As filed with the Securities and Exchange Commission on 3/2/2016
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
3 Crescent Drive, Suite 400
Philadelphia, Pennsylvania 19112
(Address of principal executive offices) (Zip code)
Richard A. Hocker |
Navy Yard Corporate Center 3 Crescent Drive, Suite 400 Philadelphia, Pennsylvania 19112 |
(Name and address of agent for service)
With copies to:
Lisa L.B. Matson, Esq. |
Navy Yard Corporate Center 3 Crescent Drive, 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, 2016
Date of reporting period: December 31, 2015
Item 1. Reports to Stockholders.
SEMIANNUAL REPORT
DECEMBER 31, 2015
PENN CAPITAL SMALL/MID CAP EQUITY FUND
PENN CAPITAL SMALL CAP EQUITY FUND
PENN CAPITAL HIGH YIELD FUND
PENN CAPITAL SENIOR FLOATING RATE FUND
TABLE OF CONTENTS
PENN CAPITAL FUNDS TRUST
Disclosure of Fund Expenses (Unaudited)
FOR THE ONE MONTH PERIOD OF DECEMBER 1, 2015 TO DECEMBER 31, 2015
Cost in Dollars of a $1,000 Investment in PENN Capital Small/Mid Cap Equity Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the one-month period from December 1, 2015, to December 31, 2015, 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 one-month period and held for the entire period from December 1, 2015, to December 31, 2015.
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 one month ended December 31, 2015. 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 one-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 12/1/15 | Ending Account Value (Based on Actual Returns and Expenses) 12/31/15 | Expenses Paid During Period2 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 12/31/15 | Expenses Paid During Period1 | |||||||||||
Institutional Class Shares3 | $ | 1,000.00 | $ | 948.00 | $ | 0.87 | $ | 1,003.34 | $ | 0.90 |
1. | No information is provided for Investor Class shares because shares of that class had not yet been issued as of December 31, 2015. |
2. | Expenses are equal to the Fund’s annualized expense ratio of each class (1.06% for the Institutional Class) multiplied by the average account value over the period, divided by 366 and multiplied by 31 for the Institutional Class (to reflect the one-month period). The table above represents the actual expenses incurred during the one-month period. |
3. | Expenses paid during the period reflect ongoing costs for the period from inception through December 31, 2015. Had these shares been offered for the full six-month period ended December 31, 2015, and had the Fund provided a hypothetical 5% annualized return, expenses paid during the period would have been $5.38 for Institutional Class shares. |
1 |
PENN CAPITAL FUNDS TRUST
Disclosure of Fund Expenses (Unaudited)
FOR THE PERIOD OF DECEMBER 18, 2015 TO DECEMBER 31, 2015
Cost in Dollars of a $1,000 Investment in PENN Capital Small Cap Equity Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the period from December 18, 2015, to December 31, 2015, 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 period and held for the entire period from December 18, 2015, to December 31, 2015.
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, 2015. 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 one-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 12/18/15 | Ending Account Value (Based on Actual Returns and Expenses) 12/31/15 | Expenses Paid During Period2 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 12/31/15 | Expenses Paid During Period1 | |||||||||||
Institutional Class Shares3 | $ | 1,000.00 | $ | 1,007.00 | $ | 0.42 | $ | 1,001.50 | $ | 0.42 |
1. | No information is provided for Investor Class shares because shares of that class had not yet been issued as of December 31, 2015. |
2. | Expenses are equal to the Fund’s annualized expense ratio of each class (1.09% for the Institutional Class) multiplied by the average account value over the period, divided by 366 and multiplied by 14 for the Institutional Class (to reflect the fourteen day period). The table above represents the actual expenses incurred during the fourteen day period. |
3. | Expenses paid during the period reflect ongoing costs for the period from inception through December 31, 2015. Had these shares been offered for the full six-month period ended December 31, 2015, and had the Fund provided a hypothetical 5% annualized return, expenses paid during the period would have been $5.53 for Institutional Class shares. |
2 |
PENN CAPITAL FUNDS TRUST
Disclosure of Fund Expenses (Unaudited)
FOR THE ONE MONTH PERIOD OF DECEMBER 1, 2015 TO DECEMBER 31, 2015
Cost in Dollars of a $1,000 Investment in PENN Capital High Yield Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the one-month period from December 1, 2015, to December 31, 2015, 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 one-month period and held for the entire period from December 1, 2015, to December 31, 2015.
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 one month ended December 31, 2015. 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 one-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 12/1/15 | Ending Account Value (Based on Actual Returns and Expenses) 12/31/15 | Expenses Paid During Period2 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 12/31/15 | Expenses Paid During Period1 | |||||||||||
Institutional Class Shares3 | $ | 1,000.00 | $ | 970.90 | $ | 0.60 | $ | 1,003.63 | $ | 0.61 |
1. | No information is provided for Investor Class shares because shares of that class had not yet been issued as of December 31, 2015. |
2. | Expenses are equal to the Fund’s annualized expense ratio of each class (0.72% for the Institutional Class) multiplied by the average account value over the period, divided by 366 and multiplied by 31 for the Institutional Class (to reflect the one-month period). The table above represents the actual expenses incurred during the one-month period. |
3. | Expenses paid during the period reflect ongoing costs for the period from inception through December 31, 2015. Had these shares been offered for the full six-month period ended December 31, 2015, and had the Fund provided a hypothetical 5% annualized return, expenses paid during the period would have been $3.66 for Institutional Class shares. |
3 |
PENN CAPITAL FUNDS TRUST
Disclosure of Fund Expenses (Unaudited)
FOR THE ONE MONTH PERIOD OF DECEMBER 1, 2015 TO DECEMBER 31, 2015
Cost in Dollars of a $1,000 Investment in PENN Capital Senior Floating Rate Income Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the one-month period from December 1, 2015, to December 31, 2015, 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 one-month period and held for the entire period from December 1, 2015, to December 31, 2015.
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 one month ended December 31, 2015. 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 one-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 12/1/15 | Ending Account Value (Based on Actual Returns and Expenses) 12/31/15 | Expenses Paid During Period2 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 12/31/15 | Expenses Paid During Period1 | |||||||||||
Institutional Class Shares3 | $ | 1,000.00 | $ | 992.00 | $ | 0.62 | $ | 1,003.61 | $ | 0.63 |
1. | No information is provided for Investor Class shares because shares of that class had not yet been issued as of December 31, 2015. |
2. | Expenses are equal to the Fund’s annualized expense ratio of each class (0.74% for the Institutional Class) multiplied by the average account value over the period, divided by 366 and multiplied by 31 for the Institutional Class (to reflect the one-month period). The table above represents the actual expenses incurred during the one-month period. |
3. | Expenses paid during the period reflect ongoing costs for the period from inception through December 31, 2015. Had these shares been offered for the full six-month period ended December 31, 2015, and had the Fund provided a hypothetical 5% annualized return, expenses paid during the period would have been $3.76 for Institutional Class shares. |
4 |
PENN CAPITAL SMALL/MID CAP EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2015 (UNAUDITED)
Shares | Value | ||||||
Common Stocks: 95.6% | |||||||
Air Freight & Logistics: 1.0% | |||||||
XPO Logistics, Inc. (a) | 3,787 | $ | 103,196 | ||||
Airlines: 1.3% | |||||||
Spirit Airlines, Inc. (a) | 3,207 | 127,799 | |||||
Banks: 10.8% | |||||||
BankUnited, Inc. | 5,120 | 184,627 | |||||
BNC Bancorp | 3,302 | 83,805 | |||||
First Horizon National Corp. | 8,803 | 127,820 | |||||
FirstMerit Corp. | 6,486 | 120,964 | |||||
Opus Bank | 4,425 | 163,592 | |||||
PacWest Bancorp | 3,462 | 149,212 | |||||
PrivateBancorp, Inc. | 6,054 | 248,335 | |||||
1,078,355 | |||||||
Biotechnology: 1.8% | |||||||
Medivation, Inc. (a) | 3,662 | 177,021 | |||||
Building Products: 1.5% | |||||||
A. O. Smith Corp. | 1,983 | 151,918 | |||||
Capital Markets: 2.5% | |||||||
LPL Financial Holdings, Inc. | 2,842 | 121,211 | |||||
WisdomTree Investments, Inc. | 8,329 | 130,599 | |||||
251,810 | |||||||
Commercial Services & Supplies: 1.6% | |||||||
Mobile Mini, Inc. | 5,106 | 158,950 | |||||
Construction & Engineering: 0.7% | |||||||
Quanta Services, Inc. (a) | 3,666 | 74,237 | |||||
Construction Materials: 1.4% | |||||||
Summit Materials, Inc. (a) | 6,736 | 134,994 | |||||
Consumer Finance: 1.4% | |||||||
Sallie Mae Corp. (a) | 21,147 | 137,878 | |||||
Containers & Packaging: 1.6% | |||||||
Berry Plastics Group, Inc. (a) | 4,510 | 163,172 | |||||
Energy Equipment & Services: 0.8% | |||||||
Superior Energy Services, Inc. | 5,889 | 79,325 | |||||
Health Care Equipment & Supplies: 1.6% | |||||||
NuVasive, Inc. (a) | 3,001 | 162,384 | |||||
Health Care Providers & Services: 2.8% | |||||||
Community Health Systems, Inc. (a) | 5,037 | 133,632 | |||||
WellCare Health Plans, Inc. (a) | 1,863 | 145,705 | |||||
279,337 | |||||||
Hotels, Restaurants & Leisure: 9.2% | |||||||
Bloomin’ Brands, Inc. | 4,257 | 71,901 | |||||
Boyd Gaming Corp. (a) | 8,898 | 176,803 | |||||
Fiesta Restaurant Group, Inc. (a) | 4,044 | 135,879 | |||||
Jack In The Box, Inc. | 1,575 | 120,818 | |||||
Krispy Kreme Doughnuts, Inc. (a) | 6,891 | 103,847 | |||||
La Quinta Holdings, Inc. (a) | 9,751 | 132,711 | |||||
Pinnacle Entertainment, Inc. (a) | 2,975 | 92,582 | |||||
Scientific Games Corp. (a) | 9,075 | 81,403 | |||||
915,944 |
Shares | Value | ||||||
Household Durables: 3.1% | |||||||
CalAtlantic Group, Inc. | 4,739 | 179,703 | |||||
TopBuild Corp. (a) | 4,124 | 126,895 | |||||
306,598 | |||||||
Industrial Conglomerates: 1.8% | |||||||
Carlisle Companies, Inc. | 2,034 | 180,395 | |||||
Insurance: 2.4% | |||||||
Arch Capital Group Ltd. (a) | 1,400 | 97,650 | |||||
Primerica, Inc. | 3,075 | 145,232 | |||||
242,882 | |||||||
Internet Software & Services: 4.3% | |||||||
GoDaddy, Inc. (a) | 5,231 | 167,706 | |||||
IAC/InterActiveCorp | 2,015 | 121,001 | |||||
Match Group, Inc. (a) | 10,498 | 142,248 | |||||
430,955 | |||||||
IT Services: 1.6% | |||||||
VeriFone Systems, Inc. (a) | 5,624 | 157,584 | |||||
Leisure Products: 1.6% | |||||||
Brunswick Corp. | 3,232 | 163,248 | |||||
Life Sciences Tools & Services: 1.7% | |||||||
ICON plc (a) | 2,189 | 170,085 | |||||
Machinery: 1.7% | |||||||
Oshkosh Corp. | 4,365 | 170,410 | |||||
Media: 6.2% | |||||||
E. W. Scripps Co. | 9,243 | 175,617 | |||||
Lions Gate Entertainment Corp. | 5,065 | 164,055 | |||||
Media General, Inc. (a) | 5,803 | 93,719 | |||||
Nexstar Broadcasting Group, Inc. | 3,256 | 191,127 | |||||
624,518 | |||||||
Multiline Retail: 1.7% | |||||||
Burlington Stores, Inc. (a) | 3,844 | 164,908 | |||||
Oil, Gas & Consumable Fuels: 4.2% | |||||||
Gulfport Energy Corp. (a) | 4,566 | 112,187 | |||||
Memorial Resource Development Corp. (a) | 11,116 | 179,523 | |||||
Rice Energy, Inc. (a) | 8,329 | 90,786 | |||||
Whiting Petroleum Corp. (a) | 4,474 | 42,235 | |||||
424,731 | |||||||
Pharmaceuticals: 6.3% | |||||||
Akorn, Inc. (a) | 4,258 | 158,866 | |||||
Depomed, Inc. (a) | 7,825 | 141,867 | |||||
Impax Laboratories, Inc. (a) | 3,959 | 169,287 | |||||
Sagent Pharmaceuticals, Inc. (a) | 9,740 | 154,963 | |||||
624,983 | |||||||
Professional Services: 1.7% | |||||||
TransUnion (a) | 6,141 | 169,307 | |||||
Real Estate Management | |||||||
& Development: 4.2% | |||||||
Forest City Enterprises, Inc. (a) | 6,314 | 138,466 | |||||
Jones Lang La Salle, Inc. | 1,067 | 170,570 | |||||
Realogy Holdings Corp. (a) | 3,055 | 112,027 | |||||
421,063 |
The accompanying notes are an integral part of the financial statements.
5 |
PENN CAPITAL SMALL/MID CAP EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2015 (UNAUDITED)
Shares | Value | ||||||
Road & Rail: 0.9% | |||||||
Genesee & Wyoming, Inc. (a) | 1,689 | 90,682 | |||||
Semiconductors & | |||||||
Semiconductor Equipment: 2.8% | |||||||
Cavium, Inc. (a) | 2,136 | 140,357 | |||||
Rambus, Inc. (a) | 12,248 | 141,954 | |||||
282,311 | |||||||
Software: 4.7% | |||||||
Cadence Design System, Inc. (a) | 4,854 | 101,012 | |||||
Ellie Mae, Inc. (a) | 2,097 | 126,302 | |||||
Fair Isaac Corp. | 1,159 | 109,155 | |||||
Fortinet, Inc. (a) | 4,273 | 133,189 | |||||
469,658 | |||||||
Specialty Retail: 2.9% | |||||||
Penske Automotive Group, Inc. | 3,547 | 150,180 | |||||
Select Comfort Corp. (a) | 6,416 | 137,366 | |||||
TravelCenters of America (a) | 1 | 5 | |||||
287,551 | |||||||
Trading Companies & Distributors: 1.8% | |||||||
HD Supply Holdings, Inc. (a) | 5,989 | 179,850 | |||||
Total Common Stocks (cost $10,051,471) | 9,558,039 | ||||||
Real Estate Investment Trusts | |||||||
(REITs): 2.2% | |||||||
Columbia Property Trust, Inc. | 5,525 | 129,727 | |||||
FelCor Lodging Trust, Inc. | 12,633 | 92,221 | |||||
Total REITs (cost $233,011) | 221,948 | ||||||
Short-Term Investments: 2.3% | |||||||
Short Term Treasury Investment, 0.15% (b) | 226,327 | 226,327 | |||||
Total Short-Term Investments | |||||||
(cost $226,327) | 226,327 | ||||||
Total Investments - 100.1% | |||||||
(cost $10,510,809) | 10,006,314 | ||||||
Liabilities in Excess of Other Assets (0.1)% | (6,217) | ||||||
Net Assets: 100.0% | $ | 10,000,097 |
(a) | No distribution or dividend was made during the period ended December 31, 2015. As such, it is classified as a non-income producing security as of December 31, 2015. |
(b) | Rate reported is the current yield as of December 31, 2015. |
Country Exposure (as a percentage of total investments) | ||||
United States | 95.68 | % | ||
Ireland | 1.70 | % | ||
Canada | 1.64 | % | ||
Bermuda | 0.98 | % |
Sector Allocation (as a percentage of total investments) |
The accompanying notes are an integral part of the financial statements.
6 |
PENN CAPITAL SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2015 (UNAUDITED)
Shares | Value | ||||||
Common Stocks: 96.8% | |||||||
Aerospace & Defense: 1.0% | |||||||
Cubic Corp. | 82 | $ | 3,875 | ||||
Banks: 14.1% | |||||||
BankUnited, Inc. | 163 | 5,878 | |||||
Capital Bank Financial Corp. | 224 | 7,164 | |||||
Cascade Bancorp (a) | 813 | 4,935 | |||||
FCB Financial Holdings, Inc. (a) | 195 | 6,979 | |||||
Pinnacle Financial Partners, Inc. | 126 | 6,471 | |||||
PrivateBancorp, Inc. | 170 | 6,974 | |||||
Talmer Bancorp, Inc. | 394 | 7,135 | |||||
Texas Capital Bancshares, Inc. (a) | 81 | 4,003 | |||||
Western Alliance Bancorporation (a) | 178 | 6,383 | |||||
55,922 | |||||||
Biotechnology: 1.6% | |||||||
Acorda Therapeutics, Inc. (a) | 148 | 6,332 | |||||
Building Products: 1.1% | |||||||
NCI Building Systems, Inc. (a) | 345 | 4,282 | |||||
Capital Markets: 3.5% | |||||||
HFF, Inc. | 147 | 4,567 | |||||
KCG Holdings, Inc. (a) | 429 | 5,281 | |||||
WisdomTree Investments, Inc. | 250 | 3,920 | |||||
13,768 | |||||||
Chemicals: 1.3% | |||||||
PolyOne Corp. | 162 | 5,145 | |||||
Commercial Services & Supplies: 2.5% | |||||||
HNI Corp. | 98 | 3,534 | |||||
Mobile Mini, Inc. | 200 | 6,226 | |||||
9,760 | |||||||
Construction & Engineering: 1.2% | |||||||
Tutor Perini Corp. (a) | 292 | 4,888 | |||||
Diversified Telecommunication Services: 1.1% | |||||||
inContact, Inc. (a) | 471 | 4,493 | |||||
Electronic Equipment, Instruments | |||||||
& Components: 0.9% | |||||||
Rogers Corp. (a) | 68 | 3,507 | |||||
Energy Equipment & Services: 2.0% | |||||||
Superior Energy Services, Inc. | 203 | 2,734 | |||||
U.S. Silica Holdings, Inc. | 267 | 5,001 | |||||
7,735 | |||||||
Health Care Equipment & Supplies: 1.6% | |||||||
NuVasive, Inc. (a) | 117 | 6,331 | |||||
Health Care Providers & Services: 2.3% | |||||||
TeamHealth Holdings, Inc. (a) | 78 | 3,423 | |||||
WellCare Health Plans, Inc. (a) | 74 | 5,788 | |||||
9,211 |
Shares | Value | ||||||
Hotels, Restaurants & Leisure: 11.0% | |||||||
Belmond Ltd. (a) | 670 | 6,365 | |||||
Boyd Gaming Corp. (a) | 366 | 7,272 | |||||
Fiesta Restaurant Group, Inc. (a) | 154 | 5,174 | |||||
Jack In The Box, Inc. | 33 | 2,532 | |||||
Krispy Kreme Doughnuts, Inc. (a) | 345 | 5,199 | |||||
Pinnacle Entertainment, Inc. (a) | 173 | 5,384 | |||||
Scientific Games Corp. (a) | 498 | 4,467 | |||||
SeaWorld Entertainment, Inc. | 364 | 7,167 | |||||
43,560 | |||||||
Household Durables: 4.3% | |||||||
Beazer Homes USA, Inc. (a) | 341 | 3,918 | |||||
La-Z-Boy, Inc. | 240 | 5,861 | |||||
TopBuild Corp. (a) | 233 | 7,169 | |||||
16,948 | |||||||
Internet Software & Services: 2.9% | |||||||
Demandware, Inc. (a) | 110 | 5,937 | |||||
Gogo, Inc. (a) | 310 | 5,518 | |||||
11,455 | |||||||
IT Services: 1.8% | |||||||
VeriFone Systems, Inc. (a) | 249 | 6,977 | |||||
Life Sciences Tools & Services: 2.2% | |||||||
Cambrex Corp. (a) | 104 | 4,897 | |||||
ICON plc (a) | 50 | 3,885 | |||||
8,782 | |||||||
Media: 11.7% | |||||||
E. W. Scripps Co. | 440 | 8,360 | |||||
Gray Television, Inc. (a) | 470 | 7,661 | |||||
IMAX Corp. (a) | 146 | 5,189 | |||||
Media General, Inc. (a) | 497 | 8,027 | |||||
Nexstar Broadcasting Group, Inc. | 127 | 7,455 | |||||
Sinclair Broadcast Group, Inc. | 200 | 6,508 | |||||
Townsquare Media, Inc. (a) | 269 | 3,217 | |||||
46,417 | |||||||
Metals & Mining: 0.9% | |||||||
Kaiser Aluminum Corp. | 43 | 3,597 | |||||
Multiline Retail: 1.4% | |||||||
Burlington Stores, Inc. (a) | 130 | 5,577 | |||||
Oil, Gas & Consumable Fuels: 5.7% | |||||||
Bonanza Creek Energy, Inc. (a) | 663 | 3,494 | |||||
Carrizo Oil & Gas, Inc. (a) | 105 | 3,106 | |||||
Memorial Resource Development Corp. (a) | 347 | 5,604 | |||||
Parsley Energy, Inc. (a) | 215 | 3,967 | |||||
PDC Energy, Inc. (a) | 66 | 3,523 | |||||
Rice Energy, Inc. (a) | 277 | 3,019 | |||||
22,713 |
The accompanying notes are an integral part of the financial statements.
7 |
PENN CAPITAL SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2015 (UNAUDITED)
Shares | Value | ||||||
Pharmaceuticals: 6.7% | |||||||
Akorn, Inc. (a) | 185 | 6,902 | |||||
BioDelivery Sciences International, Inc. (a) | 575 | 2,754 | |||||
Depomed, Inc. (a) | 339 | 6,146 | |||||
Impax Laboratories, Inc. (a) | 148 | 6,329 | |||||
Sagent Pharmaceuticals, Inc. (a) | 290 | 4,614 | |||||
26,745 | |||||||
Road & Rail: 1.4% | |||||||
Swift Transportation Co. (a) | 393 | 5,431 | |||||
Semiconductors & Semiconductor Equipment: 2.2% | |||||||
Cavium, Inc. (a) | 57 | 3,746 | |||||
Rambus, Inc. (a) | 429 | 4,972 | |||||
8,718 | |||||||
Software: 7.5% | |||||||
Callidus Software, Inc. (a) | 272 | 5,051 | |||||
Ellie Mae, Inc. (a) | 85 | 5,120 | |||||
Fair Isaac Corp. | 57 | 5,368 | |||||
Model N, Inc. (a) | 354 | 3,951 | |||||
PROS Holdings, Inc. (a) | 210 | 4,838 | |||||
Tyler Technologies, Inc. (a) | 32 | 5,578 | |||||
29,906 | |||||||
Specialty Retail: 1.3% | |||||||
Select Comfort Corp. (a) | 240 | 5,138 | |||||
Trading Companies & Distributors: 1.6% | |||||||
Beacon Roofing Supply, Inc. (a) | 158 | 6,506 | |||||
Total Common Stocks (cost $382,170) | 383,719 | ||||||
Real Estate Investment Trusts (REITs): 2.5% | |||||||
FelCor Lodging Trust, Inc. | 801 | 5,847 | |||||
Ryman Hospitality Properties, Inc. | 76 | 3,925 | |||||
Total REITs (cost $9,996) | 9,772 | ||||||
Short-Term Investments: 1.0% | |||||||
Short Term Treasury Investment, 0.15% (b) | 3,895 | 3,895 | |||||
Total Short-Term Investments | |||||||
(cost $3,895) | 3,895 | ||||||
Total Investments - 100.3% (cost $396,061) | 397,386 | ||||||
Liabilities in Excess of Other Assets (0.3)% | (1,111) | ||||||
Net Assets: 100.0% | $ | 396,275 |
(a) | No distribution or dividend was made during the period ended December 31, 2015. As such, it is classified as a non-income producing security as of December 31, 2015. |
(b) | Rate reported is the current yield as of December 31, 2015. |
Country Exposure (as a percentage of total investments) | ||||
United States | 96.11 | % | ||
Bermuda | 1.60 | % | ||
Canada | 1.31 | % | ||
Ireland | 0.98 | % |
Sector Allocation (as a percentage of total investments) |
The accompanying notes are an integral part of the financial statements.
8 |
PENN CAPITAL HIGH YIELD FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2015 (UNAUDITED)
Principal | Value | ||||||
Corporate Bonds: 90.6% | |||||||
Aerospace: 1.0% | |||||||
TransDigm, Inc., 7.500%, 7/15/21 | 10,000 | 10,350 | |||||
Triumph Group, Inc., 4.875%, 4/1/21 | 50,000 | 40,281 | |||||
50,631 | |||||||
Airline Companies: 1.0% | |||||||
Air Canada, 7.750%, 4/15/21 (b) | 50,000 | 52,000 | |||||
Beverage: 0.7% | |||||||
Cott Beverages, Inc., 5.375%, 7/1/22 | 35,000 | 34,300 | |||||
Building & Construction: 2.0% | |||||||
Hovnanian Enterprises, Inc., | |||||||
7.250%, 10/15/20 (b) | 45,000 | 38,700 | |||||
Lyon William Homes, Inc., 8.500%, 11/15/20 | 60,000 | 63,450 | |||||
Taylor Morrison, 5.250%, 4/15/21 (b) | 5,000 | 5,000 | |||||
107,150 | |||||||
Building Materials: 2.9% | |||||||
Griffon Corp., 5.250%, 3/1/22 | 40,000 | 38,150 | |||||
HD Supply Holdings, Inc., 5.250%, 12/15/21 (b) | 25,000 | 25,500 | |||||
HD Supply Holdings, Inc., 7.500%, 7/15/20 | 50,000 | 52,000 | |||||
U.S. Concrete, Inc., 8.500%, 12/1/18 | 35,000 | 36,225 | |||||
151,875 | |||||||
Chemical Companies: 0.9% | |||||||
Celanese US Holdings, 4.625%, 11/15/22 | 25,000 | 24,625 | |||||
Rentech Nitrogen Partners, L.P., | |||||||
6.500%, 4/15/21 (b) | 25,000 | 24,250 | |||||
48,875 | |||||||
Computer Hardware: 0.8% | |||||||
Dell, Inc., 5.400%, 9/10/40 | 25,000 | 18,250 | |||||
Qorvo, Inc., 6.750%, 12/1/23 (b) | 25,000 | 25,500 | |||||
43,750 | |||||||
Consumer/Commercial/Lease Financing: 4.8% | |||||||
Aircastle Ltd., 6.250%, 12/1/19 | 50,000 | 53,750 | |||||
Ally Financial, Inc., 8.000%, 11/1/31 | 25,000 | 28,875 | |||||
Ally Financial, Inc., 5.750%, 11/20/25 | 30,000 | 30,375 | |||||
Ally Financial, Inc., 5.125%, 9/30/24 | 50,000 | 51,187 | |||||
Credit Acceptance Corp., 6.125%, 2/15/21 | 30,000 | 29,400 | |||||
Provident Funding Associates, L.P., | |||||||
6.750%, 6/15/21 (b) | 60,000 | 58,050 | |||||
251,637 | |||||||
Consumer - Products: 1.8% | |||||||
Radio Systems Corp., 8.375%, 11/1/19 (b) | 45,000 | 46,688 | |||||
Revlon Consumer Products Corp., | |||||||
5.750%, 2/15/21 | 20,000 | 19,350 | |||||
Spectrum Brands, Inc., 6.625%, 11/15/22 | 25,000 | 26,375 | |||||
92,413 | |||||||
Diversified Capital Goods: 2.2% | |||||||
Anixter International, Inc., 5.125%, 10/1/21 | 50,000 | 50,000 | |||||
Gardner Denver, Inc., 6.875%, 8/15/21 (b) | 20,000 | 15,300 | |||||
Park-Ohio Industries, Inc., 8.125%, 4/1/21 | 50,000 | 51,625 | |||||
116,925 |
Principal | Value | ||||||
Electric - Generation: 2.6% | |||||||
Calpine Corp., 5.375%, 1/15/23 | 45,000 | 40,388 | |||||
Dynegy, Inc., 6.750%, 11/1/19 | 10,000 | 9,400 | |||||
GenOn Escrow Corp., 9.500%, 10/15/18 | 45,000 | 36,352 | |||||
NRG Energy, Inc., 6.625%, 3/15/23 | 60,000 | 52,050 | |||||
138,190 | |||||||
Energy - Exploration & Production: 1.8% | |||||||
Bonanza Creek Energy, Inc., 6.750%, 4/15/21 | 65,000 | 39,325 | |||||
Carrizo Oil & Gas, Inc., 7.500%, 9/15/20 | 40,000 | 34,950 | |||||
Everest Acquisition Finance, Inc., | |||||||
9.375%, 5/1/20 | 30,000 | 19,125 | |||||
93,400 | |||||||
Food - Wholesale: 0.5% | |||||||
JBS USA, Inc., 5.875%, 7/15/24 (b) | 30,000 | 27,150 | |||||
Forestry/Paper: 0.6% | |||||||
Xerium Technologies, Inc., 8.875%, 6/15/18 | 30,000 | 29,404 | |||||
Gaming: 3.9% | |||||||
Boyd Gaming Corp., 6.875%, 5/15/23 | 35,000 | 35,962 | |||||
Golden Nugget Escrow, Inc., | |||||||
8.500%, 12/1/21 (b) | 50,000 | 50,250 | |||||
Isle Of Capri Casinos, Inc., 8.875%, 6/15/20 | 25,000 | 26,250 | |||||
MGM Resorts International, 7.750%, 3/15/22 | 90,000 | 95,625 | |||||
208,087 | |||||||
Gas Distribution: 9.8% | |||||||
DCP Midstream Partners, L.P., | |||||||
5.600%, 4/1/44 | 95,000 | 57,636 | |||||
DCP Midstream Partners, L.P., | |||||||
4.950%, 4/1/22 | 33,000 | 27,008 | |||||
Kinder Morgan Energy Partners, L.P., | |||||||
5.950%, 2/15/18 | 10,000 | 10,254 | |||||
Kinder Morgan, Inc., 5.625%, 11/15/23 (b) | 10,000 | 9,147 | |||||
Rockies Express Pipeline, 6.875%, 4/15/40 (b) | 310,000 | 266,600 | |||||
Sabine Pass LNG, L.P., 6.500%, 11/1/20 | 85,000 | 82,450 | |||||
Sunoco, L.P., 5.500%, 8/1/20 (b) | 25,000 | 23,688 | |||||
Targa Resources Partners, L.P., | |||||||
5.000%, 1/15/18 (b) | 15,000 | 13,875 | |||||
Targa Resources Partners, L.P., | |||||||
6.875%, 2/1/21 | 30,000 | 27,150 | |||||
517,808 | |||||||
Health Services: 3.3% | |||||||
Acadia Healthcare Company, Inc., | |||||||
6.125%, 3/15/21 | 70,000 | 71,050 | |||||
AmSurg Corp., 5.625%, 7/15/22 | 20,000 | 19,800 | |||||
HealthSouth Corp., 5.750%, 9/15/25 (b) | 30,000 | 27,900 | |||||
Select Medical Corp., 6.375%, 6/1/21 | 65,000 | 56,875 | |||||
175,625 | |||||||
Hospitals: 3.4% | |||||||
Community Health Systems, Inc., | |||||||
6.875%, 2/1/22 | 60,000 | 56,925 | |||||
HCA Holdings, Inc., 7.500%, 2/15/22 | 15,000 | 16,612 | |||||
HCA Holdings, Inc., 5.375%, 2/1/25 | 20,000 | 19,750 | |||||
Tenet Healthcare Corp., 8.125%, 4/1/22 | 45,000 | 44,888 | |||||
Tenet Healthcare Corp., 6.875%, 11/15/31 | 50,000 | 40,500 | |||||
178,675 |
The accompanying notes are an integral part of the financial statements.
9 |
PENN CAPITAL HIGH YIELD FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2015 (UNAUDITED)
Principal | Value | ||||||
Hotels: 1.5% | |||||||
FelCor Lodging Partnership Ltd., 5.625%, 3/1/23 | 40,000 | 40,600 | |||||
Ryman Hospitality Properties, Inc., | |||||||
5.000%, 4/15/21 | 40,000 | 40,700 | |||||
81,300 | |||||||
Household & Leisure Products/Durables: 0.9% | |||||||
Serta Simmons Holdings, 8.125%, 10/1/20 (b) | 45,000 | 47,025 | |||||
Investments & Miscellaneous | |||||||
Financial Services: 2.0% | |||||||
E*Trade Financial Corp., 5.375%, 11/15/22 | 50,000 | 52,375 | |||||
First Data Corp., 7.000%, 12/1/23 (b) | 55,000 | 55,000 | |||||
107,375 | |||||||
Media - Broadcast: 7.7% | |||||||
Clear Channel Communications, | |||||||
9.000%, 3/1/21 | 45,000 | 31,387 | |||||
Entercom Communications, 10.500%, 12/1/19 | 70,000 | 72,450 | |||||
Gray Television, Inc., 7.500%, 10/1/20 | 85,000 | 87,338 | |||||
Nexstar Broadcasting, Inc., 6.875%, 11/15/20 | 65,000 | 66,463 | |||||
NuvoTV, Inc., 10.375%, 7/1/19 (b) | 45,000 | 36,000 | |||||
Radio One, Inc., 9.250%, 2/15/20 (b) | 140,000 | 110,600 | |||||
404,238 | |||||||
Media - Services: 0.7% | |||||||
Clear Channel Worldwide Holdings, Inc., | |||||||
7.625%, 3/15/20 | 40,000 | 36,400 | |||||
Media - Cable: 4.5% | |||||||
Aldephia Communications Corp., | |||||||
9.375%, 11/15/09 | 15,000 | 75 | |||||
Cequel Communications Escrow, | |||||||
6.375%, 9/15/20 (b) | 15,000 | 14,662 | |||||
CSC Holdings, Inc., 8.625%, 2/15/19 | 50,000 | 53,250 | |||||
CSC Holdings, Inc., 6.750%, 11/15/21 | 50,000 | 49,125 | |||||
Dish Network Corp., 6.750%, 6/1/21 | 30,000 | 30,225 | |||||
Dish Network Corp., 7.875%, 9/1/19 | 20,000 | 21,750 | |||||
Midcontinent Express Pipeline, | |||||||
6.250%, 8/1/21 (b) | 65,000 | 65,650 | |||||
234,737 | |||||||
Metals/Mining Excluding Steel: 0.7% | |||||||
Alcoa, Inc., 5.125%, 10/1/24 | 40,000 | 36,400 | |||||
Multi-Line Insurance: 0.6% | |||||||
Hub International Ltd., 7.875%, 10/1/21 (b) | 35,000 | 31,500 | |||||
Non-Food & Drug Retailers: 2.0% | |||||||
Dollar Tree, Inc., 5.750%, 3/1/23 (b) | 25,000 | 26,063 | |||||
J. C. Penney, Inc., 8.125%, 10/1/19 | 60,000 | 54,300 | |||||
PetSmart, Inc., 7.125%, 3/15/23 (b) | 25,000 | 24,787 | |||||
105,150 | |||||||
Oil Refining & Marketing: 1.3% | |||||||
Western Refining Logistics, L.P., | |||||||
7.500%, 2/15/23 | 40,000 | 38,200 | |||||
Western Refining, Inc., 6.250%, 4/1/21 | 30,000 | 28,800 | |||||
67,000 | |||||||
Packaging: 0.4% | |||||||
Reynolds Group Issuer, 5.750%, 10/15/20 | 20,000 | 20,344 |
Principal | Value | ||||||
Pharmaceuticals & Devices: 3.8% | |||||||
Jaguar Holding Co., 6.375%, 8/1/23 (b) | 30,000 | 29,250 | |||||
Kinetic Concepts, Inc., 12.500%, 11/1/19 | 45,000 | 40,950 | |||||
Kinetic Concepts, Inc., 10.500%, 11/1/18 | 45,000 | 43,875 | |||||
Valeant Pharmaceuticals International, Inc., | |||||||
5.625%, 12/1/21 (b) | 30,000 | 27,600 | |||||
Valeant Pharmaceuticals International, Inc., | |||||||
6.375%, 10/15/20 (b) | 45,000 | 43,425 | |||||
Valeant Pharmaceuticals International, Inc., | |||||||
5.875%, 5/15/23 (b) | 15,000 | 13,388 | |||||
198,488 | |||||||
Printing & Publishing: 0.9% | |||||||
Lee Enterprises, Inc., 9.500%, 3/15/22 (b) | 50,000 | 46,000 | |||||
Railroads: 0.7% | |||||||
Watco Companies, 6.375%, 4/1/23 (b) | 40,000 | 39,400 | |||||
Real Estate Development | |||||||
& Management: 0.8% | |||||||
Realogy Group, 5.250%, 12/1/21 (b) | 40,000 | 41,000 | |||||
REITs: 1.0% | |||||||
iStar, Inc., 5.000%, 7/1/19 | 55,000 | 53,419 | |||||
Restaurants: 0.9% | |||||||
P.F. Chang’s China Bistro, | |||||||
10.250%, 6/30/20 (b) | 60,000 | 49,200 | |||||
Software/Services: 1.3% | |||||||
Match Group, Inc., 6.750%, 12/15/22 (b) | 25,000 | 24,750 | |||||
Nuance Communications, Inc., | |||||||
5.375%, 8/15/20 (b) | 45,000 | 45,059 | |||||
69,809 | |||||||
Support - Services: 2.6% | |||||||
ADT Corp., 4.875%, 7/15/42 | 105,000 | 75,075 | |||||
Ahern Rentals, Inc., 7.375%, 5/15/23 (b) | 30,000 | 24,225 | |||||
United Rentals, Inc., 5.500%, 7/15/25 | 40,000 | 38,800 | |||||
138,100 | |||||||
Telecom - Integrated/Services: 9.2% | |||||||
Cincinnati Bell, Inc., 8.375%, 10/15/20 | 30,000 | 30,675 | |||||
Cogent Communications Finance, Inc., | |||||||
5.625%, 4/15/21 (b) | 50,000 | 46,500 | |||||
CyrusOne, L.P., 6.375%, 11/15/22 | 75,000 | 77,250 | |||||
EarthLink, Inc., 7.375%, 6/1/20 | 60,000 | 61,050 | |||||
Equinix, Inc., 5.375%, 1/1/22 | 50,000 | 51,250 | |||||
Frontier Communications Corp., | |||||||
6.875%, 1/15/25 | 55,000 | 45,306 | |||||
Frontier Communications Corp., | |||||||
7.625%, 4/15/24 | 30,000 | 25,200 | |||||
Intelsat Jackson Holdings Ltd., | |||||||
7.250%, 10/15/20 | 20,000 | 17,400 | |||||
Level 3 Financing, Inc., 5.375%, 8/15/22 | 25,000 | 25,375 | |||||
WaveDivision Escrow, 8.125%, 9/1/20 (b) | 50,000 | 47,813 | |||||
Windstream Corp., 7.750%, 10/1/21 | 40,000 | 31,475 | |||||
Windstream Corp., 7.750%, 10/15/20 | 30,000 | 25,275 | |||||
484,569 |
The accompanying notes are an integral part of the financial statements.
10 |
PENN CAPITAL HIGH YIELD FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2015 (UNAUDITED)
Principal | Value | ||||||
Telecom - Wireless: 1.6% | |||||||
Sprint Corp., 7.250%, 9/15/21 | 95,000 | 70,775 | |||||
Sprint Nextel Corp., 7.000%, 8/15/20 | 20,000 | 15,450 | |||||
86,225 | |||||||
Transportation Excluding Air/Rail: 1.5% | |||||||
Con-Way, Inc., 7.250%, 1/15/18 | 50,000 | 50,598 | |||||
OPE KAG Finance Sub, Inc., | |||||||
7.875%, 7/31/23 (b) | 30,000 | 29,812 | |||||
80,410 | |||||||
Total Corporate Bonds (cost $4,906,734) | 4,775,984 | ||||||
Shares | Value | ||||||
Preferred Stocks: 0.0% | |||||||
Spanish Broadcasting Systems, Inc. (a) | 1 | 379 | |||||
Total Preferred Stocks (cost $613) | 379 | ||||||
Short-Term Investments: 7.5% | |||||||
Short-Term Treasury Investment, 0.15% (c) | 393,732 | 393,732 | |||||
Total Short-Term Investments (cost $393,732) | 393,732 | ||||||
Total Investments - 98.1% (cost $5,301,079) | 5,170,095 | ||||||
Other Assets and Liabilities 1.9% | 100,941 | ||||||
Net Assets: 100.0% | $ | 5,271,036 |
(a) | No distribution or dividend was made during the period ended December 31, 2015. As such, it is classified as a non-income producing security as of December 31, 2015. |
(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.” These securities have been deemed to be liquid by the Fund’s adviser under the supervision of the Board of Trustees. As of December 31, 2015, the value of these investments was $1,628,307, or 30.9% of total net assets. |
(c) | Rate reported is the current yield as of December 31, 2015. |
Country Exposure (as a percentage of total investments) | ||
United States | 97.36% | |
Canada | 1.26% | |
Bermuda | 1.04% | |
Luxembourg | 0.34% |
Asset Type (as a percentage of total investments) |
The accompanying notes are an integral part of the financial statements.
11 |
PENN CAPITAL SENIOR FLOATING RATE INCOME FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2015 (UNAUDITED)
Principal | Value | |||||
Bank Loans: 58.8% | ||||||
Aerospace & Defense: 1.5% | ||||||
TransDigm, Inc., 3.500%, 5/16/22 | 250,000 | $ | 241,608 | |||
Auto Parts & Equipment: 1.5% | ||||||
TI Group Automotive Systems, | ||||||
4.500%, 6/30/22 | 250,000 | 243,750 | ||||
Automotive: 1.6% | ||||||
Chrysler Group, 3.250%, 12/31/18 | 250,000 | 247,375 | ||||
Chemical Companies: 3.1% | ||||||
Huntsman International, 3.000%, 4/19/19 | 500,000 | 490,250 | ||||
Computer Hardware: 3.1% | ||||||
Avago Technologies, 4.000%, 11/11/22 | 250,000 | 247,033 | ||||
Dell, Inc., 4.000%, 4/29/20 | 250,000 | 247,990 | ||||
495,023 | ||||||
Electric - Generation: 3.0% | ||||||
Calpine Corp., 4.000%, 1/15/23 | 500,000 | 477,500 | ||||
Food - Wholesale: 1.6% | ||||||
Pinnacle Foods, Inc., 3.000%, 4/29/20 | 250,000 | 245,590 | ||||
Food & Drug Retailers: 1.6% | ||||||
Albertsons Companies, Inc., 5.500%, 12/21/22 | 250,000 | 248,250 | ||||
Gaming: 1.6% | ||||||
CityCenter Holdings, 4.250%, 10/16/20 | 250,000 | 247,875 | ||||
Gas Distribution: 1.4% | ||||||
Energy Transfer Equity, L.P., | ||||||
4.000%, 12/2/19 | 250,000 | 223,750 | ||||
Health Services: 3.1% | ||||||
Envision Healthcare, 4.500%, 10/28/22 | 500,000 | 496,250 | ||||
Hospitals: 3.1% | ||||||
Community Health Systems, Inc., | ||||||
4.000%, 1/27/21 | 500,000 | 491,430 | ||||
Media - Broadcast: 3.1% | ||||||
Charter Communications, 3.000%, 1/3/21 | 250,000 | 244,687 | ||||
Univision Communications, Inc, | ||||||
4.000%, 3/1/20 | 250,000 | 244,198 | ||||
488,885 | ||||||
Non-Food & Drug Retailers: 6.2% | ||||||
Burlington Stores, Inc., 4.250%, 8/13/21 | 250,000 | 246,562 | ||||
Hudson’s Bay, 4.750%, 9/30/22 | 250,000 | 248,563 | ||||
PetSmart, Inc., 4.250%, 3/11/22 | 500,000 | 486,125 | ||||
981,250 | ||||||
Packaging: 1.6% | ||||||
Berry Plastics Corp., 4.000%, 10/3/22 | 250,000 | 247,500 | ||||
Pharmaceuticals & Devices: 3.1% | ||||||
Valeant Pharmaceuticals International, Inc., | ||||||
4.000%, 4/1/22 | 250,000 | 239,938 | ||||
Endo Pharmaceuticals, Inc., 3.750%, 9/26/22 | 250,000 | 246,355 | ||||
486,293 | ||||||
Printing & Publishing: 3.1% | ||||||
Tribune Media Company, 3.750%, 12/27/20 | 250,000 | 245,860 | ||||
US Airways, 3.500%, 5/23/19 | 250,000 | 246,980 | ||||
492,840 |
Principal | Value | |||||
Software/Services: 4.7% | ||||||
First Data Corp., 3.920%, 3/23/18 | 500,000 | 492,845 | ||||
HD Supply, Inc., 3.750%, 8/13/21 | 250,000 | 243,542 | ||||
736,387 | ||||||
Support - Services: 3.1% | ||||||
Hertz Corp., 3.750%, 3/11/18 | 250,000 | 249,062 | ||||
ServiceMaster Co., 4.250%, 7/1/21 | 250,000 | 246,875 | ||||
495,937 | ||||||
Telecom - Fixed Line: 3.1% | ||||||
Crown Castle Operating Co., 3.000%, 1/31/21 | 500,000 | 497,190 | ||||
Telecom - Integrated/Services: 4.6% | ||||||
Altice Financing, 5.250%, 2/4/22 | 250,000 | 248,672 | ||||
Numericable, 4.750%, 1/31/23 | 500,000 | 479,465 | ||||
728,137 | ||||||
Total Bank Loans (cost $9,404,027) | 9,303,070 | |||||
Corporate Bonds: 3.2% | ||||||
Consumer/Commercial/Lease Financing: 0.6% | ||||||
Ally Financial, Inc., 2.750%, 1/30/17 | 100,000 | 99,750 | ||||
Gas Distribution: 0.6% | ||||||
Hiland Partners, L.P., 7.250%, 10/1/20 (a) | 100,000 | 101,000 | ||||
Hospitals: 0.6% | ||||||
Tenet Healthcare Co., 4.012%, 6/15/20 (a) | 100,000 | 97,500 | ||||
Investments & Miscellaneous Financial | ||||||
Services: 0.7% | ||||||
E*Trade Financial Co., 5.375%, 11/15/22 | 100,000 | 104,750 | ||||
Media - Cable: 0.7% | ||||||
CSC Holdings, Inc., 8.625%, 2/15/19 | 100,000 | 106,500 | ||||
Total Corporate Bonds (cost $514,248) | 509,500 | |||||
Shares | Value | |||||
Short-Term Investments: 97.4% | ||||||
Short Term Treasury Investment, 0.15% (b) | 15,423,603 | 15,423,603 | ||||
Total Short-Term Investments | ||||||
(cost $15,423,603) | 15,423,603 | |||||
Total Investments - 159.4% (cost $25,341,878) | 25,236,173 | |||||
Liabilities in Excess of Other Assets (59.4)% (c) | (9,402,355) | |||||
Net Assets: 100.0% | $ | 15,833,818 |
(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.” These securities have been deemed to be liquid by the Fund’s adviser under the supervision of the Board of Trustees. As of December 31, 2015, the value of these investments was $198,500, or 1.3% of total net assets. |
(b) | Rate reported is the current yield as of December 31, 2015. |
(c) | The Liabilities in Excess of Other Assets is attributable to unsettled trades routine for the settlement process for bank loans. |
The accompanying notes are an integral part of the financial statements.
12 |
PENN CAPITAL SENIOR FLOATING RATE INCOME FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2015 (UNAUDITED)
Country Exposure (as a percentage of total investments) | ||
United States | 100% |
Asset Type (as a percentage of total investments) |
The accompanying notes are an integral part of the financial statements.
13 |
PENN CAPITAL FUNDS TRUST
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
DECEMBER 31, 2015
PENN Capital Small/Mid Cap Equity Fund | PENN Capital Small Cap Equity Fund | PENN Capital High Yield Fund | PENN Capital Senior Floating Rate Income Fund | |||||||||||||
Assets | ||||||||||||||||
Investments, at fair value (1) | $ | 10,006,314 | $ | 397,386 | $ | 5,170,095 | $ | 25,236,173 | ||||||||
Receivables: | ||||||||||||||||
Investments sold | 25,056 | — | 23,769 | — | ||||||||||||
Advisor reimbursement due | 17,835 | 3,809 | 25,435 | 26,481 | ||||||||||||
Dividends and interest | 1,139 | 61 | 88,344 | 8,152 | ||||||||||||
Prepaid expenses | 167 | — | 167 | 167 | ||||||||||||
Total assets | 10,050,511 | 401,256 | 5,307,810 | 25,270,973 | ||||||||||||
Liabilities | ||||||||||||||||
Payables: | ||||||||||||||||
Investments purchased | 25,069 | 1,021 | 9,570 | 9,404,026 | ||||||||||||
Accrued expenses: | ||||||||||||||||
Administration fees | 6,172 | 417 | 7,519 | 11,000 | ||||||||||||
Professional fees | 5,118 | 309 | 6,137 | 6,138 | ||||||||||||
Transfer agent fees and expenses | 3,210 | 1,324 | 3,210 | 3,210 | ||||||||||||
Distribution and service fees | 1,280 | 21 | 688 | 1,658 | ||||||||||||
Trustee fees and expenses | 762 | 105 | 762 | 762 | ||||||||||||
Other accrued expenses | 8,803 | 1,784 | 8,888 | 10,361 | ||||||||||||
Total liabilities | 50,414 | 4,981 | 36,774 | 9,437,155 | ||||||||||||
Net assets | $ | 10,000,097 | $ | 396,275 | $ | 5,271,036 | $ | 15,833,818 | ||||||||
Composition of Net Assets | ||||||||||||||||
Paid-in capital | $ | 10,545,021 | $ | 395,000 | $ | 5,466,612 | $ | 15,945,655 | ||||||||
Accumulated net investment income (loss) | (6,506 | ) | (90 | ) | (973 | ) | (6,132 | ) | ||||||||
Accumulated net realized gain (loss) on investments | (33,923 | ) | 40 | (63,619 | ) | — | ||||||||||
Net unrealized appreciation (depreciation) on investments | (504,495 | ) | 1,325 | (130,984 | ) | (105,705 | ) | |||||||||
Net assets | $ | 10,000,097 | $ | 396,275 | $ | 5,271,036 | $ | 15,833,818 | ||||||||
Institutional Class | ||||||||||||||||
Net assets applicable to outstanding shares | $ | 10,000,097 | $ | 396,275 | $ | 5,271,036 | $ | 15,833,818 | ||||||||
Shares of beneficial interest outstanding, no par value, unlimited authorization | 1,054,565 | 39,369 | 546,038 | 1,595,859 | ||||||||||||
Net asset value per share outstanding | $ | 9.48 | $ | 10.07 | $ | 9.65 | $ | 9.92 | ||||||||
Investor Class | ||||||||||||||||
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 | $ | 10,510,809 | $ | 396,061 | $ | 5,301,079 | $ | 25,341,878 |
The accompanying notes are an integral part of the financial statements.
14 |
PENN CAPITAL FUNDS TRUST
STATEMENTS OF OPERATIONS (UNAUDITED)
PENN Capital Small/Mid Cap Equity Fund | PENN Capital Small Cap Equity Fund | PENN Capital High Yield Fund | PENN Capital Senior Floating Rate Income Fund | |||||||||||||
Investment Income (Loss) | Period from December 1, 2015(a) through December 31, 2015 | Period from December 18, 2015(a) through December 31, 2015 | Period from December 1, 2015(a) through December 31, 2015 | Period from December 1, 2015(a) through December 31, 2015 | ||||||||||||
Income | ||||||||||||||||
Dividends* | $ | 2,526 | $ | 53 | $ | — | $ | — | ||||||||
Interest | 12 | 8 | 34,095 | 2,048 | ||||||||||||
Total income | 2,538 | 61 | 34,095 | 2,048 | ||||||||||||
Expenses | ||||||||||||||||
Investment advisory fees | 7,678 | 132 | 3,165 | 7,628 | ||||||||||||
Administration and accounting | 6,172 | 417 | 7,518 | 11,000 | ||||||||||||
Professional fees | 5,119 | 309 | 6,137 | 6,137 | ||||||||||||
Shareholder communication | 3,529 | 218 | 3,529 | 3,529 | ||||||||||||
Registration | 3,210 | 1,147 | 3,380 | 3,210 | ||||||||||||
Transfer agent expense | 3,210 | 1,324 | 3,210 | 3,210 | ||||||||||||
Compliance fees | 1,694 | 174 | 1,694 | 1,694 | ||||||||||||
Shareholder servicing fees | 1,280 | 21 | 688 | 1,658 | ||||||||||||
Trustees | 762 | 105 | 762 | 762 | ||||||||||||
Custodian | 576 | 102 | 576 | 2,134 | ||||||||||||
Insurance | 565 | 105 | 565 | 565 | ||||||||||||
Miscellaneous | 762 | 38 | 678 | 762 | ||||||||||||
Total expenses | 34,557 | 4,092 | 31,902 | 42,289 | ||||||||||||
Expense waiver from Advisor | (25,513 | ) | (3,941 | ) | (28,600 | ) | (34,109 | ) | ||||||||
Net expenses | 9,044 | 151 | 3,302 | 8,180 | ||||||||||||
Net investment income (loss) | (6,506 | ) | (90 | ) | 30,793 | (6,132 | ) | |||||||||
Realized and Unrealized Gain (Loss) on Investments | ||||||||||||||||
Net realized gain (loss) on investments | (33,923 | ) | 40 | (63,619 | ) | — | ||||||||||
Net change in unrealized appreciation (depreciation) | (504,495 | ) | 1,325 | (130,984 | ) | (105,705 | ) | |||||||||
Net realized and unrealized gain (loss) on investments | (538,418 | ) | 1,365 | (194,603 | ) | (105,705 | ) | |||||||||
Net increase (decrease) in net assets resulting from operations | $ | (544,924 | ) | $ | 1,275 | $ | (163,810 | ) | $ | (111,837 | ) | |||||
* Foreign taxes withheld | $ | 68 | $ | — | $ | — | $ | — |
(a) Commencement of operations.
The accompanying notes are an integral part of the financial statements.
15 |
PENN CAPITAL FUNDS TRUST
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
PENN Capital Small/Mid Cap Equity Fund | PENN Capital Small Cap Equity Fund | PENN Capital High Yield Fund | PENN Capital Senior Floating Rate Income Fund | |||||||||||||
Increase (Decrease) in Net Assets | Period from December 1, 2015(a) through December 31, 2015 | Period from December 18, 2015(a) through December 31, 2015 | Period from December 1, 2015(a) through December 31, 2015 | Period from December 1, 2015(a) through December 31, 2015 | ||||||||||||
Operations | ||||||||||||||||
Net investment income (loss) | $ | (6,506 | ) | $ | (90 | ) | $ | 30,793 | $ | (6,132 | ) | |||||
Net realized gain (loss) on investments | (33,923 | ) | 40 | (63,619 | ) | — | ||||||||||
Net change in unrealized appreciation (depreciation) | (504,495 | ) | 1,325 | (130,984 | ) | (105,705 | ) | |||||||||
Net increase (decrease) in net assets resulting from operations | (544,924 | ) | 1,275 | (163,810 | ) | (111,837 | ) | |||||||||
Dividends and distributions to shareholders | ||||||||||||||||
From net investment income | ||||||||||||||||
Institutional Class | — | — | (31,766 | ) | — | |||||||||||
Total dividends and distributions to shareholders | — | — | (31,766 | ) | — | |||||||||||
Capital share transactions (Note 6) | ||||||||||||||||
Net proceeds from sale of shares | 37,137 | 395,000 | 41,500 | 15,845,655 | ||||||||||||
Proceeds from Transfer In-Kind | 10,547,899 | — | 5,612,139 | — | ||||||||||||
Dividends and distributions reinvested | — | — | 31,382 | — | ||||||||||||
Cost of shares redeemed | (40,015 | ) | — | (218,409 | ) | — | ||||||||||
Net increase (decrease) in net assets resulting from capital share transactions | 10,545,021 | 395,000 | 5,466,612 | 15,845,655 | ||||||||||||
Net increase (decrease) in net assets | 10,000,097 | 396,275 | 5,271,036 | 15,733,818 | ||||||||||||
Net Assets | ||||||||||||||||
Beginning of period | — | — | — | 100,000 | ||||||||||||
End of period | $ | 10,000,097 | $ | 396,275 | $ | 5,271,036 | $ | 15,833,818 | ||||||||
Accumulated net investment income (loss) at the end of period | $ | (6,506 | ) | $ | (90 | ) | $ | (973 | ) | $ | (6,132 | ) |
(a) Commencement of operations.
The accompanying notes are an integral part of the financial statements.
16 |
PENN CAPITAL FUNDS TRUST
FINANCIAL HIGHLIGHTS (UNAUDITED)*
Per Common Share Data(a) | Supplemental data and ratios | ||||||||||||||||||||||||||||||||||||||||||||||||||
Income from | Distributions to | ||||||||||||||||||||||||||||||||||||||||||||||||||
investment operations | shareholders | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | Net investment income (loss) | Net realized and unrealized gains (losses) | Total from investment operations | Dividends from net investment income | Distributions from capital gains | Total distributions | Net asset value, end of period | Total return | Net assets, end of period (in 000’s) | Ratio of expenses to average net assets, including waivers(b) | Ratio of expenses to average net assets, excluding waivers(b) | Ratio of net investment income (loss) to average net assets, including waivers(b) | Ratio of net investment income (loss) to average net assets, excluding waivers(b) | Portfolio turnover rate(c) | |||||||||||||||||||||||||||||||||||||
PENN Capital Small/Mid Cap Equity Fund | 5 | %(d) | |||||||||||||||||||||||||||||||||||||||||||||||||
Institutional Class | $ | 10.00 | (0.01 | ) | (0.51 | ) | (0.52 | ) | — | — | — | $ | 9.48 | (5.20 | )%(d) | $ | 10,000 | 1.06 | % | 4.05 | % | (0.76 | )% | (3.75 | )% | ||||||||||||||||||||||||||
12/1/15(e) to 12/31/15 | |||||||||||||||||||||||||||||||||||||||||||||||||||
PENN Capital Small Cap Equity Fund | 1 | %(d) | |||||||||||||||||||||||||||||||||||||||||||||||||
Institutional Class | $ | 10.00 | 0.00 | (f) | 0.07 | 0.07 | — | — | — | $ | 10.07 | 0.70 | %(d) | $ | 396 | 1.09 | % | 29.44 | % | (0.65 | )% | (29.00 | )% | ||||||||||||||||||||||||||||
12/18/15(e) to 12/31/15 | |||||||||||||||||||||||||||||||||||||||||||||||||||
PENN Capital High Yield Fund | 25 | %(d) | |||||||||||||||||||||||||||||||||||||||||||||||||
Institutional Class | $ | 10.00 | 0.06 | (0.35 | ) | (0.29 | ) | (0.06 | ) | — | (0.06 | ) | $ | 9.65 | (2.91 | )%(d) | $ | 5,271 | 0.72 | % | 6.96 | % | 6.72 | % | 0.48 | % | |||||||||||||||||||||||||
12/1/15(e) to 12/31/15 | |||||||||||||||||||||||||||||||||||||||||||||||||||
PENN Capital Senior Floating Rate Income Fund | 0 | %(d) | |||||||||||||||||||||||||||||||||||||||||||||||||
Institutional Class | $ | 10.00 | 0.00 | (f) | (0.08 | ) | (0.08 | ) | — | — | — | $ | 9.92 | (0.80 | )%(d) | $ | 15,834 | 0.74 | % | 3.83 | % | (0.55 | )% | (3.64 | )% | ||||||||||||||||||||||||||
12/1/15(e) to 12/31/15 |
* | No information is provided for Investor Class shares because shares of that Class had not yet been issued as of December 31, 2015. |
(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) | Amount is less than $0.01. |
The accompanying notes are an integral part of the financial statements.
17 |
PENN CAPITAL FUNDS TRUST
Notes to the Financial Statements
DECEMBER 31, 2015 (UNAUDITED)
1. Organization
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 consists of four series: the PENN Capital Small/Mid Cap Equity Fund, the PENN Capital Small Cap Equity Fund, the PENN Capital High Yield Fund and the PENN Capital Senior Floating Rate 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 Small/Mid Cap Equity Fund and PENN Capital 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 Small/Mid Cap Equity Fund after the close of business on November 30, 2015, with the PENN Capital Small/Mid 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 Small/Mid Cap Equity Fund in exchange for Institutional Class shares of the PENN Capital Small/Mid 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 received by the Fund was $10,547,899. For financial reporting purposes, assets received and shares issued were at fair value; however, the cost basis of the investment received was carried forward to align ongoing reporting of the unrealized gains and losses with amounts distributable to shareholders for tax purposes.
The PENN Capital Small Cap Equity Fund commenced operations on December 18, 2015.
The PENN Capital High Yield 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 High Yield Fund after the close of business on November 30, 2015, with the PENN Capital High Yield 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 High Yield Fund in exchange for Institutional Class shares of the PENN Capital High Yield 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 received by the Fund was $5,612,139. For financial reporting purposes, assets received and shares issued were at fair value; however, the cost basis of the investment received was carried forward to align ongoing reporting of the unrealized gains and losses with amounts distributable to shareholders for tax purposes.
The PENN Capital Senior Floating Rate Income Fund’s investment objective is to seek to provide current income. The PENN Capital Senior Floating Rate Income Fund commenced operations on December 1, 2015.
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 of each Fund: Institutional Class and Investor Class. Neither class has a front-end or back-end sales charge.
2. Significant Accounting Policies
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”).
18 |
PENN CAPITAL FUNDS TRUST
Notes to the Financial Statements
DECEMBER 31, 2015 (UNAUDITED)
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:
The fair value of each security listed or traded on any recognized securities exchange or automated quotation system will be the last reported sale price at the relevant valuation date on the composite tape or on the principal exchange on which such security is traded. If there is no such reported sale on an exchange, the portfolio security will be valued at the mean between the most recent quoted bid and asked price.
Options contracts listed for trading on a securities exchange or board of trade shall be valued at the last quoted sales price or, in the absence of a sale, at the mean of the most recent quoted bid and asked prices. Options not listed for trading on a securities exchange or board of trade for which over-the-counter market quotations are readily available shall be valued at the most recent quoted bid and asked price. Futures contracts are valued at the most recent daily quoted settlement price.
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 Loans 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 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.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. 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 | – | quoted prices in active markets for identical securities | |
Level 2 | – | other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) | |
Level 3 | – | significant unobservable inputs (including a Fund’s own assumptions in determining the fair value of investments) |
19 |
PENN CAPITAL FUNDS TRUST
Notes to the Financial Statements
DECEMBER 31, 2015 (UNAUDITED)
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, 2015 in valuing each Fund’s investments:
PENN Capital Small/Mid Cap Equity Fund | |||||||||||||
Investments in Securities(a) | Level 1 | Level 2 | Level 3 | Total | |||||||||
Common Stocks | $ | 9,558,039 | $ | — | $ | — | $ | 9,558,039 | |||||
Real Estate Investment Trusts (REITs) | 221,948 | — | — | 221,948 | |||||||||
Short-Term Investments(b) | — | — | — | 226,327 | |||||||||
Total Investments in Securities | $ | 9,779,987 | $ | — | $ | — | $ | 10,006,314 |
PENN Capital Small Cap Equity Fund | |||||||||||||
Investments in Securities(a) | Level 1 | Level 2 | Level 3 | Total | |||||||||
Common Stocks | $ | 383,719 | $ | — | $ | — | $ | 383,719 | |||||
Real Estate Investment Trusts (REITs) | 9,772 | — | — | 9,772 | |||||||||
Short-Term Investments(b) | — | — | — | 3,895 | |||||||||
Total Investments in Securities | $ | 393,491 | — | $ | — | $ | 397,386 |
PENN Capital High Yield Fund | |||||||||||||
Investments in Securities(a) | Level 1 | Level 2 | Level 3 | Total | |||||||||
Corporate Bonds | $ | — | $ | 4,775,984 | $ | — | $ | 4,775,984 | |||||
Preferred Stocks | — | — | 379 | 379 | |||||||||
Short-Term Investments(b) | — | — | — | 393,732 | |||||||||
Total Investments in Securities | $ | — | $ | 4,775,984 | $ | 379 | $ | 5,170,095 |
PENN Capital Senior Floating Rate Income Fund | |||||||||||||
Investments in Securities(a) | Level 1 | Level 2 | Level 3 | Total | |||||||||
Bank Loans | $ | — | $ | 9,303,070 | $ | — | $ | 9,303,070 | |||||
Corporate Bonds | — | 509,500 | — | 509,500 | |||||||||
Short-Term Investments(b) | — | — | — | 15,423,603 | |||||||||
Total Investments in Securities | $ | — | $ | 9,812,570 | $ | — | $ | 25,236,173 |
(a) | All other industry classifications are identified in the Schedule of Investments for each Fund. |
(b) | Certain investments are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient to fair value. The investments noted have used net asset value as a practical expedient and have not been categorized in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Statement of Assets and Liabilities. |
The following table summarizes quantitative information about significant unobservable valuation inputs for Level 3 fair value measurement as of December 31, 2015:
Type of Assets | Fair value as of December 31, 2015 | Valuation Techniques(s) | Unobservable Input | |||||||
PENN Capital High Yield Fund Preferred Stock | ||||||||||
Spanish Broadcasting Systems, Inc. | $ | 379 | Broker Quote | — |
20 |
PENN CAPITAL FUNDS TRUST
Notes to the Financial Statements
DECEMBER 31, 2015 (UNAUDITED)
The following table reconciles Level 3 investments based on the inputs used to determine fair value:
Balance as of December 1, 2015 | Purchases | Sales | Accretion of Discount | Net Realized Gain (Loss) | Change in Unrealized Appreciation (Depreciation) | Balance as of December 31, 2015 | Change in Unrealized Appreciation / Depreciation from Investments Held as of December 31, 2015 | ||||||||||||||||||
PENN Capital High Yield Fund | |||||||||||||||||||||||||
Preferred Stock | |||||||||||||||||||||||||
Spanish Broadcasting Systems, Inc. | $ | — | $ | 613 | $ | — | $ | — | $ | — | $ | (234 | ) | $ | 379 | $ | (234 | ) |
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, 2015.
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.
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 High Yield Fund and the PENN Capital Senior Floating Rate Income Fund declare and distribute their net investment income monthly and make distributions of their net realized capital gains, if any, at least annually. The PENN Capital Small/Mid Cap Equity Fund and the PENN Capital Small Cap Equity Fund declare and distribute their net investment income annually and make distributions of net realized capital gains, if any, at least annually.
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 substantially all of their net investment income and capital gains to shareholders. Therefore, no federal income tax provision is required.
21 |
PENN CAPITAL FUNDS TRUST
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015 (UNAUDITED)
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), 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.
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 Small/Mid Cap Equity Fund | 0.90% |
PENN Capital Small Cap Equity Fund | 0.95% |
PENN Capital High Yield Fund | 0.69% |
PENN Capital Senior Floating Rate Income Fund | 0.69% |
The Advisor has contractually agreed to waive its fees and/or pay Fund expenses so that the total annual operating expenses of the Funds (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. The expense limitation agreement will remain in place for the period ending November 30, 2016. Thereafter, the expense limitation agreement for the Funds will be reviewed each year, at which time the continuation of the expense limitation agreement will be discussed by the Advisor and the Board.
Institutional Class | Investor Class | |||||||
PENN Capital Small/Mid Cap Equity Fund | 1.06 | % | 1.31 | % | ||||
PENN Capital Small Cap Equity Fund | 1.09 | % | 1.34 | % | ||||
PENN Capital High Yield Fund | 0.72 | % | 0.97 | % | ||||
PENN Capital Senior Floating Rate Income Fund | 0.74 | % | 0.99 | % |
22 |
PENN CAPITAL FUNDS TRUST
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015 (UNAUDITED)
Any waived or reimbursed expenses by the Advisor to the Funds are subject to repayment by the Fund in the three fiscal years following the fiscal year in which the payment was made, provided that the respective Fund is able to make the repayment without exceeding the Fund’s expense limitation. The Advisor’s waived fees and paid expenses that are subject to potential recoupment are as follows:
Period Incurred | Amount Waived | Amount Recouped | Amount Subject to Potential Recoupment | Expiration Date | ||||||||||
PENN Capital Small/Mid Cap Equity Fund December 31, 2015 | $ | 25,513 | $ | — | $ | 25,513 | June 30, 2019 | |||||||
PENN Capital Small Cap Equity Fund December 31, 2015 | 3,941 | — | 3,941 | June 30, 2019 | ||||||||||
PENN Capital High Yield Fund December 31, 2015 | 28,600 | — | 28,600 | June 30, 2019 | ||||||||||
PENN Capital Senior Floating Rate Income Fund December 31, 2015 | 34,109 | — | 34,109 | June 30, 2019 |
Certain Officers and Trustees of the Funds are also Officers of the Advisor.
The Trust has engaged Foreside Fund Officers Services, LLC (“Foreside”) to provide compliance services including the appointment of the Funds’ Chief Compliance Officer. The Trust pays Foreside an annual fee of $50,000 for the first Fund and an additional $5,000 for each additional Fund in the Trust.
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, 2015 there were no distribution fees paid.
The Trust has engaged U.S. Bancorp Fund Services, LLC to serve as the Funds’ administrator, fund accountant, and transfer agent. The Trust has engaged U.S. Bank, N.A. to serve as the Funds’ 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 U.S. generally accepted accounting principles. 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.
23 |
PENN CAPITAL FUNDS TRUST
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015 (UNAUDITED)
The following information is provided on a tax basis as of December 31, 2015:
PENN Capital Small/Mid Cap Equity Fund | PENN Capital Small Cap Equity Fund | PENN Capital High Yield Fund | PENN Capital Senior Floating Rate Income Fund | |||||||||||||
Cost of Investments | $ | 10,510,809 | $ | 396,061 | $ | 5,301,079 | $ | 25,341,878 | ||||||||
Gross unrealized appreciation | 101,250 | 6,739 | 14,540 | 3,965 | ||||||||||||
Gross unrealized depreciation | (605,745 | ) | (5,414 | ) | (145,524 | ) | (109,670 | ) | ||||||||
Net unrealized appreciation (depreciation) | $ | (504,495 | ) | $ | 1,325 | $ | (130,984 | ) | $ | (105,705 | ) |
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, 2015, were as follows:
Purchases | Sales | |||||||
PENN Capital Small/Mid Cap Equity Fund | $ | 11,149,091 | $ | 468,256 | ||||
PENN Capital Small Cap Equity Fund | 393,945 | 1,818 | ||||||
PENN Capital High Yield Fund | 6,993,899 | 1,299,722 | ||||||
PENN Capital Senior Floating Rate Income Fund | 9,925,349 | — |
For the period ended December 31, 2015 the cost of securities is inclusive of $10,547,899 and $5,612,139 of transfers in-kind for the PENN Capital Small/Mid Cap Equity Fund and the PENN Capital High Yield Fund respectively.
6. Capital Share Transactions
PENN Capital Small/Mid Cap Equity Fund | PENN Capital Small Cap Equity Fund | PENN Capital High Yield Fund | PENN Capital Senior Floating Rate Income Fund | |||||||||||||
Institutional Shares | ||||||||||||||||
Shares sold | 1,058,690 | 39,369 | 565,490 | 1,595,859 | ||||||||||||
Shares sold to holders in reinvestment of dividends | — | — | 3,252 | — | ||||||||||||
Shares redeemed | (4,125 | ) | — | (22,704 | ) | — | ||||||||||
Net increase | 1,054,565 | 39,369 | 546,038 | 1,595,859 | ||||||||||||
Institutional Amount | ||||||||||||||||
Shares sold | $ | 10,585,036 | $ | 395,000 | $ | 5,653,639 | $ | 15,845,655 | ||||||||
Shares sold to holders in reinvestment of dividends | — | — | 31,382 | — | ||||||||||||
Shares redeemed | (40,015 | ) | — | (218,409 | ) | — | ||||||||||
Net increase | $ | 10,545,021 | $ | 395,000 | $ | 5,466,612 | $ | 15,845,655 |
7. Line of Credit
Prior to commencing operations, on November 16, 2015, the PENN Capital Senior Floating Rate Income Fund entered into a Credit Agreement with 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 Fund did not utilize any borrowings under the line of credit for the period ended December 31, 2015.
24 |
PENN CAPITAL FUNDS TRUST
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015 (UNAUDITED)
8. Subsequent Events:
On February 1, 2016, the PENN Capital High Yield Fund declared a distribution payable of $0.05 per share, to Institutional Class shareholders of record January 29, 2016, and payable on February 1, 2016.
Except as disclosed above, as of the date the financial statements were issued, Management has determined that no additional material events or transactions occurred that would require recognition or disclosure in the Funds’ financial statements.
25 |
PENN CAPITAL FUNDS TRUST
Additional Information
DECEMBER 31, 2015 (UNAUDITED)
Trustee and Officer Compensation
The Trust does not compensate any of its trustees who are interested persons nor any of its officers. 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 on the Trust’s website at www.penncapitalfunds.com or the SEC’s website at www.sec.gov.
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 the Fund is available in the Statement of Additional Information on the Trust’s website www.penncapitalfunds.com and is also available to shareholders without charge by visiting the SEC’s website at www.sec.gov. When available, 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
The 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 Form N-Q and Statement of Additional Information are available without charge by visiting the SEC’s website at www.sec.gov. In addition, you may review and copy each Fund’s Form 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.
26 |
BOARD APPROVAL OF INVESTMENT ADVISORY AGREEMENT (UNAUDITED)
At the October 21, 2015 meeting and, with respect to the PENN Capital Small Cap Equity Fund only, the December 7, 2015 meeting (collectively, the “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. (the “Adviser”) as the investment adviser to the PENN Capital Small/Mid Cap Equity Fund, PENN Capital Small Cap Equity Fund, PENN Capital High Yield Fund and PENN Capital Senior Floating Rate Income Fund series of the Trust (each a “Fund” and collectively, the “Funds”) and (ii) the investment advisory agreement between the Trust, on behalf of the Funds, and the Adviser (the “Investment Advisory Agreement”).
In connection with considering the approval of the Investment Advisory Agreement on behalf of the 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 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 materials provided for the Meeting and other information from counsel and from the Adviser, including: (i) a copy of the form of Investment Advisory Agreement; (ii) information describing the nature, quality and extent of the services that the Adviser expected to provide to the Funds; (iii) information concerning the Adviser’s financial condition, business, operations, portfolio management teams and compliance program; (iv) information describing each Fund’s anticipated advisory fee and operating expenses; (v) a copy of the current Form ADV for the Adviser; 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 the Adviser. The Board also received information comparing the advisory fee and expenses of each 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 each Fund by the Adviser; (ii) the Adviser’s personnel and operations; (iii) each Fund’s proposed expense level; (iv) the anticipated profitability to the Adviser under the Investment Advisory Agreement at certain asset levels; (v) any “fall-out” benefits to the Adviser and its affiliates (i.e., the ancillary benefits realized by the Adviser and its affiliates from the Adviser’s relationship with the Trust); (vi) the effect of potential asset growth on each Fund’s expenses; and (vii) possible conflicts of interest.
The Board, including the Independent Trustees, considered the following in respect of each Fund:
(a) | The nature, extent and quality of services expected to be provided by the Adviser to the Funds; the Adviser’s personnel and operations. The Board reviewed the services that the Adviser expected to provide to each Fund. The Board noted the responsibilities that the Adviser would have as the Funds’ investment adviser, including: the responsibility for the management and investment of each Fund’s securities portfolio; executing portfolio security trades; monitoring compliance with each 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 Fund. |
The Board reviewed the Adviser’s experience, resources and strengths in managing other pooled investment vehicles, including the Adviser’s personnel. Based on its consideration and review of the foregoing information, the Board determined that each Fund was likely to benefit from the nature, quality and extent of these services, as well as the Adviser’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 the Adviser from the relationship with the Funds; “fall-out” benefits. The Board compared both the services to be provided and the proposed fees to be paid under other contracts of the Adviser, and under contracts of other investment advisers with respect to similar funds. In particular, the Board compared each 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 the Adviser proposed to enter into an Expense Limitation Agreement whereby the Adviser would waive advisory fees and/or reimburses expenses to keep the Funds’ 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 the Adviser, 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 the Adviser’s projected profitability in connection with its serving as each Fund’s investment adviser. In addition, the Board discussed the entrepreneurial risk undertaken by the Adviser in creating the Trust. |
27 |
With respect to the PENN Capital Small/Mid Cap Equity Fund, the Board considered that the Fund’s advisory fee was equal to the median of its peer group and the Fund’s total expenses (including the fee waiver) were below the median of its peer group. With respect to the PENN Capital Small Cap Equity Fund, the Board considered that the Fund’s advisory fee and total expenses (including the fee waiver) were above the median of its peer group. With respect to the PENN Capital High Yield Fund and PENN Capital Senior Floating Rate Income Fund, the Board considered that although each Fund’s advisory fee was above the median of its respective peer group, each Fund’s total expenses (including the fee waiver) were below the median of its respective peer group.
After comparing each Fund’s proposed fees with those of other funds in the Fund’s peer group, and considering the information about fee rates the Adviser charged to other accounts and clients, and in light of the nature, quality and extent of services proposed to be provided by the Adviser and the costs the Adviser expected to incur by providing those services, the Board concluded that the level of fees proposed to be paid to the Adviser with respect to the Funds were fair and reasonable.
The Board considered that the Adviser may experience reputational “fall-out” benefits based on the success of the Funds, but that such benefits are not easily quantifiable. The Board noted that since the Trust’s service providers are not affiliated with the Adviser, such services do not give rise to “fall-out” benefits for the Adviser.
(c) | The extent to which economies of scale would be realized as the Funds grow, and whether fee levels would reflect such economies of scale. The Board discussed potential economies of scale. Since the Trust is newly formed, the Funds had not commenced operations, and the eventual aggregate amount of assets was uncertain, the Adviser was not able to provide the Board with specific information concerning the extent to which economies of scale would be realized as each Fund grows and whether fee levels would reflect such economies of scale, if any. The Board recognized the uncertainty in launching a new investment product and estimating future asset levels. | |
(d) | Investment performance of the Funds and the Adviser. Because each Fund is newly formed and had not commenced operations, the Board did not consider a Fund’s investment performance. Rather, the Board considered the Adviser’s performance managing other discretionary investment management accounts and pooled investment vehicles according to the Funds’ 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 the Adviser to each Fund, as well as the costs to be incurred and benefits to be gained by the Adviser 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 each Fund.
28 |
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.
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
(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 | ||
Richard A. Hocker, President | |||
Date | 2/26/2016 |
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 | ||
Richard A. Hocker, President | |||
Date | 2/26/2016 | ||
By (Signature and Title) | /s/ Gerald McBride | ||
Gerald McBride, Treasurer | |||
Date | 2/25/2016 | ||