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)
745 Fifth Ave., Suite 2400
New York, NY 10151
(Address of principal executive offices)
(Zip code)
John E. Deysher
745 Fifth Ave., Suite 2400,
New York, NY 10151
(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 605-7100
Date of fiscal year end: December 31
Date of reporting period: June 30, 2013
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, 2013
Dear Fellow Shareholders,
Our Fund’s NAV rose by 7.1% in the first half of 2013. We ended the period at 50 positions with a weighted average market cap of $400 million, a dividend yield of 1.5%, and a price to book value ratio of 100%. Our performance lagged the benchmark R2000 (which rose 15.9%) for reasons that will be explained in a moment.
Total Return YTD 2012 2011 2010 2009
Pinnacle Value Fund 7.1% 18.9% (4.9)% 13.5% 12.7%
Russell 2000 15.9 16.3 (4.2) 26.9 27.1
S&P 500 13.8% 15.9% 2.1% 15.1% 26.5%
(All returns include dividend reinvestment. Past returns do not predict future results. Results do not reflect taxes payable on distributions or redemptions of shares held in taxable accounts.)
Portfolio Activity
As can be seen from the box scores above, domestic equities had a strong first half, leaving most indices at or close to record highs. Our lagging results can be explained by three key factors.
1. Large cash position. This is driven by the lack of compelling opportunities trading at valuations we find attractive and is not unusual for value investors like us. Proceeds from two acquisitions that closed in the first half (Seabright Insurance, Kent Financial) have not been reinvested (yet) and we’ve trimmed back positions where we felt valuations a bit excessive.
Cash earns next to nothing but is “money good” when reached for.
2. Robust investor appetite for risk, fostered by continuing monetary stimulus by Central Banks worldwide. Firms with a high degree of financial leverage have outperformed those with strong balance sheets. Our small cap portfolio is chock full of strong firms with balance sheets capable of withstanding the economic hiccups that inevitably occur. In 2013 that’s worked against us.
3. Most of our larger positions, which did very well in 2012, have lagged the market’s advance in 2013. They are still up, but less than the market. We are comfortable with virtually all our larger positions and expect continued value creation activity from each: continued earnings growth, balance sheet strengthening, dividend reinstatements, share repurchases and other initiatives. For example, Wilshire Bank recently made two strategic acquisitions and reinstated their dividend. Montpelier Re and MVC Capital are buying back shares at discounts to book value.
While underperforming the benchmark is never satisfying, we’ll let valuations be our guide. One of our biggest challenges at times like these is not to capitulate and lower our standards of selection to “justify” participation in an upward trending market. It’s not in our nature to chase stocks, especially when US equities (and small/microcaps in particular) are at record highs. One rarely sees the terms “margin of safety”, “capital preservation” or “risk aversion” in the press these days- a sign of the times, I guess. However, we’re not spending afternoons at the movies, and we come to work every day looking for bargains. If anything, our research intensity has increased as we want to be fully prepared to exploit any dislocation that may occur.
Banks, Insurance and other Financials….
Some of you may wonder about the concentration of these issues in our Top 10 holdings.
Most have been in the portfolio for years, and several were acquired during the depths of the financial crisis 4-5 years ago. At that time, investors shunned these issues fearing that banks would be hurt by loan losses, and insurance companies by portfolio losses. Many felt the niche businesses owned by our business development firms (MVC Capital and Capital Southwest) wouldn’t survive the coming recession. Fortunately we’ve followed these firms for years and had personal relationships with top management. After speaking with them we were convinced the stronger ones would survive, and there was good money to made on the other side. We began cautiously buying. Of course, the shares traded lower. In some cases (Anchor Bank, Preferred Bank and Wilshire Bank) the problems became so acute the regulators stepped in and forced them to raise equity capital at very attractive terms - which we were able to participate in.
Ultimately each survived and, with the benefit of additional capital, accommodative monetary policy and an economic rebound, returned to prosperity. Share prices rebounded accordingly, and the positions grew in size to what you see today. In our opinion each is a vastly better institution for having gone through the crisis: better managements, balance sheets, underwriting standards and customer relationships. While the worst is probably behind us and the institutions are doing well, we are monitoring them closely for exposure to higher interest rates.
By now you should have received your quarter end statement. As of today, we’ll most likely pay a distribution at year end, which’ll be taxable to those who hold shares in taxable accounts. Currently our net realized gains ( 81% long term) comprise about 5.8% of Fund assets, which is a rough estimate for your planning purposes. We’ll have a final amount on Oct. 31. As always, should you have any questions about your account or the Fund, don’t hesitate to call or write.
John E. Deysher Pinnacle Value Fund
President & Portfolio Manager 745 Fifth Ave.-2400
212-605-7100 New York, NY 10151
TOP 10 POSITIONS % net assets
1. First Acceptance- non standard personal auto insurance 4.3
2. Hallmark Financial- multi-line specialty insurer 4.0
3. Preferred Bank- Chinese American bank 3.9
4. Wilshire Bank- Korean American bank 3.9
5. Montpelier Re- multi-national re-insurer 3.9
6. Capital Southwest- business development co. 3.8
7. MVC Capital- business development co. 3.1
8. Anchor Bancorp- savings bank 2.7
9. Asta Funding- specialty finance co. 2.5
10. Christopher & Banks- woman’s retailer �� 2.5
Total 34.6%
YTD TOP 5 WINNERS (realized & unrealized gains)
1. Capital Southwest $704,500
2. First Acceptance 608,700
3. Christopher & Banks 385,300
4. Preferred Bank 338,400
5. Wilshire Bank 264,300
Total $2,301,200
YTD TOP 5 SINNERS (realized & unrealized losses)
1. Asta Funding $148,900
2. National Security 76,300
3. Hallmark Financial 62,700
4. Ambassador Group 49,800
5. Stanley Furniture 38,000
Total $375,700
SECURITY CLASSIFICATIONS
Government & Prime Money Market Funds 43.2%
Insurance 17.3
Banks & Thrifts 10.6
Closed End & Exchange Traded Funds 9.6
Financial Services 7.1
Consumer Goods & Services 6.0
Real Estate Investment Trusts 2.8
Conglomerates 2.0
Industrial Good & Services 1.4
Total 100%
PINNACLE VALUE FUND |
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BERTOLET CAPITAL TRUST |
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| Schedule of Investments |
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| June 30, 2013 (Unaudited) | |
Shares/Principal Amount | Basis |
| Market Value | % of Assets | ||
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COMMON STOCKS |
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Banks & Thrifts |
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93,800 |
| Anchor Bancorp * | $ 720,836 |
| $ 1,573,026 |
|
800 |
| Eastern Virginia Bank * | 4,763 |
| 4,000 |
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138,604 |
| Preferred Bank * | 1,031,442 |
| 2,284,194 |
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1,016 |
| United Community Financial Corp. * | 4,203 |
| 4,724 |
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342,007 |
| Wilshire Bancorp | 1,017,026 |
| 2,264,086 |
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| 2,778,270 |
| 6,130,030 | 10.56% |
Conglomerate |
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100 |
| Steel Partners Holdings L.P. * | 1,109 |
| 1,368 |
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142,049 |
| Regency Affiliates, Inc. * | 750,235 |
| 1,136,392 |
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| 751,344 |
| 1,137,760 | 1.96% |
Fabricated Metal Products |
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100 |
| Circor International, Inc. | 4,357 |
| 5,086 |
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15,719 |
| Hardinge, Inc. | 51,305 |
| 232,327 |
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12,150 |
| Keystone Consol Industries, Inc. * | 95,170 |
| 109,107 |
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| 150,832 |
| 346,520 | 0.60% |
Financial Services |
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170,687 |
| Asta Funding, Inc. * | 239,960 |
| 1,476,443 |
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238,445 |
| BKF Capital Group, Inc. * | 783,446 |
| 240,829 |
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512,840 |
| Cadus Corp. * | 828,076 |
| 717,976 |
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285,670 |
| CoSine Communications, Inc. * | 697,285 |
| 548,486 |
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300 |
| Gleacher & Company, Inc. * | 4,147 |
| 4,164 |
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1,000 |
| Special Diversified Opportunities, Inc. | 990 |
| 901 |
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1,141,027 |
| SWK Holdings Corp. * | 970,970 |
| 1,141,027 |
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| 3,524,874 |
| 4,129,826 | 7.12% |
Furniture & Fixtures |
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20,000 |
| Hooker Furniture | 210,009 |
| 325,200 |
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10,183 |
| Flexsteel Industries, Inc. | 52,316 |
| 248,262 |
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100 |
| Stanley Furniture Company, Inc. * | 283 |
| 400 |
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| 262,608 |
| 573,862 | 0.99% |
Greeting Cards & Giftwrap |
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39,600 |
| CSS Industries, Inc. | 640,739 |
| 987,228 | 1.70% |
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Insurance |
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31,448 |
| EMC Insurance Group, Inc. | 578,620 |
| 825,824 |
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1,525,886 |
| First Acceptance Corp. * | 3,102,939 |
| 2,502,453 |
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250,724 |
| Hallmark Financial Services, Inc. * | 1,640,612 |
| 2,291,617 |
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26,840 |
| Independence Holding Co. | 116,279 |
| 317,249 |
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89,900 |
| Montpelier Re Holdings Ltd. | 1,177,775 |
| 2,248,399 |
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98,818 |
| National Security Group, Inc. | 820,249 |
| 760,899 |
|
900 |
| Navigators Group, Inc. * | 33,483 |
| 51,336 |
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80,400 |
| Old Republic International Corp. | 627,565 |
| 1,034,748 |
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| 8,097,522 |
| 10,032,525 | 17.29% |
Retail |
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17,150 |
| ALCO Stores, Inc. * | 128,985 |
| 190,363 |
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135 |
| Cache, Inc. * | 423 |
| 601 |
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218,158 |
| Christopher & Banks Corp. * | 229,006 |
| 1,470,385 |
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| 358,414 |
| 1,661,349 | 2.86% |
Test & Measurement |
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50,200 |
| Electro Sensors, Inc. | 199,619 |
| 206,824 | 0.36% |
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Security Services |
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65,107 |
| Costar Technologies, Inc. (a) * | 554,772 |
| 186,206 | 0.32% |
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Educational Services |
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70,201 |
| Ambassador Group, Inc. | 297,108 |
| 249,214 | 0.43% |
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Real Estate Investment Trusts |
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30,700 |
| American Land Lease, Inc. PFD 7.75% Series A | 644,555 |
| 759,825 |
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41,500 |
| Getty Realty Corp. | 586,745 |
| 856,975 |
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2,100 |
| Vestin Realty Mortgage I, Inc. * | 2,597 |
| 3,591 |
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4,400 |
| Vestin Realty Mortgage II, Inc. * | 6,377 |
| 7,260 |
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| 1,240,274 |
| 1,627,651 | 2.80% |
Trucking |
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28,273 |
| P.A.M. Transportation Services, Inc. * | 108,706 |
| 289,798 |
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400 |
| Patriot Transportation Holding, Inc. * | 12,086 |
| 12,016 |
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| 120,792 |
| 301,814 | 0.52% |
Water Supply |
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100 |
| Consolidated Water Co. | 731 |
| 1,143 | 0.00% |
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Total for Common Stock | $ 18,977,899 |
| $ 27,571,952 | 47.51% | ||
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Closed-End & Exchange Traded Funds |
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16,100 |
| Capital Southwest Corp. | 1,169,463 |
| 2,219,063 |
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2,421 |
| Central Europe & Russia Fund, Inc. * | 29,150 |
| 72,194 |
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5,190 |
| Guggenheim Solar * | 79,579 |
| 123,262 |
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64,780 |
| Japan Smaller Capitalization Fund, Inc. * | 414,665 |
| 555,165 |
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143,437 |
| MVC Capital, Inc. | 1,254,961 |
| 1,805,872 |
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27,359 |
| Petroleum & Resources Corp. | 462,344 |
| 702,374 |
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�� 3,417 |
| Singapore Fund, Inc. | 20,742 |
| 44,182 |
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4,762 |
| Turkish Investment Fund, Inc. * | 20,302 |
| 75,668 |
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Total for Closed-End & Exchange Traded Funds | $ 3,451,206 |
| $ 5,597,780 | 9.65% | ||
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SHORT TERM INVESTMENTS |
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Money Market Fund |
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500,000 |
| Invesco Liquid Assets Portfolio Fund Institutional Class 0.10% ** | 500,000 |
| 500,000 |
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500,000 |
| Federated Money Market Prime Obligation Fund Institutional Class 0.06% ** | 500,000 |
| 500,000 |
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24,072,403 |
| First American Government Obligation Fund Class Z 0.02% ** | 24,072,403 |
| 24,072,403 |
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Total for Short Term Investments | $ 25,072,403 |
| $ 25,072,403 | 43.20% | ||
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| Total Investments | $ 47,501,508 |
| $ 58,242,135 | 100.35% |
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| Liabilities in excess of other Assets |
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| (205,142) | -0.35% |
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| Net Assets |
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| $ 58,036,993 | 100.00% |
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(a) Level 2 Security |
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* Non-Income producing securities. |
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** Variable rate security; the money market rate shown represents the yield at June 30, 2013. |
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| The accompanying notes are an integral part of the financial statements. |
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PINNACLE VALUE FUND |
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BERTOLET CAPITAL TRUST |
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Statement of Assets and Liabilities |
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June 30, 2013 (Unaudited) |
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Assets: |
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Investment Securities at Market Value | $ 58,242,135 |
(Identified Cost $47,501,508) |
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Cash | 404,557 |
Receivables: |
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Shareholder Subscriptions | 6,932 |
Portfolio Securities Sold | 380,754 |
Dividends and Interest | 32,474 |
Prepaid Expenses | 13,399 |
Total Assets | 59,080,251 |
Liabilities: |
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Payable to Advisor | 1,014,437 |
Shareholder Redemptions | 549 |
Portfolio Securities Purchased | 12,086 |
Accrued Expenses | 16,186 |
Total Liabilities | 1,043,258 |
Net Assets | $ 58,036,993 |
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Net Assets Consist of: |
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Paid-In Capital | $ 45,432,077 |
Accumulated Undistributed Net Investment Loss | (224,301) |
Accumulated Realized Gain on Investments - Net | 2,088,590 |
Unrealized Appreciation in Value of Investments Based on Identified Cost - Net | 10,740,627 |
Net Assets | $ 58,036,993 |
Net Asset Value and Redemption Price |
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Per Share ($56,036,993/3,398,456 shares outstanding), no par value, unlimited |
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shares authorized | $ 17.08 |
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PINNACLE VALUE FUND |
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BERTOLET CAPITAL TRUST |
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Statement of Operations |
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For the six months ended June 30, 2013 (Unaudited) |
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Investment Income: |
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Dividends | $ 184,879 |
Interest | 2,094 |
Total Investment Income | 186,973 |
Expenses: |
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Investment Advisor Fees (Note 3) | 345,183 |
Transfer Agent & Fund Accounting Fees | 20,954 |
Insurance Fees | 7,980 |
Custodial Fees | 8,478 |
Audit Fees | 7,480 |
Registration Fees | 3,499 |
Trustee Fees | 4,987 |
Legal Fees | 998 |
Miscellaneous Fees | 3,493 |
Printing & Mailing Fees | 2,494 |
Total Expenses | 405,546 |
Expense Recoupment (Note 3) | 5,728 |
Net Expenses | 411,274 |
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Net Investment Loss | (224,301) |
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Realized and Unrealized Gain (Loss) on Investments: |
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Net Realized Gain on Investments | 2,223,220 |
Capital Gain Distributions from Regulated Investment Companies | 48,940 |
Change in Unrealized Appreciation on Investments | 1,716,637 |
Net Realized and Unrealized Gain on Investments | 3,988,797 |
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Net Increase in Net Assets from Operations | $ 3,764,496 |
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PINNACLE VALUE FUND |
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BERTOLET CAPITAL TRUST |
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Statements of Changes in Net Assets | (Unaudited) |
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| Six Months |
| Year |
| Ended |
| Ended |
| 6/30/2013 |
| 12/31/2012 |
From Operations: |
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Net Investment Loss | $ (224,301) |
| $ (131,648) |
Net Realized Gain on Investments | 2,223,220 |
| 1,232,019 |
Capital Gain Distributions from Regulated Investment Companies | 48,940 |
| 336,256 |
Net Unrealized Appreciation | 1,716,637 |
| 7,127,874 |
Increase in Net Assets from Operations | 3,764,496 |
| 8,564,501 |
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From Distributions to Shareholders: |
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Net Realized Gain from Security Transactions | - |
| (1,787,127) |
Total distributions to shareholders | - |
| (1,787,127) |
From Capital Share Transactions: (a) |
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Proceeds From Sale of Shares | 3,579,232 |
| 4,956,212 |
Shares issued in Reinvestment of Dividends | - |
| 1,663,219 |
Cost of Shares Redeemed | (1,944,099) |
| (8,398,971) |
Net Increase (Decrease) from Shareholder Activity | 1,635,133 |
| (1,779,540) |
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Net Increase in Net Assets | 5,399,629 |
| 4,997,834 |
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Net Assets at Beginning of Period | 52,637,364 |
| 47,639,530 |
Net Assets at End of Period (b) | $ 58,036,993 |
| $ 52,637,364 |
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Share Transactions: |
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Issued | 214,859 |
| 323,531 |
Reinvested | - |
| 105,134 |
Redeemed | (117,222) |
| (557,787) |
Net increase in shares | 97,637 |
| (129,122) |
Shares outstanding beginning of Period | 3,300,819 |
| 3,429,941 |
Shares outstanding end of Period | 3,398,456 |
| 3,300,819 |
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(a) Net of Redemption Fees of $2,072 for the period ended June 30, 2013, and $6,474 for the period ended December 31, 2012. | |||
(b) Includes undistributed net investment income of $(224,301) at June 30, 2013 and $0 at December 31, 2012. |
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PINNACLE VALUE FUND |
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BERTOLET CAPITAL TRUST |
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Financial Highlights |
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Selected data for a share outstanding throughout the period: | (Unaudited) |
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| Six Months |
| Year | Year | Year | Year | Year |
| Ended |
| Ended | Ended | Ended | Ended | Ended |
| 6/30/2013 |
| 12/31/2012 | 12/31/2011 | 12/31/2010 | 12/31/2009 | 12/31/2008 |
Net Asset Value - |
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Beginning of Period | $ 15.95 |
| $ 13.89 | $ 14.61 | $ 12.87 | $ 11.45 | $ 15.57 |
Net Investment Income (Loss) * | (0.07) |
| (0.04) | (0.13) | (0.12) | (0.04) | 0.15 |
Net Gains or Losses on Securities |
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(realized and unrealized) | 1.20 |
| 2.66 | (0.59) | 1.86 | 1.49 | (2.80) |
Total from Investment Operations | 1.13 |
| 2.62 | (0.72) | 1.74 | 1.45 | (2.65) |
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Distributions from Net Investment Income | - |
| - | - | - | - | (0.14) |
Distributions from Capital Gains | - |
| (0.56) | - | - | (0.03) | (1.33) |
| - |
| (0.56) | - | - | (0.03) | (1.47) |
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Paid-in Capital from Redemption Fees (Note 2) (a) | - |
| - | - | - | - | - |
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Net Asset Value - |
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End of Period | $ 17.08 |
| $ 15.95 | $ 13.89 | $ 14.61 | $ 12.87 | $ 11.45 |
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Total Return | 7.08 % | (c) | 18.88 % | (4.93)% | 13.52 % | 12.71 % | (16.87)% |
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Ratios/Supplemental Data |
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Net Assets - End of Period (Thousands) | $ 58,037 |
| $ 52,637 | $ 47,640 | $ 64,475 | $ 59,795 | $ 57,365 |
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Before Reimbursement |
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Ratio of Expenses to Average Net Assets | 1.47% | (b) | 1.49% | 1.48% | 1.47% | 1.47% | 1.44% |
Ratio of Net Income (Loss) to Average Net Assets | (0.79)% | (b) | (0.26)% | (0.93)% | (0.91)% | (0.35)% | 1.12% |
After Reimbursement |
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Ratio of Expenses to Average Net Assets | 1.49% | (b) | 1.49% | 1.47% | 1.47% | 1.49% | 1.49% |
Ratio of Net Income (Loss) to Average Net Assets | (0.82)% | (b) | (0.26)% | (0.91)% | (0.91)% | (0.37)% | 1.06% |
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Portfolio Turnover Rate | 1.18% | (c) | 8.14% | 34.11% | 5.46% | 63.12% | 66.37% |
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* Per share net investment Income (loss) determined on average shares outstanding during year. |
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(a) Less than $0.01 per share |
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(b) Annualized |
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(c) Not Annualized |
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PINNACLE VALUE FUND
BERTOLET CAPITAL TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013 (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 on that day. Lacking a last sale price, a security is valued at its last bid price on that day, except when, in the 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. 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 Trust has performed an analysis of all existing investments to determine the significance and character of all inputs to their fair value determination. Various inputs are used in determining the value of each investment which are summarized in the following three broad levels:
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, yield curves & similar data.)
Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining
fair value which may require a high degree of judgement)
The availability of observable inputs may vary by security and is affected by a wide variety of factors including type of security, liquidity and other characteristics unique to the security. If valuation is based on models or inputs that are less observable or unobservable in the market, determination of fair value requires more judgment. Thus, the degree of judgment exercised in determining fair value is greatest for Level 3 investments. Inputs used in valuing securities are not indicative of associated risks. The below table summarizes the inputs used at June 30 2013:
Level 1 Level 2 Level 3 Total
Equity * $32,983,526 186,206 0 $ 33,169,732
Money Market Funds 25,072,403 0 0 25,072,403
Investments at Market $58,055,929 186,206 0 $ 58,242,135
* See Schedule of Investments for industry breakout.
PINNACLE VALUE FUND
BERTOLET CAPITAL TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013 (UNAUDITED)
Fund has adopted the financial accounting reporting rules required by the Derivatives and Hedging Topic of FASB Accounting Standards Codification (FASB ASC). Fund is required to include enhanced disclosure that enables investors to understand how and why a fund uses derivatives, how they are accounted for and how they affect a fund’s results. For six months end June 30, 2013, Fund held no derivative instruments.
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. At June 30, 2013 the Fund invested approximately 43% of net assets in money market funds.
SECURITY TRANSACTIONS AND INVESTMENT INCOME:
The Fund 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 Fund’s policy is to continue to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all 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. All short term capital gain distributions are ordinary income distributions for tax purposes.
The Fund recognizes the tax benefits of uncertain tax positions only when the position is “more-likely-than-not” to be sustained upon examination by tax authority. Management has analyzed the Fund’s tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on the prior three year returns or expected to be taken on the Fund’s 2012 tax return. The Fund is not aware of any tax position for which it is reasonably possible that the total amount or unrecognized tax benefits will change materially in the next 12 months.
ESTIMATES:
Preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the financial statement date and reported revenues and expenses during the reporting period. Actual results could differ from those estimates.
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, 2013, $2,072 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, 2013, Adviser earned $345,183 in fees.
A Fund officer and trustee are also an officer and trustee of the Adviser. Advisory Agreement provides for expense reimbursement and fee waivers by Adviser, if Fund Annual Total
PINNACLE VALUE FUND
BERTOLET CAPITAL TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013 (UNAUDITED)
Expenses exceed 1.49%, of average daily net assets through April 30, 2013.
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 if payment of such expenses does not cause the Fund to exceed the expense limitation. For the year ended December 31, 2012, the Adviser recouped $879 of prior waiver/reimbursements from the Fund and has $7,829 available for recoupment expiring December 31, 2014.
4.)
PURCHASES AND SALES OF SECURITIES
For the six months ended June 30, 2013, purchases and sales of investment securities other than U.S. Government obligations/short-term investments totaled $396,826 and $4,987,050, 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 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.
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.
The tax nature of distributions paid during six months ended June 30, 2013 and the year ended Dec 31, 2012 are:
| 2013 | 2012 |
Net Investment Income | $ 0 | $ 0 |
Long Term Capital Gain | $ 0 | $ 1,787,127 |
At December 31, 2012, the components of accumulated earnings/(losses) on a tax basis were as follows:
Costs of investments for federal income tax purposes $44,770,984
Gross tax unrealized appreciation $11,238,058
Gross tax unrealized depreciation (2,608,784)
Net tax unrealized appreciation 8,629,274
Accumulated realized gain on investments –net 211,146
Accumulated Gain $ 8,840,420
6.) SUBSEQUENT EVENTS
Management has evaluated Fund related events and transactions occurring subsequent to yearend. There were no events or transactions that occurred during this period that materially impacted the Fund’s financial statements.
7.) NEW ACCOUNTING PRONOUNCEMENT
In December 2011, FASB issued ASU No. 2011-11 related to disclosures about offsetting
PINNACLE VALUE FUND
BERTOLET CAPITAL TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013 (UNAUDITED)
assets and liabilities. The amendments in this ASU require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The ASU is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The guidance requires retrospective application for all comparative periods presented. The Adviser is currently evaluating the impact ASU 2011-11 will have on the financial statement disclosures.
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 most recent 12 month period ended June 30, are available without charge upon request by calling 877-369-3705 or visiting www.pinnaclevaluefund.com or www.sec.gov.
QUARTERLY PORTFOLIO HOLDINGS (unaudited)
Fund files a complete schedule of investments with the SEC for the first and third quarter of each fiscal year on Form N-Q. Fund’s first and third fiscal quarters end on March 31 and Sept. 30. Form N-Q filing must be made within 60 days of the end of the quarter, and Fund’s first Form N-Q was filed with the SEC on Nov. 29, 2004. Fund Form N-Qs 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 |
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Interested Trustee |
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John E. Deysher, CFA (57) | Trustee | Unlimited | President, Secretary, Treasurer | None |
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| Since Inception | Pinnacle Value Fund |
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Independent Trustees |
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Edward P. Breau, CFA (80) | Trustee | Unlimited | Private Investor | None |
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Richard M. Connelly (57) | Trustee | Unlimited | Counsel, CCO | None |
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| Since Inception | JG Wentworth (finance) |
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James W. Denney (47) | Trustee | Unlimited | President, Mohawk Asset | None |
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| Since Inception | Management |
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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- 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,- 2400, Philadelphia PA 19103
Expense Example (Unaudited)
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, 2013 through June 30, 2013.
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.
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Pinnacle Value Fund | Beginning Account Value | Ending Account Value | Expenses Paid During the Period* |
| January 1, 2013 | June 30, 2013 | January 1, 2013 to June 30, 2013 |
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Actual | $1,000.00 | $1,070.85 | $7.65 |
Hypothetical |
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(5% Annual Return before expenses) | $1,000.00 | $1,017.41 | $7.45 |
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* Expenses are equal to the Fund's annualized expense ratio of 1.49%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
Item 2. Code of Ethics
Registrant has adopted a Code of Ethics applicable to its principal executive officer, principal financial officer and other persons performing similar functions. Registrant has not made any amendments to or granted any waivers from any provision of this Code of Ethics during the period covered by this report.
Item 3. Audit Committee Financial Expert
Registrant’s Board of Trustees has determined that it does not have an audit committee financial expert. Registrant does not feel the absence of a financial expert impacts the ability of audit committee to fulfil its requirement because of the (1) straightforward nature of the Fund’s investment & accounting requirements; (2) fact that transfer agent and accounting functions are performed by an independent third party; (3) fact that annual results are audited by an independent accounting firm; (4) fact that there is only one fund in fund complex;(5) aggregate financial expertise of all Trustees is adequate
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 August 6, 2013
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 August 6, 2013