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 number811-21291
Bertolet Capital Trust
(Exact name of registrant as specified in charter)
745 Fifth Avenue, Suite 2400
New York, NY 10151
(Address of principal executive offices)
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:December 31, 2020
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.
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Fund’s website www.pinnaclevaluefund.com, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
PINNACLE VALUE FUND®
A SERIES OF THE
BERTOLET CAPITAL TRUST
ANNUAL REPORT
DECEMBER 31, 2019
www.pinnaclevaluefund.com
PINNACLE VALUE FUND 1
BERTOLET CAPITAL TRUST
Pinnacle Value Fund Annual Report December 31, 2019
Dear Fellow Shareholders,
Total Return | 2019 | 2018 | 2017 | 2016 | 2015 |
Pinnacle Value Fund | 10.7% | (11.8)% | (0.1)% | 16.5% | (6.0)% |
Russell 2000 | 26.5 | (11.0) | 14.6 | 21.4 | (4.4) |
S&P 500 | 32.6% | (4.4)% | 21.8% | 12.0% | 1.4% |
(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.)
Fund Performance
Our Fund rose 10.7% in 2019 while the benchmark R2000 rose 26.5%. Our underperformance was driven by a few factors. First, our cash levels remained high throughout the year. The market provided very few opportunities to deploy cash in meaningful amounts at reasonable valuations. Proceeds from positions sold were temporarily placed in government money market funds yielding 1.5%. Next, investors favored high growth companies in high growth industries like IT, technology, healthcare and biotech. Already enthusiastic about high priced growth stocks, many turned euphoric driving prices even higher. Finally, we had some positions which did not meet expectations, we are monitoring these closely.
While disappointed with our relative results, we feel our portfolio is well positioned for the current market cycle. Most positions have specific potential catalysts that, if realized, should trigger upside moves. Capable managements are critical to the Fund’s success and we are pleased with the caliber of most of our management teams. Virtually all of our companies have viable business models and strong balance sheets providing the ability to weather economic storms. Finally, cash provides the capital to exploit any potential dislocations that may occur.
Contributors to and Detractors from Performance
As shown on the following page, there were several contributors to Fund performance. The strongest was Dorian LPG, an operator of seaborne vessels that transport liquid petroleum gas (propane, butane) around the globe to satisfy growing demand for heating, cooking and industrial use purposes. Dorian has a new, efficient and environmentally friendly fleet that’s captured growing LPG volumes and higher shipping rates. ERA Group prospered as the market recognized ERA’s strong presence in the global helicopter market. While their core business of flying roughnecks to offshore oil & gas rigs is rebounding slowly, ERA also has a strong presence in search and rescue (SAR) a growing market as more governments and businesses seek fast responses to unanticipated “events”. Long term holding Powell Industries also contributed strong results. Powell makes electrical equipment/systems to facilitate electricity transmission from generators (utilities/independent power producers) to industrial users, mostly in the energy field. The US Gulf Coast is undergoing a massive buildout of energy infrastructure including pipelines, petrochemical plants and LPG/LNG terminals to accommodate oil and natural gas production. All of these require huge amounts of electricity which Powell helps facilitate.
2 PINNACLE VALUE FUND
BERTOLET CAPITAL TRUST
Our biggest detractor was Williams Industrial Services, a provider of construction, maintenance and support services to energy, power and industrial end markets. After a long restructuring Williams is now profitable and is on the cusp of completing a refinancing to shore up the balance sheet. San Juan Royalty Trust was hurt by low natural gas prices which reduced distributions to shareholders, a situation we view as temporary. Gulf Island Fabrication, a provider of offshore marine services, was hurt by poorly executed, unprofitable contracts and recently hired an experienced CEO committed to implementing policies/procedures to ensure that only high potential projects are bid upon. Freightcar America builds freight railcars for railroads and leasing firms. Their core coal car market has declined in recent years and a new CEO is rationalizing costs and diversifying their product line to include more popular car types.
Outlook
A strong market year always raises the question: What could go wrong? For starters, the economic acceleration expected in 2020 might not show up. Much of the 2019 rally was driven by expanding P/E multiples fostered by near record low interest rates. Since rates probably won’t go much lower in 2020, we’ll need some strong earnings growth to sustain the rally. Another by-product of easy money is an explosion of debt which exists at multiple levels- corporate, government and personal. Any major default may lead to a contraction of credit, the lifeblood of any economy. Next, the trade wars could heat up again with China or other nations leading to renewed economic uncertainty. Or, inflation might exceed the Fed’s target rate leading to a RISE in rates which is rarely good for the market. Finally, we have growing geo-political risks and a major election in 2020 with possible policy and tax changes as a result. Stay tuned.
By now you should have received your year end statement. Should you have any questions about your account or the Fund, don’t hesitate to call or write. We are positioned to invest our cash as opportunities become available and are searching diligently for such opportunities. Your portfolio manager recently bought additional Fund shares and remains a major shareholder.
John E. Deysher Pinnacle Value Fund
President & Portfolio Manager 745 Fifth Ave.- 2400
212-605-7100 New York, NY 10151
PINNACLE VALUE FUND 3
BERTOLET CAPITAL TRUST
TOP 10 POSITIONS | % net assets |
|
|
1. Dorian LPG- fleet of liquid petroleum gas tankers | 10.1% |
2. ERA Group- helicopter services | 8.6 |
3. Gulf Island Fabrication- marine goods & services | 5.1 |
4. Williams Industrial Services-engineering/design/construction | 4.1 |
5. Seacor Marine- offshore supply vessels | 2.6 |
6. Buckle- young adult apparel retailer | 2.6 |
7. Powell Industries- electrical equipment | 2.5 |
8. Sprott Gold Miners- gold miner ETF | 2.4 |
9. Weyco Group- shoe retailer & wholesaler | 2.3 |
10. Costar Technologies- security services | 2.2 |
Total | 42.5% |
|
|
|
|
YTD TOP 5 Contributors (includes dividends) |
|
1. Dorian LPG | 7.69% |
2. ERA Group | 1.70 |
3. Powell Industries | 1.40 |
4. Buckle | 0.94 |
5. Sprott Gold Miners ETF | 0.67% |
|
|
|
|
YTD TOP 5 Detractors (net of dividends received) |
|
1. Williams Industries | -1.36% |
2. San Juan Royalty Trust | -1.09 |
3. Gulf Island Fabrication | -0.82 |
4. Freightcar America | -0.82 |
5. Christopher & Banks | -0.69% |
|
|
|
|
SECURITY CLASSIFICATIONS |
|
Government Money Market Funds | 38.9% |
Energy | 13.8 |
Transportation | 10.4 |
Construction & Fabrication | 9.2 |
Industrial Goods & Services | 7.0 |
Consumer Goods & Services | 6.7 |
Closed end & Exchange traded funds | 4.8 |
Insurance | 4.1 |
Financial Services | 2.4 |
Real Estate | 1.9 |
Banks & Thrifts | 0.8 |
Total | 100.0% |
4 PINNACLE VALUE FUND
BERTOLET CAPITAL TRUST
Schedule of Investments | |||||||
December 31, 2019 | |||||||
Shares/ Principal Amount | Basis |
| Market Value |
| % of Net Assets | ||
|
|
|
|
|
|
|
|
COMMON STOCKS |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
Banks & Thrifts |
|
|
|
|
| ||
17,807 |
| Hope Bancorp, Inc. | $ 65,849 |
| $ 264,612 |
| 0.86% |
|
|
|
|
|
|
|
|
Construction & Fabrication |
|
|
|
|
| ||
311,547 |
| Gulf Island Fabrication, Inc. * | 1,899,740 |
| 1,579,543 |
|
|
734,290 |
| Williams Industrial Service Group, Inc. * | 1,251,726 |
| 1,262,979 |
|
|
|
|
| 3,151,466 |
| 2,842,522 |
| 9.20% |
Energy |
|
|
|
|
|
|
|
260,219 |
| Era Group, Inc. * | 2,324,541 |
| 2,646,427 |
|
|
64,784 |
| Permian Basin Royalty Trust | 349,329 |
| 250,066 |
|
|
201,242 |
| San Juan Basin Royalty Trust | 802,736 |
| 511,155 |
|
|
59,004 |
| Seacor Marine Holdings, Inc. * | 715,649 |
| 813,665 |
|
|
|
|
| 4,192,255 |
| 4,221,313 |
| 13.67% |
Financial Services |
|
|
|
|
| ||
41,289 |
| BKF Capital Group, Inc.(a) * | 544,385 |
| 495,468 |
|
|
21,007 |
| SWK Holdings Corp. * | 174,269 |
| 252,084 |
|
|
|
|
| 718,654 |
| 747,552 |
| 2.42% |
Footwear & Accessories |
|
|
|
|
| ||
27,105 |
| Weyco Group, Inc. | 671,962 |
| 716,927 |
| 2.32% |
|
|
|
|
|
|
|
|
Furniture & Fixtures |
|
|
|
|
| ||
26,136 |
| Flexsteel Industries, Inc. | 405,030 |
| 520,629 |
| 1.69% |
|
|
|
|
|
|
|
|
Insurance |
|
|
|
|
|
|
|
29,590 |
| Atlas Financial Holdings, Inc. * | 42,690 |
| 12,771 |
|
|
110,311 |
| First Acceptance Corp. * | 91,075 |
| 87,697 |
|
|
30,000 |
| Genworth Financial, Inc. * | 87,875 |
| 132,000 |
|
|
9,784 |
| Independence Holding Co. | 41,636 |
| 411,711 |
|
|
6,233 |
| Kansas City Life Insurance Co. | 239,205 |
| 209,117 |
|
|
26,234 |
| National Security Group, Inc. (a) | 207,629 |
| 401,380 |
|
|
|
|
| 710,110 |
| 1,254,676 |
| 4.06% |
Power Equipment |
|
|
|
|
| ||
68,010 |
| LSI Industries, Inc. | 237,153 |
| 411,461 |
|
|
15,731 |
| Powell Industries, Inc. | 363,175 |
| 770,662 |
|
|
|
|
| 600,328 |
| 1,182,123 |
| 3.83% |
Real Estate |
|
|
|
|
| ||
17,407 |
| Getty Realty Corp. | 221,221 |
| 572,168 |
|
|
3,255 |
| Regency Affiliates, Inc.(a) | 12,760 |
| 20,344 |
|
|
|
|
| 233,981 |
| 592,512 |
| 1.92% |
Retail |
|
|
|
|
|
|
|
30,035 |
| The Buckle, Inc. | $ 467,450 |
| $ 812,146 |
| 2.63% |
|
|
|
|
|
|
|
|
Security Services |
|
|
|
|
| ||
63,921 |
| Costar Technologies, Inc.(a) * | 453,999 |
| 696,100 |
| 2.25% |
|
|
|
|
|
|
|
|
Steel Works, Blast Furnaces, & Rolling Mills |
|
|
|
|
|
PINNACLE VALUE FUND 5
BERTOLET CAPITAL TRUST
45,953 |
| Friedman Industries, Inc. | 256,265 |
| 276,637 |
| 0.90% |
The accompanying notes are an integral part of the financial statements.
Schedule of Investments | |||||||
December 31, 2019 | |||||||
Shares/ Principal Amount | Basis |
| Market Value |
| % of Net Assets | ||
|
|
|
|
|
|
|
|
Transportation |
|
|
|
|
| ||
200,773 |
| Dorian LPG Ltd. * | 1,367,366 |
| 3,107,966 |
|
|
47,337 |
| FreightCar America, Inc. * | 339,892 |
| 97,988 |
|
|
|
|
| 1,707,258 |
| 3,205,954 |
| 10.38% |
|
|
|
|
|
|
|
|
Total for Common Stock | $13,634,607 |
| $17,333,703 |
| 56.13% | ||
|
|
|
|
|
|
|
|
Closed-End & Exchange Traded Funds |
|
|
|
|
| ||
4,378 |
| Barings Participation Investor | 56,770 |
| 70,617 |
|
|
29,200 |
| Sprott Gold Miners ETF | 551,481 |
| 734,380 |
|
|
20,200 |
| Sprott Junior Gold Miners ETF | 588,824 |
| 686,598 |
|
|
|
|
|
|
|
|
|
|
Total for Closed-End & Exchange Traded Funds | $ 1,197,075 |
| $ 1,491,595 |
| 4.83% | ||
|
|
|
|
|
|
|
|
WARRANTS |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
Energy |
|
|
|
|
|
|
|
9,414 |
| Tidewater, Inc. * | 18,035 |
| 5,083 |
|
|
13,355 |
| Tidewater, Inc. Class A * | 94,078 |
| 21,789 |
|
|
14,438 |
| Tidewater, Inc. Class B * | 84,269 |
| 17,037 |
|
|
|
|
|
|
|
|
|
|
Total for Warrants | $ 196,382 |
| $ 43,909 |
| 0.14% | ||
|
|
|
|
|
|
|
|
SHORT TERM INVESTMENTS |
|
|
|
|
| ||
Money Market Fund |
|
|
|
|
| ||
1,000,000 |
| Invesco Government & Agency Portfolio Institutional Class 1.51% ** | 1,000,000 |
| 1,000,000 |
|
|
11,501,186 |
| First American Government Obligation Fund Class Z 1.48% ** | 11,501,186 |
| 11,501,186 |
|
|
|
|
|
|
|
|
|
|
Total for Short Term Investments | $12,501,186 |
| $12,501,186 |
| 40.47% | ||
|
|
|
|
|
|
|
|
|
| Total Investments | $27,529,250 |
| $31,370,393 |
| 101.57% |
|
|
|
|
|
|
|
|
|
| Liabilities in excess of other assets |
|
| (484,162) |
| (1.57)% |
|
|
|
|
|
|
|
|
|
| Net Assets |
|
| $30,886,231 |
| 100.00% |
(a) Level 2 Security
* Non-Income producing securities.
6 PINNACLE VALUE FUND
BERTOLET CAPITAL TRUST
** Variable rate security; the money market rate shown represents the yield at December 31, 2019.
The accompanying notes are an integral part of the financial statements.
PINNACLE VALUE FUND 7
BERTOLET CAPITAL TRUST
Statement of Assets and Liabilities |
|
December 31, 2019 |
|
|
|
Assets: |
|
Investment Securities at Market Value (Identified Cost $27,529,250) | $ 31,370,393 |
Cash | 1,000 |
Receivables: |
|
Dividends and Interest | 42,950 |
Shareholder Subscriptions | 7,976 |
Prepaid Expenses | 3,893 |
Total Assets | 31,426,212 |
Liabilities: |
|
Payable to Advisor | 504,084 |
Shareholder Redemptions | 8,432 |
Accrued Expenses | 27,465 |
Total Liabilities | 539,981 |
Net Assets | $ 30,886,231 |
|
|
Net Assets Consist of: |
|
Paid-In Capital | $ 27,713,166 |
Distributable Earnings | 3,173,065 |
Net Assets | $ 30,886,231 |
Net Asset Value and Redemption Price |
|
Per Share ($30,886,231/2,164,793 shares outstanding), no par value, unlimited |
|
shares authorized | $ 14.27 |
8 PINNACLE VALUE FUND
BERTOLET CAPITAL TRUST
The accompanying notes are an integral part of the financial statements.
Statement of Operations |
|
For the year ended December 31, 2019 |
|
|
|
Investment Income: |
|
Dividends | $ 283,121 |
Interest | 283,515 |
Total Investment Income | 566,636 |
Expenses: |
|
Investment Advisor Fees (Note 3) | 419,547 |
Transfer Agent & Fund Accounting Fees | 44,058 |
Insurance Fees | 15,739 |
Custodial Fees | 14,013 |
Audit Fees | 15,399 |
Registration Fees | 9,827 |
Trustee Fees | 10,001 |
Legal Fees | 2,000 |
Miscellaneous Fees | 4,304 |
Printing & Mailing Fees | 2,500 |
Total Expenses | 537,388 |
Advisory Fees Waived by Advisor | (121,198) |
Net Expenses | 416,190 |
|
|
Net Investment Income | 150,446 |
|
|
Realized and Unrealized Gain (Loss) on Investments: |
|
Net Realized Loss on Investments | (829,835) |
Capital Gain Distributions from Regulated Investment Companies | 12,636 |
Change in Unrealized Appreciation on Investments | 4,081,643 |
Net Realized and Unrealized Gain on Investments | 3,264,444 |
|
|
Net Increase in Net Assets from Operations | $ 3,414,890 |
PINNACLE VALUE FUND 9
BERTOLET CAPITAL TRUST
The accompanying notes are an integral part of the financial statements.
Statements of Changes in Net Assets |
|
|
|
| Year |
| Year |
| Ended |
| Ended |
| 12/31/2019 |
| 12/31/2018 |
From Operations: |
|
|
|
Net Investment Income | $ 150,446 |
| $ 166,403 |
Net Realized Gain (Loss) on Investments | (829,835) |
| 2,359,406 |
Capital Gain Distributions from Regulated Investment Companies | 12,636 |
| 12,573 |
Net Change In Unrealized Appreciation (Depreciation) | 4,081,643 |
| (8,174,454) |
Net Increase (Decrease) in Net Assets from Operations | 3,414,890 |
| (5,636,072) |
|
|
|
|
From Distributions to Shareholders: |
|
|
|
Distributions(a) | (752,209) |
| (1,698,768) |
Total Distributions to Shareholders | (752,209) |
| (1,698,768) |
|
|
|
|
From Capital Share Transactions: |
|
|
|
Proceeds From Sale of Shares | 1,081,589 |
| 1,150,821 |
Shares issued in Reinvestment of Dividends | 684,590 |
| 1,586,096 |
Cost of Shares Redeemed(b) | (9,576,364) |
| (19,939,305) |
Net Decrease from Shareholder Activity | (7,810,185) |
| (17,202,388) |
|
|
|
|
Net Decrease in Net Assets | (5,147,504) |
| (24,537,228) |
|
|
|
|
Net Assets at Beginning of Year | 36,033,735 |
| 60,570,963 |
Net Assets at End of Year | $ 30,886,231 |
| $ 36,033,735 |
|
|
|
|
|
|
|
|
Share Transactions: |
|
|
|
Issued | 77,808 |
| 75,710 |
Reinvested | 49,287 |
| 119,345 |
Redeemed | (689,536) |
| (1,344,313) |
Net decrease in shares | (562,441) |
| (1,149,258) |
Shares outstanding beginning of Year/Period | 2,727,234 |
| 3,876,492 |
Shares outstanding end of Year/Period | 2,164,793 |
| 2,727,234 |
10 PINNACLE VALUE FUND
BERTOLET CAPITAL TRUST
(a)The SEC eliminated the requirements to disclose components of distributions paid to shareholders effective November 5, 2018.
(b) Net of Redemption Fees of $1,516 for the year ended December 31, 2019, and $4,757 for the year ended December 31, 2018.
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
|
|
|
|
Selected data for a share outstanding throughout the year: |
|
|
| ||
|
|
|
|
|
|
| Year | Year | Year | Year | Year |
| Ended | Ended | Ended | Ended | Ended |
| 12/31/2019 | 12/31/2018 | 12/31/2017 | 12/31/2016 | 12/31/2015 |
Net Asset Value - |
|
|
|
|
|
Beginning of Year | $ 13.21 | $ 15.63 | $16.12 | $14.79 | $17.22 |
Net Investment Income (Loss) * | 0.06 | 0.05 | (0.01) | (0.09) | -(a) |
Net Gains or Losses on Securities |
|
|
|
|
|
(realized and unrealized) | 1.34 | (1.88) | (0.01) | 2.53 | (1.04) |
Total from Investment Operations | 1.40 | (1.83) | (0.02) | 2.44 | (1.04) |
|
|
|
|
|
|
Distributions from Net Investment Income | -(a) | (0.06) | - | - | - |
Distributions from Capital Gains | (0.34) | (0.53) | (0.47) | (1.11) | (1.39) |
Total Distributions | (0.34) | (0.59) | (0.47) | (1.11) | (1.39) |
|
|
|
|
|
|
Paid-in Capital from Redemption Fees (Note 2)(a) | - | - | - | - | - |
|
|
|
|
|
|
Net Asset Value - |
|
|
|
|
|
End of Year | $ 14.27 | $ 13.21 | $15.63 | $16.12 | $14.79 |
|
|
|
|
|
|
Total Return | 10.66% | (11.75)% | (0.06)% | 16.51% | (5.99)% |
|
|
|
|
|
|
Ratios/Supplemental Data |
|
|
|
|
|
Net Assets - End of Year (Thousands) | $ 30,886 | $ 36,034 | $ 60,571 | $ 67,978 | $ 58,974 |
|
|
|
|
|
|
Before Reimbursement/Recapture |
|
|
|
|
|
Ratio of Expenses to Average Net Assets | 1.60% | 1.50% | 1.44% | 1.45% | 1.44% |
Ratio of Net Income (Loss) to Average Net Assets | 0.09% | 0.15% | (0.07)% | (0.56)% | (0.02)% |
|
|
|
|
|
|
After Reimbursement/Recapture |
|
|
|
|
|
Ratio of Expenses to Average Net Assets | 1.24% | 1.33% | 1.44% | 1.45% | 1.44% |
Ratio of Net Income (Loss) to Average Net Assets | 0.45% | 0.32% | (0.07)% | (0.56)% | (0.02)% |
|
|
|
|
|
|
Portfolio Turnover Rate | 19.50% | 31.51% | 23.37% | 43.04% | 29.23% |
PINNACLE VALUE FUND 11
BERTOLET CAPITAL TRUST
* Per share net investment Income (loss) determined on average shares outstanding during year.
(a) Less than $0.01 per share.
The accompanying notes are an integral part of the financial statements.
Notes to Financial Statements
December 31, 2019
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.
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standard Codification Topic 946 “Financial Services-Investment Companies.”
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. Transfers between levels are recognized at the end of a reporting period. Transfer from Level 1 to Level 2 results when a security priced previously with an official close price (Level 1) has no official close price so the bid price is used. The below table summarizes the inputs used at December 31, 2019:
| Level 1 | Level 2 | Level 3 | Total |
12 PINNACLE VALUE FUND
BERTOLET CAPITAL TRUST
(a) See Schedule of Investments for industry breakout.
There were no transfers between levels at period end.
The Fund did not hold any Level 3 assets (those valued using significant unobservable inputs) at any time during the year ended December 31, 2019. Therefore a reconciliation of assets in which significant unobservable inputs were used in determining fair value is not applicable.
The 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 the year ended December 31, 2019, the 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 December 31, 2019 the Fund held approximately 40% of net assets in money market funds. These include the First American Government Obligations Fund which normally invests in government and agency securities with an objective of maximum current income consistent with capital preservation and maintaining liquidity and the Invesco Government & Agency Fund.
As of December 31, 2019 the Fund had approximately 37% of its assets in First American Government Obligation Fund - Class Z (Ticker: FGZXX). The investment in this fund is approximately 0.06% of the fund’s net assets which was approximately $20.4 billion dollars at December 31, 2019. If the Adviser determines that it is in the best interest of Fund shareholders, the Adviser may redeem this investment. Further information on these funds is available at www.sec.gov.
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 2019 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 year ended December 31, 2019 and year ended December 31, 2018, $1,516 and $4,757, of early redemption fees, respectively, were returned to the Fund through shareholder redemptions.
PINNACLE VALUE FUND 13
BERTOLET CAPITAL TRUST
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 up to $300 million, and an annual rate of 1% of the Fund’s average daily net assets thereafter. For the year ended December 31, 2019, Adviser earned $419,547 in fees, and waived $121,198 of such fees, which is paid yearly.
A Fund officer and trustee is also an officer and trustee of the Adviser. Advisory Agreement provides for expense reimbursement and fee waivers by Adviser, if Fund Annual Total Expenses exceed 1.24%, of average daily net assets through April 30, 2020.
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. Adviser is entitled to recoup $87,199 through Dec. 31, 2021, and $121,198 through Dec. 31, 2022.
4.)
PURCHASES AND SALES OF SECURITIES
For year ended December 31, 2019, purchases and sales of investment securities other than U.S. Government obligations/short-term investments totaled $4,016,681 and $11,376,385, respectively.
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 October 31, 2019. Differences between book basis and tax basis unrealized appreciation/(depreciation) are attributable to tax deferral of losses.
For the year ended December 31, 2019 the Fund paid a long-term capital gain distribution of $0.315 per share, a short-term capital gain distribution of $0.022, and an ordinary income distribution of $0.002 per share.
For the year ended December 31, 2018 the Fund paid a long-term capital gain distribution of $0.495 per share, a short-term capital gain distribution of $0.037, and an ordinary income distribution of $0.056 per share.
The tax nature of distributions paid during the year ended December 31, 2019, and the year ended December 31, 2018:
| 2019 | 2018 |
Ordinary Income | $54,700 | $ 652,094 |
Long Term Capital Gain | $697,509 | $ 1,141,279 |
| $752,209 | $1,793,373 |
At December 31, 2019, the components of accumulated earnings/(losses) on a tax basis were as follows:
Costs of investments for federal income tax purposes | $ 27,546,430 |
|
|
Gross tax unrealized appreciation | $ 5,194,659 |
Gross tax unrealized depreciation | (1,353,517) |
Net tax unrealized appreciation | 3,823,963 |
Undistributed ordinary income | 150,441 |
Accumulated capital and other gains - net | (801,339) |
Total Distributable Earnings | $ 3,173,065 |
At December 31, 2019, the Fund had non-expiring capital loss carryforwards as follows: $499,705 short-term and $157,508 long-term. The Fund had post-October losses of $144,126.
6.) SUBSEQUENT EVENTS
Management has evaluated Fund related events and transactions occurring subsequent to year end. There were no events or transactions that occurred during this period that materially impacted the Fund’s financial statements.
7.) COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Fund may enter into contracts that may contain a variety of representations and warranties and provide general indemnifications. The Fund’s maximum exposure under these arrangements is dependent on future claims that may be made against the Fund and, therefore, cannot be estimated; however, management considers the risk of loss from such claims to be remote.
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BERTOLET CAPITAL TRUST
8.) NEW ACCOUNTING PRONOUNCEMENTS
In August 2018, FASB issued Accounting Standards Update No. 2018-13 (“ASU 2018-13”), “Disclosure Framework – Changes to the Disclosure requirements for Fair Value Measurement,” which amends the fair value measurement disclosure requirements of ASC Topic 820 (“ASC 820”), “Fair Value Measurement.” ASU 2018-13 includes new, eliminated, and modified disclosure requirements for ASC 820. In addition, ASU 2018-13 clarifies that materiality is an appropriate consideration of entities when evaluating disclosure requirements. ASU 2018-13 is effective for all entities for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption is permitted and the Fund has adopted ASU 2018-13 with these financial statements.
Table of Contents
- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- To the Board of Trustees and
- Philadelphia, Pennsylvania
- Philadelphia, Pennsylvania
- To the Board of Trustees and
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and
Shareholders of Bertolet Capital Trust
New York, New York
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of Pinnacle Value Fund, a series of shares of Bertolet Capital Trust, including the schedule of investments, as of December 31, 2019, the related statement 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 financial highlights for each of the five years in the period then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of Pinnacle Value Fund as of December 31, 2019, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the 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.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We have served as the Fund’s auditor since 2003.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2019 by correspondence with the custodian. We believe that our audits provide a reasonable basis for our
PINNACLE VALUE FUND 15
BERTOLET CAPITAL TRUST
opinion.
TAIT, WELLER & BAKER LLP
Philadelphia, Pennsylvania
February 21, 2020
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 visitingwww.pinnaclevaluefund.com orwww.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 atwww.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 (64) | Trustee | Unlimited | President, Secretary, Treasurer | None |
|
| Since Inception | Pinnacle Value Fund |
|
|
|
|
|
|
Independent Trustees |
|
|
|
|
Edward P. Breau, CFA (87) | Trustee | Unlimited | Private Investor | None |
|
| Since Inception |
|
|
|
|
|
|
|
Richard M. Connelly (64) | Trustee | Unlimited | Counsel, CCO | None |
|
| Since Inception | JG Wentworth (finance) |
|
|
|
|
|
|
James W. Denney (54) | Trustee | Unlimited | President, Mohawk Asset | None |
|
| Since Inception | Management |
|
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
16 PINNACLE VALUE FUND
BERTOLET CAPITAL TRUST
Custodian: US Bank, 425 Walnut St., Cincinnati OH 45202
Independent Registered Public Accounting Firm: Tait, Weller & Baker LLP, 50 S.16th Street - 2900, Philadelphia PA 19102
Expense Example (Unaudited)
As a shareholder of the Pinnacle Value Fund, you incur ongoing costs which typically include 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, July 1, 2019 through December 31, 2019.
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 the 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* |
| July 1, 2019 | December 31, 2019 | July 1, 2019 to December 31, 2019 |
|
|
|
|
Actual | $1,000.00 | $1,063.18 | $6.45 |
Hypothetical |
|
|
|
(5% Annual Return before expenses) | $1,000.00 | $1,018.95 | $6.31 |
|
|
|
|
* Expenses are equal to the Fund's annualized expense ratio of 1.24%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
AVERAGE ANNUAL RATE OF RETURN (%) FOR YEAR ENDED DECEMBER 31, 2019
| 1 Year | 3 Year | 5 Year | 10 Year |
Pinnacle Value Fund | 10.66% | -0.81% | 1.34% | 5.30% |
Russell 2000 Index | 25.52% | 8.59% | 8.23% | 11.83% |
Chart assumes an initial investment of $10,000 made on 1/1/2010. Total return is based on the net change in NAV and assuming reinvestment of all dividends and other distributions. Performance figures represent past performance which is not predictive of future performance. Investment return and principal value will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. All returns reflect reinvested dividends but do not reflect the impact of taxes.
Throughout the period shown, the investment adviser has voluntarily waived and reimbursed certain expenses of the Fund. Without such waivers and reimbursements returns would be lower.
PINNACLE VALUE FUND 17
BERTOLET CAPITAL TRUST
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Fund’s website www.pinnaclevaluefund.com, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
PINNACLE VALUE FUND®
A SERIES OF THE
BERTOLET CAPITAL TRUST
ANNUAL REPORT
DECEMBER 31, 2019
www.pinnaclevaluefund.com
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
Registrant has engaged its principal accountant to perform audit and tax services during the past two fiscal years. “Audit services” refers to performing an audit of registrant’s financial statements, tests of internal controls and any other services provided in connection with regulatory or statutory filings. “Tax services” refers to the preparation of federal, state and excise tax returns.
FYE 12/31/19 FYE 12/31/18
Audit services $12,600 $12,600
Tax services $2,800 $2,800
Audit committee has adopted pre-approval policies & procedures requiring the audit committee to pre-approve all audit, tax and non-audit services of registrant including services provided to any entity affiliated with registrant. All of principal accountant’s hours spent auditing the registrant’s financial statements were attributable to work performed by full time permanent employees of the principal accountant.
The following table shows all non-audit fees billed by registrant’s principal accountant for services to registrant and registrant’s investment adviser for last 2 years. The audit committee has considered whether non-audit services rendered to registrant’s adviser is compatible with maintaining the accountant’s independence and has concluded that the rendering of non-audit services has not compromised the accountant’s independence.
Non-audit fees FYE 12/31/19 FYE 12/31/18
Registrant $0 $0
Registrant’s Investment Adviser $0 $0
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 Management Investment Companies. Not applicable.
Item 9. Purchases of Equity Securities by Closed End Management Investment Company and Affiliated Purchasers. 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. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies. Not applicable.
ITEM 13. EXHIBITS.
(a)(1)
EX-99.CODE ETH. Filed herewith.
(a)(2)
EX-99.CERT. Filed herewith.
(a)(2)
EX-99.906CERT. Filed herewith.
Table of Contents
- SIGNATURES
- By /s/ John E. Deysher
SIGNATURES
Pursuant to the requirements of the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, Registrant has duly caused this report to be signed on its behalf by the undersigned, duly authorized.
By /s/ John E. Deysher
President
Bertolet Capital Trust
Date: March 5, 2020