past performance does not guarantee future results. Returns don’t reflect taxes payable on distributions or redemptions held in taxable accts.
As can be seen from the above box scores, we had a dismal first half - no way to sugar coat it . While we approximated the Russell 2000 performance, we should have done much better given our high cash position. Please see below for details but suffice it to say we were caught by the market’s increasing focus on credit quality and by our own premature accumulation of some financial stocks. We were way too early and, as a wise investor once said, if you’re two years early, you’re 18 months wrong. We were wrong.
Some of you have inquired whether we’ve changed our investment philosophy. The answer is no and now might be a good time to review our approach. We’re seeking:
1. businesses that are well capitalized with favorable long term prospects, and are
2. run by capable managers with exceptional ability, unyielding determination and unquestionable integrity (many are large shareholders themselves), and are
3. available at a reasonable price.
We invest only for the long term and attempt to keep permanent capital loss (as opposed to short term quotational loss) to a minimum. As value investors, we are actively looking for opportunities in markets like these and are encouraged that small caps are returning to more reasonable valuations. We expect the stock market to remain volatile and are pleased to have the firepower to exploit opportunites which may occur.
What Happened to the Portfolio?
As you can see from the Winners & Sinners page opposite, the sinners ruled the day. Most of the damage occurred in two areas. First, we have a few positions like WHX Corp. and International Textiles Corp. (ITC) that are being run by smart people but face dual negatives of having leveraged balance sheets and slowing end user markets.
Conglomerate WHX is exposed to slowing automotive and construction markets while ITC is exposed to slowing apparel and automotive markets. WHX is in the process of raising capital via a rights offering which should put them on sounder financial footing. WHX also appears to be making progress in rationalizing operations to enhance profitability and asset utilization. ITC is controlled by billionaire Wilbur Ross who is attempting to create a worldwide textile company via the rollup of a couple domestic producers (Burlington Industries, Cone Denim) complemented by newly built plants in Nicaragua, China and Vietnam. This has all been debt financed and has taken longer than expected, hence the decline in share price. While the ultimate outcome is uncertain, the majority owners of both WHX and ITC have their reputations on the line and have suffered the same humiliating common stock losses as we have.
An equal amount of damage was done by our premature purchase of some well managed, well capitalized, high return commercial banks such as Preferred Bank and Corus Bank at what we thought were compelling valuations. We’ve followed both institutions for years and were aware of their large construction loan portfolios and the risks therein but
felt their underwriting criteria, strong balance sheets and workout abilities were enough to get them through the down cycle. Yes, a certain portion of the loans will go sour but we believe this is more than reflected in the stock price. Many of the construction loans were used to build condos in metropolitan areas of the southeast and southwest. Retiring baby boomers will most likely continue to migrate to these areas which should put an eventual floor on real estate values. Insiders at Preferred and Corus Banks are both large holders owning 30% and 32% respectively. Recently, they have been aggressive buyers of their own shares which led us to become too comfortable in our purchases. Banks and financial stocks have been terrible performers for the last year or so and sentiment remains extremely negative. Investors are worried Preferred and Corus may need to raise new capital which would dilute our interests. Whether this occurs remains to be seen.
There is some good news. We still have plenty of cash left (50 %) to take advantage of opportunities. However, given our painful experience of catching “falling knives”, we remain cautious in deploying it. We’ll pay extra close attention to balance sheets, operating results and market perceptions. We’ll be much more willing to step away when issues of interest to us are in freefall because of gloomy investor perceptions. In short, we’ve learned some painful lessons recently which we hope not to repeat.
Two final notes. First, your portfolio manager remains the largest individual shareholder and, having purchased shares in January, May and July feels your pain. Second, despite being down year to date, we will most likely pay a distribution of net investment income and net capital gains in late December. We’ll have a better feel for the exact amount after Oct. 31. This distribution is taxable for shares held in non-retirement accounts.
As always, should you have any questions or concerns about your account or the Fund, don’t hesitate to call or write. Thank you for your continued support.
John E. Deysher Pinnacle Value Fund
Preisdent & Portfolio Manager 1414 Sixth Ave.-900
212-508-4537 New York, NY 10019
TOP 10 POSITIONS % net assets
1. Argan- Power plant construction, nutraceuticals, telecom services 6.5%
2. MVC Capital- Business Development Company 3.7
3. Preferred Bank- Korean American commercial bank 3.4
4. Conrad Ind.- Gulf of Mexico shipbuilding & repair 2.7
5. Asta Funding- Buys, sells, collects defaulted consumer receivables 2.6
6. First Acceptance Corp.- Auto insurance for low income customers 2.5
7. Pro-shares ultra short oil & gas 2.2
8. Corus Bankshares- Commercial bank specializing in construction loans 2.0
9. Flanders Corp.- Air filters- residential, commercial, industrial 1.5
10. Cadus Corp.- Cash rich shell with large NOL carryforwards 1.3
Total 28.4%
YTD TOP 5 Winners (realized & unrealized gains)
1. Technology Solutions $206,000
2. IWM, XLF Put options 166,300
3. Argan 97,600
4. Flanders Corp. 79,100
5. Stein Mart 25,000
Total $574,000
YTD TOP 5 Sinners (realized & unrealized losses)
1. Preferred Bank $1,873,600
2. WHX Corp. 951,300
3. Corus Bankshares 674,000
4. International Textiles 476,700
5. Pro- shares ultra short oil & gas 448,500
Total $4,424,100
SECURITY CLASSIFICATIONS
Government Money Market Fund $34,376,200
Financial Services 7,873,300
Conglomerates 6,278,100
Industrial Goods & Services 5,856,600
Commercial Banks 4,173,500
Insurance 2,326,100
Exchange Traded Funds 1,418,300
Consumer Goods & Services 1,096,500
Total $63,398,600
PINNACLE VALUE FUND |
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BERTOLET CAPITAL TRUST |
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Schedule of Investments | |||||
June 30, 2008 (Unaudited) | |||||
Shares/Principal Amount | Basis |
| Market Value | % of Assets | |
COMMON STOCKS | |||||
Conglomerate | |||||
297,068 | Argan, Inc. * | $ 1,229,155 | $ 4,111,421 | ||
115,449 | Regency Affiliates * | 640,038 | 468,723 | ||
14,400 | United Capital Corp. * | 316,779 | 276,480 | ||
2,097 | Wesco Financial Corp. | 810,373 | 801,054 | ||
413,614 | WHX Corp. * | 3,205,801 | 620,421 | ||
6,202,146 | 6,278,099 | 9.90% | |||
Electric Housewares & Fans | |||||
2,200 | National Presto Industries, Inc. | 89,068 | 141,196 | ||
53,100 | Ultrashort Oil & Gas Proshares | 1,866,764 | 1,418,301 | ||
1,955,832 | 1,559,497 | 2.46% | |||
Fabricated Metal Products | |||||
5,500 | Keystone Consol Industries, Inc. * | 54,850 | 60,500 | 0.10% | |
Filtration | |||||
157,900 | Flanders Corp. * | 803,761 | 955,295 | 1.51% | |
Financial Services | |||||
181,300 | Asta Funding, Inc. | 1,987,241 | 1,642,578 | ||
330,845 | BKF Capital Group, Inc. * | 1,200,242 | 744,401 | ||
507,840 | Cadus Corp. * | 821,627 | 827,779 | ||
3,700 | Capital Southwest Corp. | 370,955 | 385,651 | ||
271,570 | CoSine Communications, Inc. * | 668,135 | 722,376 | ||
117,200 | Kent Financial Services, Inc. * | 265,452 | 191,036 | ||
171,600 | MVC Capital, Inc. | 2,069,491 | 2,349,204 | ||
157,850 | Novt Corp. * | 384,457 | 285,709 | ||
6,850 | Webfinancial Corp. * | 62,599 | 116,450 | ||
87,000 | Zapata Corp. * | 606,489 | 608,130 | ||
8,436,688 | 7,873,314 | 12.42% | |||
Furniture & Fixtures | |||||
2,800 | Flexsteel Industries, Inc. | 33,460 | 31,500 | 0.05% | |
Industrial Instruments For Measurement, Display, and Control | |||||
75,100 | Electronic Sensors, Inc. | 307,988 | 341,705 | 0.54% | |
Insurance | |||||
490,500 | First Acceptance Corp. * | 1,842,388 | 1,569,600 | ||
18,900 | Montpelier Re Holdings Ltd. | 297,430 | 278,775 | ||
13,400 | Safety Insurance Group, Inc. | 467,735 | 477,710 | ||
2,607,553 | 2,326,085 | 3.67% | |||
IT Services | |||||
369,500 | New Horizons Worldwide Inc. * | 206,920 | 624,455 | ||
108,800 | Technology Solutions Company * | 816,478 | 507,008 | ||
1,023,398 | 1,131,463 | 1.78% | |||
Commercial Banks | |||||
83,500 | Center Financial Corp. | 718,284 | 707,245 | ||
297,600 | Corus Bankshares, Inc. * | 1,842,636 | 1,238,016 | ||
11,200 | Hanmi Financial Corp. | 69,069 | 58,352 | ||
418,900 | Preferred Bank * | 4,043,476 | 2,169,902 | ||
6,673,465 | 4,173,515 | 6.58% | |||
News Paper Publishing & Printing | |||||
25,700 | McClatchy Co. | 637,946 | 174,246 | 0.27% | |
Mailboxes & Lockers | |||||
77,200 | American Locker Group, Inc. * | 459,549 | 270,200 | 0.43% | |
Optical Instruments & Lenses | |||||
476,105 | Meade Instruments Corp. * | 756,080 | 428,495 | 0.68% | |
Security Services | |||||
1,627,683 | Sielox, Inc. * | 554,777 | 309,260 | 0.49% | |
Ship & Boat Building & Repairing | |||||
130,672 | Conrad Industries, Inc. * | 173,878 | 1,710,496 | 2.70% | |
Real Estate Investment Trusts | |||||
479 | USA Real Estate Investors Trust | 233,764 | 159,986 | 0.25% | |
Retail-Family Clothing Stores | |||||
116,800 | Stein Mart, Inc. * | 495,040 | 526,768 | 0.83% | |
Telecommunications | |||||
341,600 | NMS Communications * | 532,791 | 379,176 | 0.60% | |
Textile Mill Products | |||||
369,310 | International Textil Group, Inc. * | 809,057 | 129,259 | 0.20% | |
Total for Common Stock | $ 32,752,023 | $ 28,818,859 | 45.46% | ||
Preferreds | |||||
34,200 | Ameritrans Capital Corp. Pfd | 392,133 | 345,420 | ||
49,870 | Aristotle Corp. Pfd - I | 392,770 | 411,428 | ||
Total for Convertible Preferred Stock | $ 784,903 | $ 756,848 | 1.19% | ||
SHORT TERM INVESTMENTS | |||||
Money Market Fund | |||||
34,376,171 | First American Government Obligation Fund Cl Z 2.18% ** | 34,376,171 | 34,376,171 | 54.22% | |
Total for Short Term Investments | $ 34,376,171 | $ 34,376,171 | 54.22% | ||
Total Investments | $ 67,913,097 | $ 63,951,878 | 100.87% | ||
| Liabilities in excess of other Assets | (553,323) | (0.87)% | ||
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Net Assets | $ 63,398,555 | 100.00% | |||
* Non-Income producing securities. | |||||
** Dividend Yield | |||||
The accompanying notes are an integral part of the financial statements. |
PINNACLE VALUE FUND |
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BERTOLET CAPITAL TRUST |
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Statement of Changes in Net Assets | (Unaudited) | ||
Six Months | Year | ||
Ended | Ended | ||
6/30/2008 | 12/31/2007 | ||
From Operations: | |||
Net Investment Income | $ 196,583 | $ 713,312 | |
Net Realized Gain on Investments | 1,940,103 | 2,037,797 | |
Net Unrealized Appreciation (Depreciation) | (8,609,939) | 2,931,946 | |
Increase (Decrease) in Net Assets from Operations | (6,473,253) | 5,683,055 | |
From Distributions to Shareholders: | |||
Net Investment Income | 0 | (677,681) | |
Net Realized Gain from Security Transactions | 0 | (721,605) | |
Return of Capital | 0 | 0 | |
| 0 | (1,399,286) | |
From Capital Share Transactions: | |||
Proceeds From Sale of Shares | 9,122,686 | 30,220,329 | |
Shares issued in Reinvestment of Dividends | 0 | 1,370,512 | |
Cost of Shares Redeemed | (3,459,445) | (2,243,422) | |
Net Increase from Shareholder Activity | 5,663,241 | 29,347,419 | |
Net Increase in Net Assets | (810,012) | 33,631,188 | |
Net Assets at Beginning of Period | 64,208,567 | 30,577,379 | |
Net Assets at End of Period (a) | $ 63,398,555 | $ 64,208,567 | |
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Share Transactions: | |||
Issued | 607,111 | 1,963,453 | |
Reinvested | 0 | 88,592 | |
Redeemed | (233,250) | (143,693) | |
Net increase in shares | 373,861 | 1,908,352 | |
Shares outstanding beginning of Period | 4,124,865 | 2,216,513 | |
Shares outstanding end of Period | 4,498,726 | 4,124,865 | |
(a) Includes undistributed net investment income of $232,214 at June 30, 2008 and $35,631 at December 31, 2007. |
PINNACLE VALUE FUND |
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BERTOLET CAPITAL TRUST |
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Financial Highlights | |||||
Selected data for a share outstanding throughout the period: | (Unaudited) | ||||
Six Months | Year | Year | Year | Year | |
Ended | Ended | Ended | Ended | Ended | |
6/30/2008 | 12/31/2007 | 12/31/2006 | 12/31/2005 | 12/31/2004 | |
Net Asset Value - | |||||
Beginning of Period | $ 15.57 | $ 13.80 | $ 13.09 | $ 12.84 | $ 11.27 |
Net Investment Income (Loss) * | 0.04 | 0.23 | 0.24 | 0.15 | (0.02) |
Net Gains or Losses on Securities | |||||
(realized and unrealized) | (1.52) | 1.90 | 1.49 | 0.94 | 2.23 |
Total from Investment Operations | (1.48) | 2.13 | 1.73 | 1.09 | 2.21 |
Distributions from Net Investment Income | - | (0.17) | (0.20) | (0.10) | - |
Distributions from Capital Gains | - | (0.19) | (0.74) | (0.74) | (0.64) |
Distributions from Return of Capital | - | - | (0.08) | - | - |
- | (0.36) | (1.02) | (0.84) | (0.64) | |
Paid-in Capital from Redemption Fees (Note 2) (a) | - | - | - | - | - |
Net Asset Value - | |||||
End of Period | $ 14.09 | $ 15.57 | $ 13.80 | $ 13.09 | $ 12.84 |
Total Return | (9.51)% | 15.43 % | 13.23 % | 8.53 % | 19.65 % |
Ratios/Supplemental Data | |||||
Net Assets - End of Period (Thousands) | $ 63,399 | $ 64,209 | $ 30,577 | $ 17,175 | $ 7,633 |
Before Reimbursement | |||||
Ratio of Expenses to Average Net Assets | 1.49% | 1.49% | 1.62% | 1.90% | 2.17% |
Ratio of Net Income (Loss) to Average Net Assets | 0.60% | 1.53% | 1.64% | 0.68 % | (0.54)% |
After Reimbursement | |||||
Ratio of Expenses to Average Net Assets | 1.49% | 1.49% | 1.49% | 1.49% | 1.79% |
Ratio of Net Income (Loss) to Average Net Assets | 0.60% | 1.53% | 1.77% | 1.10 % | (0.16)% |
Portfolio Turnover Rate | 20.22% | 27.11% | 29.44% | 27.88% | 71.66% |
* Per share net investment Income (loss) determined on average shares outstanding during year. | |||||
(a) Less than $0.01 per share |
PINNACLE VALUE FUND
BERTOLET CAPITAL TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
1.)
ORGANIZATION:
Pinnacle Value Fund (”Fund”) is registered under the Investment Company Act of 1940 as an open-end investment management company and is the only series of the Bertolet Capital Trust, a Delaware business trust organized on January 1, 2003 (“Trust”). The Trust’s Declaration of Trust authorizes the Board of Trustees to issue an unlimited number of Fund shares. Each share of the Fund has equal voting, dividend, distribution, and liquidation rights. The Fund’s investment objective is long term capital appreciation with income as a secondary objective.
2.)
SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION:
The Fund will primarily invest in equities and convertible securities. Investments in securities are carried at market value. Securities traded on any exchange or on the NASDAQ over-the-counter market are valued at the last quoted sale price. Lacking a last sale price, a security is valued at its last bid price except when, in Adviser’s opinion, the last bid price does not accurately reflect the current value of the security. When market quotations are not readily available, when Adviser determines the last bid price does not accurately reflect the current value or when restricted securities are being valued, such securities are valued as determined in good faith by Adviser, in conformity with guidelines adopted by and subject to review of the Board of Trustees.
Fixed income securities are valued by using market quotations, but may be valued on the basis of prices furnished by a pricing service when Adviser believes such prices accurately reflect the fair market value of such securities. A pricing service uses electronic data processing techniques based on yield spreads relating to securities with similar characteristics to determine prices for normal institutional-size trading lots of debt securities without regard to sale or bid prices. When prices are not readily available from a pricing service, or when restricted or illiquid securities are being valued, securities are valued at fair value determined in good faith by Adviser, subject to review of the Board of Trustees. Short term investments in fixed income securities with maturities of less than 60 days when acquired, or which are within 60 days of maturity, are valued by using the amortized cost method.
The Fund adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“FAS 157”), effective January 1, 2008. In accordance with FAS 157, “fair value” is defined as the price that a Fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment. Various inputs are used in determining the value of a Fund’s investments. FAS 157 established a three-tier hierarchy of inputs to establish a classification of fair value measurements for disclosure purposes. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below:
Level 1 – quoted prices in active markets for identical securities
Level 2 – other significant observable inputs (including quoted prices for similar securities,
interest rates, prepayment speeds, credit risk, etc.)
PINNACLE VALUE FUND
BERTOLET CAPITAL TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining
fair value of investments)
The following is a summary of the inputs used to value the Fund’s investments as of June 30, 2008:
Valuation Inputs
Investment in Securities
Level 1 – Quoted Prices $63,398,555
Level 2 – Other Significant Observable Inputs
-
Level 3 – Significant Unobservable Inputs -
Total
$63,398,555
SHORT TERM INVESTMENTS:
The Fund may invest in money market funds and short term high quality debt securities such as commercial paper, repurchase agreements and certificates of deposit. Money market funds typically invest in short term instruments and attempt to maintain a stable net asset value. While the risk is low, these funds may lose value.
SECURITY TRANSACTIONS AND INVESTMENT INCOME:
The Company records security transactions based on a trade date. Dividend income is recognized on the ex-dividend date, and interest income is recognized on an accrual basis. Discounts and premiums on securities purchased are amortized over the lives of the respective securities.
INCOME TAXES:
Federal income taxes. The Company’s policy is to continue to comply with the requirements of the Internal Revenue Code that are applicable to regulated investment companies and to distribute all its taxable income to its shareholders. Therefore, no federal income tax provision is required.
Distribution to shareholders. Distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date.
In July 2006, 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 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 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
PINNACLE VALUE FUND
BERTOLET CAPITAL TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
threshold would be recorded as a tax benefit or expense in the current year. Effective June 29, 2007, the Fund adopted FIN 48 which had no material impact on the Fund's financial statements.
ESTIMATES:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Reclassification of Capital Accounts. U.S. generally accepted accounting principles require that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or NAV per share. For the six months ended June 30, 2008 there were no reclassifications.
The Fund imposes a redemption fee of 1.00% on shares redeemed within one year of purchase. The fee is assessed on an amount equal to the Net Asset Value of the shares at the time of redemption and is deducted from proceeds otherwise payable to the shareholder. For the six months ended June 30, 2008, $2,331 of redemption fees were returned to the Fund through shareholder redemptions.
3.)
INVESTMENT ADVISORY AGREEMENT
The Fund has entered into an Investment Advisory Agreement with Bertolet Capital LLC (Adviser). Under the Agreement, Adviser receives a fee equal to the annual rate of 1.25% of the Fund’s average daily net assets. For the six months ended June 30, 2008, the Adviser earned $410,083 in Advisor fees. At June 30, 2008 the Fund owed the Adviser a net fee of $355,987. An officer and trustee of the Fund is also an officer and trustee of the Adviser.
Advisory Agreement provides for expense reimbursement from the Adviser, if Fund total expenses, exclusive of taxes, interest on borrowings, dividends on securities sold short, brokerage commissions and extraordinary expenses exceed 1.49% average daily net assets through June 30, 2008.
Adviser will be entitled to reimbursement of fees waived or reimbursed by Adviser to the Fund. Fees waived or expenses reimbursed during a given year may be paid to Adviser during the following three year period to the extent that payment of such expenses does not cause the Fund to exceed the expense limitation. At June 30, 2008, amounts subject to future recoupment are as follows:
Fiscal Year Ended | Recoverable Through | Fund |
December 31, 2005 | December 31, 2008 | 51,592 |
December 31, 2006 | December 30, 2009 | 27,914 |
In 2008 the Adviser earned $21,178 of $51,592 available for reimbursement of prior expense waivers.
PINNACLE VALUE FUND
BERTOLET CAPITAL TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
4.)
PURCHASES AND SALES OF SECURITIES
For the six months ended June 30, 2008, purchases and sales of investment securities other than U.S. Government obligations/short-term investments totaled $15,814,894 and $5,756,174 respectively.
Fund may purchase put and call options. Put options are purchased to hedge against a decline in value of Fund securities. If such a decline occurs, put options permit Fund to sell securities underlying such options at exercise price or to close out options at a profit. Premiums paid for put or call options plus transaction costs will reduce the benefit, if any, realized upon option exercise and unless price of the underlying security rises or declines sufficiently, option may expire worthless. In addition, in the event that price of security in connection with option was purchased moves in a direction favorable to Fund, benefits realized as result of such favorable movement will be reduced by premium paid for option and related transaction costs. Written and purchased options are non-income producing securities.
5.)
FEDERAL TAX INFORMATION
Net Investment income/(loss) and net realized gains/(losses) differ for financial statement and tax purposes due to differing treatments of wash sale losses deferred and losses realized after Oct. 31.
Differences between book basis and tax basis unrealized appreciation/(depreciation) are attributable to tax deferral of losses on certain derivative instruments.
The tax character of distributions paid during the six months ended June 30, 2008 and the years ended December 31, 2007 is as follows:
2008 | 2007 | |
Net Investment Income | $ 0 | $ 677,681 |
Long Term Capital Gain | $ 0 | $ 721,605 |
Return of Capital | $ 0 | $0 |
At June 30, 2008, the components of accumulated earnings/(losses) on a tax basis were as follows:
Costs of investments for federal income tax purposes $67,913,097
Gross tax unrealized appreciation $5,839,311
Gross tax unrealized depreciation (9,800,532)
Net tax unrealized depreciation (3,961,219)
Undistributed ordinary income 232,214
Accumulated realized gain on investments –net 3,700,599
Accumulated Loss $ (28,406)
PROXY VOTING (Unaudited)
A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted those proxies during the six month period ended June 30, 2008, are available without charge upon request by calling 877-369-3705 or visiting www.pinnaclevaluefund.com or www.sec.gov.
PINNACLE VALUE FUND
BERTOLET CAPITAL TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
QUARTERLY 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 March 31 and Sept. 30. 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 Nov. 29, 2004. The Fund’s Forms N-Q are available at www.sec.gov or 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 1-877-369-3705.
SUPPLEMENTAL INFORMATION
The following table provides biographical information with respect to each Trustee.
Name, Age | Position with Fund | Term of Office Length of Time Served | Principal Occupation During Past 5 years | Other Directorships |
Interested Trustee | ||||
John E. Deysher, CFA (52) | Trustee | Unlimited | President, Secretary, Treasurer | None |
Since Inception | Pinnacle Value Fund | |||
Principal, Portfolio Manager | ||||
Royce & Associates | ||||
Independent Trustees | ||||
Edward P. Breau, CFA (74) | Trustee | Unlimited | Private Investor | None |
Since Inception | ||||
Richard M. Connelly (52) | Trustee | Unlimited | General Counsel | None |
Since Inception | JG Wentworth (finance) | |||
James W. Denney (42) | Trustee | Unlimited | President, Mohawk Asset | Director, Electric |
Since Inception | Management | City Funds |
TRUSTEES AND SERVICE PROVIDERS
Trustees: Edward P. Breau, Richard M. Connelly, James W. Denney, John E. Deysher
Transfer Agent: Mutual Shareholder Services, 8000 Town Centre Dr, Ste 400, Broadview Heights, OH 44147
Custodian: US Bank, 425 Walnut St., Cincinnati OH 45202
Independent Registered Public Accounting Firm: Tait, Weller & Baker LLP, 1818 Market St, Suite 2400, Philadelphia PA 19103
Expense Example
As a shareholder of the Pinnacle Value Fund, you incur one type of cost: management fees. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the 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, January 1, 2008 through June 30, 2008.
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 ratios and an assumed rate of return of 5% per year before expenses, which are not the Fund’s actual returns. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in 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.
Pinnacle Value Fund | Beginning Account Value | Ending Account Value | Expenses Paid During the Period* |
January 1, 2008 | June 30, 2008 | January 1,2008 to June 30, 2008 | |
Actual | $1,000.00 | $904.95 | $7.06 |
Hypothetical | |||
(5% Annual Return before expenses) | $1,000.00 | $1,017.45 | $7.47 |
* Expenses are equal to the Fund's annualized expense ratio of 1.49%, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). | |||
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Item 2. Code of Ethics Not applicable.
Item 3. Audit Committee Financial Expert Not applicable.
Item 4. Principal Accountant Fees and Services Not applicable.
Item 5. Audit Committee of Listed Companies. Not applicable.
Item 6. Schedule of Investments. Included in Report to Shareholders.
Item 7. Disclosure of Closed End fund Proxy Voting Policies/Procedures. 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. Not applicable.
Item 11. Controls and Procedures.
(a)
Disclosure Controls & Procedures. Principal executive and financial officers have concluded that Registrant’s disclosure controls & procedures are effective based on their evaluation as of a date within 90 days of the filing date of this report.
(b)
Internal Controls. There were no significant changes in Registrant’s internal controls of in other factors that could significantly effect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Item 12. Exhibits.
(a)(1)
EX-99.CODE ETH. Filed herewith.
(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.
Bertolet Capital Trust
By /s/John E. Deysher President
*John E. Deysher President
Date September 4, 2008
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/John E. Deysher Treasurer
*John E. Deysher Treasurer
Date September 4, 2008