As filed with the Securities and Exchange Commission on February 28, 2018
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 811-23011
PENN CAPITAL FUNDS TRUST
(Exact name of registrant as specified in charter)
Navy Yard Corporate Center
1200 Intrepid Ave., Suite 400
Philadelphia, Pennsylvania 19112
(Address of principal executive offices) (Zip code)
Richard A. Hocker
Navy Yard Corporate Center
1200 Intrepid Ave., Suite 400
Philadelphia, Pennsylvania 19112
(Name and address of agent for service)
With copies to:
Lisa L.B. Matson, Esq.
Navy Yard Corporate Center
1200 Intrepid Ave., Suite 400
Philadelphia, Pennsylvania 19112
Michael P. O’Hare, Esq.
Stradley Ronon Stevens & Young, LLP
2005 Market Street, Suite 2600
Philadelphia, Pennsylvania 19103
(215) 302-1500
Registrant’s telephone number, including area code
Date of fiscal year end: June 30, 2018
Date of reporting period: December 31, 2017
Item 1. Reports to Stockholders.
SEMIANNUAL REPORT
DECEMBER 31, 2017
PENN CAPITAL MANAGED ALPHA SMID CAP EQUITY FUND
PENN CAPITAL SPECIAL SITUATIONS SMALL CAP EQUITY FUND
PENN CAPITAL MULTI-CREDIT HIGH INCOME FUND
PENN CAPITAL DEFENSIVE FLOATING RATE INCOME FUND
PENN CAPITAL DEFENSIVE SHORT DURATION HIGH INCOME FUND
PENN CAPITAL MANAGED ALPHA SMID CAP EQUITY FUND
FUND SUMMARY (UNAUDITED)
This chart assumes an initial gross investment of $10,000 made on December 1, 2015, inception of the Institutional Class shares. Returns shown in the chart and table include the reinvestment of all dividends, but do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. In the absence of fee waivers and reimbursements, when they are necessary to keep expenses at the expense cap, total return would be reduced. Past performance 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 the original cost. Index returns do not reflect the effects of fees, transaction costs or expenses. It is not possible to invest directly in an index. No information is provided for Investor Class shares because shares of that class had not yet been issued as of December 31, 2017.
Average Annual Total Returns for the Period Ended December 31, 2017 | One Year | Since Inception(1) | ||||
Penn Capital Managed Alpha SMID Cap Equity Fund | ||||||
Institutional Class Shares | 19.97 | % | 14.68 | % | ||
Russell 2500™ Index | 16.81 | % | 14.14 | %(2) |
(1) | Inception date is 12/1/15. |
(2) | The return shown for the Russell 2500™ Index is from the inception date of the Institutional Class shares. |
2
PENN CAPITAL SPECIAL SITUATIONS SMALL CAP EQUITY FUND
FUND SUMMARY (UNAUDITED)
This chart assumes an initial gross investment of $10,000 made on December 18, 2015, inception of the Institutional Class shares. Returns shown in the chart and table include the reinvestment of all dividends, but do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. In the absence of fee waivers and reimbursements, when they are necessary to keep expenses at the expense cap, total return would be reduced. Past performance 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 the original cost. Index returns do not reflect the effects of fees, transaction costs or expenses. It is not possible to invest directly in an index. No information is provided for Investor Class shares because shares of that class had not yet been issued as of December 31, 2017.
Average Annual Total Returns for the Period Ended December 31, 2017 | One Year | Since Inception(1) | ||||
Penn Capital Special Situations Small Cap Equity Fund | ||||||
Institutional Class Shares | 15.85 | % | 18.23 | % | ||
Russell 2000® Index | 14.65 | % | 17.65 | %(2) |
(1) | Inception date is 12/18/15. |
(2) | The return shown for the Russell 2000® Index is from the inception date of the Institutional Class shares. |
3
PENN CAPITAL MULTI-CREDIT HIGH INCOME FUND
FUND SUMMARY (UNAUDITED)
This chart assumes an initial gross investment of $10,000 made on December 1, 2015, inception of the Institutional Class shares. Returns shown in the chart and table include the reinvestment of all dividends, but do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. In the absence of fee waivers and reimbursements, when they are necessary to keep expenses at the expense cap, total return would be reduced. Past performance 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 the original cost. Index returns do not reflect the effects of fees, transaction costs or expenses. It is not possible to invest directly in an index. No information is provided for Investor Class shares because shares of that class had not yet been issued as of December 31, 2017.
Average Annual Total Returns for the Period Ended December 31, 2017 | One Year | Since Inception(1) | ||||
Penn Capital Multi-Credit High Income Fund | ||||||
Institutional Class Shares | 6.88 | % | 8.95 | % | ||
ICE BofA Merrill Lynch US High Yield Constrained Index | 7.47 | % | 10.44 | %(2) |
(1) | Inception date is 12/1/15. |
(2) | The return shown for the ICE BofA Merrill Lynch US High Yield Constrained Index is from the inception date of the Institutional Class shares. |
4
PENN CAPITAL DEFENSIVE FLOATING RATE INCOME FUND
FUND SUMMARY (UNAUDITED)
This chart assumes an initial gross investment of $10,000 made on December 1, 2015, inception of the Institutional Class shares. Returns shown in the chart and table include the reinvestment of all dividends, but do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. In the absence of fee waivers and reimbursements, when they are necessary to keep expenses at the expense cap, total return would be reduced. Past performance 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 the original cost. Index returns do not reflect the effects of fees, transaction costs or expenses. It is not possible to invest directly in an index. No information is provided for Investor Class shares because shares of that class had not yet been issued as of December 31, 2017.
Average Annual Total Returns for the Period Ended December 31, 2017 | One Year | Since Inception(1) | ||||
Penn Capital Defensive Floating Rate Income Fund | ||||||
Institutional Class Shares | 3.75 | % | 4.68 | % | ||
S&P/LSTA BB/B Loan Index(2) | 3.91 | % | 5.78 | %(3) | ||
Credit Suisse Institutional Leveraged Loan Index | 4.29 | % | 5.52 | %(4) |
(1) | Inception date is 12/1/15. |
(2) | The S&P/LSTA BB/B Loan Index has replaced the Credit Suisse Institutional Leveraged Loan Index as the Fund’s primary benchmark. Penn Capital Management Company, Inc. believes that the new index is more appropriate given the Fund’s holdings. |
(3) | The return shown for the S&P/LSTA BB/B Loan Index is from the inception date of the Institutional Class shares. |
(4) | The return shown for the Credit Suisse Institutional Leveraged Loan Index is from the inception date of the Institutional Class shares. |
5
PENN CAPITAL DEFENSIVE SHORT DURATION HIGH INCOME FUND
FUND SUMMARY (UNAUDITED)
This chart assumes an initial gross investment of $10,000 made on July 17, 2017, inception of the Institutional Class shares. Returns shown in the chart and table include the reinvestment of all dividends, but do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. In the absence of fee waivers and reimbursements, when they are necessary to keep expenses at the expense cap, total return would be reduced. Past performance 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 the original cost. Index returns do not reflect the effects of fees, transaction costs or expenses. It is not possible to invest directly in an index.
Total Returns for the Period Ended December 31, 2017 | One Month | Three Month | Since Inception(1) | ||||||
Penn Capital Defensive Short Duration High Income Fund | |||||||||
Institutional Class Shares | 0.22 | % | 0.27 | % | 0.35 | % | |||
ICE BofAML 1-3 Year BB US Cash Pay High Yield Index | 0.01 | % | 0.02 | % | 1.07 | %(2) | |||
ICE BofAML US High Yield Cash Pay BB-B Rated 1-3 Years Index | 0.14 | % | 0.22 | % | 1.43 | %(3) |
(1) | Inception date is 7/17/17. |
(2) | The return shown for the ICE BofAML 1-3 Year BB US Cash Pay High Yield Index is from the inception date of the Institutional Class shares. |
(3) | The return shown for the ICE BofAML US High Yield Cash Pay BB-B Rated 1-3 Years Index is from the inception date of the Institutional Class shares. |
6
PENN CAPITAL FUNDS TRUST
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
FOR THE SIX MONTH PERIOD FROM JULY 1, 2017 TO DECEMBER 31, 2017
Cost in Dollars of a $1,000 Investment in Penn Capital Managed Alpha SMID Cap Equity Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from July 1, 2017 to December 31, 2017, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees on sales (as applicable) and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). 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 made at the beginning of the six-month period and held for the entire period from July 1, 2017 to December 31, 2017.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended December 31, 2017. 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 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 fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in 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.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees. Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Actual | Hypothetical | ||||||||||||||
Share Class1 | Beginning Account Value 7/1/17 | Ending Account Value (Based on Actual Returns and Expenses) 12/31/17 | Expenses Paid During Period2 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 12/31/17 | Expenses Paid During Period2 | ||||||||||
Institutional Class Shares | $ | 1,000.00 | $ | 1,134.30 | $ | 5.70 | $ | 1,019.86 | $ | 5.40 |
1. | No information is provided for Investor Class shares because shares of that class had not yet been issued as of December 31, 2017. |
2. | Expenses are equal to the Fund’s annualized expense ratio, net of waivers (1.06% for the Institutional Class), multiplied by the average account value over the period, divided by 365 and multiplied by 184 for the Institutional Class (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. |
7
PENN CAPITAL FUNDS TRUST
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
FOR THE SIX MONTH PERIOD FROM JULY 1, 2017 TO DECEMBER 31, 2017
Cost in Dollars of a $1,000 Investment in Penn Capital Special Situations Small Cap Equity Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from July 1, 2017 to December 31, 2017, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees on sales (as applicable) and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). 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 made at the beginning of the six-month period and held for the entire period from July 1, 2017 to December 31, 2017.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended December 31, 2017. 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 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 fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in 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.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees. Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Actual | Hypothetical | ||||||||||||||
Share Class1 | Beginning Account Value 7/1/17 | Ending Account Value (Based on Actual Returns and Expenses) 12/31/17 | Expenses Paid During Period2 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 12/31/17 | Expenses Paid During Period2 | ||||||||||
Institutional Class Shares | $ | 1,000.00 | $ | 1,121.90 | $ | 5.83 | $ | 1,019.71 | $ | 5.55 |
1. | No information is provided for Investor Class shares because shares of that class had not yet been issued as of December 31, 2017. |
2. | Expenses are equal to the Fund’s annualized expense ratio, net of waivers (1.09% for the Institutional Class), multiplied by the average account value over the period, divided by 365 and multiplied by 184 for the Institutional Class (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. |
8
PENN CAPITAL FUNDS TRUST
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
FOR THE SIX MONTH PERIOD FROM JULY 1, 2017 TO DECEMBER 31, 2017
Cost in Dollars of a $1,000 Investment in Penn Capital Multi-Credit High Income Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from July 1, 2017 to December 31, 2017, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees on sales (as applicable) and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). 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 made at the beginning of the six-month period and held for the entire period from July 1, 2017 to December 31, 2017.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended December 31, 2017. 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 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 fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in 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.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees. Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Actual | Hypothetical | ||||||||||||||
Share Class1 | Beginning Account Value 7/1/17 | Ending Account Value (Based on Actual Returns and Expenses) 12/31/17 | Expenses Paid During Period2 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 12/31/17 | Expenses Paid During Period2 | ||||||||||
Institutional Class Shares | $ | 1,000.00 | $ | 1,027.30 | $ | 3.53 | $ | 1,021.73 | $ | 3.52 |
1. | No information is provided for Investor Class shares because shares of that class had not yet been issued as of December 31, 2017. |
2. | Expenses are equal to the Fund’s annualized expense ratio, net of waivers (0.69% for the Institutional Class), multiplied by the average account value over the period, divided by 365 and multiplied by 184 for the Institutional Class (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. |
9
PENN CAPITAL FUNDS TRUST
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
FOR THE SIX MONTH PERIOD FROM JULY 1, 2017 TO DECEMBER 31, 2017
Cost in Dollars of a $1,000 Investment in Penn Capital Defensive Floating Rate Income Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from July 1, 2017 to December 31, 2017, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees on sales (as applicable) and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). 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 made at the beginning of the six-month period and held for the entire period from July 1, 2017 to December 31, 2017.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended December 31, 2017. 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 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 fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in 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.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees. Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Actual | Hypothetical | ||||||||||||||
Share Class1 | Beginning Account Value 7/1/17 | Ending Account Value (Based on Actual Returns and Expenses) 12/31/17 | Expenses Paid During Period2 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 12/31/17 | Expenses Paid During Period2 | ||||||||||
Institutional Class Shares | $ | 1,000.00 | $ | 1,020.90 | $ | 3.36 | $ | 1,021.88 | $ | 3.36 |
1. | No information is provided for Investor Class shares because shares of that class had not yet been issued as of December 31, 2017. |
2. | Expenses are equal to the Fund’s annualized expense ratio, net of waivers (0.66% for the Institutional Class), multiplied by the average account value over the period, divided by 365 and multiplied by 184 for the Institutional Class (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. |
10
PENN CAPITAL FUNDS TRUST
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
FOR THE PERIOD FROM JULY 18, 2017 TO DECEMBER 31, 2017
Cost in Dollars of a $1,000 Investment in Penn Capital Defensive Short Duration High Income Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the period from July 18, 2017 to December 31, 2017, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees on sales (as applicable) and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). 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 made at the beginning of the since inception period and held for the entire period from July 18, 2017 to December 31, 2017.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the period ended December 31, 2017. 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 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 fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the since inception period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in 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.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees. Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Actual | Hypothetical | ||||||||||||||
Share Class | Beginning Account Value 7/18/17 | Ending Account Value (Based on Actual Returns and Expenses) 12/31/17 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 12/31/17 | Expenses Paid During Period1 | ||||||||||
Institutional Class Shares2 | $ | 1,000.00 | $ | 1,003.50 | $ | 2.48 | $ | 1,020.41 | $ | 2.50 |
1. | Expenses are equal to the Fund’s annualized expense ratio, net of waivers (0.54% for the Institutional Class), multiplied by the average account value over the period, divided by 365 and multiplied by 167 for the Institutional Class (to reflect the since inception period). The table above represents the actual expenses incurred during the since inception period. |
2. | Expenses paid during the period reflect ongoing costs for the period from inception through December 31, 2017. Had these shares been offered for the full six-month period ended December 31, 2017, and had the fund provided a hypothetical 5% annualized return, expenses paid during the period would have been $2.75 for the Institutional Class shares. |
11
PENN CAPITAL FUNDS TRUST |
PENN CAPITAL MANAGED ALPHA SMID CAP EQUITY FUND |
SCHEDULE OF INVESTMENTS |
DECEMBER 31, 2017 (UNAUDITED) |
Shares | Value | |||||
Common Stocks: 91.4% | ||||||
Air Freight & Logistics: 2.4% | ||||||
XPO Logistics, Inc.(a) | 3,531 | $ | 323,404 | |||
Banks: 8.9% | ||||||
BOK Financial Corp. | 2,487 | 229,600 | ||||
Chemical Financial Corp. | 3,934 | 210,351 | ||||
Pinnacle Financial Partners, Inc. | 2,362 | 156,601 | ||||
Sterling Bancorp | 7,785 | 191,511 | ||||
Webster Financial Corp. | 3,551 | 199,424 | ||||
Western Alliance Bancorp(a) | 3,849 | 217,930 | ||||
1,205,417 | ||||||
Biotechnology: 2.4% | ||||||
Bioverativ, Inc.(a) | 2,754 | 148,496 | ||||
Ironwood Pharmaceuticals, Inc.(a) | 11,675 | 175,008 | ||||
323,504 | ||||||
Building Products: 1.1% | ||||||
Allegion PLC | 1,932 | 153,710 | ||||
Capital Markets: 1.7% | ||||||
Affiliated Managers Group, Inc. | 1,108 | 227,417 | ||||
Chemicals: 2.5% | ||||||
HB Fuller Co. | 3,110 | 167,536 | ||||
Valvoline, Inc. | 6,606 | 165,546 | ||||
333,082 | ||||||
Commercial Services & Supplies: 1.7% | ||||||
KAR Auction Services, Inc. | 4,498 | 227,194 | ||||
Communications Equipment: 1.5% | ||||||
CommScope Holding Co., Inc.(a) | 5,374 | 203,298 | ||||
Construction Materials: 1.6% | ||||||
Summit Materials, Inc. - Class A(a) | 6,825 | 214,578 | ||||
Consumer Finance: 2.0% | ||||||
SLM Corp.(a) | 24,014 | 271,358 | ||||
Containers & Packaging: 1.5% | ||||||
Berry Global Group, Inc.(a) | 3,545 | 207,985 | ||||
Diversified Financial Services: 3.5% | ||||||
FNF Group | 5,170 | 202,871 | ||||
Voya Financial, Inc. | 5,394 | 266,841 | ||||
469,712 | ||||||
Electronic Equipment, Instruments & Components: 1.6% | ||||||
Mercury Systems, Inc.(a) | 4,167 | 213,975 | ||||
Energy Equipment & Services: 2.0% | ||||||
Keane Group, Inc.(a) | 8,726 | 165,881 | ||||
U.S. Silica Holdings, Inc. | 3,461 | 112,690 | ||||
278,571 | ||||||
Health Care Equipment & Supplies: 2.2% | ||||||
NuVasive, Inc.(a) | 2,279 | 133,299 | ||||
Wright Medical Group NV(a) | 7,516 | 166,855 | ||||
300,154 |
Shares | Value | |||
Health Care Providers & Services: 2.8% | ||||
Acadia Healthcare Co., Inc.(a) | 4,558 | $ | 148,728 | |
WellCare Health Plans, Inc.(a) | 1,165 | 234,293 | ||
383,021 | ||||
Hotels, Restaurants & Leisure: 4.9% | ||||
Boyd Gaming Corp. | 5,656 | 198,243 | ||
Red Rock Resorts, Inc. - Class A | 8,226 | 277,545 | ||
Vail Resorts, Inc. | 923 | 196,110 | ||
671,898 | ||||
Household Durables: 3.8% | ||||
CalAtlantic Group, Inc. | 2,479 | 139,791 | ||
Roku, Inc.(a) | 2,381 | 123,288 | ||
TopBuild Corp.(a) | 3,311 | 250,775 | ||
513,854 | ||||
Independent Power and Renewable Electricity Producers: 1.2% | ||||
Ormat Technologies, Inc. | 2,588 | 165,529 | ||
Insurance: 1.7% | ||||
Arch Capital Group Ltd.(a) | 2,529 | 229,557 | ||
Internet Software & Services: 5.1% | ||||
GoDaddy, Inc. - Class A(a) | 5,328 | 267,892 | ||
Match Group, Inc.(a) | 7,293 | 228,344 | ||
MongoDB, Inc.(a) | 6,671 | 197,995 | ||
694,231 | ||||
IT Services: 2.5% | ||||
Black Knight, Inc.(a) | 4,313 | 190,419 | ||
Blackhawk Network Holdings, Inc.(a) | 4,345 | 154,899 | ||
345,318 | ||||
Life Sciences Tools & Services: 1.2% | ||||
Cambrex Corp.(a) | 3,420 | 164,160 | ||
Machinery: 1.7% | ||||
Oshkosh Corp. | 2,467 | 224,226 | ||
Media: 5.8% | ||||
Gray Television, Inc.(a) | 12,334 | 206,595 | ||
Lions Gate Entertainment Corp. - Class B(a) | 3,876 | 123,024 | ||
Live Nation Entertainment, Inc.(a) | 4,978 | 211,914 | ||
Nexstar Media Group, Inc. - Class A | 3,138 | 245,392 | ||
786,925 | ||||
Multiline Retail: 1.8% | ||||
Burlington Stores, Inc.(a) | 2,019 | 248,398 | ||
Oil, Gas & Consumable Fuels: 3.5% | ||||
Arch Coal, Inc. - Class A | 1,577 | 146,913 | ||
Cabot Oil & Gas Corp. | 5,255 | 150,293 | ||
Callon Petroleum Co.(a) | 15,001 | 182,262 | ||
479,468 | ||||
Pharmaceuticals: 1.6% | ||||
Pacira Pharmaceuticals, Inc.(a) | 4,848 | 221,311 |
The Accompanying Notes are an Integral Part of these Financial Statements.
12
PENN CAPITAL FUNDS TRUST |
PENN CAPITAL MANAGED ALPHA SMID CAP EQUITY FUND |
SCHEDULE OF INVESTMENTS |
DECEMBER 31, 2017 (UNAUDITED) |
Shares | Value | |||
Professional Services: 1.7% | ||||
TransUnion(a) | 4,176 | $ | 229,513 | |
Road & Rail: 1.0% | ||||
Genesee & Wyoming, Inc. - Class A(a) | 1,782 | 140,297 | ||
Semiconductors & Semiconductor Equipment: 3.9% | ||||
Cavium, Inc.(a) | 1,769 | 148,295 | ||
Silicon Laboratories, Inc.(a) | 2,051 | 181,103 | ||
Teradyne, Inc. | 4,903 | 205,289 | ||
534,687 | ||||
Software: 2.6% | ||||
Nice Ltd. - ADR | 1,975 | 181,522 | ||
Tyler Technologies, Inc.(a) | 973 | 172,270 | ||
353,792 | ||||
Specialty Retail: 2.0% | ||||
Floor & Decor Holdings, Inc. - Class A(a) | 5,720 | 278,450 | ||
TravelCenters of America LLC(a) | 1 | 2 | ||
278,452 | ||||
Trading Companies & Distributors: 4.2% | ||||
HD Supply Holdings, Inc.(a) | 4,090 | 163,723 | ||
United Rentals, Inc.(a) | 1,273 | 218,841 | ||
WESCO International, Inc.(a) | 2,732 | 186,186 | ||
568,750 | ||||
Water Utilities: 1.8% | ||||
Aqua America, Inc. | 6,195 | 243,030 | ||
Total Common Stocks (cost $9,675,284) | 12,429,776 | |||
Real Estate Investment Trusts (REITs): 6.2% | ||||
CyrusOne, Inc. | 3,523 | 209,724 | ||
Invitation Homes, Inc. | 9,622 | 226,791 | ||
MGM Growth Properties LLC - Class A | 7,692 | 224,222 | ||
The GEO Group, Inc. | 7,679 | 181,224 | ||
Total REITs (cost $814,427) | 841,961 | |||
Short-Term Investment: 2.7% | ||||
Money Market Fund - 2.7% | ||||
Short-Term Investments Trust Treasury Portfolio Institutional Class, 1.160%(b) | 367,840 | 367,840 | ||
Total Short-Term Investment (cost $367,840) | 367,840 | |||
Total Investments - 100.3% (cost $10,857,551) | 13,639,577 | |||
Liabilities in Excess of Other Assets (0.3)% | (37,920 | ) | ||
Net Assets: 100.0% | $ | 13,601,657 |
Percentages are stated as a percent of net assets.
(a) | No distribution or dividend was made during the period ending December 31, 2017. As such, it is classified as a non-income producing security as of December 31, 2017. |
(b) | Rate reported is the 7-day effective yield as of December 31, 2017. |
The cost basis of investments for federal income tax purposes at December 31, 2017 was as follows*:
Cost of investments | $ | 10,857,551 | |
Gross unrealized appreciation | 2,995,611 | ||
Gross unrealized depreciation | (213,585 | ) | |
Net unrealized appreciation | $ | 2,782,026 |
* | Because tax adjustments are calculated annually, the above table does not reflect tax adjustments. For the previous fiscal year's federal income tax information, please refer to the Notes to Financial Statements section in the Fund's most recent annual report. |
Country Exposure (as a percentage of total investments) (Unaudited) | |
United States | 93.74% |
Bermuda | 1.68% |
Israel | 1.33% |
Netherlands | 1.22% |
Ireland | 1.13% |
Canada | 0.90% |
Sector Allocation (as a percentage of total investments) (Unaudited) |
The industry classifications presented in this report, present the Global Industry Classification Standard (GICS®). GICS® was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor Financial Services LLC (“S&P”). GICS® is a service mark of MSCI and S&P and has been licensed for use by U.S. Bancorp Fund Services, LLC.
The Accompanying Notes are an Integral Part of these Financial Statements.
13
PENN CAPITAL FUNDS TRUST |
PENN CAPITAL SPECIAL SITUATIONS SMALL CAP EQUITY FUND |
SCHEDULE OF INVESTMENTS |
DECEMBER 31, 2017 (UNAUDITED) |
Shares | Value | |||||
Common Stocks: 98.4% | ||||||
Aerospace & Defense: 1.4% | ||||||
Aerojet Rocketdyne Holdings, Inc.(a) | 9,276 | $ | 289,411 | |||
Banks: 11.5% | ||||||
Banc of California, Inc. | 14,473 | 298,868 | ||||
Chemical Financial Corp. | 6,024 | 322,103 | ||||
FB Financial Corp.(a) | 4,978 | 209,026 | ||||
Sterling Bancorp | 14,670 | 360,882 | ||||
Texas Capital Bancshares, Inc.(a) | 4,801 | 426,809 | ||||
Webster Financial Corp. | 6,162 | 346,058 | ||||
Western Alliance Bancorp(a) | 6,211 | 351,667 | ||||
2,315,413 | ||||||
Biotechnology: 1.2% | ||||||
Ironwood Pharmaceuticals, Inc.(a) | 16,237 | 243,393 | ||||
Building Products: 1.2% | ||||||
JELD-WEN Holding, Inc.(a) | 6,299 | 247,992 | ||||
Capital Markets: 2.4% | ||||||
Hamilton Lane, Inc. - Class A | 7,895 | 279,404 | ||||
PJT Partners, Inc. - Class A | 4,365 | 199,044 | ||||
478,448 | ||||||
Chemicals: 2.0% | ||||||
Venator Materials PLC(a) | 18,327 | 405,393 | ||||
Construction Materials: 1.8% | ||||||
Summit Materials, Inc. - Class A(a) | 11,215 | 352,600 | ||||
Diversified Consumer Services: 1.5% | ||||||
Chegg, Inc.(a) | 18,959 | 309,411 | ||||
Energy Equipment & Services: 6.2% | ||||||
C&J Energy Services, Inc.(a) | 7,853 | 262,840 | ||||
Keane Group, Inc.(a) | 19,742 | 375,295 | ||||
Transocean Ltd.(a) | 22,790 | 243,397 | ||||
U.S. Silica Holdings, Inc. | 11,123 | 362,165 | ||||
1,243,697 | ||||||
Health Care Equipment & Supplies: 4.2% | ||||||
ICU Medical, Inc.(a) | 1,038 | 224,208 | ||||
K2M Group Holdings, Inc.(a) | 9,588 | 172,584 | ||||
LivaNova PLC(a) | 2,892 | 231,129 | ||||
Wright Medical Group NV(a) | 9,562 | 212,276 | ||||
840,197 | ||||||
Health Care Providers & Services: 2.1% | ||||||
Acadia Healthcare Co., Inc.(a) | 5,861 | 191,244 | ||||
WellCare Health Plans, Inc.(a) | 1,177 | 236,707 | ||||
427,951 |
Shares | Value | |||
Hotels, Restaurants & Leisure: 9.4% | ||||
ILG, Inc. | 3,906 | $ | 111,243 | |
Penn National Gaming, Inc.(a) | 10,776 | 337,612 | ||
Pinnacle Entertainment, Inc.(a) | 7,253 | 237,391 | ||
Planet Fitness, Inc. - Class A(a) | 7,116 | 246,427 | ||
Red Rock Resorts, Inc. - Class A | 11,113 | 374,952 | ||
Scientific Games Corp. - Class A(a) | 6,469 | 331,860 | ||
SeaWorld Entertainment, Inc.(a) | 18,881 | 256,215 | ||
1,895,700 | ||||
Household Durables: 1.7% | ||||
TopBuild Corp.(a) | 4,383 | 331,968 | ||
Independent Power and Renewable Electricity Producers: 1.6% | ||||
Dynegy, Inc.(a) | 27,325 | 323,801 | ||
Internet Software & Services: 8.4% | ||||
Carbonite, Inc.(a) | 10,375 | 260,412 | ||
Gogo, Inc.(a) | 20,506 | 231,308 | ||
Hortonworks, Inc.(a) | 12,509 | 251,556 | ||
Instructure, Inc.(a) | 5,588 | 184,963 | ||
Mimecast Ltd.(a) | 8,038 | 230,449 | ||
MINDBODY, Inc. - Class A(a) | 10,313 | 314,031 | ||
Q2 Holdings, Inc.(a) | 6,015 | 221,653 | ||
1,694,372 | ||||
IT Services: 3.4% | ||||
Blackhawk Network Holdings, Inc.(a) | 5,510 | 196,431 | ||
Everi Holdings, Inc.(a) | 23,831 | 179,686 | ||
InterXion Holding NV(a) | 5,203 | 306,613 | ||
682,730 | ||||
Life Sciences Tools & Services: 1.2% | ||||
Cambrex Corp.(a) | 4,913 | 235,824 | ||
Machinery: 6.8% | ||||
Astec Industries, Inc. | 5,227 | 305,779 | ||
Harsco Corp.(a) | 15,266 | 284,711 | ||
ITT, Inc. | 3,972 | 211,986 | ||
Milacron Holdings Corp.(a) | 15,694 | 300,383 | ||
SPX FLOW, Inc.(a) | 5,624 | 267,421 | ||
1,370,280 | ||||
Media: 10.8% | ||||
AMC Entertainment Holdings, Inc. - Class A | 21,711 | 327,836 | ||
Gray Television, Inc.(a) | 33,242 | 556,804 | ||
MDC Partners, Inc. - Class A(a) | 22,494 | 219,317 | ||
Media General, Inc.(a) | 1,867 | 93 | ||
Nexstar Media Group, Inc. - Class A | 5,103 | 399,055 | ||
Sinclair Broadcast Group, Inc. - Class A | 17,617 | 666,803 | ||
2,169,908 | ||||
Metals & Mining: 1.4% | ||||
Ferroglobe PLC | 17,840 | 289,008 |
The Accompanying Notes are an Integral Part of these Financial Statements.
14
PENN CAPITAL FUNDS TRUST |
PENN CAPITAL SPECIAL SITUATIONS SMALL CAP EQUITY FUND |
SCHEDULE OF INVESTMENTS |
DECEMBER 31, 2017 (UNAUDITED) |
Shares | Value | |||
Oil, Gas & Consumable Fuels: 3.5% | ||||
Resolute Energy Corp.(a) | 12,004 | $ | 377,766 | |
WPX Energy, Inc.(a) | 22,711 | 319,544 | ||
697,310 | ||||
Pharmaceuticals: 1.4% | ||||
Pacira Pharmaceuticals, Inc.(a) | 6,170 | 281,660 | ||
Road & Rail: 1.4% | ||||
Schneider National, Inc. - Class B | 9,909 | 283,001 | ||
Semiconductors & Semiconductor Equipment: 2.6% | ||||
Semtech Corp.(a) | 8,791 | 300,652 | ||
Versum Materials, Inc. | 6,005 | 227,289 | ||
527,941 | ||||
Software: 3.0% | ||||
Model N, Inc.(a) | 9,472 | 149,184 | ||
Nice Ltd. - ADR | 3,011 | 276,741 | ||
Tyler Technologies, Inc.(a) | 960 | 169,968 | ||
595,893 | ||||
Specialty Retail: 1.7% | ||||
Five Below, Inc.(a) | 2,648 | 175,615 | ||
Floor & Decor Holdings, Inc. - Class A(a) | 3,566 | 173,593 | ||
349,208 | ||||
Textiles, Apparel & Luxury Goods: 1.1% | ||||
G-III Apparel Group Ltd.(a) | 6,218 | 229,382 | ||
Thrifts & Mortgage Finance: 1.4% | ||||
WSFS Financial Corp. | 6,034 | 288,727 | ||
Trading Companies & Distributors: 2.1% | ||||
Beacon Roofing Supply, Inc.(a) | 3,779 | 240,949 | ||
DXP Enterprises, Inc.(a) | 6,422 | 189,899 | ||
430,848 | ||||
Total Common Stocks (cost $17,200,726) | 19,831,467 | |||
Short-Term Investment: 1.4% | ||||
Money Market Fund - 1.4% | ||||
Short-Term Investments Trust Treasury Portfolio Institutional Class, 1.160%(b) | 289,394 | 289,394 | ||
Total Short-Term Investment (cost $289,394) | 289,394 | |||
Total Investments - 99.8% (cost $17,490,120) | 20,120,861 | |||
Other Assets and Liabilities 0.2% | 38,055 | |||
Net Assets: 100.0% | $ | 20,158,916 |
Percentages are stated as a percent of net assets.
(a) | No distribution or dividend was made during the period ending December 31, 2017. As such, it is classified as a non-income producing security as of December 31, 2017. |
(b) | Rate reported is the 7-day effective yield as of December 31, 2017. |
The cost basis of investments for federal income tax purposes at December 31, 2017 was as follows*:
Cost of investments | $ | 17,490,120 | |
Gross unrealized appreciation | 3,136,567 | ||
Gross unrealized depreciation | (505,826 | ) | |
Net unrealized appreciation | $ | 2,630,741 |
* | Because tax adjustments are calculated annually, the above table does not reflect tax adjustments. For the previous fiscal year's federal income tax information, please refer to the Notes to Financial Statements section in the Fund's most recent annual report. |
Country Exposure (as a percentage of total investments) (Unaudited) | |
United States | 88.00% |
United Kingdom | 4.60% |
Netherlands | 2.58% |
Israel | 1.38% |
Switzerland | 1.21% |
Jersey | 1.14% |
Canada | 1.09% |
Sector Allocation (as a percentage of total investments) (Unaudited) |
The Accompanying Notes are an Integral Part of these Financial Statements.
15
PENN CAPITAL FUNDS TRUST |
PENN CAPITAL MULTI-CREDIT HIGH INCOME FUND |
SCHEDULE OF INVESTMENTS |
DECEMBER 31, 2017 (UNAUDITED) |
Principal | Value | |||||
Corporate Bonds: 82.4% | ||||||
Aerospace: 1.1% | ||||||
Bombardier, Inc., 8.750%, 12/1/21(a) | 110,000 | $ | 121,000 | |||
Airline Companies: 0.5% | ||||||
Air Canada, 7.750%, 4/15/21(a) | 50,000 | 57,000 | ||||
Animal Slaughtering and Processing: 0.4% | ||||||
Simmons Foods, Inc., 5.750%, 11/1/24(a) | 40,000 | 39,650 | ||||
Automotive: 0.7% | ||||||
Navistar International Corp., 6.620%, 11/1/25(a) | 75,000 | 78,254 | ||||
Auto Parts & Equipment: 0.4% | ||||||
Meritor, Inc., 6.250%, 2/15/24 | 35,000 | 36,838 | ||||
Banking: 1.8% | ||||||
Ally Financial, Inc., 8.000%, 11/1/31 | 25,000 | 32,500 | ||||
Ally Financial, Inc., 5.750%, 11/20/25 | 90,000 | 98,100 | ||||
Ally Financial, Inc., 5.120%, 9/30/24 | 50,000 | 54,062 | ||||
184,662 | ||||||
Beverage: 0.6% | ||||||
Cott Beverages, Inc., 5.370%, 7/1/22 | 60,000 | 62,412 | ||||
Brokerage: 0.5% | ||||||
Oppenheimer Holdings, Inc., 6.750%, 7/1/22 | 50,000 | 51,500 | ||||
Building & Construction: 0.6% | ||||||
Ashton Woods USA LLC, 6.750%, 8/1/25(a) | 15,000 | 14,981 | ||||
Ashton Woods USA LLC, 6.870%, 2/15/21(a) | 24,000 | 24,450 | ||||
Beazer Homes USA, Inc., 8.750%, 3/15/22 | 20,000 | 22,048 | ||||
61,479 | ||||||
Building Materials: 1.1% | ||||||
Griffon Corp., 5.250%, 3/1/22 | 55,000 | 55,550 | ||||
U.S. Concrete, Inc., 6.370%, 6/1/24 | 60,000 | 64,350 | ||||
119,900 | ||||||
Chemical Companies: 0.8% | ||||||
Olin Corp., 5.120%, 9/15/27 | 15,000 | 15,788 | ||||
Tronox Finance LLC, 7.500%, 3/15/22(a) | 25,000 | 26,125 | ||||
Tronox Finance PLC, 5.750%, 10/1/25(a) | 40,000 | 41,100 | ||||
83,013 | ||||||
Chemicals: 1.2% | ||||||
Platform Specialty Products Corp., 5.870%, 12/1/25(a) | 80,000 | 79,400 | ||||
Trinseo Materials Operating SCA, 5.370%, 9/1/25(a) | 45,000 | 46,575 | ||||
125,975 | ||||||
Computer Hardware: 3.0% | ||||||
Dell International LLC, 8.100%, 7/15/36(a) | 140,000 | 176,689 | ||||
Qorvo, Inc., 6.750%, 12/1/23 | 40,000 | 43,000 | ||||
Western Digital Corp., 10.500%, 4/1/24 | 80,000 | 92,700 | ||||
312,389 |
Principal | Value | |||
Consumer/Commercial/Lease Financing: 1.4% | ||||
International Lease Finance Corp., 8.620%, 1/15/22 | 35,000 | $ | 42,147 | |
Navient Corp., 6.120%, 3/25/24 | 35,000 | 35,438 | ||
Navient Corp., 6.620%, 7/26/21 | 10,000 | 10,550 | ||
Navient Corp., 5.870%, 10/25/24 | 65,000 | 64,512 | ||
152,647 | ||||
Diversified Capital Goods: 0.5% | ||||
Anixter, Inc., 5.120%, 10/1/21 | 50,000 | 52,625 | ||
Electric - Generation: 3.0% | ||||
Calpine Corp., 5.370%, 1/15/23 | 65,000 | 63,294 | ||
Calpine Corp., 5.870%, 1/15/24(a) | 25,000 | 25,437 | ||
Dynegy, Inc., 7.370%, 11/1/22 | 25,000 | 26,375 | ||
Dynegy, Inc., 7.620%, 11/1/24 | 70,000 | 75,075 | ||
Dynegy, Inc., 8.120%, 1/30/26(a) | 50,000 | 54,625 | ||
NRG Energy, Inc., 7.250%, 5/15/26 | 20,000 | 21,775 | ||
NRG Energy, Inc., 6.620%, 1/15/27 | 25,000 | 26,437 | ||
NRG Energy, Inc., 5.750%, 1/15/28(a) | 25,000 | 25,250 | ||
318,268 | ||||
Energy - Exploration & Production: 5.7% | ||||
Antero Resources Corp., 5.120%, 12/1/22 | 50,000 | 51,000 | ||
Approach Resources, Inc., 7.000%, 6/15/21 | 40,000 | 34,600 | ||
Bill Barrett Corp., 7.000%, 10/15/22 | 35,000 | 35,656 | ||
Carrizo Oil & Gas, Inc., 8.250%, 7/15/25 | 25,000 | 27,469 | ||
VFH Parent LLC, 6.750%, 6/15/22(a) | 35,000 | 36,838 | ||
Centennial Resource Production LLC, 5.370%, 1/15/26(a) | 30,000 | 30,562 | ||
Comstock Resources, Inc., 10.000% Cash or 12.250% PIK, 3/15/20(b) | 115,000 | 118,594 | ||
Continental Resources, Inc., 5.000%, 9/15/22 | 20,000 | 20,300 | ||
Gulfport Energy Corp., 6.620%, 5/1/23 | 15,000 | 15,300 | ||
PetroQuest Energy, Inc., 10.000% Cash or 10.000% PIK, 2/15/21(b) | 59,456 | 45,188 | ||
Resolute Energy Corp., 8.500%, 5/1/20 | 95,000 | 96,662 | ||
Sanchez Energy Corp., 6.120%, 1/15/23 | 50,000 | 42,375 | ||
Unit Corp., 6.620%, 5/15/21 | 45,000 | 45,337 | ||
599,881 | ||||
Entertainment: 1.1% | ||||
AMC Entertainment Holdings, Inc., 5.750%, 6/15/25 | 55,000 | 54,450 | ||
AMC Entertainment Holdings, Inc., 5.870%, 11/15/26 | 25,000 | 24,687 | ||
National CineMedia LLC, 5.750%, 8/15/26 | 40,000 | 37,500 | ||
116,637 |
The Accompanying Notes are an Integral Part of these Financial Statements.
16
PENN CAPITAL FUNDS TRUST |
PENN CAPITAL MULTI-CREDIT HIGH INCOME FUND |
SCHEDULE OF INVESTMENTS |
DECEMBER 31, 2017 (UNAUDITED) |
Principal | Value | |||
Food - Wholesale: 0.8% | ||||
JBS USA LUX SA, 7.250%, 6/1/21(a) | 15,000 | $ | 15,244 | |
JBS USA LUX SA, 5.870%, 7/15/24(a) | 35,000 | 33,819 | ||
JBS USA LUX SA, 7.250%, 6/1/21(a) | 15,000 | 15,243 | ||
JBS USA LUX SA, 8.250%, 2/1/20(a) | 20,000 | 20,060 | ||
84,366 | ||||
Food & Drug Retailers: 0.9% | ||||
Albertsons Cos LLC / Safeway, Inc., 6.620%, 6/15/24 | 25,000 | 23,875 | ||
Ingles Markets, Inc., 5.750%, 6/15/23 | 25,000 | 25,312 | ||
Rite Aid Corp., 6.750%, 6/15/21 | 30,000 | 29,850 | ||
Rite Aid Corp., 6.120%, 4/1/23(a) | 15,000 | 13,538 | ||
92,575 | ||||
Forestry/Paper: 0.4% | ||||
Rayonier AM Products, Inc., 5.500%, 6/1/24(a) | 40,000 | 39,850 | ||
Gaming: 2.6% | ||||
Everi Payments, Inc., 7.500%, 12/15/25(a) | 75,000 | 74,344 | ||
Gateway Casinos & Entertainment Ltd., 8.250%, 3/1/24(a) | 40,000 | 42,800 | ||
MGM Resorts International, 4.620%, 9/1/26 | 90,000 | 90,900 | ||
MGM Resorts International, 7.750%, 3/15/22 | 30,000 | 34,200 | ||
Pinnacle Entertainment, Inc., 5.620%, 5/1/24 | 35,000 | 37,450 | ||
279,694 | ||||
Gas Distribution: 4.7% | ||||
Blue Racer Midstream LLC, 6.120%, 11/15/22(a) | 45,000 | 46,800 | ||
DCP Midstream Operating LP, 3.870%, 3/15/23 | 55,000 | 54,656 | ||
DCP Midstream Operating LP, 4.950%, 4/1/22 | 33,000 | 34,279 | ||
DCP Midstream Operating LP, 5.850% (3 Month LIBOR USD + 3.850%), 5/21/43(a)(c) | 90,000 | 83,700 | ||
NGL Energy Partners LP, 5.120%, 7/15/19 | 50,000 | 50,875 | ||
NGL Energy Partners LP, 6.870%, 10/15/21 | 20,000 | 20,400 | ||
NGPL PipeCo LLC, 7.770%, 12/15/37(a) | 45,000 | 55,462 | ||
Rockies Express Pipeline LLC, 6.870%, 4/15/40(a) | 45,000 | 50,625 | ||
Rockies Express Pipeline LLC, 5.620%, 4/15/20(a) | 25,000 | 26,188 | ||
Sunoco LP, 6.370%, 4/1/23 | 45,000 | 47,419 | ||
Targa Resources Partners LP, 5.250%, 5/1/23 | 30,000 | 30,675 | ||
501,079 |
Principal | Value | |||
Health Services: 4.2% | ||||
Acadia Healthcare Co., Inc., 5.620%, 2/15/23 | 50,000 | $ | 50,750 | |
Acadia Healthcare Co., Inc., 6.120%, 3/15/21 | 35,000 | 35,481 | ||
Envision Healthcare Corp., 5.620%, 7/15/22 | 25,000 | 25,250 | ||
Centene Corp., 6.120%, 2/15/24 | 30,000 | 31,725 | ||
DaVita, Inc., 5.120%, 7/15/24 | 40,000 | 40,400 | ||
HealthSouth Corp., 5.750%, 9/15/25 | 50,000 | 52,000 | ||
Opal Acquisition, Inc., 10.000%, 10/1/24(a) | 80,000 | 71,500 | ||
Opal Acquisition, Inc., 7.500%, 7/1/24(a) | 10,000 | 9,700 | ||
Select Medical Corp., 6.370%, 6/1/21 | 85,000 | 87,231 | ||
Universal Hospital Services, Inc., 7.620%, 8/15/20 | 35,000 | 35,000 | ||
439,037 | ||||
Hospitals: 2.1% | ||||
HCA, Inc., 7.500%, 2/15/22 | 25,000 | 28,125 | ||
HCA, Inc., 5.250%, 6/15/26 | 40,000 | 42,400 | ||
HCA, Inc., 5.370%, 2/1/25 | 65,000 | 67,275 | ||
Tenet Healthcare Corp., 8.120%, 4/1/22 | 80,000 | 81,400 | ||
219,200 | ||||
Hotels: 0.6% | ||||
FelCor Lodging LP, 5.620%, 3/1/23 | 60,000 | 61,650 | ||
Household & Leisure Products/Durables: 0.4% | ||||
Tempur Sealy International, Inc., 5.500%, 6/15/26 | 45,000 | 46,134 | ||
Investments & Miscellaneous Financial Services: 2.5% | ||||
First Data Corp., 5.750%, 1/15/24(a) | 50,000 | 51,925 | ||
First Data Corp., 5.000%, 1/15/24(a) | 30,000 | 30,862 | ||
First Data Corp., 7.000%, 12/1/23(a) | 75,000 | 79,312 | ||
Icahn Enterprises LP, 6.370%, 12/15/25(a) | 10,000 | 10,001 | ||
Icahn Enterprises LP, 6.750%, 2/1/24 | 50,000 | 51,375 | ||
Icahn Enterprises LP, 5.870%, 2/1/22 | 45,000 | 45,563 | ||
269,038 | ||||
Machinery Companies: 0.5% | ||||
Zekelman Industries, Inc., 9.870%, 6/15/23(a) | 50,000 | 56,250 | ||
Media - Broadcast: 3.4% | ||||
Gray Television, Inc., 5.120%, 10/15/24(a) | 25,000 | 24,937 | ||
Gray Television, Inc., 5.870%, 7/15/26(a) | 25,000 | 25,625 | ||
Salem Media Group, Inc., 6.750%, 6/1/24(a) | 45,000 | 44,775 | ||
Sinclair Television Group, Inc., 5.620%, 8/1/24(a) | 65,000 | 67,031 | ||
Townsquare Media, Inc., 6.500%, 4/1/23(a) | 25,000 | 24,438 | ||
Urban One, Inc., 7.370%, 10/15/22(a) | 45,000 | 44,888 | ||
Urban One, Inc., 9.250%, 2/15/20(a) | 140,000 | 131,600 | ||
363,294 |
The Accompanying Notes are an Integral Part of these Financial Statements.
17
PENN CAPITAL FUNDS TRUST |
PENN CAPITAL MULTI-CREDIT HIGH INCOME FUND |
SCHEDULE OF INVESTMENTS |
DECEMBER 31, 2017 (UNAUDITED) |
Principal | Value | |||
Media - Cable: 2.8% | ||||
Dish DBS Corp., 7.750%, 7/1/26 | 45,000 | $ | 47,306 | |
Dish DBS Corp., 6.750%, 6/1/21 | 40,000 | 42,050 | ||
SFR Group SA, 7.370%, 5/1/26(a) | 200,000 | 206,000 | ||
295,356 | ||||
Media - Services: 1.2% | ||||
Clear Channel Worldwide Holdings, Inc., 7.620%, 3/15/20 | 10,000 | 9,800 | ||
Clear Channel Worldwide Holdings, Inc., 7.620%, 3/15/20 | 40,000 | 39,150 | ||
Lamar Media Corp., 5.750%, 2/1/26 | 10,000 | 10,675 | ||
MDC Partners, Inc., 6.500%, 5/1/24(a) | 70,000 | 70,350 | ||
129,975 | ||||
Metals/Mining Excluding Steel: 4.1% | ||||
Aleris International, Inc., 7.870%, 11/1/20 | 45,000 | 44,550 | ||
Alliance Resource Operating Partners LP, 7.500%, 5/1/25(a) | 40,000 | 42,500 | ||
Cleveland-Cliffs, Inc., 5.750%, 3/1/25(a) | 35,000 | 33,381 | ||
Freeport-McMoRan, Inc., 4.550%, 11/14/24 | 15,000 | 15,250 | ||
Freeport-McMoRan, Inc., 5.450%, 3/15/43 | 75,000 | 74,906 | ||
Freeport-McMoRan, Inc., 3.870%, 3/15/23 | 5,000 | 4,975 | ||
Peabody Energy Corp., 10.000%, 3/15/22(d) | 95,000 | 0 | ||
Peabody Energy Corp., 6.370%, 3/31/25(a) | 45,000 | 46,800 | ||
SunCoke Energy Partners LP, 7.500%, 6/15/25(a) | 65,000 | 67,925 | ||
Teck Resources Ltd., 5.200%, 3/1/42 | 35,000 | 34,650 | ||
Teck Resources Ltd., 3.750%, 2/1/23 | 35,000 | 35,088 | ||
Teck Resources Ltd., 6.250%, 7/15/41 | 25,000 | 28,625 | ||
428,650 | ||||
Multi-Line Insurance: 0.4% | ||||
HUB International Ltd., 7.870%, 10/1/21(a) | 35,000 | 36,444 | ||
Non-Food & Drug Retailers: 0.2% | ||||
JC Penney Corp., Inc., 8.120%, 10/1/19 | 22,000 | 22,440 | ||
Oil Field Equipment & Services: 2.1% | ||||
CSI Compressco LP, 7.250%, 8/15/22 | 45,000 | 42,412 | ||
Nabors Industries, Inc., 5.500%, 1/15/23 | 25,000 | 24,188 | ||
Noble Holding International Ltd., 7.750%, 1/15/24 | 45,000 | 38,700 | ||
Pioneer Energy Services Corp., 6.120%, 3/15/22 | 60,000 | 49,182 | ||
Transocean, Inc., 6.800%, 3/15/38 | 30,000 | 24,188 | ||
Transocean, Inc., 8.370%, 12/15/21 | 15,000 | 16,200 | ||
Williams Partners LP, 4.870%, 3/15/24 | 25,000 | 26,125 | ||
220,995 | ||||
Oil Refining & Marketing: 0.6% | ||||
PBF Holding Co. LLC, 7.000%, 11/15/23 | 40,000 | 41,750 | ||
PBF Holding Co. LLC, 7.250%, 6/15/25 | 25,000 | 26,281 | ||
68,031 |
Principal | Value | |||
Oil, Gas & Consumable Fuels: 0.7% | ||||
CONSOL Energy, Inc., 11.000%, 11/15/25(a) | 70,000 | $ | 73,500 | |
Pharmaceuticals & Devices: 5.0% | ||||
Endo Finance LLC, 5.370%, 1/15/23(a) | 55,000 | 42,900 | ||
Jaguar Holding Co. II, 6.370%, 8/1/23(a) | 55,000 | 55,550 | ||
Kinetic Concepts, Inc., 12.500%, 11/1/21(a) | 75,000 | 84,187 | ||
Mallinckrodt International Finance SA, 4.750%, 4/15/23 | 35,000 | 27,475 | ||
Mallinckrodt International Finance SA, 5.750%, 8/1/22(a) | 40,000 | 36,300 | ||
Valeant Pharmaceuticals International, Inc., 7.500%, 7/15/21(a) | 60,000 | 61,125 | ||
Valeant Pharmaceuticals International, Inc., 5.620%, 12/1/21(a) | 30,000 | 29,325 | ||
Valeant Pharmaceuticals International, Inc., 5.870%, 5/15/23(a) | 210,000 | 194,513 | ||
531,375 | ||||
Printing & Publishing: 0.4% | ||||
Lee Enterprises, Inc., 9.500%, 3/15/22(a) | 45,000 | 46,575 | ||
Radio and Television Broadcasting: 0.3% | ||||
Univision Communications, Inc., 5.120%, 2/15/25(a) | 35,000 | 34,125 | ||
Railroads: 0.6% | ||||
Watco Cos LLC, 6.370%, 4/1/23(a) | 60,000 | 62,100 | ||
Real Estate Development & Management: 0.5% | ||||
Realogy Group LLC, 5.250%, 12/1/21(a) | 50,000 | 51,875 | ||
Restaurants: 1.0% | ||||
Golden Nugget, Inc., 6.750%, 10/15/24(a) | 50,000 | 50,875 | ||
P.F. Chang's China Bistro, Inc., 10.250%, 6/30/20(a) | 55,000 | 50,050 | ||
100,925 | ||||
Special Retail: 0.2% | ||||
Staples, Inc., 8.500%, 9/15/25(a) | 25,000 | 23,125 | ||
Steel Producers & Products: 0.8% | ||||
United States Steel Corp., 6.870%, 8/15/25 | 55,000 | 57,409 | ||
United States Steel Corp., 7.370%, 4/1/20 | 25,000 | 27,125 | ||
84,534 | ||||
Support - Services: 1.6% | ||||
Herc Rentals, Inc., 7.750%, 6/1/24(a) | 35,000 | 38,413 | ||
The ADT Corp., 4.870%, 7/15/32(a) | 50,000 | 47,250 | ||
The ADT Corp., 3.500%, 7/15/22 | 10,000 | 9,850 | ||
The ADT Corp., 6.250%, 10/15/21 | 20,000 | 21,900 | ||
The GEO Group, Inc., 5.870%, 10/15/24 | 45,000 | 46,237 | ||
163,650 |
The Accompanying Notes are an Integral Part of these Financial Statements.
18
PENN CAPITAL FUNDS TRUST |
PENN CAPITAL MULTI-CREDIT HIGH INCOME FUND |
SCHEDULE OF INVESTMENTS |
DECEMBER 31, 2017 (UNAUDITED) |
Principal | Value | |||
Telecom - Integrated/Services: 8.5% | ||||
CenturyLink, Inc., 5.620%, 4/1/20 | 25,000 | $ | 25,187 | |
Cincinnati Bell, Inc., 7.000%, 7/15/24(a) | 35,000 | 34,738 | ||
Cogent Communications Finance, Inc., 5.620%, 4/15/21(a) | 65,000 | 65,650 | ||
Consolidated Communications, Inc., 6.500%, 10/1/22 | 70,000 | 63,000 | ||
Frontier Communications Corp., 8.870%, 9/15/20 | 20,000 | 16,800 | ||
Frontier Communications Corp., 8.500%, 4/15/20 | 110,000 | 91,300 | ||
Gogo Intermediate Holdings LLC, 12.500%, 7/1/22(a) | 110,000 | 124,163 | ||
Intelsat Connect Finance SA, 12.500%, 4/1/22(a) | 113,000 | 98,875 | ||
Intelsat Jackson Holdings SA, 7.250%, 10/15/20 | 50,000 | 47,000 | ||
Intelsat Jackson Holdings SA, 5.500%, 8/1/23 | 70,000 | 57,225 | ||
Intelsat Luxembourg SA, 6.750%, 6/1/18 | 50,000 | 48,750 | ||
Level 3 Financing, Inc., 5.120%, 5/1/23 | 40,000 | 40,100 | ||
Uniti Group LP, 6.000%, 4/15/23(a) | 70,000 | 68,775 | ||
Uniti Group LP, 7.120%, 12/15/24(a) | 40,000 | 36,400 | ||
WaveDivision Escrow LLC, 8.120%, 9/1/20(a) | 50,000 | 51,000 | ||
Windstream Services LLC, 7.750%, 10/15/20 | 36,000 | 30,420 | ||
899,383 | ||||
Telecom - Wireless: 2.4% | ||||
GTT Communications, Inc., 7.870%, 12/31/24(a) | 35,000 | 36,925 | ||
Sprint Capital Corp., 6.870%, 11/15/28 | 55,000 | 55,344 | ||
Sprint Corp., 7.120%, 6/15/24 | 70,000 | 71,225 | ||
Sprint Corp., 7.870%, 9/15/23 | 40,000 | 42,600 | ||
Sprint Corp., 7.250%, 9/15/21 | 20,000 | 21,175 | ||
Telesat Canada, 8.870%, 11/15/24(a) | 25,000 | 28,000 | ||
255,269 | ||||
Telecommunications Equipment: 0.4% | ||||
CommScope Technologies LLC, 5.000%, 3/15/27(a) | 5,000 | 5,000 | ||
CommScope, Inc., 5.500%, 6/15/24(a) | 40,000 | 41,600 | ||
46,600 | ||||
Transportation Excluding Air/Rail: 0.8% | ||||
Deck Chassis Acquisition, Inc., 10.000%, 6/15/23(a) | 30,000 | 33,375 | ||
The Kenan Advantage Group, Inc., 7.870%, 7/31/23(a) | 45,000 | 46,575 | ||
79,950 |
Principal | Value | |||
Wireless Telecommunication Services: 0.3% | ||||
United States Cellular Corp., 6.700%, 12/15/33 | 30,000 | $ | 31,297 | |
Total Corporate Bonds (cost $8,460,392) | 8,712,471 | |||
Convertible Bonds: 1.8% | ||||
Automotive: 0.3% | ||||
Navistar International Corp., 4.750%, 4/15/19 | 25,000 | 27,063 | ||
Oil Field Equipment & Services: 0.2% | ||||
Ensco Jersey Finance Ltd., 3.000%, 1/31/24 | 30,000 | 26,625 | ||
Telecom - Wireless: 0.7% | ||||
Gogo, Inc., 3.750%, 3/1/20 | 85,000 | 77,509 | ||
Energy - Exploration & Production: 0.6% | ||||
Comstock Resources, Inc., 7.750% Cash or 7.750% PIK, 4/1/19(b) | 67,325 | 61,602 | ||
Total Convertible Bonds (cost $182,737) | 192,799 |
Shares | Value | |||||
Common Stock: 0.0% | ||||||
Media - Cable: 0.0% | ||||||
ACC Claims Holdings LLC(e)(f) | 11,610 | 35 | ||||
Total Common Stock (cost $237) | 35 | |||||
Convertible Preferred Stock: 0.5% | ||||||
Health Care Providers & Services: 0.5% | ||||||
Anthem, Inc.(e) | 1,000 | 56,000 | ||||
Total Convertible Preferred Stock (cost $55,084) | 56,000 | |||||
Mutual Fund: 9.5% | ||||||
Penn Capital Defensive Floating Rate Income Fund-Institutional Shares(g) | 98,780 | 999,648 | ||||
Total Mutual Fund (cost $1,008,229) | 999,648 | |||||
Preferred Stock: 0.0% | ||||||
Spanish Broadcasting System, Inc., 10.750% Cash or 10.750% PIK(b)(e)(f) | 1 | 41 | ||||
Total Preferred Stock (cost $613) | 41 | |||||
Warrant: 0.0% | ||||||
Comstock Resources, Inc.(e) | 138 | 1,166 | ||||
Total Warrant (cost $0) | 1,166 |
The Accompanying Notes are an Integral Part of these Financial Statements.
19
PENN CAPITAL FUNDS TRUST |
PENN CAPITAL MULTI-CREDIT HIGH INCOME FUND |
SCHEDULE OF INVESTMENTS |
DECEMBER 31, 2017 (UNAUDITED) |
Shares | Value | |||
Short-Term Investment: 4.4% | ||||
Money Market Fund - 4.4% | ||||
Short-Term Investments Trust Treasury Portfolio Institutional Class, 1.160%(h) | 465,706 | $ | 465,706 | |
Total Short-Term Investment (cost $465,706) | 465,706 | |||
Total Investments - 98.6% (cost $10,172,998) | 10,427,866 | |||
Other Assets and Liabilities 1.4% | 149,880 | |||
Net Assets: 100.0% | $ | 10,577,746 |
Percentages are stated as a percent of net assets.
(a) | Securities purchased pursuant to Rule 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other “qualified institutional buyers.” As of December 31, 2017, the value of these investments was $4,224,717, or 39.9% of total net assets. |
(b) | Payment-in-kind security which may pay interest/dividends in additional par/shares and/or in cash. |
(c) | Variable rate security. The rate listed is as of December 31, 2017. |
(d) | Item identified as in default as to payment of interest, the value of these investments were $0.00 or 0.0% of total net assets. |
(e) | No distribution or dividend was made during the period ending December 31, 2017. As such, it is classified as a non-income producing security as of December 31, 2017. |
(f) | Value determined using significant unobservable inputs. |
(g) | Affiliated company. See Note 7. |
(h) | Rate reported is the 7-day effective yield as of December 31, 2017. |
The cost basis of investments for federal income tax purposes at December 31, 2017 was as follows*:
Cost of investments | $ | 10,172,998 | |
Gross unrealized appreciation | 388,978 | ||
Gross unrealized depreciation | (134,110 | ) | |
Net unrealized appreciation | $ | 254,868 |
* | Because tax adjustments are calculated annually, the above table does not reflect tax adjustments. For the previous fiscal year's federal income tax information, please refer to the Notes to Financial Statements section in the Fund's most recent annual report. |
Country Exposure (as a percentage of total investments) (Unaudited) | |
United States | 86.41% |
Canada | 6.74% |
Luxembourg | 3.47% |
France | 1.98% |
Cayman Islands | 0.76% |
United Kingdom | 0.39% |
Jersey | 0.25% |
Asset Type (as a percentage of total investments) (Unaudited) |
The Accompanying Notes are an Integral Part of these Financial Statements.
20
PENN CAPITAL FUNDS TRUST |
PENN CAPITAL DEFENSIVE FLOATING RATE INCOME FUND |
SCHEDULE OF INVESTMENTS |
DECEMBER 31, 2017 (UNAUDITED) |
Principal | Value | |||||
Bank Loans: 83.1%(a) | ||||||
Airline Companies: 1.2% | ||||||
American Airlines, Inc., 3.570% (1 Month US LIBOR + 2.000%), 4/28/23 | 99,000 | $ | 98,897 | |||
United Airlines, Inc., 3.400% (3 Month US LIBOR + 2.000%), 4/1/24 | 248,125 | 248,569 | ||||
347,466 | ||||||
Automotive: 1.8% | ||||||
Navistar, Inc., 4.900% (1 Month US LIBOR + 3.500%), 11/06/24 | 250,000 | 250,702 | ||||
Octavius Corp., 4.980% (1 Month US LIBOR + 3.500%), 11/8/23 | 250,000 | 251,563 | ||||
502,265 | ||||||
Auto Parts & Equipment: 0.8% | ||||||
Key Safety Systems, Inc., 5.890% (3 Month US LIBOR + 2.750%), 8/29/21 | 235,287 | 233,424 | ||||
Building Materials: 0.9% | ||||||
Quikrete Holdings, Inc., 4.320% (1 Month US LIBOR + 2.750%), 11/15/23 | 240,384 | 240,685 | ||||
Building Products: 0.9% | ||||||
Atkore International, Inc., 4.700% (3 Month US LIBOR + 3.000%), 12/22/23 | 247,500 | 248,738 | ||||
Chemicals: 0.4% | ||||||
Encapsys LLC, 4.820% (1 Month US LIBOR + 3.250%), 10/27/24 | 125,000 | 125,391 | ||||
Chemical Compaines: 2.7% | ||||||
HB Fuller Co., 3.750% (1 Month US LIBOR + 2.250%), 10/20/24 | 249,375 | 250,033 | ||||
McAfee LLC, 6.070% (1 Month US LIBOR + 4.500%), 9/29/24 | 249,374 | 248,395 | ||||
Tronox Blocked Borrower LLC, 4.690% (3 Month US LIBOR + 3.000%), 9/22/24 | 75,581 | 76,013 | ||||
Tronox Finance LLC, 4.690% (3 Month US LIBOR + 3.000%), 9/22/24 | 174,419 | 175,414 | ||||
749,855 | ||||||
Communications Equipment: 0.7% | ||||||
Polycom, Inc., 6.780% (1 Month US LIBOR + 5.250%), 9/27/23 | 196,854 | 198,002 | ||||
Computer & Peripherals: 0.9% | ||||||
Western Digital Corp., 3.570% (1 Month US LIBOR + 2.000%), 4/29/23 | 245,152 | 245,949 | ||||
Consumer - Products: 0.8% | ||||||
HLF Financing Sarl, 7.070% (1 Month US LIBOR + 5.500%), 2/15/23 | 235,937 | 235,126 |
Principal | Value | |||
Diversified Capital Goods: 1.8% | ||||
Gardner Denver, Inc., 4.440% (3 Month US LIBOR + 2.750%), 7/30/24 | 124,688 | $ | 125,033 | |
Harsco Corp., 4.370% (1 Month US LIBOR + 5.000%), 12/7/24 | 247,500 | 250,284 | ||
Thermon Industries, Inc., 5.120% (1 Month US LIBOR + 3.750%), 10/30/24 | 125,000 | 125,781 | ||
501,098 | ||||
Diversified Financial Services: 0.9% | ||||
Canyon Valor Cos, Inc., 5.940% (3 Month US LIBOR + 4.250%), 6/16/23 | 249,375 | 251,973 | ||
Diversified Telecommunication Services: 0.9% | ||||
Consolidated Communications, Inc., 4.570% (1 Month US LIBOR + 3.000%), 10/5/23 | 249,065 | 244,520 | ||
Electric - Generation: 4.3% | ||||
Calpine Corp., 4.200% (3 Month US LIBOR + 2.500%), 1/15/23 | 243,149 | 242,845 | ||
Dynegy, Inc., 3.750%, (1 Month US LIBOR + 2.750% ) 2/7/24 | 226,893 | 227,839 | ||
Exgen Renewables IV LLC, 4.470% (3 Month US LIBOR + 3.000%), 11/28/24 | 125,000 | 126,250 | ||
Helix Gen Funding LLC, 5.440% (3 Month US LIBOR + 3.750%), 6/3/24 | 231,144 | 231,673 | ||
Lightstone Holdco LLC, 6.070% (1 Month US LIBOR + 4.500%), 1/30/24 | 14,493 | 14,546 | ||
Lightstone Holdco LLC, 6.070% (1 Month US LIBOR + 4.500%), 1/30/24 | 228,242 | 229,075 | ||
TerraForm Power Operating LLC, 4.150% (3 Month US LIBOR + 2.750%), 11/8/22 | 125,000 | 126,562 | ||
1,198,790 | ||||
Electronics: 0.9% | ||||
Micron Technology, Inc., 3.390% (3 Month US LIBOR + 2.000%), 4/26/22 | 246,250 | 248,326 | ||
Electric Utilities: 0.5% | ||||
Compass Power Generation LLC, 5.390% (3 Month US LIBOR + 3.750%), 12/20/24 | 125,000 | 125,729 | ||
Entertainment: 2.2% | ||||
Intrawest Resorts Holdings, Inc., 4.820% (1 Month US LIBOR + 3.250%), 7/31/24 | 250,000 | 251,720 | ||
Life Time Fitness, Inc., 4.230% (3 Month US LIBOR + 2.750%), 6/15/22 | 245,017 | 245,681 | ||
SeaWorld Parks & Entertainment, Inc., 4.690% (3 Month US LIBOR + 3.000%), 3/31/24 | 124,686 | 122,972 | ||
620,373 |
The Accompanying Notes are an Integral Part of these Financial Statements.
21
PENN CAPITAL FUNDS TRUST |
PENN CAPITAL DEFENSIVE FLOATING RATE INCOME FUND |
SCHEDULE OF INVESTMENTS |
DECEMBER 31, 2017 (UNAUDITED) |
Principal | Value | |||
Food - Wholesale: 1.8% | ||||
American Seafoods Group LLC, 4.700% (3 Month US LIBOR + 3.250%), 8/21/23 | 250,000 | $ | 251,562 | |
JBS USA LUX SA, 4.100% (3 Month US LIBOR + 2.500%), 10/30/22 | 248,125 | 243,597 | ||
495,159 | ||||
Food & Drug Retailers: 0.9% | ||||
Albertson's LLC, 4.670% (3 Month US LIBOR + 3.000%), 12/21/22 | 246,889 | 241,670 | ||
Gaming: 2.3% | ||||
Boyd Gaming Corp., 3.980% (1 Week US LIBOR + 2.500%), 9/15/23 | 231,320 | 232,477 | ||
Eldorado Resorts, Inc., 3.770% (1 Month US LIBOR + 2.250%), 4/17/24 | 164,957 | 164,957 | ||
Scientific Games International, Inc., 4.700% (2 Month US LIBOR + 3.250%), 8/14/24 | 249,375 | 251,245 | ||
648,679 | ||||
Gas Utilities: 0.9% | ||||
Vistra Operations Co. LLC, 4.200% (1 Month US LIBOR + 2.750%), 12/14/23 | 247,500 | 249,181 | ||
Health Care Equipment & Supplies: 0.4% | ||||
Mallinckrodt International Finance SA, 4.440% (3 Month US LIBOR + 2.750%), 9/24/24 | 123,439 | 123,153 | ||
Health Care Providers & Services: 1.3% | ||||
Press Ganey Holdings, Inc., 4.570% (1 Month US LIBOR + 3.000%), 10/23/23 | 124,685 | 125,387 | ||
Prospect Medical Holdings, Inc., 7.500% (6 Month US LIBOR + 6.000%), 6/30/22 | 246,250 | 248,712 | ||
374,099 | ||||
Health Services: 3.5% | ||||
Acadia Healthcare Co., Inc., 4.140% (1 Month US LIBOR + 2.750%), 2/16/23 | 241,126 | 242,331 | ||
Concentra, Inc., 4.490% (3 Month US LIBOR + 3.000%), 6/1/22 | 239,804 | 240,903 | ||
Envision Healthcare Corp., 4.570% (1 Month US LIBOR + 3.000%), 12/1/23 | 245,028 | 245,538 | ||
Select Medical Corp., 4.850% (3 Month US LIBOR + 3.500%), 3/6/24 | 248,125 | 250,296 | ||
979,068 | ||||
Hotels: 0.9% | ||||
Belmond Interfin Ltd., 4.320% (1 Month US LIBOR + 2.750%), 7/3/24 | 248,750 | 248,854 | ||
Household Durables: 0.4% | ||||
Floor & Decor Outlets of America, Inc., 4.070% (1 Month US LIBOR + 2.500%), 9/30/23 | 125,000 | 125,330 |
Principal | Value | |||
Investments & Miscellaneous Financial Services: 2.7% | ||||
FinCo I LLC, 2.750% (1 Month US LIBOR + 2.750%), 12/27/22 | 250,000 | $ | 252,562 | |
LPL Holdings, Inc., 3.810% (3 Month US LIBOR + 2.250%), 9/21/24 | 248,752 | 249,580 | ||
Russell Investments US Institutional Holdco, Inc., 5.940% (3 Month US LIBOR + 4.250%), 6/1/23 | 246,250 | 247,558 | ||
749,700 | ||||
IT Services: 1.8% | ||||
NAB Holdings LLC, 4.820% (1 Month US LIBOR + 3.250%), 6/30/24 | 248,750 | 249,218 | ||
PI US Borrowerco, Inc., 4.500% (1 Month US LIBOR + 3.500%), 12/20/24 | 250,000 | 249,688 | ||
498,906 | ||||
Media - Broadcast: 7.5% | ||||
Altice US Finance I Corp., 3.820% (1 Month US LIBOR + 2.250%), 7/28/25 | 246,267 | 245,088 | ||
Beasley Mezzanine Holdings LLC, 5.490% (1 Month US LIBOR + 4.000%), 11/1/23 | 250,000 | 251,250 | ||
CSC Holdings LLC, 3.740% (1 Month US LIBOR + 2.250%), 7/17/25 | 249,373 | 248,204 | ||
Gray Television, Inc., 3.610% (1 Month US LIBOR + 2.250%), 2/7/24 | 247,500 | 248,738 | ||
Radiate Holdco LLC, 4.570% (1 Month US LIBOR + 3.000%), 2/1/24 | 248,125 | 246,043 | ||
Sinclair Television Group, Inc., 3.820% (1 Month US LIBOR + 2.250%), 1/3/24 | 247,500 | 247,267 | ||
Univision Communications, Inc., 4.320% (1 Month US LIBOR + 2.750%), 3/15/24 | 249,324 | 248,354 | ||
Urban One, Inc., 5.700% (3 Month US LIBOR + 4.000%), 4/18/23 | 123,439 | 120,970 | ||
WideOpenWest Finance LLC, 4.750% (1 Month US LIBOR + 3.250%), 8/19/23 | 249,375 | 246,804 | ||
2,102,718 | ||||
Media - Cable: 0.9% | ||||
SFR Group SA, 4.350% (3 Month US LIBOR + 3.000%), 1/31/26 | 250,000 | 240,390 | ||
Metals & Mining: 1.8% | ||||
Big River Steel LLC, 6.690% (3 Month US LIBOR + 5.000%), 8/23/23 | 249,375 | 251,245 | ||
Zekelman Industries, Inc., 4.070% (3 Month US LIBOR + 2.750%), 6/14/21 | 246,263 | 247,248 | ||
498,493 | ||||
Metals/Mining Excluding Steel: 0.9% | ||||
American Rock Salt Co. LLC, 4.750% (3 Month US LIBOR + 3.750%), 5/20/21 | 125,000 | 124,740 | ||
Peabody Energy Corp., 5.070% (1 Month US LIBOR + 3.500%), 3/31/22 | 117,370 | 118,873 | ||
243,613 |
The Accompanying Notes are an Integral Part of these Financial Statements.
22
PENN CAPITAL FUNDS TRUST |
PENN CAPITAL DEFENSIVE FLOATING RATE INCOME FUND |
SCHEDULE OF INVESTMENTS |
DECEMBER 31, 2017 (UNAUDITED) |
Principal | Value | |||
Non-Food & Drug Retailers: 1.8% | ||||
G-III Apparel Group Ltd., 6.690% (2 Month US LIBOR + 5.250%), 12/1/22 | 250,000 | $ | 252,292 | |
The Men's Wearhouse, Inc., 4.890% (1 Month US LIBOR + 3.500%), 6/18/21 | 244,843 | 244,691 | ||
496,983 | ||||
Other Industrial & Manufacturing: 2.5% | ||||
Harland Clarke Holdings Corp., 6.440% (3 Month US LIBOR + 4.750%), 11/3/23 | 248,874 | 249,703 | ||
RBS Global, Inc., 3.800% (1 Month US LIBOR + 2.250%), 8/21/24 | 250,000 | 250,938 | ||
XPO Logistics, Inc., 3.600% (3 Month US LIBOR + 2.250%), 11/1/21 | 181,427 | 182,388 | ||
683,029 | ||||
Packaging: 0.7% | ||||
Berry Global, Inc., 3.770% (1 Month US LIBOR + 2.250%), 10/1/22 | 185,988 | 186,639 | ||
Pharmaceuticals & Devices: 1.8% | ||||
Endo International PLC, 5.870% (1 Month US LIBOR + 4.250%), 4/27/24 | 248,750 | 249,994 | ||
Kinetic Concepts, Inc., 4.580% (3 Month US LIBOR + 3.250%), 2/3/24 | 248,750 | 247,444 | ||
Valeant Pharmaceuticals International, Inc., 4.940% (1 Month US LIBOR + 3.500%), 4/1/22 | 5 | 5 | ||
497,443 | ||||
Restaurants: 1.7% | ||||
Burger King, 3.870% (1 Month US LIBOR + 2.250%), 2/17/24 | 247,089 | 246,955 | ||
P.F. Chang's China Bistro, Inc., 6.510% (6 Month US LIBOR + 5.000%), 9/1/22 | 249,375 | 234,206 | ||
481,161 | ||||
Road & Rail: 0.4% | ||||
Daseke Cos, Inc., 6.570% (1 Month US LIBOR + 5.000%), 2/27/24 | 125,000 | 124,948 | ||
Semiconductors & Semiconductor Equipment: 0.9% | ||||
Xperi Corp., 4.820% (1 Month US LIBOR + 3.250%), 11/30/23 | 247,500 | 248,814 | ||
Software: 1.4% | ||||
Quest Software US Holdings, Inc., 6.500% (3 Month US LIBOR + 5.500%), 10/31/22 | 117,372 | 119,112 | ||
Veritas US, Inc., 6.190% (3 Month US LIBOR + 4.500%), 1/27/23 | 262,312 | 262,750 | ||
381,862 |
Principal | Value | |||
Software/Services: 4.3% | ||||
Almonde, Inc., 4.980% (3 Month US LIBOR + 3.500%), 6/16/24 | 249,375 | $ | 249,981 | |
Avaya, Inc., 6.230% (1 Month US LIBOR + 4.750%), 11/9/24 | 125,000 | 122,865 | ||
Blucora, Inc., 4.690% (3 Month US LIBOR + 3.000%), 5/22/24 | 230,000 | 230,720 | ||
First Data Corp., 3.800% (1 Month US LIBOR + 2.250%), 4/26/24 | 230,733 | 230,774 | ||
Match Group, Inc., 3.850% (2 Month US LIBOR + 2.500%), 11/16/22 | 109,375 | 110,058 | ||
MTS Systems Corp., 4.690% (1 Month US LIBOR + 3.250%), 7/5/23 | 238,674 | 240,464 | ||
1,184,862 | ||||
Special Retail: 0.9% | ||||
Staples, Inc., 5.490% (2 Month US LIBOR + 4.000%), 9/12/24 | 250,000 | 244,875 | ||
Support - Services: 3.6% | ||||
Aramark Services, Inc., 3.570% (1 Month US LIBOR + 2.000%), 3/11/25 | 250,000 | 251,173 | ||
The ServiceMaster Co. LLC, 4.070% (1 Month US LIBOR + 2.500%), 11/8/23 | 247,500 | 248,242 | ||
TruGreen LP, 5.540% (3 Month US LIBOR + 4.000%), 4/13/23 | 246,881 | 250,123 | ||
UOS LLC, 7.070% (1 Month US LIBOR + 5.500%), 4/18/23 | 248,750 | 253,725 | ||
1,003,263 | ||||
Telecom - Integrated/Services: 8.5% | ||||
CenturyLink, Inc., 6.750% (1 Month US LIBOR + 2.75%), 12/1/21 | 125,000 | 120,430 | ||
Cincinnati Bell, Inc., 5.110% (1 Month US LIBOR + 3.750%), 10/2/24 | 250,000 | 252,578 | ||
GTT Communications, Inc., 4.870% (1 Month US LIBOR + 3.250%), 1/9/24 | 247,500 | 248,737 | ||
Intelsat Jackson Holdings SA, 4.750% (3 Month US LIBOR + 3.750%), 11/27/23 | 250,000 | 244,553 | ||
Level 3 Parent LLC, 3.700% (3 Month US LIBOR + 2.250%), 2/22/24 | 250,000 | 250,000 | ||
Maxar Technologies Ltd., 4.100% (3 Month US LIBOR + 2.750%), 10/5/24 | 250,000 | 251,072 | ||
Sprint Communications, Inc., 4.120% (1 Month US LIBOR + 2.500%), 2/2/24 | 248,125 | 247,939 | ||
Telenet Financing USD LLC, 3.920% (1 Month US LIBOR + 2.500%), 3/1/26 | 250,000 | 250,650 | ||
Telesat Canada, 4.700% (3 Month US LIBOR + 3.000%), 11/17/23 | 246,881 | 247,575 | ||
UPC Financing Partnership, 3.980% (1 Month US LIBOR + 2.500%), 1/15/26 | 250,000 | 249,792 | ||
2,363,326 |
The Accompanying Notes are an Integral Part of these Financial Statements.
23
PENN CAPITAL FUNDS TRUST |
PENN CAPITAL DEFENSIVE FLOATING RATE INCOME FUND |
SCHEDULE OF INVESTMENTS |
DECEMBER 31, 2017 (UNAUDITED) |
Principal | Value | |||
Telecom - Wireless: 0.7% | ||||
Windstream Services LLC, 5.500% (1 Month US LIBOR + 4.000%), 3/30/21 | 222,835 | $ | 208,676 | |
Trading Companies & Distributors: 0.9% | ||||
DXP Enterprises, Inc., 7.070% (1 Month US LIBOR + 5.500%), 8/29/23 | 249,375 | 249,998 | ||
Transportation Excluding Air/Rail: 1.8% | ||||
CB URS Holdings Corp., 6.820% (1 Month US LIBOR + 5.250%), 10/19/24 | 124,063 | 124,838 | ||
Deck Chassis Acquisition, Inc., 7.520% (1 Month US LIBOR + 6.000%), 6/15/23 | 125,000 | 126,875 | ||
YRC Worldwide, Inc., 10.070% (1 Month US LIBOR + 8.500%), 7/26/22 | 248,116 | 246,786 | ||
498,499 | ||||
Water Utilities: 0.6% | ||||
EWT Holdings III Corp., 4.690% (3 Month US LIBOR + 3.000%), 12/15/23 | 158,252 | 158,779 | ||
Total Bank Loans (cost $23,005,183) | 23,149,880 | |||
Corporate Bonds: 11.7% | ||||
Automotive: 0.5% | ||||
Penske Automotive Group, Inc., 3.750%, 8/15/20 | 130,000 | 132,438 | ||
Building & Construction: 0.4% | ||||
Lennar Corp., 4.120%, 1/15/22 | 110,000 | 112,200 | ||
Chemicals: 0.2% | ||||
CF Industries, Inc., 7.120%, 5/1/20 | 47,000 | 51,183 | ||
Commercial Services & Supplies: 0.4% | ||||
Matthews International Corp., 5.250%, 12/1/25(b) | 100,000 | 101,000 | ||
Computer Hardware: 0.8% | ||||
Dell International LLC, 5.870%, 6/15/21(b) | 100,000 | 103,750 | ||
Western Digital Corp., 10.500%, 4/1/24 | 100,000 | 115,875 | ||
219,625 | ||||
Consumer/Commercial/Lease Financing: 0.4% | ||||
Navient Corp., 8.000%, 3/25/20 | 100,000 | 108,125 | ||
Electric - Generation: 0.4% | ||||
NRG Energy, Inc., 6.250%, 7/15/22 | 115,000 | 119,600 | ||
Electric - Integrated: 0.4% | ||||
Dynegy, Inc., 5.870%, 6/1/23 | 125,000 | 126,562 | ||
Energy - Exploration & Production: 0.3% | ||||
Carrizo Oil & Gas, Inc., 7.500%, 9/15/20 | 76,000 | 77,425 | ||
Entertainment: 0.5% | ||||
NCL Corp. Ltd., 4.750%, 12/15/21(b) | 125,000 | 129,375 | ||
Food & Drug Retailers: 0.2% | ||||
Ingles Markets, Inc., 5.750%, 6/15/23 | 70,000 | 70,875 |
Principal | Value | |||
Gas Distribution: 1.0% | ||||
NGL Energy Partners LP, 5.120%, 7/15/19 | 130,000 | $ | 132,275 | |
Tallgrass Energy Partners LP, 5.500%, 9/15/24(b) | 145,000 | 148,806 | ||
281,081 | ||||
Health Services: 0.4% | ||||
Universal Hospital Services, Inc., 7.620%, 8/15/20 | 120,000 | 120,000 | ||
Hospitals: 0.5% | ||||
HCA, Inc., 7.500%, 2/15/22 | 125,000 | 140,625 | ||
Household & Leisure Products/Durables: 0.5% | ||||
Tempur Sealy International, Inc., 5.620%, 10/15/23 | 125,000 | 130,000 | ||
Investments & Miscellaneous Financial Services: 0.4% | ||||
Icahn Enterprises LP, 6.250%, 2/1/22 | 100,000 | 102,250 | ||
Media - Diversified: 0.4% | ||||
Videotron Ltd., 5.000%, 7/15/22 | 100,000 | 105,250 | ||
Metals/Mining Excluding Steel: 0.2% | ||||
Peabody Energy Corp., 6.000%, 3/31/22(b) | 65,000 | 67,438 | ||
Pharmaceuticals & Devices: 1.0% | ||||
Mallinckrodt International Finance SA, 4.870%, 4/15/20(b) | 70,000 | 67,200 | ||
Valeant Pharmaceuticals International, Inc., 7.500%, 7/15/21(b) | 140,000 | 142,625 | ||
Valeant Pharmaceuticals International, Inc., 5.870%, 5/15/23(b) | 75,000 | 69,469 | ||
279,294 | ||||
Support - Services: 0.4% | ||||
CoreCivic, Inc., 4.120%, 4/1/20 | 110,000 | 111,650 | ||
Telecom - Integrated/Services: 2.4% | ||||
Frontier Communications Corp., 8.120%, 10/1/18 | 195,000 | 194,249 | ||
Gogo Intermediate Holdings LLC, 12.500%, 7/1/22(b) | 115,000 | 129,806 | ||
Hughes Satellite Systems Corp., 7.620%, 6/15/21 | 125,000 | 138,125 | ||
Qwest Corp., 6.750%, 12/1/21 | 125,000 | 134,596 | ||
Uniti Group LP, 6.000%, 4/15/23(b) | 80,000 | 78,600 | ||
675,376 | ||||
Total Corporate Bonds (cost $3,221,684) | 3,261,372 |
The Accompanying Notes are an Integral Part of these Financial Statements.
24
PENN CAPITAL FUNDS TRUST |
PENN CAPITAL DEFENSIVE FLOATING RATE INCOME FUND |
SCHEDULE OF INVESTMENTS |
DECEMBER 31, 2017 (UNAUDITED) |
Shares | Value | |||||
Short-Term Investment: 7.1% | ||||||
Money Market Fund - 7.1% | ||||||
Short-Term Investments Trust Treasury Portfolio Institutional Class, 1.160%(c) | 1,990,278 | $ | 1,990,278 | |||
Total Short-Term Investment (cost $1,990,278) | 1,990,278 | |||||
Total Investments - 101.9% (cost $28,217,145) | 28,401,530 | |||||
Liabilities in Excess of Other Assets (1.9)% | (535,193 | ) | ||||
Net Assets: 100.0% | $ | 27,866,337 |
Percentages are stated as a percent of net assets.
(a) | Bank Loans typically have rates of interest which are redetermined either daily, monthly, quarterly or semi-annually by reference to a base lending rate, plus a premium. These base lending rates are primarily the London Interbank Offered Rate (“LIBOR”) and secondarily, the prime rate offered by one or more major United States banks (the “Prime Rate”) and the certificate of deposit (“CD”) rate or other base lending rates used by commercial lenders. |
(b) | Securities purchased pursuant to Rule 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other “qualified institutional buyers.” As of December 31, 2017, the value of these investments was $1,038,069, or 3.7% of total net assets. |
(c) | Rate reported is the 7-day effective yield as of December 31, 2017. |
The cost basis of investments for federal income tax purposes at December 31, 2017 was as follows*:
Cost of investments | $ | 28,217,145 | |
Gross unrealized appreciation | 250,798 | ||
Gross unrealized depreciation | (66,413 | ) | |
Net unrealized appreciation | $ | 184,385 |
* | Because tax adjustments are calculated annually, the above table does not reflect tax adjustments. For the previous fiscal year's federal income tax information, please refer to the Notes to Financial Statements section in the Fund's most recent annual report. |
Country Exposure (as a percentage of total investments) (Unaudited) | |
United States | 98.19% |
Canada | 1.12% |
Bermuda | 0.45% |
Luxembourg | 0.24% |
Asset Type (as a percentage of total investments) (Unaudited) |
The Accompanying Notes are an Integral Part of these Financial Statements.
25
PENN CAPITAL FUNDS TRUST |
PENN CAPITAL DEFENSIVE SHORT DURATION HIGH INCOME FUND |
SCHEDULE OF INVESTMENTS |
DECEMBER 31, 2017 (UNAUDITED) |
Principal | Value | |||||
Corporate Bonds: 83.7% | ||||||
Aerospace: 2.1% | ||||||
Bombardier, Inc., 8.750%, 12/1/21(a) | 75,000 | $ | 82,500 | |||
Bombardier, Inc., 7.750%, 3/15/20(a) | 95,000 | 102,125 | ||||
184,625 | ||||||
Airline Companies: 0.4% | ||||||
Air Canada, 7.750%, 4/15/21(a) | 30,000 | 34,200 | ||||
Airline Cos: 2.7% | ||||||
American Airlines Group, Inc., 6.120%, 6/1/18 | 95,000 | 96,188 | ||||
American Airlines Group, Inc., 5.500%, 10/1/19(a) | 65,000 | 66,787 | ||||
United Continental Holdings, Inc., 6.370%, 6/1/18 | 75,000 | 75,937 | ||||
238,912 | ||||||
Airlines Cos: 0.9% | ||||||
Allegiant Travel Co., 5.500%, 7/15/19 | 80,000 | 81,800 | ||||
Auto Parts & Equipment: 1.5% | ||||||
American Axle & Manufacturing, Inc., 7.750%, 11/15/19 | 45,000 | 49,050 | ||||
The Goodyear Tire & Rubber Co., 8.750%, 8/15/20 | 75,000 | 85,688 | ||||
134,738 | ||||||
Automotive: 2.9% | ||||||
Fiat Chrysler Automobiles NV, 4.500%, 4/15/20 | 200,000 | 205,170 | ||||
Penske Automotive Group, Inc., 3.750%, 8/15/20 | 45,000 | 45,844 | ||||
251,014 | ||||||
Banking: 3.1% | ||||||
Ally Financial, Inc., 8.000%, 12/31/18 | 75,000 | 78,562 | ||||
Ally Financial, Inc., 3.750%, 11/18/19 | 60,000 | 60,756 | ||||
Ally Financial, Inc., 8.000%, 3/15/20 | 60,000 | 66,150 | ||||
Ally Financial, Inc., 4.120%, 2/13/22 | 60,000 | 61,338 | ||||
266,806 | ||||||
Banks: 1.0% | ||||||
CIT Group, Inc., 5.370%, 5/15/20 | 80,000 | 84,500 | ||||
Building & Construction: 1.1% | ||||||
CalAtlantic Group, Inc., 8.370%, 5/15/18 | 30,000 | 30,600 | ||||
Lennar Corp., 6.950%, 6/1/18 | 30,000 | 30,563 | ||||
Toll Brothers Finance Corp., 6.750%, 11/1/19 | 35,000 | 37,625 | ||||
98,788 | ||||||
Chemicals: 0.7% | ||||||
CF Industries, Inc., 7.120%, 5/1/20 | 54,000 | 58,806 | ||||
Chemical Companies: 0.5% | ||||||
Huntsman International LLC, 4.870%, 11/15/20 | 40,000 | 41,600 |
Principal | Value | |||
Computer Hardware: 3.5% | ||||
Dell, Inc., 5.650%, 4/15/18 | 40,000 | $ | 40,241 | |
EMC Corp., 2.650%, 6/1/20 | 150,000 | 148,090 | ||
Western Digital Corp., 10.500%, 4/1/24 | 100,000 | 115,875 | ||
304,206 | ||||
Consumer/Commercial/Lease Financing: 4.0% | ||||
International Lease Finance Corp., 6.250%, 5/15/19 | 70,000 | 73,347 | ||
Navient Corp., 8.450%, 6/15/18 | 40,000 | 41,020 | ||
Navient Corp., 8.000%, 3/25/20 | 180,000 | 194,625 | ||
Navient Corp., 6.500%, 6/15/22 | 40,000 | 41,960 | ||
350,952 | ||||
Consumer/Commerical/Lease Financing: 0.7% | ||||
Aircastle Ltd., 6.250%, 12/1/19 | 55,000 | 58,025 | ||
Containers & Packaging: 0.5% | ||||
Sealed Air Corp., 6.500%, 12/1/20(a) | 40,000 | 43,800 | ||
Diversified Capital Goods: 0.7% | ||||
Anixter, Inc., 5.620%, 5/1/19 | 60,000 | 61,875 | ||
Electric - Generation: 2.3% | ||||
DPL, Inc., 6.750%, 10/1/19 | 55,000 | 57,612 | ||
Dynegy, Inc., 7.370%, 11/1/22 | 40,000 | 42,200 | ||
NRG Energy, Inc., 6.250%, 7/15/22 | 95,000 | 98,800 | ||
198,612 | ||||
Energy - Exploration & Production: 3.1% | ||||
Carrizo Oil & Gas, Inc., 7.500%, 9/15/20 | 37,000 | 37,694 | ||
Comstock Resources, Inc., 10.000% Cash or 12.000% PIK, 3/15/20 | 45,000 | 46,406 | ||
Oasis Petroleum, Inc., 6.500%, 11/1/21 | 55,000 | 56,169 | ||
Resolute Energy Corp., 8.500%, 5/1/20 | 65,000 | 66,137 | ||
WPX Energy, Inc., 7.500%, 8/1/20 | 55,000 | 59,538 | ||
265,944 | ||||
Energy Equipment & Services: 0.6% | ||||
Rowan Cos, Inc., 7.870%, 8/1/19 | 50,000 | 53,500 | ||
Food - Wholesale: 0.9% | ||||
JBS USA LUX SA, 7.250%, 6/1/21(a) | 40,000 | 40,650 | ||
JBS USA LUX SA, 8.250%, 2/1/20(a) | 40,000 | 40,120 | ||
80,770 | ||||
Gaming: 2.0% | ||||
GLP Capital LP / GLP Financing II, Inc., 4.370%, 4/15/21 | 20,000 | 20,550 | ||
MGM Resorts International, 6.750%, 10/1/20 | 80,000 | 86,400 | ||
MGM Resorts International, 8.620%, 2/1/19 | 40,000 | 42,400 | ||
Scientific Games International, Inc., 10.000%, 12/1/22 | 25,000 | 27,438 | ||
176,788 |
The Accompanying Notes are an Integral Part of these Financial Statements.
26
PENN CAPITAL FUNDS TRUST |
PENN CAPITAL DEFENSIVE SHORT DURATION HIGH INCOME FUND |
SCHEDULE OF INVESTMENTS |
DECEMBER 31, 2017 (UNAUDITED) |
Principal | Value | |||
Gas Distribution: 6.3% | ||||
DCP Midstream Operating LP, 9.750%, 3/15/19(a) | 80,000 | $ | 86,500 | |
DCP Midstream Operating LP, 5.350%, 3/15/20(a) | 115,000 | 119,888 | ||
NGL Energy Partners LP, 5.120%, 7/15/19 | 95,000 | 96,662 | ||
Rockies Express Pipeline LLC, 5.620%, 4/15/20(a) | 145,000 | 151,888 | ||
Sunoco LP, 6.250%, 4/15/21 | 40,000 | 41,580 | ||
Sunoco LP, 5.500%, 8/1/20 | 50,000 | 51,456 | ||
547,974 | ||||
Health Services: 2.1% | ||||
Fresenius Medical Care US Finance II, Inc., 5.620%, 7/31/19(a) | 65,000 | 67,989 | ||
Kindred Healthcare, Inc., 8.000%, 1/15/20 | 15,000 | 16,252 | ||
Universal Hospital Services, Inc., 7.620%, 8/15/20 | 95,000 | 95,000 | ||
179,241 | ||||
Hospitals: 5.5% | ||||
HCA Healthcare, Inc., 6.250%, 2/15/21 | 40,000 | 42,400 | ||
HCA, Inc., 7.500%, 2/15/22 | 100,000 | 112,500 | ||
HCA, Inc., 6.500%, 2/15/20 | 80,000 | 84,800 | ||
HCA, Inc., 3.750%, 3/15/19 | 85,000 | 85,744 | ||
Tenet Healthcare Corp., 6.000%, 10/1/20 | 140,000 | 148,022 | ||
473,466 | ||||
Household Durables: 0.9% | ||||
KB Home, 8.000%, 3/15/20 | 75,000 | 82,125 | ||
Household Products: 0.5% | ||||
HRG Group, Inc., 7.870%, 7/15/19 | 40,000 | 40,080 | ||
Investments & Misc Financial Services: 3.5% | ||||
Icahn Enterprises LP, 4.870%, 3/15/19 | 50,000 | 50,010 | ||
Icahn Enterprises LP, 6.000%, 8/1/20 | 245,000 | 251,964 | ||
301,974 | ||||
Media - Cable: 4.6% | ||||
CSC Holdings LLC, 7.620%, 7/15/18 | 35,000 | 35,787 | ||
CSC Holdings LLC, 6.750%, 11/15/21 | 60,000 | 64,350 | ||
DISH DBS Corp., 6.750%, 6/1/21 | 100,000 | 105,125 | ||
DISH DBS Corp., 7.870%, 9/1/19 | 110,000 | 117,700 | ||
Cablevision Systems Corp., 7.750%, 4/15/18 | 75,000 | 75,937 | ||
398,899 | ||||
Media - Services: 0.9% | ||||
Clear Channel Worldwide Holdings, Inc., 7.620%, 3/15/20 | 80,000 | 78,400 |
Principal | Value | |||
Metals/Mining Excluding Steel: 2.6% | ||||
Freeport-McMoRan, Inc., 3.100%, 3/15/20 | 105,000 | $ | 104,344 | |
Freeport-McMoRan, Inc., 2.370%, 3/15/18 | 55,000 | 54,931 | ||
Peabody Energy Corp., 6.000%, 3/31/22(a) | 65,000 | 67,438 | ||
226,713 | ||||
Nondepository Credit Intermediation: 0.8% | ||||
Nationstar Mortgage LLC, 6.500%, 7/1/21 | 65,000 | 65,894 | ||
Non-Food & Drug Retailers: 2.5% | ||||
GameStop Corp., 6.750%, 3/15/21(a) | 75,000 | 78,375 | ||
GameStop Corp., 5.500%, 10/1/19(a) | 75,000 | 76,219 | ||
L Brands, Inc., 8.500%, 6/15/19 | 55,000 | 59,744 | ||
214,338 | ||||
Oil Field Equipment & Services: 1.8% | ||||
Nabors Industries, Inc., 4.620%, 9/15/21 | 20,000 | 19,050 | ||
Nabors Industries, Inc., 9.250%, 1/15/19 | 47,000 | 49,820 | ||
Pride International LLC, 8.500%, 6/15/19 | 40,000 | 42,300 | ||
SESI LLC, 7.120%, 12/15/21 | 20,000 | 20,500 | ||
Transocean, Inc., 8.370%, 12/15/21 | 20,000 | 21,600 | ||
153,270 | ||||
Oil Refining & Marketing: 0.5% | ||||
PBF Holding Co. LLC, 7.000%, 11/15/23 | 40,000 | 41,750 | ||
Oil, Gas & Consumable Fuels: 0.5% | ||||
Energy Transfer Equity LP, 7.500%, 10/15/20 | 40,000 | 44,000 | ||
Packaging: 0.6% | ||||
Greif, Inc., 7.750%, 8/1/19 | 50,000 | 53,375 | ||
Pharmaceuticals & Devices: 1.9% | ||||
Mallinckrodt International Finance SA, 3.500%, 4/15/18(a) | 40,000 | 39,800 | ||
Mallinckrodt International Finance SA, 4.870%, 4/15/20(a) | 60,000 | 57,600 | ||
Valeant Pharmaceuticals International, Inc., 5.370%, 3/15/20(a) | 65,000 | 65,163 | ||
162,563 | ||||
Steel Producers & Products: 1.4% | ||||
United States Steel Corp., 7.370%, 4/1/20 | 110,000 | 119,350 | ||
Steel Producers/Products: 0.8% | ||||
AK Steel Corp., 7.620%, 10/1/21 | 65,000 | 67,437 | ||
Support - Services: 2.5% | ||||
The ADT Corp., 5.250%, 3/15/20 | 75,000 | 78,281 | ||
The ADT Corp., 6.250%, 10/15/21 | 55,000 | 60,225 | ||
CoreCivic, Inc., 4.120%, 4/1/20 | 75,000 | 76,125 | ||
214,631 |
The Accompanying Notes are an Integral Part of these Financial Statements.
27
PENN CAPITAL FUNDS TRUST |
PENN CAPITAL DEFENSIVE SHORT DURATION HIGH INCOME FUND |
SCHEDULE OF INVESTMENTS |
DECEMBER 31, 2017 (UNAUDITED) |
Principal | Value | |||
Telecom - Integrated/Services: 4.6% | ||||
CenturyLink, Inc., 5.620%, 4/1/20 | 40,000 | $ | 40,300 | |
Frontier Communications Corp., 8.120%, 10/1/18 | 120,000 | 119,538 | ||
Frontier Communications Corp., 7.120%, 3/15/19 | 20,000 | 19,200 | ||
Gogo Intermediate Holdings LLC, 12.500%, 7/1/22(a) | 35,000 | 39,506 | ||
Hughes Satellite Systems Corp., 6.500%, 6/15/19 | 65,000 | 67,925 | ||
Hughes Satellite Systems Corp., 7.620%, 6/15/21 | 35,000 | 38,675 | ||
Qwest Corp., 6.750%, 12/1/21 | 72,000 | 77,527 | ||
402,671 | ||||
Telecom - Wireless: 3.7% | ||||
Sprint Capital Corp., 6.900%, 5/1/19 | 80,000 | 83,700 | ||
Sprint Corp., 7.250%, 9/15/21 | 55,000 | 58,231 | ||
Sprint Communications, Inc., 7.000%, 8/15/20 | 170,000 | 180,200 | ||
322,131 | ||||
Total Corporate Bonds (cost $7,298,463) | 7,260,543 | |||
Asset-Backed Security: 0.5% | ||||
Airline Companies: 0.5% | ||||
Continental Airlines 2012-3 Class C Pass Through Trust, 6.120%, 4/29/18 | 40,000 | 40,420 | ||
Total Asset-Backed Security (cost $40,445) | 40,420 | |||
Mutual Fund: 9.6% | ||||
Penn Capital Defensive Floating Rate Income Fund-Institutional Class(b) | 82,395 | 833,839 | ||
Total Mutual Fund (cost $841,260) | 833,839 |
Shares | Value | |||||
Short-Term Investment: 5.4% | ||||||
Money Market Fund - 5.4% | ||||||
Short-Term Investments Trust Treasury Portfolio Institutional Class, 1.160%(c) | 470,226 | 470,226 | ||||
Total Short-Term Investment (cost $470,226) | 470,226 | |||||
Total Investments - 99.2% (cost $8,650,394) | 8,605,028 | |||||
Other Assets and Liabilities 0.8% | 65,469 | |||||
Net Assets: 100.0% | $ | 8,670,497 |
Percentages are stated as a percent of net assets.
(a) | Securities purchased pursuant to Rule 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other “qualified institutional buyers.” As of December 31, 2017, the value of these investments was $1,260,548, or 14.5% of total net assets. |
(b) | Affiliated company. See Note 7. |
(c) | Rate reported is the 7-day effective yield as of December 31, 2017. |
The cost basis of investments for federal income tax purposes at December 31, 2017 was as follows*:
Cost of investments | $ | 8,650,394 | |
Gross unrealized appreciation | 15,256 | ||
Gross unrealized depreciation | (60,622 | ) | |
Net unrealized depreciation | $ | (45,366 | ) |
* | Because tax adjustments are calculated annually, the above table does not reflect tax adjustments. For the previous fiscal year's federal income tax information, please refer to the Notes to Financial Statements section in the Fund's most recent annual report. |
Country Exposure (as a percentage of total investments) (Unaudited) | |
United States | 92.26% |
Canada | 3.30% |
Netherlands | 2.38% |
Luxembourg | 1.13% |
Bermuda | 0.68% |
Cayman Islands | 0.25% |
Asset Type (as a percentage of total investments) (Unaudited) |
The Accompanying Notes are an Integral Part of these Financial Statements.
28
PENN CAPITAL FUNDS TRUST
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2017 (UNAUDITED)
Penn Capital Managed Alpha SMID Cap Equity Fund | Penn Capital Special Situations Small Cap Equity Fund | Penn Capital Multi-Credit High Income Fund | Penn Capital Defensive Floating Rate Income Fund | Penn Capital Defensive Short Duration High Income Fund | |||||||||||
Assets | |||||||||||||||
Investments, at fair value(1) | |||||||||||||||
Unaffiliated issuers | $ | 13,639,577 | $ | 20,120,861 | $ | 9,428,218 | $ | 28,401,530 | $ | 7,771,189 | |||||
Affiliated mutual fund (See Note 7) | — | — | 999,648 | — | 833,839 | ||||||||||
Receivables: | |||||||||||||||
Advisor reimbursement due | 2,900 | 306 | 12,543 | 11,743 | 11,717 | ||||||||||
Dividends and interest | 8,276 | 4,543 | 158,853 | 187,441 | 121,047 | ||||||||||
Investments sold | — | — | — | 548,279 | — | ||||||||||
Fund shares sold | — | 59,825 | 29,950 | — | — | ||||||||||
Cash | 309 | — | — | — | — | ||||||||||
Other assets | 10,194 | 15,309 | 8,317 | 13,079 | 99 | ||||||||||
Total assets | 13,661,256 | 20,200,844 | 10,637,529 | 29,162,072 | 8,737,891 | ||||||||||
Liabilities | |||||||||||||||
Payables: | |||||||||||||||
Investments purchased | — | — | — | 1,246,040 | — | ||||||||||
Fund shares redeemed | 10,000 | — | — | — | — | ||||||||||
Accrued expenses: | |||||||||||||||
Professional fees | 10,740 | 10,660 | 14,126 | 11,607 | 22,860 | ||||||||||
Administration fees | 14,475 | 14,313 | 23,861 | 7,552 | 22,532 | ||||||||||
Custody fees | 979 | 2,140 | 901 | 806 | 1,856 | ||||||||||
Transfer agent fees and expenses | 6,538 | 7,186 | 6,152 | 9,487 | 7,066 | ||||||||||
Trustee fees and expenses | 2,297 | 4,709 | 1,961 | 5,134 | 969 | ||||||||||
Other accrued expenses | 14,570 | 2,920 | 12,782 | 15,109 | 12,111 | ||||||||||
Total liabilities | 59,599 | 41,928 | 59,783 | 1,295,735 | 67,394 | ||||||||||
Net assets | $ | 13,601,657 | $ | 20,158,916 | $ | 10,577,746 | $ | 27,866,337 | $ | 8,670,497 | |||||
Composition of Net Assets | |||||||||||||||
Paid-in capital | $ | 10,447,863 | $ | 17,717,928 | $ | 10,368,355 | $ | 27,705,301 | $ | 8,744,566 | |||||
Accumulated net investment income (loss) | (18,160 | ) | (72,722 | ) | (12,937 | ) | 11,872 | (10,102 | ) | ||||||
Accumulated net realized gain (loss) on investments | 389,928 | (117,031 | ) | (32,540 | ) | (35,221 | ) | (18,601 | ) | ||||||
Net unrealized appreciation (depreciation) on investments | 2,782,026 | 2,630,741 | 254,868 | 184,385 | (45,366 | ) | |||||||||
Net assets | $ | 13,601,657 | $ | 20,158,916 | $ | 10,577,746 | $ | 27,866,337 | $ | 8,670,497 | |||||
Institutional Class | |||||||||||||||
Net assets applicable to outstanding shares | $ | 13,601,657 | $ | 20,158,916 | $ | 10,577,746 | $ | 27,866,337 | $ | 8,670,497 | |||||
Shares of beneficial interest outstanding, no par value, unlimited authorization | 1,038,900 | 1,717,219 | 1,038,599 | 2,754,476 | 876,922 | ||||||||||
Net asset value per share outstanding | $ | 13.09 | $ | 11.74 | $ | 10.18 | $ | 10.12 | $ | 9.89 | |||||
Investor Class(2) | |||||||||||||||
Net assets applicable to outstanding shares | $ | — | $ | — | $ | — | $ | — | $ | — | |||||
Shares of beneficial interest outstanding, no par value, unlimited authorization | — | — | — | — | — | ||||||||||
Net asset value per share outstanding | $ | — | $ | — | $ | — | $ | — | $ | — | |||||
_________ (1) Investment in securities at cost | |||||||||||||||
Unaffiliated issuers | $ | 10,857,551 | $ | 17,490,120 | $ | 9,164,769 | $ | 28,217,145 | $ | 7,809,134 | |||||
Affiliated mutual fund (See Note 7) | — | — | 1,008,229 | 841,260 | |||||||||||
(2) No information is provided for Investor Share Class shares because shares of that Class had not yet been issued as of December 31, 2017. |
The accompanying Notes are an integral part of the financial statements.
29
PENN CAPITAL FUNDS TRUST
STATEMENTS OF OPERATIONS
DECEMBER 31, 2017 (UNAUDITED)
Investment Income (Loss) | Penn Capital Managed Alpha SMID Cap Equity Fund July 1, 2017 - December 31, 2017 | Penn Capital Special Situations Small Cap Equity Fund July 1, 2017 - December 31, 2017 | Penn Capital Multi-Credit High Income Fund July 1, 2017 - December 31, 2017 | Penn Capital Defensive Floating Rate Income Fund July 1, 2017 - December 31, 2017 | Penn Capital Defensive Short Duration High Income Fund July 17, 2017* - December 31, 2017 | ||||||||||
Income | |||||||||||||||
Dividends | |||||||||||||||
Unaffiliated dividends | $ | 44,253 | $ | 42,099 | $ | — | $ | — | $ | — | |||||
Dividend distributions from affiliated mutual fund (See Note 7) | — | — | 12,238 | — | 11,263 | ||||||||||
Short-term capital gain distribution from affiliated mutual fund (See Note 7) | — | — | 5,722 | — | 4,773 | ||||||||||
Interest | 2,026 | 1,776 | 326,563 | 649,690 | 93,502 | ||||||||||
Total income | 46,279 | 43,875 | 344,523 | 649,690 | 109,538 | ||||||||||
Expenses | |||||||||||||||
Investment advisory fees | 54,712 | 101,621 | 32,820 | 77,293 | 11,008 | ||||||||||
Administration and accounting | 28,403 | 28,805 | 45,971 | 53,737 | 36,811 | ||||||||||
Professional fees | 20,138 | 20,119 | 23,874 | 24,772 | 23,910 | ||||||||||
Registration | 16,588 | 16,647 | 16,619 | 17,046 | 11,624 | ||||||||||
Transfer agent expense | 10,956 | 12,453 | 10,300 | 14,492 | 10,440 | ||||||||||
Compliance fees | 7,048 | 6,387 | 6,974 | 7,105 | 5,984 | ||||||||||
Custodian | 3,110 | 4,923 | 3,687 | 4,941 | 4,090 | ||||||||||
Trustees | 2,960 | 5,624 | 2,537 | 6,747 | 2,209 | ||||||||||
Insurance | 2,248 | 4,078 | 1,765 | 4,832 | 459 | ||||||||||
Shareholder communication | 109 | 1,723 | 261 | 129 | 582 | ||||||||||
Shareholder servicing fees | 37 | 2,716 | 642 | 1,739 | — | ||||||||||
Miscellaneous | 7 | 44 | 7 | 7 | 14 | ||||||||||
Total expenses | 146,316 | 205,140 | 145,457 | 212,840 | 107,131 | ||||||||||
Expense waiver and reimbursement from Advisor | (81,877 | ) | (88,543 | ) | (111,134 | ) | (124,259 | ) | (91,487 | ) | |||||
Net expenses | 64,439 | 116,597 | 34,323 | 88,581 | 15,644 | ||||||||||
Net investment income (loss) | (18,160 | ) | (72,722 | ) | 310,200 | 561,109 | 93,894 | ||||||||
Realized and Unrealized Gain (Loss) on Investments | |||||||||||||||
Net realized gain (loss) on investments | |||||||||||||||
Unaffiliated issuers | 384,425 | 986,180 | (7,906 | ) | (34,504 | ) | (18,826 | ) | |||||||
Long-term capital gain distribution from affiliated mutual fund | — | — | 269 | — | 225 | ||||||||||
Net change in unrealized appreciation (depreciation) | 1,239,949 | 1,649,258 | (39,944 | ) | 12,046 | (45,366 | ) | ||||||||
Net realized and unrealized gain (loss) on investments | 1,624,374 | 2,635,438 | (47,581 | ) | (22,458 | ) | (63,967 | ) | |||||||
Net increase in net assets resulting from operations | $ | 1,606,214 | $ | 2,562,716 | $ | 262,619 | $ | 538,651 | $ | 29,927 | |||||
_________ * Commencement of operations. |
The accompanying Notes are an integral part of the financial statements.
30
PENN CAPITAL FUNDS TRUST
STATEMENTS OF CHANGES IN NET ASSETS
DECEMBER 31, 2017 (UNAUDITED)
Penn Capital Managed Alpha SMID Cap Equity Fund | Penn Capital Special Situations Small Cap Equity Fund | Penn Capital Multi-Credit High Income Fund | Penn Capital Defensive Floating Rate Income Fund | Penn Capital Defensive Short Duration High Income Fund | |||||||||||||||||||||||
Increase (Decrease) in Net Assets | July 1, 2017 - December, 2017 | July 1, 2016 - June 30, 2017 | July 1, 2017 - December, 2017 | July 1, 2016 - June 30, 2017 | July 1, 2017 - December, 2017 | July 1, 2016 - June 30, 2017 | July 1, 2017 - December, 2017 | July 1, 2016 - June 30, 2017 | July 17, 2017* - December, 2017 | ||||||||||||||||||
Operations | |||||||||||||||||||||||||||
Net investment income (loss) | $ | (18,160 | ) | $ | (29,053 | ) | $ | (72,722 | ) | $ | (78,582 | ) | $ | 310,200 | $ | 603,650 | $ | 561,109 | $ | 844,177 | $ | 93,894 | |||||
Net realized gain (loss) on investments: | |||||||||||||||||||||||||||
Unaffiliated issuers | 384,425 | 324,087 | 986,180 | 1,733,389 | (7,906 | ) | 366,485 | (34,504 | ) | 228,049 | (18,826 | ) | |||||||||||||||
Long-term capital gain distribution from affiliated mutual fund | — | — | — | — | 269 | — | — | — | 225 | ||||||||||||||||||
Net change in unrealized appreciation (depreciation) | 1,239,949 | 1,669,969 | 1,649,258 | 408,497 | (39,944 | ) | 99,903 | 12,046 | 73,586 | (45,366 | ) | ||||||||||||||||
Net increase in net assets resulting from operations | 1,606,214 | 1,965,003 | 2,562,716 | 2,063,304 | 262,619 | 1,070,038 | 538,651 | 1,145,812 | 29,927 | ||||||||||||||||||
Dividends and distributions to shareholders | |||||||||||||||||||||||||||
From net investment income | |||||||||||||||||||||||||||
Institutional Class | — | — | — | — | (372,938 | ) | (596,135 | ) | (629,036 | ) | (826,690 | ) | (103,996 | ) | |||||||||||||
From realized gain | |||||||||||||||||||||||||||
Institutional Class | (217,398 | ) | — | (2,239,983 | ) | (850,482 | ) | (222,565 | ) | — | (167,015 | ) | (95,164 | ) | — | ||||||||||||
Total dividends and distributions to shareholders | (217,398 | ) | — | (2,239,983 | ) | (850,482 | ) | (595,503 | ) | (596,135 | ) | (796,051 | ) | (921,854 | ) | (103,996 | ) | ||||||||||
Capital share transactions | |||||||||||||||||||||||||||
Net proceeds from sale of shares | 1,166,867 | 240,732 | 4,545,371 | 12,938,608 | 1,770,514 | 457,456 | 3,005,403 | 6,674,297 | 8,641,582 | ||||||||||||||||||
Dividends and distributions reinvested | 217,014 | — | 2,233,477 | 845,459 | 571,680 | 558,116 | 792,325 | 916,744 | 103,996 | ||||||||||||||||||
Cost of shares redeemed** | (198,412 | ) | (640,048 | ) | (8,809,759 | ) | (1,684,172 | ) | (203,128 | ) | (560,783 | ) | (705,343 | ) | (1,408,771 | ) | (1,012 | ) | |||||||||
Net increase (decrease) in net assets resulting from capital share transactions | 1,185,469 | (399,316 | ) | (2,030,911 | ) | 12,099,895 | 2,139,066 | 454,789 | 3,092,385 | 6,182,270 | 8,744,566 | ||||||||||||||||
Net increase (decrease) in net assets | 2,574,285 | 1,565,687 | (1,708,178 | ) | 13,312,717 | 1,806,182 | 928,692 | 2,834,985 | 6,406,228 | 8,670,497 | |||||||||||||||||
Net Assets | |||||||||||||||||||||||||||
Beginning of period | 11,027,372 | 9,461,685 | 21,867,094 | 8,554,377 | 8,771,564 | 7,842,872 | 25,031,352 | 18,625,124 | — | ||||||||||||||||||
End of period | $ | 13,601,657 | $ | 11,027,372 | $ | 20,158,916 | $ | 21,867,094 | $ | 10,577,746 | $ | 8,771,564 | $ | 27,866,337 | $ | 25,031,352 | $ | 8,670,497 | |||||||||
_________ ** Net of redemption fees of: | $ | — | $ | — | $ | 495 | $ | 1,853 | $ | — | $ | 51 | $ | — | $ | — | $ | — | |||||||||
Accumulated net investment income (loss) at the end of period | $ | (18,160 | ) | $ | (51,724 | ) | $ | (72,722 | ) | $ | (78,582 | ) | $ | (12,937 | ) | $ | 49,801 | $ | 11,872 | $ | 79,799 | $ | (10,102 | ) | |||
* Commencement of operations. |
The accompanying Notes are an integral part of the financial statements.
31
PENN CAPITAL FUNDS TRUST
FINANCIAL HIGHLIGHTS
DECEMBER 31, 2017 (UNAUDITED)
Per Common Share Data(a) | Supplemental data and ratios | ||||||||||||||||||||||||||||||||||||||||||||
Income from investment operations | Distributions to shareholders | ||||||||||||||||||||||||||||||||||||||||||||
Penn Capital Managed Alpha SMID Cap Equity Fund | |||||||||||||||||||||||||||||||||||||||||||||
Institutional Class | |||||||||||||||||||||||||||||||||||||||||||||
7/1/17 to 12/31/17 | $ | 11.73 | (0.02 | ) | 1.59 | 1.57 | — | (0.21 | ) | (0.21 | ) | $ | 13.09 | 13.43 | %(d) | $ | 13,602 | 1.06 | % | 2.41 | % | (0.30 | )% | (1.65 | )% | 31 | %(d) | ||||||||||||||||||
7/1/16 to 6/30/17 | $ | 9.65 | (0.02 | ) | 2.10 | 2.08 | — | — | — | $ | 11.73 | 21.55 | % | $ | 11,027 | 1.06 | % | 2.63 | % | (0.29 | )% | (1.86 | )% | 91 | % | ||||||||||||||||||||
12/1/15(e) to 6/30/16 | $ | 10.00 | (0.03 | ) | (0.32 | ) | (0.35 | ) | — | — | — | $ | 9.65 | (3.50 | )%(d) | $ | 9,462 | 1.06 | % | 3.74 | % | (0.53 | )% | (3.21 | )% | 70 | %(d) | ||||||||||||||||||
Penn Capital Special Situations Small Cap Equity Fund | |||||||||||||||||||||||||||||||||||||||||||||
Institutional Class | |||||||||||||||||||||||||||||||||||||||||||||
7/1/17 to 12/31/17 | $ | 11.71 | (0.04 | ) | 1.47 | 1.43 | (f) | — | (1.40 | ) | (1.40 | ) | $ | 11.74 | 12.19 | %(d) | $ | 20,159 | 1.09 | % | 1.92 | % | (0.68 | )% | (1.51 | )% | 50 | %(d) | |||||||||||||||||
7/1/16 to 6/30/17 | $ | 10.32 | (0.04 | ) | 2.24 | 2.20 | (f) | — | (0.81 | ) | (0.81 | ) | $ | 11.71 | 21.52 | % | $ | 21,867 | 1.09 | % | 2.19 | % | (0.54 | )% | (1.64 | )% | 101 | % | |||||||||||||||||
12/18/15(e) to 6/30/16 | $ | 10.00 | (0.02 | ) | 0.34 | 0.32 | — | — | — | $ | 10.32 | 3.20 | %(d) | $ | 8,554 | 1.09 | % | 5.63 | % | (0.48 | )% | (5.02 | )% | 102 | %(d) | ||||||||||||||||||||
Penn Capital Multi-Credit High Income Fund | |||||||||||||||||||||||||||||||||||||||||||||
Institutional Class | |||||||||||||||||||||||||||||||||||||||||||||
7/1/17 to 12/31/17 | $ | 10.52 | 0.32 | (0.04 | ) | 0.28 | (0.40 | ) | (0.22 | ) | (0.62 | ) | $ | 10.18 | 2.73 | %(d) | $ | 10,578 | 0.69 | % | 2.94 | % | 6.19 | % | 3.94 | % | 38 | %(d) | |||||||||||||||||
7/1/16 to 6/30/17 | $ | 9.95 | 0.73 | 0.56 | 1.29 | (f) | (0.72 | ) | — | (0.72 | ) | $ | 10.52 | 13.36 | % | $ | 8,772 | 0.72 | % | 3.25 | % | 7.01 | % | 4.48 | % | 79 | % | ||||||||||||||||||
12/1/15(e) to 6/30/16 | $ | 10.00 | 0.35 | (0.10 | ) | 0.25 | (0.30 | ) | — | (0.30 | ) | $ | 9.95 | 2.66 | %(d) | $ | 7,843 | 0.72 | % | 5.14 | % | 6.34 | % | 1.92 | % | 62 | %(d) | ||||||||||||||||||
Penn Capital Defensive Floating Rate Income Fund | |||||||||||||||||||||||||||||||||||||||||||||
Institutional Class | |||||||||||||||||||||||||||||||||||||||||||||
7/1/17 to 12/31/17 | $ | 10.21 | 0.21 | (0.00 | )(g) | 0.21 | (0.24 | ) | (0.06 | ) | (0.30 | ) | $ | 10.12 | 2.09 | %(d) | $ | 27,866 | 0.66 | %(h) | 1.58 | % | 4.16 | %(h) | 3.24 | % | 43 | %(d) | |||||||||||||||||
7/1/16 to 6/30/17 | $ | 10.09 | 0.40 | 0.17 | 0.57 | (0.40 | ) | (0.05 | ) | (0.45 | ) | $ | 10.21 | 5.66 | % | $ | 25,031 | 0.74 | % | 1.95 | % | 3.90 | % | 2.69 | % | 108 | % | ||||||||||||||||||
12/1/15(e) to 6/30/16 | $ | 10.00 | 0.14 | 0.06 | 0.20 | (0.11 | ) | — | (0.11 | ) | $ | 10.09 | 1.99 | %(d) | $ | 18,625 | 0.74 | % | 2.77 | % | 2.56 | % | 0.53 | % | 43 | %(d) | |||||||||||||||||||
Penn Capital Defensive Short Duration High Income Fund | |||||||||||||||||||||||||||||||||||||||||||||
Institutional Class | |||||||||||||||||||||||||||||||||||||||||||||
7/17/17(e) to 12/31/17 | $ | 10.00 | 0.13 | (0.10 | ) | 0.03 | (0.14 | ) | — | (0.14 | ) | $ | 9.89 | 0.35 | %(d) | $ | 8,670 | 0.54 | % | 3.77 | % | 3.24 | % | 0.01 | % | 25 | %(d) |
* | No information is provided for Investor Class shares because shares of that class had not yet been issued as of December 31, 2017. |
(a) | Information presented related to a share outstanding for the entire period. |
(b) | Annualized for periods less than one full year. |
(c) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
(d) | Not annualized. |
(e) | Commencement of operations. |
(f) | Total from investment operations per share includes redemption fees of less than $0.01 per share. |
(g) | The amount represents less than $0.01 per share. |
(h) | Expense waiver of 0.64% was implemented on July 31, 2017. |
The accompanying Notes are an integral part of the financial statements.
32
PENN CAPITAL FUNDS TRUST
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
1. Organization (Unaudited)
PENN Capital Funds Trust (the “Trust”) was organized as a Delaware statutory trust on August 29, 2014, and is registered under the Investment Company Act of 1940 (the “1940 Act”), as amended, as an open-end management investment company. The Trust currently offers five series: the Penn Capital Managed Alpha SMID Cap Equity Fund, the Penn Capital Special Situations Small Cap Equity Fund, the Penn Capital Multi-Credit High Income Fund, the Penn Capital Defensive Floating Rate Income Fund and the Penn Capital Defensive Short Duration High Income Fund (collectively referred to as the “Funds” and each individually referred to as a “Fund”). The Funds follow the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 “Financial Services- Investment Companies.”
The Penn Capital Alpha SMID Cap Equity Fund and Penn Capital Special Situations Small Cap Equity Fund’s investment objective is to seek to provide capital appreciation.
A privately offered fund managed by PENN Capital Management Company, Inc. (the “Advisor”) reorganized into the Penn Capital Alpha SMID Cap Equity Fund after the close of business on November 30, 2015, with the Penn Capital Alpha SMID Cap Equity Fund commencing operations on December 1, 2015. The reorganization consisted of the transfer of the assets and stated liabilities of the private fund to the Penn Capital Alpha SMID Cap Equity Fund in exchange for Institutional Class shares of the Penn Capital Alpha SMID Cap Equity Fund, which were then distributed to the private fund partners. The reorganization was non-taxable, whereby the Fund issued 1,054,790 shares. The fair value and cost of securities, for tax purposes, received by the Fund was $10,185,471 and $10,120,793 respectively. In addition, the Fund received $362,428 of cash. For financial reporting purposes, assets received and shares issued by the Fund were recorded at fair value.
The Penn Capital Special Situations Small Cap Equity Fund commenced operations on December 18, 2015.
The Penn Capital Multi-Credit High Income Fund’s investment objective is to seek to provide total return through interest income and capital appreciation.
A privately offered fund managed by the Advisor reorganized into the Penn Capital Multi-Credit High Income Fund after the close of business on November 30, 2015, with the Penn Capital Multi-Credit High Income Fund commencing operations on December 1, 2015. The reorganization consisted of the transfer of the assets and stated liabilities of the private fund to the Penn Capital Multi-Credit High Income Fund in exchange for Institutional Class shares of the Penn Capital Multi-Credit High Income Fund, which were then distributed to the private fund partners. The reorganization was non-taxable, whereby the Fund issued 561,214 shares. The fair value and cost of securities, for tax purposes, received by the Fund was $4,879,311. Certain investments cost basis were adjusted to the limitation of built in losses for tax purposes. In addition, the Fund received $732,828 of cash, receivables and accrued interest. For financial reporting purposes, assets received and shares issued by the Fund were recorded at fair value.
The Penn Capital Defensive Floating Rate Income Fund’s investment objective is to seek to provide current income. The Penn Capital Defensive Floating Rate Income Fund commenced operations on December 1, 2015.
The Penn Capital Defensive Short Duration High Income Fund’s investment objective is to seek to provide a high level of current income. The Penn Capital Defensive Short Duration High Income Fund commenced operations on July 17, 2017.
Each Fund’s investment objective is non-fundamental, and may be changed by the Trust’s Board of Trustees (the “Board” or “Trustees”) without shareholder approval. Unless otherwise noted, all of the other investment policies and strategies described in the Prospectus or hereafter are nonfundamental. The Advisor serves as the investment advisor to the Funds.
The Trust offers two classes of shares for the Penn Capital Managed Alpha SMID Cap Equity Fund, the Penn Capital Special Situations Small Cap Equity Fund, the Penn Capital Multi-Credit High Income Fund and the Penn Capital Defensive Floating Rate Income Fund: Institutional and Investor Class. The Trust has registered 3 other series, each with one class: the Penn Capital Defensive Short Duration High Income Fund, the Penn Capital Micro Cap Equity Fund and the Penn Capital Enterprise Value Small Cap Equity Fund: Institutional Class. No information is provided in this report for the Investor Class shares because shares of that class had not yet been issued as of December 31, 2017. None of these classes has a front-end or back-end sales charge. The Penn Capital Micro Cap Equity Fund and Penn Capital Enterprise Value Small Cap Equity Fund have not commenced operations as of the date of this Report.
33
PENN CAPITAL FUNDS TRUST
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
2. Significant Accounting Policies (Unaudited)
The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
A. Investment Valuation
The Funds use the following valuation methods to determine fair value as either fair value for investments for which market quotations are available, or if not available, the fair value, as determined in good faith pursuant to such policies and procedures as may be approved by the Trust’s Board from time to time. The valuation of the portfolio investments of the Funds currently includes the following processes:
Portfolio securities listed on a national or foreign securities exchange, except those listed on the NASDAQ® Stock Market and Small CapSM exchanges (“NASDAQ®”), for which market quotations are available, are valued at the official closing price of such exchange on each business day (defined as days on which the Funds are open for business (“Business Day”)). Portfolio securities traded on the NASDAQ® will be valued at the NASDAQ® Official Closing Price on each Business Day. If there is no such reported sale on an exchange or NASDAQ®, the portfolio security will be valued at the most recent quoted bid price. Price information on listed securities is taken from the exchange where the security is primarily traded.
Other assets and securities for which no quotations are readily available (such as for certain restricted or unlisted securities and private placements) or that may not be reliably priced (such as in the case of trade suspensions or halts, price movement limits set by certain foreign markets, and thinly traded or illiquid securities) will be valued in good faith at fair value using procedures and methods approved by the Board. Under the procedures adopted by the Board, the Board has delegated day-to-day responsibility for fair value determinations to a Valuation Committee comprised of representatives from the Advisor.
A Fund’s portfolio holdings may also consist of shares of other investment companies in which the Fund invests. The value of each such investment company will be its net asset value (“NAV”) at the time the Fund’s shares are priced. Each investment company calculates its NAV based on the current market value for its portfolio holdings. Each investment company values securities and other instruments in a manner as described in that investment company’s prospectus. The investment company’s prospectus explains the circumstances under which the company will use fair value pricing and the effects of using fair value pricing.
Because a Fund may invest in foreign securities, the Fund’s NAV may change on days when a shareholder will not be able to purchase or redeem Fund shares because foreign markets are open at times and on days when U.S. markets are not. Investments quoted in foreign currencies will be valued daily in U.S. dollars on the basis of the foreign currency exchange rates prevailing at the time such valuation is determined. Foreign currency exchange rates are generally determined as of the close of the New York Stock Exchange (“NYSE”) (generally 4:00 p.m. Eastern time). If an event that could materially affect the value of the Fund’s foreign securities has occurred between the time the securities were last traded and the time that the Fund calculates its NAV, the closing price of the Fund’s securities may no longer reflect their market value at the time the Fund calculates its NAV. In such a case, the Fund may use fair value methods to value such securities.
Fixed income securities shall be valued at the evaluated bid price supplied by the Fund’s pricing agent based on broker-dealer supplied valuations and other criteria, or directly by independent brokers when the pricing agent does not provide a price or the Valuation Committee does not believe that the pricing agent price reflects the current market value. If a price of a position is sought using independent brokers, the Advisor shall seek to obtain an evaluation bid price from at least two independent brokers who are knowledgeable about the position. The price of the position would be deemed to be an average of such bid prices. In the absence of sufficient broker dealer quotes, securities shall be valued at fair value pursuant to procedures adopted by the Board.
Bank loans are not listed on any securities exchange or board of trade. They are typically bought and sold by institutional investors in individually negotiated private transactions that function in many respects like an over-the-counter secondary market. This market generally has fewer trades and less liquidity than the secondary market for other types of securities. Some bank loans have few or no trades, or trade infrequently, and information regarding a specific bank loan may not be widely available or may be incomplete. Except as otherwise specified, bank loan securities shall be valued at the evaluated bid prices supplied by the Fund’s pricing agent based on broker-dealer supplied valuations and other criteria, or directly by independent brokers when the pricing agent does not provide a price or the Valuation Committee does not believe that the pricing agent price reflects the current market
34
PENN CAPITAL FUNDS TRUST
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
value. If a price of a position is sought using independent brokers, the Advisor shall seek to obtain a bid price from at least two independent brokers who are knowledgeable about the position. The price of the position would be deemed to be an average of such bid prices. In the absence of sufficient broker dealer quotes, securities shall be valued at fair value pursuant to procedures adopted by the Board.
Occasionally, reliable market quotations are not readily available (such as for certain restricted or unlisted securities and private placements) or securities and other assets may not be reliably priced (such as in the case of trade suspensions or halts, price movement limits set by certain foreign markets, and thinly traded or illiquid securities), or there may be events affecting the value of foreign securities or other securities held by the Funds that occur when regular trading on foreign or other exchanges is closed, but before trading on the NYSE is closed. Fair value determinations are then made in good faith in accordance with procedures adopted by the Board. Under the procedures adopted by the Board, the Board has delegated the responsibility for making fair value determinations to a Valuation Committee, subject to the Board’s oversight. Generally, the fair value of a portfolio security or other asset shall be the amount that the owner of the security or asset might reasonably expect to receive upon its current sale. A three-tier hierarchy is utilized to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability and are developed based on the best information available under the circumstances. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.
Level 1 – | unadjusted quoted prices in active markets for identical securities that the Funds have the ability to access |
Level 2 – | other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) |
Level 3 – | significant unobservable inputs (including a Fund’s own assumptions in determining the fair value of investments) |
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.
The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
The following table summarizes the inputs used as of December 31, 2017 in valuing each Fund’s investments:
Penn Capital Managed Alpha SMID Cap Equity Fund Investments in Securities(a) | Level 1 | Level 2 | Level 3 | Total | ||||||||
Common Stocks | $ | 12,429,776 | $ | — | $ | — | $ | 12,429,776 | ||||
Real Estate Investment Trusts (REITs) | 841,961 | — | — | 841,961 | ||||||||
Short-Term Investment | 367,840 | — | — | 367,840 | ||||||||
Total Investments in Securities | $ | 13,639,577 | $ | — | $ | — | $ | 13,639,577 |
35
PENN CAPITAL FUNDS TRUST
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
Penn Capital Special Situations Small Cap Equity Fund Investments in Securities(a) | Level 1 | Level 2 | Level 3 | Total | ||||||||
Common Stocks | ||||||||||||
Aerospace & Defense | $ | 289,411 | $ | — | $ | — | $ | 289,411 | ||||
Banks | 2,315,413 | — | — | 2,315,413 | ||||||||
Biotechnology | 243,393 | — | — | 243,393 | ||||||||
Building Products | 247,992 | — | — | 247,992 | ||||||||
Capital Markets | 478,448 | — | — | 478,448 | ||||||||
Chemicals | 405,393 | — | — | 405,393 | ||||||||
Construction Materials | 352,600 | — | — | 352,600 | ||||||||
Diversified Consumer Services | 309,411 | — | — | 309,411 | ||||||||
Energy Equipment & Services | 1,243,697 | — | — | 1,243,697 | ||||||||
Health Care Equipment & Supplies | 840,197 | — | — | 840,197 | ||||||||
Health Care Providers & Services | 427,951 | — | — | 427,951 | ||||||||
Hotels, Restaurants & Leisure | 1,895,700 | — | — | 1,895,700 | ||||||||
Household Durables | 331,968 | — | — | 331,968 | ||||||||
Independent Power and Renewable Electricity Producers | 323,801 | — | — | 323,801 | ||||||||
Internet Software & Services | 1,694,372 | — | — | 1,694,372 | ||||||||
IT Services | 682,730 | — | — | 682,730 | ||||||||
Life Sciences Tools & Services | 235,824 | — | — | 235,824 | ||||||||
Machinery | 1,370,280 | — | — | 1,370,280 | ||||||||
Media | 2,169,815 | 93 | — | 2,169,908 | ||||||||
Metals & Mining | 289,008 | — | — | 289,008 | ||||||||
Oil, Gas & Consumable Fuels | 697,310 | — | — | 697,310 | ||||||||
Pharmaceuticals | 281,660 | — | — | 281,660 | ||||||||
Road & Rail | 283,001 | — | — | 283,001 | ||||||||
Semiconductors & Semiconductor Equipment | 527,941 | — | — | 527,941 | ||||||||
Software | 595,893 | — | — | 595,893 | ||||||||
Specialty Retail | 349,208 | — | — | 349,208 | ||||||||
Textiles, Apparel & Luxury Goods | 229,382 | — | — | 229,382 | ||||||||
Thrifts & Mortgage Finance | 288,727 | — | — | 288,727 | ||||||||
Trading Companies & Distributors | 430,848 | — | — | 430,848 | ||||||||
Total Common Stocks | 19,831,374 | 93 | — | 19,831,467 | ||||||||
Short-Term Investment | 289,394 | — | — | 289,394 | ||||||||
Total Investments in Securities | $ | 20,120,768 | 93 | — | $ | 20,120,861 |
Penn Capital Multi-Credit High Income Fund Investments in Securities(a) | Level 1 | Level 2 | Level 3 | Total | ||||||||
Corporate Bonds | $ | — | $ | 8,712,471 | $ | — | $ | 8,712,471 | ||||
Convertible Bonds | — | 192,799 | — | 192,799 | ||||||||
Common Stock | — | — | 35 | 35 | ||||||||
Convertible Preferred Stock | 56,000 | — | — | 56,000 | ||||||||
Mutual Fund | 999,648 | — | — | 999,648 | ||||||||
Preferred Stock | — | — | 41 | 41 | ||||||||
Warrant | — | 1,166 | — | 1,166 | ||||||||
Short-Term Investment | 465,706 | — | — | 465,706 | ||||||||
Total Investments in Securities | $ | 1,521,354 | $ | 8,906,436 | $ | 76 | $ | 10,427,866 |
36
PENN CAPITAL FUNDS TRUST
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
Penn Capital Defensive Floating Rate Income Fund Investments in Securities(a) | Level 1 | Level 2 | Level 3 | Total | ||||||||
Bank Loans | $ | — | $ | 23,149,880 | $ | — | $ | 23,149,880 | ||||
Corporate Bonds | — | 3,261,372 | — | 3,261,372 | ||||||||
Short-Term Investment | 1,990,278 | — | — | 1,990,278 | ||||||||
Total Investments in Securities | $ | 1,990,278 | $ | 26,411,252 | $ | — | $ | 28,401,530 |
Penn Capital Defensive Short Duration High Income Fund Investments in Securities(a) | Level 1 | Level 2 | Level 3 | Total | ||||||||
Corporate Bonds | $ | — | $ | 7,260,543 | $ | — | $ | 7,260,543 | ||||
Asset-Backed Security | — | 40,420 | — | 40,420 | ||||||||
Mutual Fund | 833,839 | — | — | 833,839 | ||||||||
Short-Term Investment | 470,226 | — | — | 470,226 | ||||||||
Total Investments in Securities | $ | 1,304,065 | $ | 7,300,963 | $ | — | $ | 8,605,028 |
(a) | All other industry classifications are identified in the Schedule of Investments for each Fund. |
The following table summarizes quantitative information about significant unobservable valuation inputs for Level 3 fair value measurement as of December 31, 2017:
Type of Assets | Fair Value as of December 31, 2017 | Valuation Techniques | Unobservable Input | ||||||
Penn Capital Multi-Credit High Income Fund | |||||||||
Common Stock | |||||||||
ACC Claims Holdings LLC | $ | 35 | Broker Quote(a) | N/A | |||||
Preferred Stock | |||||||||
Spanish Broadcasting Systems, Inc. | 41 | Broker Quote(a) | N/A |
(a) | Unaudited |
The following table reconciles Level 3 investments based on the inputs used to determine fair value:
Balance as of July 1, 2017 | Purchases | Sales | Accretion of Discount | Net Realized Gain/Loss | Balance as of December 31, 2017 | Change in Unrealized Appreciation (Depreciation) from Investments Held as of December 31, 2017 | |||||||||||||||
Penn Capital Multi-Credit High Income Fund | |||||||||||||||||||||
Common Stock | |||||||||||||||||||||
ACC Claims Holdings LLC | $ | 44 | $ | — | $ | — | $ | — | $ | — | $ | 35 | $ | (9 | ) | ||||||
Preferred Stock | |||||||||||||||||||||
Spanish Broadcasting Systems, Inc. | 32 | — | — | — | — | 41 | 9 |
The Funds disclose transfers between Levels based on valuations at the end of the reporting period. There were no transfers between Levels 1, 2, or 3 for the period ended December 31, 2017.
37
PENN CAPITAL FUNDS TRUST
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
B. Investment Transactions and Related Investment Income
Investment transactions are accounted for on a trade-date basis. Interest income is recorded on the accrual basis, including the amortization of premiums and accretion of discounts on bonds held using the yield-to-maturity method. Dividend income is recognized on ex-dividend date.
Realized gains and losses on investment transactions and unrealized appreciation and depreciation of investments are reported for financial statement and Federal income tax purposes on the identified cost method.
C. Expenses
The Trust’s expenses are allocated to the individual Fund in proportion to the net assets of the respective Fund when the expenses were incurred, except where direct allocations of expenses can be made.
D. Use of Estimates
The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
E. Dividends and Distributions
Dividends and distributions to Shareholders are recorded on the ex-date. The Penn Capital Multi-Credit High Income Fund, the Penn Capital Defensive Floating Rate Income Fund and the Penn Capital Defensive Short Duration High Income Fund declare and distribute their net investment income, if any, monthly and make distributions of their net realized capital gains, if any, at least annually, usually in December. The Penn Capital Managed Alpha SMID Cap Equity Fund and the Penn Capital Special Situations Small Cap Equity Fund declare and distribute their net investment income, if any, annually and make distributions of net realized capital gains, if any, at least annually, usually in December.
The character of distributions made during the period from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes. In addition, due to the timing of dividend distributions, the fiscal period in which the amounts are distributed may differ from the period that income or realized gains (losses) were recorded by each Fund.
F. Federal Income Taxes
Each Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. If so qualified, the Funds will not be subject to federal income tax to the extent they distribute all of their net investment income and capital gains to shareholders. Therefore, no federal income tax provision is required.
The Funds evaluate tax positions taken or expected to be taken in the course of preparing their tax returns to determine whether it is more-likely-than-not (i.e., greater than 50%) that each tax position will be sustained upon examination by a taxing authority based on the technical merits of the position. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. The Funds did not record any tax provision in the current period and have no provision for taxes in the financial statements. However, management’s conclusions regarding tax positions taken may be subject to review and adjustment at a later date based on factors including, but not limited to, examination by tax authorities (i.e., the last three open tax year ends, as applicable) and on-going analysis of and changes to tax laws, regulations and interpretations thereof.
G. Indemnifications
Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust and each Fund. In addition, in the normal course of business, the Trust may enter into contracts that provide general indemnification to other parties. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred, and may not occur. However, the Trust has not had prior claims or losses pursuant to these contracts and considers the risk of loss to be remote.
38
PENN CAPITAL FUNDS TRUST
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
3. Agreements and Related Party Transactions
Investment Advisory Agreement
The Trust has entered into an investment advisory agreement with the Advisor. Under the terms of the agreement, each Fund pays the Advisor a fee, payable at the end of each month, at an annual rate, set forth in the table below, of the respective Fund’s average daily net assets.
Penn Capital Managed Alpha SMID Cap Equity Fund | 0.90 | % | |
Penn Capital Special Situations Small Cap Equity Fund | 0.95 | % | |
Penn Capital Multi-Credit High Income Fund | 0.69 | % | |
Penn Capital Defensive Floating Rate Income Fund | 0.55 | %* | |
Penn Capital Defensive Short Duration High Income Fund | 0.45 | % |
* | Advisor fee reduced to 0.55% effective July 31, 2017. Prior to July 31, 2017, the Fund’s contractual advisory fee rate was 0.69%. |
With respect to each Fund other than the Penn Capital Multi-Credit High Income Fund and the Penn Capital Defensive Short Duration High Income Fund, the Advisor has contractually agreed to waive its fees and/or pay Fund expenses so that the Funds’ total annual operating expenses (excluding any acquired fund fees and expenses, taxes, interest, brokerage fees, certain insurance costs, and extraordinary and other non-routine expenses) do not exceed the amounts shown below as a percentage of each Fund’s average daily net assets. With respect to the Penn Capital Multi-Credit High Income Fund and the Penn Capital Defensive Short Duration High Income Fund, the Advisor has contractually agreed to waive its fees and/or pay Fund expenses so that the Fund’s total annual operating expenses (including any acquired fund fees and expenses incurred by the Fund as a result of its investments in other investment companies managed by the Advisor, but excluding any acquired fund fees and expenses incurred by the Fund as a result of its investments in unaffiliated investment companies, taxes, interest, brokerage fees, certain insurance costs, and extraordinary and other non-routine expenses) do not exceed the amounts shown below as a percentage of each Fund’s average daily net assets. The expense limitation agreement will remain in place through October 30, 2018. Thereafter, the expense limitation agreement for the Funds will be reviewed annually by the Advisor and the Board.
Institutional Class | Investor Class | |||||
Penn Capital Managed Alpha SMID Cap Equity Fund | 1.06 | % | 1.31 | % | ||
Penn Capital Special Situations Small Cap Equity Fund | 1.09 | % | 1.34 | % | ||
Penn Capital Multi-Credit High Income Fund | 0.72 | % | 0.97 | % | ||
Penn Capital Defensive Floating Rate Income Fund | 0.64 | %* | 0.89 | %* | ||
Penn Capital Defensive Short Duration High Income Fund | 0.54 | % | N/A |
* | Prior to July 31, 2017, the Penn Capital Defensive Floating Rate Income Fund’s total annual operating expenses (excluding certain specified items) were limited to 0.74% for Institutional Class shares and 0.99% for Investor Class shares. |
Any waived or reimbursed expenses by the Advisor to the Funds are subject to repayment by a Fund in the three years following the date the payment was made, provided that the respective Fund is able to make the repayment without exceeding the Fund’s expense limitation in place when the fees were waived or expenses paid. The Advisor’s waived fees and paid expenses that are subject to potential recoupment are as follows:
Fiscal Year Incurred | Amount Waived/ Expenses Assumed | Amount Recouped | Amount Subject to Potential Recoupment | Year of Expiration | ||||||||
Penn Capital Managed Alpha SMID Cap Equity Fund | ||||||||||||
June 30, 2016 | $ | 146,572 | $ | — | $ | 146,572 | 2019 | |||||
June 30, 2017 | 162,111 | — | 162,111 | 2020 | ||||||||
June 30, 2018 | 81,877 | — | 81,877 | 2021 | ||||||||
Total | $ | 390,560 | $ | — | $ | 390,560 | ||||||
Penn Capital Special Situations Small Cap Equity Fund | ||||||||||||
June 30, 2016 | $ | 128,464 | $ | — | $ | 128,464 | 2019 | |||||
June 30, 2017 | 158,820 | — | 158,820 | 2020 | ||||||||
June 30, 2018 | 88,543 | — | 88,543 | 2021 | ||||||||
Total | $ | 375,827 | $ | — | $ | 375,827 | ||||||
Penn Capital Multi-Credit High Income Fund | ||||||||||||
June 30, 2016 | $ | 171,803 | $ | — | $ | 171,803 | 2019 |
39
PENN CAPITAL FUNDS TRUST
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
Fiscal Year Incurred | Amount Waived/ Expenses Assumed | Amount Recouped | Amount Subject to Potential Recoupment | Year of Expiration | ||||||
June 30, 2017 | 218,116 | — | 218,116 | 2020 | ||||||
June 30, 2018 | 111,134 | — | 111,134 | 2021 | ||||||
Total | $ | 501,053 | $ | — | $ | 501,053 | ||||
Penn Capital Defensive Floating Rate Income Fund | ||||||||||
June 30, 2016 | $ | 205,304 | $ | — | $ | 205,304 | 2019 | |||
June 30, 2017 | 261,441 | — | 261,441 | 2020 | ||||||
June 30, 2018 | 124,259 | — | 124,259 | 2021 | ||||||
Total | $ | 591,004 | $ | — | $ | 591,004 | ||||
Penn Capital Defensive Short Duration High Income Fund | ||||||||||
June 30, 2018 | $ | 91,487 | $ | — | $ | 91,487 | 2021 | |||
Total | $ | 91,487 | $ | — | $ | 91,487 |
Certain Officers and Trustees of the Funds are also Officers of the Advisor.
The Trust has engaged Foreside Fund Officers Services, LLC to provide compliance services including the appointment of the Trust’s Chief Compliance Officer and Anti-Money Laundering Officer.
Distribution Agreement
Foreside Fund Services, LLC is the Trust’s distributor and principal underwriter (the Distributor). The Trust has adopted a plan of distribution under Rule 12b-1 of the 1940 Act applicable to the Investor Class. Under the plan, 12b-1 distribution fees at an annual rate of 0.25% of average daily net assets of Investor Class shares are paid to the Distributor or others for distribution and shareholder services. For the period ended December 31, 2017, there were no distribution fees paid under the plan because the Investor Class shares had not yet been issued as of December 31, 2017.
The Trust has engaged U.S. Bancorp Fund Services, LLC to serve as the Fund’s administrator, fund accountant, and transfer agent. The Trust has engaged U.S. Bank, N.A. to serve as the Fund’s custodian.
4. Federal Tax Information
It is each Fund’s intention to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code and distribute all of its taxable income. Accordingly, no provision for federal income taxes is required in the financial statements.
The amount and character of income and capital gain distributions to be paid, if any, are determined in accordance with federal income tax regulations, which may differ from GAAP. These differences are primarily due to differences in the timing of recognition of gains or losses on investments. Permanent book and tax basis differences, if any, may result in reclassifications to undistributed net investment income (loss), undistributed net realized gain (loss) and additional paid-in capital.
A regulated investment company may elect for any taxable year to treat any portion of the qualified late year loss as arising on the first day of the next taxable year. Qualified late year losses are certain capital and ordinary losses which occur during the portion of the taxable year subsequent to October 31 and December 31, respectively.
The character of distributions for tax purposes paid during the period ended December 31, 2017 is as follows:
Ordinary Income Distributions | Long-Term Capital Gain Distributions | |||||
Penn Capital Managed Alpha SMID Cap Equity Fund | $ | 103,969 | $ | 113,429 | ||
Penn Capital Special Situations Small Cap Equity Fund | 1,149,801 | 1,090,182 | ||||
Penn Capital Multi-Credit High Income Fund | 571,777 | 23,726 | ||||
Penn Capital Defensive Floating Rate Income Fund | 788,547 | 7,504 | ||||
Penn Capital Defensive Short Duration Income Fund | 103,996 | — |
40
PENN CAPITAL FUNDS TRUST
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
The character of distributions for tax purposes paid during the fiscal year ended June 30, 2017 is as follows:
Ordinary Income Distributions | Long-Term Capital Gain Distributions | |||||
Penn Capital Managed Alpha SMID Cap Equity Fund | $ | — | $ | — | ||
Penn Capital Special Situations Small Cap Equity Fund | 850,428 | 54 | ||||
Penn Capital Multi-Credit High Income Fund | 596,135 | — | ||||
Penn Capital Defensive Floating Rate Income Fund | 921,854 | — |
5. Investment Transactions
The cost of security purchases and the proceeds from security sales, other than short-term investments, for the period ended December 31, 2017, were as follows:
Purchases | Sales | |||||
Penn Capital Managed Alpha SMID Cap Equity Fund | $ | 4,413,441 | $ | 3,644,403 | ||
Penn Capital Special Situations Small Cap Equity Fund | 10,704,332 | 15,150,982 | ||||
Penn Capital Multi-Credit High Income Fund | 5,139,318 | 3,626,373 | ||||
Penn Capital Defensive Floating Rate Income Fund | 12,753,508 | 11,192,592 | ||||
Penn Capital Defensive Short Duration High Income Fund | 9,085,116 | 1,427,925 |
6. Capital Share Transactions
Penn Capital Managed Alpha SMID Cap Equity Fund Period Ended December 31, 2017 | Penn Capital Special Situations Small Cap Fund Period Ended December 31, 2017 | Penn Capital Multi-Credit High Income Fund Period Ended December 31, 2017 | Penn Capital Defensive Floating Rate Income Fund Period Ended December 31, 2017 | Penn Capital Defensive Short Duration High Income Fund Period Ended December 31, 2017 | |||||||||||
Institutional Class Shares | |||||||||||||||
Share sold | 98,344 | 386,139 | 169,076 | 294,326 | 866,540 | ||||||||||
Shares sold to holders in reinvestment of dividends | 16,642 | 189,922 | 55,306 | 77,935 | 10,484 | ||||||||||
Shares redeemed | (16,319 | ) | (725,912 | ) | (19,241 | ) | (69,118 | ) | (102 | ) | |||||
Net increase (decrease) | 98,667 | (149,851 | ) | 205,141 | 303,143 | 876,922 | |||||||||
Institutional Amount | |||||||||||||||
Shares sold | $ | 1,166,867 | $ | 4,545,371 | $ | 1,770,514 | $ | 3,005,403 | $ | 8,641,582 | |||||
Shares sold to holders in reinvestment of dividends | 217,014 | 2,233,477 | 571,680 | 792,325 | 103,996 | ||||||||||
Shares redeemed | (198,412 | ) | (8,809,759 | ) | (203,128 | ) | (705,343 | ) | (1,012 | ) | |||||
Net increase (decrease) | $ | 1,185,469 | $ | (2,030,911 | ) | $ | 2,139,066 | $ | 3,092,385 | $ | 8,744,566 |
41
PENN CAPITAL FUNDS TRUST
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
Penn Capital Managed Alpha SMID Cap Equity Fund Year Ended June 30, 2017 | Penn Capital Special Situations Small Cap Equity Fund Year Ended June 30, 2017 | Penn Capital Multi-Credit High Income Fund Year Ended June 30, 2017 | Penn Capital Defensive Floating Rate Income Fund Year Ended June 30, 2017 | |||||||||
Institutional Class Shares | ||||||||||||
Shares sold | 21,067 | 1,115,266 | 45,061 | 653,532 | ||||||||
Shares sold to holders in reinvestment of dividends | — | 74,359 | 53,946 | 90,055 | ||||||||
Shares redeemed | (61,810 | ) | (151,648 | ) | (54,000 | ) | (137,775 | ) | ||||
Net increase (decrease) | (40,743 | ) | 1,037,977 | 45,007 | 605,812 | |||||||
Institutional Amount | ||||||||||||
Shares sold | $ | 240,732 | $ | 12,938,608 | $ | 457,456 | $ | 6,674,297 | ||||
Shares sold to holders in reinvestment of dividends | — | 845,459 | 558,116 | 916,744 | ||||||||
Shares redeemed | (640,048 | ) | (1,684,172 | ) | (560,783 | ) | (1,408,771 | ) | ||||
Net increase (decrease) | $ | (399,316 | ) | $ | 12,099,895 | $ | 454,789 | $ | 6,182,270 |
7. Transactions with Affiliates (Unaudited)
The following issuers are affiliated with the Funds; that is, the Adviser had control of 5% or more of the outstanding voting securities during the period from July 1, 2017 through December 31, 2017. As defined in Section (2)(a)(3) of the Investment Company Act of 1940; such issues are:
July 1, 2017 | Additions | Reductions | December 31, 2017 | Dividend Income | Short-Term Capital Gain Distribution | Unrealized Depreciation Change | Realized Gain/ (Loss) | December 31, 2017 | |||||||||||||||||||||||||||||||
Issuer Name | Share Balance | Cost | Share Balance | Cost | Share Balance | Cost | Share Balance | Value | Cost | ||||||||||||||||||||||||||||||
Penn Capital Multi-Credit High Income Fund | |||||||||||||||||||||||||||||||||||||||
Penn Capital Defensive Floating Rate Income Fund | — | $ | — | 98,780 | $ | 1,008,229 | — | $ | — | 98,780 | $ | 12,238 | $ | 5,722 | $ | (8,581 | ) | $ | — | $ | 999,648 | $ | 1,008,229 | ||||||||||||||||
$ | — | $ | 1,008,229 | $ | — | $ | 12,238 | $ | 5,722 | $ | (8,581 | ) | $ | — | $ | 999,648 | $ | 1,008,229 | |||||||||||||||||||||
Penn Capital Defensive Short Duration High Income Fund | |||||||||||||||||||||||||||||||||||||||
Penn Capital Defensive Floating Rate Income Fund | — | $ | — | 82,395 | $ | 841,260 | — | $ | — | 82,395 | $ | 11,263 | $ | 4,773 | $ | (7,421 | ) | $ | — | $ | 833,839 | $ | 841,260 | ||||||||||||||||
$ | — | $ | 841,260 | $ | — | $ | 11,263 | $ | 4,773 | $ | (7,421 | ) | $ | — | $ | 833,839 | $ | 841,260 |
8. Credit Risk and Asset Concentration
Small- and mid-capitalization companies may not have the size, resources and other assets of large capitalization companies. As a result, the securities of small- and mid-capitalization companies may be subject to greater market risks and fluctuations in value than large capitalization companies or may not correspond to changes in the stock market in general. In addition, small- and mid-capitalization companies may be particularly affected by interest rate increases, as they may find it more difficult to borrow money to continue or expand operations, or may have difficulty in repaying any loans.
High yield securities and unrated securities of similar credit quality have speculative characteristics and involve greater volatility of price and yield, greater of liquidity risk, and generally reflect a greater possibility of an adverse change in financial condition that could affect an issuer’s ability to honor its obligations.
There are a number of risks associated with an investment in bank loans, including credit risk, interest rate risk, liquidity risk and prepayment risk. Lack of an active trading market, restrictions on resale, irregular trading activity, wide bid/ask spreads and
42
PENN CAPITAL FUNDS TRUST
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2017
extended trade settlement periods may impair the Fund’s ability to sell bank loans within its desired time frame or at an acceptable price and its ability to accurately value existing and prospective investments. Extended trade settlement periods may result in cash not being immediately available to the Fund. As a result of such illiquidity, the Fund may have to sell other investments or engage in borrowing transactions to raise cash to meet its obligations.
9. Line of Credit
The Penn Capital Defensive Floating Rate Income Fund has a Credit Agreement for a line of credit equal to the lesser of (i) $3.0 Million, (ii) 20% of the gross market value of the Fund or (iii) 33.3% of the net market value of the Fund. Borrowings pursuant to the agreement are collateralized by the investments in the Fund. The line of credit is intended to provide short term financing, if necessary, in connection with shareholder redemptions. The interest rate as of December 31, 2017 was 4.50%. The Fund did not utilize any borrowings under the line of credit for the period ended December 31, 2017.
10. Recent Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in the ASU shorten the amortization period for certain callable debt securities, held at a premium, to be amortized to the earliest call date. The ASU does not require an accounting change for securities held at a discount; which continues to be amortized to maturity. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Management is currently evaluating the impact, if any, of applying this provision.
11. Subsequent Events
Except as disclosed above, as of the date the financial statements were available to be issued, Management has determined that no additional material events or transactions occurred that would require recognition or disclosure in the Funds’ financial statements.
43
PENN CAPITAL FUNDS TRUST
ADDITIONAL INFORMATION
DECEMBER 31, 2017 (UNAUDITED)
Trustee and Officer Compensation
The Trust does not compensate any of its Trustees who are interested persons nor any of its officers. For the period ended December 31, 2017, the aggregate compensation paid by the Trust to the independent Trustees was $15,000. The Trust did not pay any special compensation to any of its Trustees or officers. The Statement of Additional Information includes additional information about the Trustees and is available without charge, upon request, by calling 844-302-7366.
Proxy Voting Policies
A description of the policies and procedures that each Fund uses to determine how to vote proxies relating to portfolio securities owned by that Fund is available: (1) without charge, upon request, by calling 844-302-7366; (2) in the Statement of Additional Information on the Trust’s website www.penncapitalfunds.com; and (3) on the SEC’s website at www.sec.gov. Information about how the Funds voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 may be obtained (1) without charge, upon request, by calling 844-302-7366 and (2) on the SEC’s website at www.sec.gov.
Form N-Q
Each Fund files its complete schedule of portfolio holdings for the first and third quarters of each fiscal year with the SEC on Form N-Q. Each Fund’s Forms N-Q are available without charge by visiting the SEC’s website at www.sec.gov. In addition, you may review and copy each Fund’s Forms N-Q at the SEC’s Public Reference Room in Washington D.C. You may obtain information on the operation of the Public Reference Room by calling (800) SEC-0330.
Householding
In an effort to decrease costs, the Funds intend to reduce the number of duplicate prospectuses, annual and semi-annual reports, proxy statements and other similar documents you receive by sending only one copy of each to those addresses shared by two or more accounts and to shareholders that the transfer agent reasonably believes are from the same family or household. Once implemented, if you would like to discontinue householding for your accounts, please call (844) 302-7366 to request individual copies of these documents. The transfer agent will begin sending individual copies thirty days after receiving your request to stop householding. This policy does not apply to account statements.
44
Investment Advisory Agreement Disclosure
At the June 1, 2017 meeting of the Board of Trustees (the “Board” or “Trustees”) of the PENN Capital Funds Trust (the “Trust”), the Board, including those Trustees who are not “interested persons” (as that term is defined in the Investment Company Act of 1940, as amended (the “1940 Act”)) of the Trust (the “Independent Trustees”), approved (i) Penn Capital Management Company, Inc. (“Penn Capital” or the “Adviser”) as the investment adviser to the Penn Capital Defensive Short Duration High Income Fund series of the Trust (the “New Fund”) and (ii) the investment advisory agreement between the Trust, on behalf of the New Fund, and the Adviser (the “Investment Advisory Agreement”).
In connection with considering the approval of the Investment Advisory Agreement on behalf of the New Fund, the Independent Trustees met in executive session. The Board, including the Independent Trustees, evaluated the terms of the Investment Advisory Agreement, reviewed the information provided by the Adviser in connection with the consideration of approving the Investment Advisory Agreement, and reviewed the duties and responsibilities of the Trustees in evaluating and approving the agreement.
In considering approval of the Investment Advisory Agreement, the Board, including the Independent Trustees, reviewed the Meeting Materials and other information from counsel and from Penn Capital, including: (i) a copy of the form of Investment Advisory Agreement; (ii) information describing the nature, quality and extent of the services that Penn Capital expected to provide to the New Fund; (iii) information concerning Penn Capital’s financial condition, business, operations, portfolio management teams and compliance program; (iv) information describing the New Fund’s anticipated advisory fee and operating expenses; (v) a copy of the current Form ADV for Penn Capital; and (vi) a memorandum from counsel on the responsibilities of trustees in considering investment advisory arrangements under the 1940 Act. The Board also considered presentations made by, and discussions held with, representatives of Penn Capital, as well as information presented at Board meetings throughout the year. The Board also received information comparing the advisory fee and expenses of the New Fund to other investment companies considered to be in the Fund’s peer group.
During its review of this information, the Board focused on and analyzed the factors that the Board deemed relevant, including: (i) the nature, quality and extent of the services expected to be provided to the New Fund by Penn Capital; (ii) Penn Capital’s personnel and operations; (iii) the New Fund’s proposed expense level; (iv) the anticipated profitability to Penn Capital under the Investment Advisory Agreement at certain asset levels; (v) any “fall-out” benefits to Penn Capital and its affiliates (i.e., the ancillary benefits realized by Penn Capital and its affiliates from Penn Capital’s relationship with the Trust); (vi) the effect of potential asset growth on the New Fund’s expenses; and (vii) possible conflicts of interest.
The Board, including the Independent Trustees, considered the following in respect of the New Fund:
(a) | The nature, extent and quality of services expected to be provided by Penn Capital to the New Fund; Penn Capital’s personnel and operations. The Board reviewed the services that Penn Capital expected to provide to the New Fund. The Board noted the responsibilities that Penn Capital would have as the New Fund’s investment adviser, including: the responsibility for the management and investment of the New Fund’s securities portfolio; executing portfolio security trades; monitoring compliance with the New Fund’s investment objective, policies and limitations; the responsibility for quarterly reporting to the Board; the oversight of general portfolio compliance with relevant law; and the implementation of Board directives as they relate to the New Fund. |
The Board reviewed Penn Capital’s experience, resources and strengths in managing the other series of the Trust and other pooled investment vehicles, as well as Penn Capital’s personnel. Based on its consideration and review of the foregoing information, the Board determined that the New Fund was likely to benefit from the nature, quality and extent of these services, as well as Penn Capital’s ability to render such services based on their experience, personnel, operations, and resources. |
(b) | Comparison of services expected to be provided and fees to be paid to those under other investment advisory contracts, and the cost of the services to be provided and profits to be realized by Penn Capital from the relationship with the New Fund; “fall-out” benefits. The Board compared both the services to be provided and the proposed fees to be paid under other contracts of Penn Capital, and under contracts of other investment advisers with respect to similar funds. In particular, the Board compared the New Fund’s proposed advisory fee and projected expense ratio to other investment companies considered to be in that Fund’s peer group. The Board noted that Penn Capital proposed to enter into the Expense Limitation Agreement whereby Penn Capital would waive advisory fees and/or reimburse expenses to keep the New Fund’s expenses from exceeding certain levels. The Board received and considered information about the fee rates charged to other accounts and clients that are managed by Penn Capital, including information about the differences in services provided to the non-registered investment company clients. The Board also discussed the anticipated costs, including operational costs, and Penn Capital’s projected profitability in |
45
connection with its serving as the New Fund’s investment adviser. In addition, the Board discussed the entrepreneurial risk undertaken by Penn Capital in launching the New Fund.
The Board considered that the New Fund’s advisory fee was lower than both the median and average of its peer group, and the New Fund’s total expenses (including the fee waiver) were below the median of its respective peer group. |
After comparing the New Fund’s proposed fees with those of other funds in the Fund’s peer group, and considering the information about fee rates Penn Capital charged to other accounts and clients, and in light of the nature, quality and extent of services proposed to be provided by Penn Capital and the costs Penn Capital expected to incur by providing those services, the Board concluded that the level of fees proposed to be paid to Penn Capital with respect to the New Fund was fair and reasonable. |
The Board considered that Penn Capital may experience reputational “fall-out” benefits based on the success of the New Fund, but that such benefits are not easily quantifiable. The Board noted that since the Trust’s service providers are not affiliated with Penn Capital, such services do not give rise to “fall-out” benefits for Penn Capital. |
(c) | The extent to which economies of scale would be realized as the New Fund grows, and whether fee levels would reflect such economies of scale. The Board discussed potential economies of scale. As the New Fund had not yet commenced operations, Penn Capital was not able to provide the Board with specific information concerning the extent to which economies of scale would be realized as the New Fund grows and whether fee levels would reflect such economies of scale, if any. The Board would address economies of scale for the New Fund when assets under management reached appropriate levels. The Board recognized the uncertainty in launching a new investment product and estimating future asset levels. |
(d) | Investment performance of the New Fund and Penn Capital. Because the New Fund is newly formed and had not commenced operations, the Board did not consider the New Fund’s investment performance. Rather, the Board considered Penn Capital’s performance managing other discretionary investment management accounts and pooled investment vehicles according to the New Fund’s investment strategies. |
Conclusion. No single factor was determinative to the Board’s decision. Based on the foregoing and such other matters as were deemed relevant, such as the Expense Limitation Agreement, the Board concluded that the proposed advisory fee rates and projected total expense ratios were reasonable in relation to the services to be provided by Penn Capital to the New Fund, as well as the costs to be incurred and benefits to be gained by Penn Capital in providing such services. The Board also found the proposed advisory fees to be reasonable in comparison to the fees charged by advisers to other comparable funds of similar actual or anticipated size. As a result, the Board concluded that the initial approval of the Investment Advisory Agreement was in the best interests of the New Fund.
At the September 15, 2017 and November 8, 2017 meetings of the Board of Trustees (the “Board” or “Trustees”) of the PENN Capital Funds Trust (the “Trust”), the Board, including those Trustees who are not “interested persons” (as that term is defined in the Investment Company Act of 1940, as amended (the “1940 Act”)) of the Trust (the “Independent Trustees”), approved the continuation of (i) Penn Capital Management Company, Inc. (“Penn Capital” or the “Adviser”) as the investment adviser to the Penn Capital Managed Alpha SMID Cap Equity Fund, Penn Capital Special Situations Small Cap Equity Fund, Penn Capital Multi-Credit High Income Fund and Penn Capital Defensive Floating Rate Income Fund series of the Trust (each a “Renewing Fund” and collectively, the “Renewing Funds”) and (ii) the investment advisory agreement between the Trust, on behalf of the Renewing Funds, and the Adviser (the “Investment Advisory Agreement”).
In connection with considering the approval of the continuation of the Investment Advisory Agreement on behalf of the Renewing Funds, the Independent Trustees met in executive session. The Board, including the Independent Trustees, evaluated the terms of the Investment Advisory Agreement, reviewed the information provided by the Adviser in connection with the consideration of the approval of the continuation of the Investment Advisory Agreement, and reviewed the duties and responsibilities of the Trustees in evaluating and approving the continuation of the agreement.
In considering the approval of the continuation of the Investment Advisory Agreement, the Board, including the Independent Trustees, reviewed the Meeting Materials and other information from counsel and from Penn Capital, including: (i) a copy of the Investment Advisory Agreement; (ii) information describing the nature, quality and extent of the services that Penn Capital provides and expects to provide to the Renewing Funds; (iii) information concerning Penn Capital’s financial condition, business, operations, portfolio management teams and compliance program; (iv) information describing each Renewing Fund’s advisory fee and operating expenses; (v) a copy of the current Form ADV for Penn Capital; and (vi) a memorandum from counsel on the responsibilities of trustees in considering investment advisory arrangements under the Investment Company Act of 1940, as
46
amended. The Board also considered presentations made by, and discussions held with, representatives of Penn Capital, as well as information presented at Board meetings throughout the year. The Board also received information comparing the advisory fee, expenses and performance of each Renewing Fund to other investment companies considered to be in the Renewing Funds’ peer group.
During its review of this information, the Board focused on and analyzed the factors that the Board deemed relevant, including: (i) the nature, quality and extent of the services provided and expected to be provided to each Renewing Fund by Penn Capital; (ii) Penn Capital’s personnel and operations; (iii) each Renewing Fund’s expense level; (iv) the profitability to Penn Capital under the Investment Advisory Agreement; (v) any “fall-out” benefits to Penn Capital and its affiliates (i.e., the ancillary benefits realized by Penn Capital and its affiliates from Penn Capital’s relationship with the Trust); (vi) the effect of asset growth on each Renewing Fund’s expenses; (vii) possible conflicts of interest; and (viii) the investment performance of the Renewing Funds. The Board, including the Independent Trustees, considered the following in respect of each Renewing Fund:
(a) | The nature, extent and quality of services provided and expected to be provided by Penn Capital to the Renewing Funds; Penn Capital’s personnel and operations. The Board reviewed the services that Penn Capital provides and expected to provide to each Renewing Fund. The Board noted the responsibilities that Penn Capital has as the Renewing Funds’ investment adviser, including: the responsibility for the management and investment of each Renewing Fund’s securities portfolio; executing portfolio security trades; monitoring compliance with each Renewing Fund’s investment objective, policies and limitations; the responsibility for quarterly reporting to the Board; the oversight of general portfolio compliance with relevant law; and the implementation of Board directives as they relate to each Renewing Fund. |
The Board reviewed Penn Capital’s experience, resources and strengths in managing the Renewing Funds, as well as the other series of the Trust and other pooled investment vehicles, and Penn Capital’s personnel. Based on its consideration and review of the foregoing information, the Board determined that each Renewing Fund was likely to continue to benefit from the nature, quality and extent of these services, as well as Penn Capital’s ability to render such services based on their experience, personnel, operations, and resources.
(b) | Comparison of services provided and fees paid to those under other investment advisory contracts. The Board compared both the services provided and the fees paid pursuant to the Investment Advisory Agreement to those under other contracts of Penn Capital, and under contracts of other investment advisers with respect to similar funds. In particular, the Board compared each Renewing Fund’s advisory fee and expense ratio to other investment companies considered to be in that Renewing Fund’s peer group. The Board noted that Penn Capital entered into an Expense Limitation Agreement whereby Penn Capital waives advisory fees and/or assumes expenses to keep the Renewing Funds’ expenses from exceeding certain levels. The Board also noted that Penn Capital has agreed to waive advisory fees and/or assume expenses with respect to the Penn Capital Multi-Credit High Income Fund to the extent of any acquired fund fees and expenses incurred by the Fund as a result of its investment in other investment companies managed by Penn Capital. The Board received and considered information about the fee rates charged to other accounts and clients that are managed by Penn Capital, including information about the differences in services provided to the non-registered investment company clients. |
Consideration was given to the advisory fees and expense ratios of the Institutional Class Shares of the Renewing Funds, the only share class with assets to date. With respect to the Penn Capital Defensive Floating Rate Income Fund, the Board considered that the Fund’s advisory fee was below both the median and average of its peer group, and the Fund’s total expenses (including the fee waiver) were below the median and average of its peer group. With respect to the Penn Capital Multi-Credit High Income Fund, the Board considered that the Fund’s advisory fee was above both the median and average of its peer group, but the Fund’s total expenses (including the fee waiver) were below the median and average of its peer group. With respect to the Penn Capital Managed Alpha SMID Cap Equity Fund and Penn Capital Special Situations Small Cap Equity Fund, the Board considered that each Fund’s advisory fee was above both the median and average of its respective expense peer group, but each Fund’s total expenses (including the fee waiver) were below the median and average of its respective expense peer group. To the extent that a Renewing Fund’s advisory fee was above the median and average of its respective peer group, Penn Capital explained and the Board considered the reasons for the higher advisory fees.
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After comparing each Renewing Fund’s fees with those of other funds in the Renewing Fund’s peer group, and considering the information about fee rates Penn Capital charged to other accounts and clients, and in light of the nature, quality and extent of services provided by Penn Capital and the costs Penn Capital incurred by providing those services, the Board concluded that the level of fees paid to Penn Capital with respect to the Renewing Funds was fair and reasonable.
(c) | The cost of the services provided and profits realized by Penn Capital from the relationship with the Renewing Funds; the extent to which economies of scale were realized as the Renewing Funds grew, and whether fee levels reflect such economies of scale; “fall-out” benefits; possible conflicts of interest. |
The Board discussed the costs, including operational costs, and Penn Capital’s profitability in connection with its serving as each Renewing Fund’s investment adviser. The Board considered that the Renewing Funds were still not yet of a sufficient size to be experiencing economies of scale. The Board concluded that the profitability of Penn Capital, and the extent to which economies of scale were reflected in the Renewing Funds’ advisory fees, were reasonable for the Renewing Funds in relation to the performance and asset sizes of the Renewing Funds.
The Board considered that Penn Capital may experience reputational “fall-out” benefits based on the success of the Renewing Funds, but that such benefits are not easily quantifiable. The Board noted that since the Trust’s service providers are not affiliated with Penn Capital, such services do not give rise to “fall-out” benefits for Penn Capital. The Board also noted Penn Capital’s procedures to manage potential conflicts of interest and Penn Capital’s belief that its management of the series of the Trust does not present a material conflict of interest.
(d) | Investment performance of the Renewing Funds. The Board considered the investment performance of the Renewing Funds. In particular, the Board considered the investment performance of the Renewing Funds relative to their stated investment objectives and strategies and the success of Penn Capital in reaching such objectives. The Board considered each Renewing Fund’s investment performance compared to the benchmark index that each Renewing Fund uses for comparison in its Prospectus and shareholder reports. The Board also considered each Renewing Fund’s investment performance compared to the Renewing Fund’s respective peer group. Consideration was given to the performance of the Institutional Class Shares of the Renewing Funds, the only share class with performance to date. The Board considered that the Penn Capital Defensive Floating Rate Income Fund underperformed its peer group for the one-year and since-inception periods ended June 30, 2017. The Board considered that the Penn Capital Multi-Credit High Income Fund outperformed its peer group for the one-year and since-inception periods ended June 30, 2017. The Board considered that each of the Penn Capital Managed Alpha SMID Cap Equity Fund and Penn Capital Special Situations Small Cap Equity Fund underperformed its respective performance peer group for the one-period but outperformed its respective performance peer group for the since-inception period ended June 30, 2017. The Board discussed with Penn Capital the reasons for the relative underperformance of the Penn Capital Defensive Floating Rate Income Fund, Penn Capital Managed Alpha SMID Cap Equity Fund and Penn Capital Special Situations Small Cap Equity Fund for certain periods ended June 30, 2017. The Board concluded that the performance of the Renewing Funds was reasonable in light of the respective investment objectives and policies of the Renewing Funds. |
Conclusion. No single factor was determinative to the Board’s decision. Based on the foregoing and such other matters as were deemed relevant, such as the Expense Limitation Agreement, the Board concluded that the advisory fee rates and total expense ratios were reasonable in relation to the services provided, and to be provided, by Penn Capital to each Renewing Fund, as well as the costs incurred and benefits gained by Penn Capital in providing such services. The Board also found the advisory fees to be reasonable in comparison to the fees charged by advisers to other comparable funds of similar size. As a result, the Board concluded that the approval of the continuation of the Investment Advisory Agreement was in the best interests of each Renewing Fund.
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Board of Trustees
Dennis S. Hudson, III
John R. Schwab
Richard A. Hocker
Investment Advisor
Penn Capital Management Company, Inc.
Navy Yard Corporate Center
1200 Intrepid Avenue, Suite 400
Philadelphia, Pennsylvania 19112
Legal Counsel
Stradley Ronon Stevens & Young, LLP
2005 Market Street, Suite 2600
Philadelphia, Pennsylvania 19103
Custodian
U.S. Bank, N.A.
1555 N. Rivercenter Drive, Suite 302
Milwaukee, WI 53212
Distributor
Foreside
10 High Street, Suite 302
Boston, MA 02110
Administrator, Transfer Agent
and Dividend Disbursing Agent
U.S. Bancorp Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
Shareholder/Investor Information
1.844.302.PENN (7366)
www.penncapitalfunds.com
49
Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934).
Item 6. Investments.
(a) | Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form. |
(b) | Not applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable to open-end investment companies.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of trustees.
Item 11. Controls and Procedures.
(a) | The Registrant’s President and Treasurer have reviewed the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant’s service provider. |
(b) | There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. |
Item 12. Exhibits.
(a) | (1) Any code of ethics or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Not applicable for semi-annual reports. |
(2) A separate certification for each principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. |
(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable to open-end investment companies. |
(b) | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished 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.
(Registrant) | PENN Capital Funds Trust |
By (Signature and Title) | /s/ Richard A. Hocker, President |
Richard A. Hocker, President | |
Date | 2/27/2018 |
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 (Signature and Title) | /s/ Richard A. Hocker, President |
Richard A. Hocker, President | |
Date | 2/27/2018 |
By (Signature and Title) | /s/ Gerald McBride, Treasurer |
Gerald McBride, Treasurer | |
Date | 2/27/2018 |