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 811-22436
EntrepreneurShares Series Trust
(Exact name of registrant as specified in charter)
470 Atlantic Avenue, Suit 400
Boston, MA 02210
(Address of principal executive offices) (Zip code)
Dr. Joel M. Shulman
470 Atlantic Avenue, Suit 400
Boston, MA 02210
(Name and address of agent for service)
800-287-9469
Registrant's telephone number, including area code
Date of fiscal year end: June 30
Date of reporting period: December 31, 2013
Item 1. Reports to Stockholders.
Semi-Annual Report
December 31, 2013
EntrepreneurShares Series Trust
c/o U.S. Bancorp Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
EntrepreneurShares Series Trust
SEMI-ANNUAL SHAREHOLDER LETTER
December 31, 2013 (Unaudited)
December 31, 2013
Dear Shareholders:
As we complete our third complete calendar year, we would like to extend our appreciation for your continuing support for investing in our vision. Our treatise on investments rests upon a conviction that entrepreneurial managers, as defined by our 15 attributes, will outperform non-entrepreneurs over an extended period of time. We diversify our holdings with investments in global capital markets (US, International and Emerging markets) that include different market capitalizations (Small-Cap, Mid-Cap and Large-Cap), both value stocks and growth stocks, high dividend yield stocks, and impact stocks. Our fund invests in all major industry sectors.
In our semi-annual report, we reflect upon our past performance and look ahead to the future. Given the significant appreciation in the financial markets during 2013, we see reason for both optimism and concern.
Calendar year 2013 was a strong year for investors. Most of the major stock indices performed well as did our EntrepreneurShares Global fund. In addition, we launched a new mutual fund (the EntrepreneurShare US All Cap Fund) on December 17th. Overall equity returns were positive throughout all of our Entrepreneur sub categories, though varied by sector, geographic region, market cap size, and growth orientation. Similar to historical performance patterns of our fund, the EntrepreneurShares Funds ended with positive returns for calendar year 2013. Large market cap, mid-cap, all cap, growth, and small cap firms were among our strongest performers and emerging market and international companies were among our weakest.
We are optimistic that global equity markets will continue to remain positive in the first quarter of 2014 across most sectors and investment categories. However, we remain concerned about a number of issues. First, valuation levels are near 5-year highs and have made security selection more challenging. Second, growth and infrastructure issues persist throughout many of the emerging markets.
Consistent with our historical pattern, our funds move in the same direction as the overall markets, with stronger performance in key sub-categories in positive months. Our enthusiasm and trepidation for future Fund performance rests with the direction of the overall market.
At the time of this writing (January 2014), we are experiencing equity appreciation. However, should the financial markets decline our Funds will likely follow this pattern.
We believe that global equities continue to be priced at attractive levels and we believe we are positioned for a strong first quarter in 2014. In particular, we believe value stocks may offer strong potential for investors.
As an overall commentary, we continue to be confident that savvy entrepreneurial managers will find a way to make their businesses grow in good conditions and survive in difficult ones. Entrepreneurs have economic incentive to help grow their profits and generate stock appreciation for themselves and other shareholders. This policy has held true in prior years and should remain true in the months and years ahead.
We look forward to sharing more updates with you in the future and assisting you with your portfolio appreciation. Thank you again for your support.
Joel Shulman Ph.D., CFA
Chief Investment Officer
EntrepreneurShares
Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 617-273-8218 or visiting www.ershares.com. The Global Fund and the All Cap Fund are distributed by Rafferty Capital Markets, LLC.
The fund's investment objectives, risks, charges and expenses must be considered carefully before investing. The prospectus contains this and other important information about the investment company, and it may be obtained by calling 877-271-8811, or visiting www.ershares.com. Read it carefully before investing.
The Fund invests in foreign securities which involve greater volatility and political, economic and currency risks and differences in accounting methods. The Fund invests in smaller companies, which involve additional risks such as limited liquidity and greater volatility. Additional risks are detailed in the prospectus.
| 1 |
EntrepreneurShares Series Trust
SECTOR ALLOCATION OF PORTFOLIO INVESTMENTS
December 31, 2013 (Unaudited)
| 2 |
EntrepreneurShares Series Trust
EXPENSE EXAMPLE
December 31, 2013 (Unaudited)
As a shareholder of the EntrepreneurShares Global Fund or the EntrepreneurShares U.S. All Cap Fund (the “Funds”), you incur two types of costs: (1) transaction costs, including redemption fees on shares held less than 5 days; and (2) ongoing costs, including investment advisory fees, distribution and/or shareholder servicing fees, and other expenses for the Funds, which are indirectly paid by shareholders. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held the entire six-month period from July 1, 2013 to December 31, 2013 for the EntrepreneurShares Global Fund and at the EntrepreneurShares U.S. All Cap Fund’s inception and held for the entire period from December 17, 2013 to December 31, 2013.
ACTUAL EXPENSES
The first line of the table below provides information about actual account values and actual expenses. However, the table does not include shareholder specific fees, such as the $15.00 fee charged for wire redemptions by the Funds’ transfer agent. To the extent that the Funds invests in other investment companies as part of its investment strategy, you will indirectly bear your proportional share of any fees and expenses charged by the underlying funds in which the Funds invests in addition to expenses of the Funds. These expenses are not included in the following example. The table also does not include portfolio trading commissions and related trading costs. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during the period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical account values and hypothetical expense based on the actual expense ratios for each share class of the Funds and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other fund. 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 sales charges (loads), redemptions fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relevant total cost of owning different funds.
| 3 |
EntrepreneurShares Series Trust
EXPENSE EXAMPLE (continued)
December 31, 2013 (Unaudited)
EntrepreneurShares Global Fund – Institutional Class
| Beginning Account Value July 1, 2013 | Ending Account Value December 31, 2013 | Expenses Paid During Period* July 1, 2013 – December 31, 2013 | ||||
| Actual | $1,000.00 | $1,180.30 | $9.34 | |||
| Hypothetical (5% annual return before expenses) | 1,000.00 | 1,016.64 | 8.64 |
* Expenses are equal to the Fund’s annualized expense ratio (including extraordinary expenses) of 1.70%, multiplied by the average account value over the period, multiplied by 184/365 to reflect the half-year period.
EntrepreneurShares U.S. All Cap Fund – Institutional Class
| Beginning Account Value December 17, 2013^ | Ending Account Value December 31, 2013 | Expenses Paid During Period° December 17, 2013 – December 31, 2013 | ||||
| Actual | $1,000.00 | $1,045.50 | $0.71 | |||
| Hypothetical (5% annual return before expenses) | 1,000.00 | 1,001.36 | 0.70 |
° Expenses are equal to the Fund’s annualized expense ratio (including extraordinary expenses) of 0.85%, multiplied by the average account value over the period, multiplied by 15/365 to reflect the partial year period.
^ Inception date of Fund.
| 4 |
EntrepreneurShares Global Fund
SCHEDULE OF INVESTMENTS
December 31, 2013 (Unaudited)
| Shares | Value | |||
| COMMON STOCKS - 91.02% | ||||
| Administrative and Support Services - 5.04% | ||||
| 4,100 | Flight Centre Travel Group Ltd. (a) | $174,075 | ||
| 4,998 | Liquidity Services, Inc. (b) | 113,255 | ||
| 4,102 | Portfolio Recovery Associates, Inc. (b) | 216,750 | ||
| 27,000 | Seek Ltd. (a) | 323,291 | ||
| 4,902 | The Geo Group, Inc. | 157,942 | ||
| 55,000 | The Warehouse Group Ltd. (a) | 169,168 | ||
| 1,945 | TripAdvisor, Inc. (a)(b) | 161,104 | ||
| 1,315,585 | ||||
| Ambulatory Health Care Services - 0.77% | ||||
| 7,859 | Bio-Reference Labs, Inc. (b) | 200,719 | ||
| Amusement, Gambling, and Recreation Industries - 1.27% | ||||
| 2,059 | Las Vegas Sands Corp. | 162,393 | ||
| 871 | Wynn Resorts Ltd. | 169,157 | ||
| 331,550 | ||||
| Apparel Manufacturing - 1.08% | ||||
| 1,000 | Lululemon Athletica, Inc. (b) | 59,030 | ||
| 1,256 | Under Armour, Inc. (b) | 109,649 | ||
| 4,342 | Zumiez, Inc. (b) | 112,892 | ||
| 281,571 | ||||
| Broadcasting (except Internet) - 1.33% | ||||
| 25,000 | CTC Media, Inc. (a) | 347,375 | ||
| Building Material and Garden Equipment and Supplies Dealers - 1.61% | ||||
| 2,250 | Lumber Liquidators Holdings, Inc. (b) | 231,502 | ||
| 10,579 | Titan Machinery, Inc. (b) | 188,518 | ||
| 420,020 | ||||
| Chemical Manufacturing - 7.40% | ||||
| 5,825 | Abaxis, Inc. (b) | 233,117 | ||
| 1,716 | Alexion Pharmaceuticals, Inc. (b) | 228,331 | ||
| 6,300 | Galapagos NV (a)(b) | 132,604 | ||
| 66,000 | Indorama Ventures PCL (a) | 40,170 | ||
| 6,113 | Inter Parfums, Inc. (a) | 218,907 | ||
| 1,893 | Jazz Pharmaceuticals PLC (b) | 239,578 | ||
| 9,043 | Myriad Genetics, Inc. (b) | 189,722 | ||
| 593 | Regeneron Pharmaceuticals, Inc. (b) | 163,217 | ||
| 2,402 | United Therapeutics Corp. (b) | 271,618 | ||
| 2,838 | USANA Health Sciences, Inc. (a)(b) | 214,496 | ||
| 1,931,760 | ||||
| Clothing and Clothing Accessories Stores - 3.20% | ||||
| 800 | LVMH Moet Hennessy Louis Vuitton SA (a) | 145,935 | ||
| 15,000 | SuperGroup PLC (a)(b) | 351,477 | ||
| 4,180 | The FinishLine, Inc. | 117,751 | ||
| 5,896 | Urban Outfitters, Inc. (b) | 218,741 | ||
| 833,904 | ||||
| Computer and Electronic Product Manufacturing - 9.69% | ||||
| 8,589 | Ambarella, Inc. (a)(b) | 291,425 | ||
| 9,000 | Axis Communications AB (a) | 313,160 |
See Notes to Financial Statements
| 5 |
EntrepreneurShares Global Fund
SCHEDULE OF INVESTMENTS (Continued)
December 31, 2013 (Unaudited)
| Shares | Value | |||
| 3,614 | Cabot Microelectronics Corp. (a)(b) | $165,160 | ||
| 71 | CSR PLC-ADR | 2,986 | ||
| 2,858 | IPG Photonics Corp. (b) | 221,809 | ||
| 5,702 | Ituran Location and Control Ltd. (a) | 123,448 | ||
| 10,829 | IXYS Corp. (a) | 140,452 | ||
| 2,543 | Microchip Technology, Inc. | 113,799 | ||
| 5,000 | Mindray Medical International Ltd. - ADR | 181,800 | ||
| 1,000 | Nidec Corp. (a) | 97,806 | ||
| 12,796 | OmniVision Technologies, Inc. (a)(b) | 220,091 | ||
| 8,000 | Parrot SA (a)(b) | 217,912 | ||
| 2,918 | QUALCOMM, Inc. (a) | 216,662 | ||
| 3,172 | SanDisk Corp. (a) | 223,753 | ||
| 2,530,263 | ||||
| Construction of Buildings - 1.43% | ||||
| 25,000 | Africa Israel Investments Ltd. (a)(b) | 49,820 | ||
| 16,000 | Direcional Engenharia SA (a) | 81,382 | ||
| 5,044 | Meritage Homes Corp. (b) | 242,061 | ||
| 373,263 | ||||
| Couriers and Messengers - 0.63% | ||||
| 1,139 | FedEx Corp. | 163,754 | ||
| Credit Intermediation and Related Activities - 1.85% | ||||
| 2,943 | Capital One Financial Corp. | 225,463 | ||
| 1,243 | Credit Acceptance Corp. (b) | 161,578 | ||
| 5,399 | Newstar Financial, Inc. (b) | 95,940 | ||
| 482,981 | ||||
| Data Processing, Hosting and Related Services - 1.27% | ||||
| 5,920 | ExlService Holdings, Inc. (b) | 163,510 | ||
| 2,011 | Shutterstock, Inc. (b) | 168,180 | ||
| 331,690 | ||||
| Electrical Equipment, Appliance, and Component Manufacturing - 0.43% | ||||
| 14,609 | Alpha & Omega Semiconductor Ltd. (a)(b) | 112,636 | ||
| Electronics and Appliance Stores - 0.65% | ||||
| 6,779 | PC Connection, Inc. | 168,458 | ||
| Fabricated Metal Product Manufacturing - 0.41% | ||||
| 1,237 | B/E Aerospace, Inc. (b) | 107,656 | ||
| Food and Beverage Stores - 0.63% | ||||
| 2,840 | Whole Foods Market, Inc. | 164,237 | ||
| Food Manufacturing - 3.88% | ||||
| 3,580 | Annie’s, Inc. (b) | 154,083 | ||
| 150,000 | Charoen Pokphand Foods PCL (a) | 146,074 | ||
| 200,000 | Golden Agri-Resources Ltd. (a) | 86,374 | ||
| 1,813 | J&J Snack Foods Corp. | 160,614 | ||
| 10,000 | MHP SA (a) | 170,500 | ||
| 2,564 | The Hain Celestial Group, Inc. (b) | 232,760 | ||
| 22,500 | Wilmar International Ltd. (a) | 60,977 | ||
| 1,011,382 | ||||
| Food Services and Drinking Places - 3.13% | ||||
| 1,237 | Panera Bread Co. (b) | 218,566 | ||
| 4,906 | Papa John’s International, Inc. | 222,732 |
See Notes to Financial Statements
| 6 |
EntrepreneurShares Global Fund
SCHEDULE OF INVESTMENTS (Continued)
December 31, 2013 (Unaudited)
| Shares | Value | |||
| 2,778 | Starbucks Corp. | $217,767 | ||
| 5,712 | Texas Roadhouse, Inc. | 158,794 | ||
| 817,859 | ||||
| General Merchandise Stores - 2.00% | ||||
| 1,350 | Costco Wholesale Corp. | 160,664 | ||
| 2,839 | Dollar Tree, Inc. (b) | 160,176 | ||
| 12,500 | SM Investments Corp. (a) | 200,248 | ||
| 521,088 | ||||
| Health and Personal Care Stores - 0.40% | ||||
| 77,000 | China Shineway Pharmaceutical Group Ltd. (a) | 105,456 | ||
| Hospitals - 0.41% | ||||
| 1,787 | IPC The Hospitalist Co., Inc. (b) | 106,130 | ||
| Insurance Carriers and Related Activities - 2.04% | ||||
| 4,633 | HCI Group, Inc. | 247,866 | ||
| 3,238 | Molina Healthcare, Inc. (b) | 112,520 | ||
| 214 | National Interstate Corp. | 4,922 | ||
| 2,656 | The Navigators Group, Inc. (b) | 167,753 | ||
| 533,061 | ||||
| Internet Publishing and Broadcasting and Web Search Portals - 0.50% | ||||
| 22,200 | QSC AG (a) | 131,172 | ||
| Leather and Allied Product Manufacturing - 0.42% | ||||
| 1,389 | NIKE, Inc. (a) | 109,231 | ||
| Machinery Manufacturing - 1.67% | ||||
| 13,000 | Fabrinet (a)(b) | 267,280 | ||
| 9,591 | II-VI, Inc. (b) | 168,802 | ||
| 436,082 | ||||
| Merchant Wholesalers, Durable Goods - 0.63% | ||||
| 8,046 | American Axle & Manufacturing Holdings, Inc. (b) | 164,541 | ||
| Merchant Wholesalers, Nondurable Goods - 1.69% | ||||
| 76,000 | Chow Sang Sang Holdings International Ltd. (a) | 216,602 | ||
| 1,200 | Inditex SA (a) | 197,771 | ||
| 36,000 | Ports Design Ltd. (a) | 27,856 | ||
| 442,229 | ||||
| Mining - 0.80% | ||||
| 40,000 | Fortescue Metals Group Ltd. (a) | 207,867 | ||
| Mining (except Oil and Gas) - 2.11% | ||||
| 10,000 | Antofagasta PLC (a) | 136,451 | ||
| 100,000 | DMCI Holdings, Inc. (a) | 126,176 | ||
| 7,022 | Hi-Crush Partners LP | 266,695 | ||
| 6,212 | Kazakhmys PLC (a) | 22,487 | ||
| 551,809 | ||||
| Miscellaneous Manufacturing - 5.33% | ||||
| 1,350 | BioMerieux (a) | 141,649 | ||
| 2,500 | Cochlear Ltd. (a) | 131,524 | ||
| 3,750 | Coloplast A/S (a) | 248,260 | ||
| 6,657 | Exactech, Inc. (b) | 158,170 | ||
| 8,367 | Globus Medical, Inc. (b) | 168,846 | ||
| 2,452 | ICU Medical, Inc. (b) | 156,217 | ||
| 12,000 | Renishaw PLC (a) | 386,500 |
See Notes to Financial Statements
| 7 |
EntrepreneurShares Global Fund
SCHEDULE OF INVESTMENTS (Continued)
December 31, 2013 (Unaudited)
| Shares | Value | |||
| $1,391,166 | ||||
| Motor Vehicle and Parts Dealers - 0.62% | ||||
| 6,641 | Sonic Automotive, Inc. | 162,572 | ||
| Nonstore Retailers - 2.24% | ||||
| 3,000 | eBay, Inc. (a)(b) | 164,670 | ||
| 1,650 | MercadoLibre, Inc. (a) | 177,853 | ||
| 3,318 | Sohu.com, Inc. (a)(b) | 241,982 | ||
| 584,505 | ||||
| Other Information Services - 1.05% | ||||
| 148 | Google, Inc. (b) | 165,865 | ||
| 5,048 | Travelzoo, Inc. (b) | 107,624 | ||
| 273,489 | ||||
| Personal and Laundry Services - 1.03% | ||||
| 6,000 | Natura Cosmeticos SA (a) | 105,212 | ||
| 9,031 | Service Corp. International | 163,732 | ||
| 268,944 | ||||
| Primary Metal Manufacturing - 1.73% | ||||
| 25,000 | Cia Siderurgica Nacional SA (a) | 152,379 | ||
| 30,000 | MMX Mineracao e Metalicos SA (a)(b) | 8,901 | ||
| 7,500 | Novolipetsk Steel OJSC | 126,675 | ||
| 8,403 | Steel Dynamics, Inc. | 164,195 | ||
| 452,150 | ||||
| Professional, Scientific, and Technical Services - 8.47% | ||||
| 3,910 | Cerner Corp. (b) | 217,943 | ||
| 5,000 | JCDecaux SA (a) | 206,149 | ||
| 3,833 | Netscout Systems, Inc. (b) | 113,419 | ||
| 5,088 | PAREXEL International Corp. (a)(b) | 229,876 | ||
| 15,000 | Park24 Co. Ltd. (a) | 282,452 | ||
| 136 | priceline.com, Inc. (a)(b) | 158,086 | ||
| 3,569 | Synchronoss Technologies, Inc. (b) | 110,889 | ||
| 2,389 | Syntel, Inc. | 217,280 | ||
| 3,678 | VeriSign, Inc. (a)(b) | 219,871 | ||
| 4,367 | Virtusa Corp. (b) | 166,339 | ||
| 5,084 | VistaPrint NV (a)(b) | 289,025 | ||
| 2,211,329 | ||||
| Publishing Industries (except Internet) - 2.40% | ||||
| 5,793 | Ellie Mae, Inc. (b) | 155,658 | ||
| 6,333 | Oracle Corp. (a) | 242,301 | ||
| 6,468 | Twenty-First Century Fox, Inc | 227,544 | ||
| 625,503 | ||||
| Real Estate - 1.00% | ||||
| 50,000 | Hopewell Holdings Ltd. (a) | 169,261 | ||
| 26,000 | MRV Engenharia e Participacoes SA (a) | 92,902 | ||
| 262,163 | ||||
| Rental and Leasing Services - 0.81% | ||||
| 6,780 | Air Lease Corp. (a) | 210,723 | ||
| Securities, Commodity Contracts, and Other Financial Investments and Related Activities - 4.45% | ||||
| 4,190 | Cohen & Steers, Inc. | 167,851 | ||
| 3,652 | Evercore Partners, Inc. (a) | 218,317 |
See Notes to Financial Statements
| 8 |
EntrepreneurShares Global Fund
SCHEDULE OF INVESTMENTS (Continued)
December 31, 2013 (Unaudited)
| Shares | Value | |||
| 25,049 | Fortress Investment Group LLC | $214,419 | ||
| 3,500 | Lundbergforetagen AB (a) | 148,394 | ||
| 2,706 | Morningstar, Inc. | 211,312 | ||
| 750 | Partners Group Holding AG (a) | 200,017 | ||
| 1,160,310 | ||||
| Support Activities for Mining - 0.63% | ||||
| 10,312 | W&T Offshore, Inc. | 164,992 | ||
| Telecommunications - 1.02% | ||||
| 6,069 | Oplink Communications, Inc. (a)(b) | 112,883 | ||
| 3,330 | Ubiquiti Networks, Inc. (b) | 153,047 | ||
| 265,930 | ||||
| Utilities - 0.83% | ||||
| 2,262 | ITC Holdings Corp | 216,745 | ||
| Waste Management and Remediation Services - 0.43% | ||||
| 1,891 | Clean Harbors, Inc. (b) | 113,384 | ||
| Water Transportation - 0.61% | ||||
| 3,253 | Hornbeck Offshore Services, Inc. (b) | 160,145 | ||
| TOTAL COMMON STOCKS (Cost $19,904,582) | 23,759,379 | |||
| REAL ESTATE INVESTMENT TRUSTS (REITs) -0.64% | ||||
| Real Estate - 0.64% | ||||
| 6,753 | DuPont Fabros Technology, Inc. | 166,867 | ||
| TOTAL REAL ESTATE INVESTMENT TRUSTS (REITs) (Cost $160,770) | 166,867 | |||
| CLOSED-ENDED MUTUAL FUNDS - 2.23% | ||||
| Funds, Trusts, and Other Financial Vehicles - 2.23% | ||||
| 9,220 | Ares Capital Corp. | 163,839 | ||
| 12,835 | Hercules Technology Growth Capital, Inc. | 210,494 | ||
| 17,986 | PennantPark Investment Corp. | 208,638 | ||
| TOTAL CLOSED-ENDED MUTUAL FUNDS (Cost $536,162) | 582,971 | |||
| MONEY MARKET FUND - 5.95% | ||||
| 1,553,873 | First American Treasury Obligations Fund - Class Z, 0.00% (c) | 1,553,873 | ||
| TOTAL MONEY MARKET FUND (Cost $1,553,873) | 1,553,873 | |||
| Total Investments (Cost $22,155,387) - 99.84% | 26,063,090 | |||
| Other Assets in Excess of Liabilities - 0.16% | 40,943 | |||
| TOTAL NET ASSETS - 100.00% | $ 26,104,033 |
Percentages are stated as a percent of net assets.
ADR - American Depository Receipt
(a) Global security, as defined in the Fund’s prospectus.
(b) Non-income producing security.
(c) Variable rate security. The rate listed is as of December 31, 2013.
See Notes to Financial Statements
| 9 |
EntrepreneurShares U.S. All Cap Fund
SCHEDULE OF INVESTMENTS
December 31, 2013 (Unaudited)
| Shares | Value | |||
| COMMON STOCKS -93.13% | ||||
| Administrative and Support Services - 3.84% | ||||
| 37,647 | Liquidity Services, Inc. (a) | $853,081 | ||
| 30,900 | Portfolio Recovery Associates, Inc. (a) | 1,632,756 | ||
| 36,923 | The Geo Group, Inc. | 1,189,659 | ||
| 14,654 | TripAdvisor, Inc. (a) | 1,213,791 | ||
| 4,889,287 | ||||
| Ambulatory Health Care Services - 1.19% | ||||
| 59,193 | Bio-Reference Labs, Inc. (a) | 1,511,789 | ||
| Amusement, Gambling, and Recreation Industries - 1.96% | ||||
| 15,508 | Las Vegas Sands Corp. | 1,223,116 | ||
| 6,564 | Wynn Resorts Ltd. | 1,274,794 | ||
| 2,497,910 | ||||
| Apparel Manufacturing - 1.32% | ||||
| 9,460 | Under Armour, Inc. (a) | 825,858 | ||
| 32,706 | Zumiez, Inc. (a) | 850,356 | ||
| 1,676,214 | ||||
| Building Material and Garden Equipment and Supplies Dealers - 2.49% | ||||
| 16,947 | Lumber Liquidators Holdings, Inc. (a) | 1,743,677 | ||
| 79,681 | Titan Machinery, Inc. (a) | 1,419,915 | ||
| 3,163,592 | ||||
| Chemical Manufacturing - 10.41% | ||||
| 43,871 | Abaxis, Inc. (a) | 1,755,717 | ||
| 12,926 | Alexion Pharmaceuticals, Inc. (a) | 1,719,934 | ||
| 46,043 | Inter Parfums, Inc. | 1,648,800 | ||
| 14,262 | Jazz Pharmaceuticals PLC (a)(b) | 1,804,999 | ||
| 68,114 | Myriad Genetics, Inc. (a) | 1,429,032 | ||
| 4,470 | Regeneron Pharmaceuticals, Inc. (a) | 1,230,323 | ||
| 18,091 | United Therapeutics Corp. (a) | 2,045,731 | ||
| 21,373 | USANA Health Sciences, Inc. (a) | 1,615,371 | ||
| 13,249,907 | ||||
| Clothing and Clothing Accessories Stores - 1.99% | ||||
| 31,484 | The Finish Line, Inc. | 886,904 | ||
| 44,407 | Urban Outfitters, Inc. (a) | 1,647,501 | ||
| 2,534,405 | ||||
| Computer and Electronic Product Manufacturing - 9.43% | ||||
| 64,699 | Ambarella, Inc. (a)(b) | 2,195,237 | ||
| 27,223 | Cabot Microelectronics Corp. (a) | 1,244,091 | ||
| 21,526 | IPG Photonics Corp. (a) | 1,670,633 | ||
| 81,566 | IXYS Corp. | 1,057,911 | ||
| 19,157 | Microchip Technology, Inc. | 857,276 | ||
| 96,386 | OmniVision Technologies, Inc. (a) | 1,657,839 | ||
| 21,981 | QUALCOMM, Inc. | 1,632,089 | ||
| 23,891 | SanDisk Corp. | 1,685,271 | ||
| 12,000,347 | ||||
| Construction of Buildings - 1.43% | ||||
| 37,996 | Meritage Homes Corp. (a) | 1,823,428 | ||
| Couriers and Messengers - 0.97% | ||||
| 8,581 | FedEx Corp. | 1,233,690 |
See Notes to Financial Statements
| 10 |
EntrepreneurShares U.S. All Cap Fund
SCHEDULE OF INVESTMENTS (Continued)
December 31. 2013 (Unaudited)
| Shares | Value | |||
| Credit Intermediation and Related Activities - 2.86% | ||||
| 22,167 | Capital One Financial Corp. | $1,698,214 | ||
| 9,365 | Credit Acceptance Corp. (a) | 1,217,356 | ||
| 40,670 | NewStar Financial, Inc. (a) | 722,706 | ||
| 3,638,276 | ||||
| Data Processing, Hosting and Related Services - 1.96% | ||||
| 44,593 | ExlService Holdings, Inc. (a) | 1,231,659 | ||
| 15,148 | Shutterstock, Inc. (a) | 1,266,827 | ||
| 2,498,486 | ||||
| Electrical Equipment, Appliance, and Component Manufacturing - 0.67% | ||||
| 110,041 | Alpha & Omega Semiconductor Ltd. (a)(b) | 848,416 | ||
| Electronics and Appliance Stores - 1.00% | ||||
| 51,064 | PC Connection, Inc. | 1,268,940 | ||
| Fabricated Metal Product Manufacturing - 0.64% | ||||
| 9,319 | B/E Aerospace, Inc. (a) | 811,033 | ||
| Food and Beverage Stores - 0.97% | ||||
| 21,394 | Whole Foods Market, Inc. | 1,237,215 | ||
| Food Manufacturing - 3.24% | ||||
| 26,966 | Annie’s, Inc. (a) | 1,160,617 | ||
| 13,658 | J&J Snack Foods Corp. | 1,209,962 | ||
| 19,312 | The Hain Celestial Group, Inc. (a) | 1,753,143 | ||
| 4,123,722 | ||||
| Food Services and Drinking Places - 4.84% | ||||
| 9,320 | Panera Bread Co. (a) | 1,646,751 | ||
| 36,956 | Papa John’s International, Inc. | 1,677,802 | ||
| 20,926 | Starbucks Corp. | 1,640,389 | ||
| 43,026 | Texas Roadhouse, Inc. | 1,196,123 | ||
| 6,161,065 | ||||
| General Merchandise Stores - 1.90% | ||||
| 10,169 | Costco Wholesale Corp. | 1,210,212 | ||
| 21,387 | Dollar Tree, Inc. (a) | 1,206,655 | ||
| 2,416,867 | ||||
| Hospitals - 0.63% | ||||
| 13,459 | IPC The Hospitalist Co., Inc. (a) | 799,330 | ||
| Insurance Carriers and Related Activities - 3.15% | ||||
| 34,896 | HCI Group, Inc. | 1,866,936 | ||
| 24,390 | Molina Healthcare, Inc. (a) | 847,553 | ||
| 1,610 | National Interstate Corp. | 37,030 | ||
| 20,007 | The Navigators Group, Inc. (a) | 1,263,642 | ||
| 4,015,161 | ||||
| Leather and Allied Product Manufacturing - 0.65% | ||||
| 10,466 | NIKE, Inc. | 823,046 | ||
| Machinery Manufacturing - 1.00% | ||||
| 72,246 | II-VI, Inc. (a) | 1,271,530 | ||
| Merchant Wholesalers, Durable Goods - 0.97% | ||||
| 60,606 | American Axle & Manufacturing Holdings, Inc. (a) | 1,239,393 | ||
| Mining (except Oil and Gas) - 1.58% | ||||
| 52,895 | Hi-Crush Partners LP | 2,008,952 | ||
| Miscellaneous Manufacturing - 2.86% |
See Notes to Financial Statements
| 11 |
EntrepreneurShares U.S. All Cap Fund
SCHEDULE OF INVESTMENTS (Continued)
December 31, 2013 (Unaudited)
| Shares | Value | |||
| 50,146 | Exactech, Inc. (a) | $1,191,469 | ||
| 63,025 | Globus Medical, Inc. (a) | 1,271,844 | ||
| 18,470 | ICU Medical, Inc. (a) | 1,176,724 | ||
| 3,640,037 | ||||
| Motor Vehicle and Parts Dealers - 0.96% | ||||
| 50,021 | Sonic Automotive, Inc. | 1,224,514 | ||
| Nonstore Retailers - 0.97% | ||||
| 22,595 | eBay, Inc. (a) | 1,240,240 | ||
| Other Information Services - 1.62% | ||||
| 1,118 | Google, Inc. (a) | 1,252,954 | ||
| 38,023 | Travelzoo, Inc. (a) | 810,650 | ||
| 2,063,604 | ||||
| Personal and Laundry Services - 0.97% | ||||
| 68,027 | Service Corp. International | 1,233,330 | ||
| Primary Metal Manufacturing - 0.97% | ||||
| 63,291 | Steel Dynamics, Inc. | 1,236,706 | ||
| Professional, Scientific, and Technical Services - 8.48% | ||||
| 29,455 | Cerner Corp. (a) | 1,641,822 | ||
| 28,870 | Netscout Systems, Inc. (a) | 854,263 | ||
| 38,323 | PAREXEL International Corp. (a) | 1,731,433 | ||
| 1,022 | priceline.com, Inc. (a) | 1,187,973 | ||
| 26,882 | Synchronoss Technologies, Inc. (a) | 835,224 | ||
| 17,994 | Syntel, Inc. | 1,636,554 | ||
| 27,701 | VeriSign, Inc. (a) | 1,655,965 | ||
| 32,895 | Virtusa Corp. (a) | 1,252,971 | ||
| 10,796,205 | ||||
| Publishing Industries (except Internet) - 3.70% | ||||
| 43,636 | Ellie Mae, Inc. (a) | 1,172,499 | ||
| 47,704 | Oracle Corp. | 1,825,155 | ||
| 48,721 | Twenty-First Century Fox, Inc | 1,714,005 | ||
| 4,711,659 | ||||
| Rental and Leasing Services - 1.25% | ||||
| 51,069 | Air Lease Corp. | 1,587,225 | ||
| Securities, Commodity Contracts, and Other Financial Investments and Related Activities - 4.81% | ||||
| 31,562 | Cohen & Steers, Inc. | 1,264,374 | ||
| 27,506 | Evercore Partners, Inc. | 1,644,309 | ||
| 188,679 | Fortress Investment Group LLC | 1,615,092 | ||
| 20,382 | Morningstar, Inc. | 1,591,630 | ||
| 6,115,405 | ||||
| Support Activities for Mining - 0.98% | ||||
| 77,670 | W&T Offshore, Inc. | 1,242,720 | ||
| Telecommunications - 1.57% | ||||
| 45,714 | Oplink Communications, Inc. (a) | 850,280 | ||
| 25,082 | Ubiquiti Networks, Inc. (a) | 1,152,769 | ||
| 2,003,049 | ||||
| Utilities - 1.28% | ||||
| 17,036 | ITC Holdings Corp. | 1,632,390 | ||
| Waste Management and Remediation Services - 0.67% | ||||
| 14,245 | Clean Harbors, Inc. (a) | 854,130 |
See Notes to Financial Statements
| 12 |
EntrepreneurShares U.S. All Cap Fund
SCHEDULE OF INVESTMENTS (Continued)
December 31, 2013 (Unaudited)
| Shares | Value | |||
| Water Transportation - 0.95% | ||||
| 24,500 | Hornbeck Offshore Services, Inc. (a) | $1,206,135 | ||
| TOTAL COMMON STOCKS (Cost $113,063,638) | 118,529,350 | |||
| REAL ESTATE INVESTMENT TRUST (REITs) -0.99% | ||||
| Real Estate - 0.99% | ||||
| 50,869 | DuPont Fabros Technology, Inc. | 1,256,973 | ||
| TOTAL REAL ESTATE INVESTIVIENT TRUST (REITs) (Cost $1,204,478) | 1,256,973 | |||
| CLOSED-ENDED MUTUAL FUNDS -3.45% | ||||
| Funds, Trusts, and Other Financial Vehicles - 3.45% | ||||
| 69,444 | Ares Capital Corp. | 1,234,020 | ||
| 96,677 | Hercules Technology Growth Capital, Inc. | 1,585,502 | ||
| 135,478 | PennantPark Investment Corp. | 1,571,545 | ||
| TOTAL CLOSED-ENDED MUTUAL FUNDS (Cost $4,429,827) | 4,391,067 | |||
| MONEY MARKET FUNDS -2.18% | ||||
| Funds, Trusts, and Other Financial Vehicles - 2.18% | ||||
| 2,771,826 | Fidelity Institutional Money Market Funds - Class I, 0.01% (c) | 2,771,826 | ||
| TOTAL MONEY MARKET FUNDS (Cost $2,771,826) | 2,771,826 | |||
| Total Investments (Cost $121,469,769) - 99.75% | 126,949,216 | |||
| Other Assets in Excess of Liabilities -0.25% | 321,398 | |||
| TOTAL NET ASSETS - 100.00% | $ 127,270,614 |
Percentages are stated as a percent of net assets.
(a) Non-income producing security.
(b) Foreign issued securities.
(c) Variable rate security. The rate listed is as of December 31, 2013.
See Notes to Financial Statements
| 13 |
EntrepreneurShares Series Trust
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2013 (Unaudited)
| EntrepreneurShares | EntrepreneurShares | |||||||
| Global Fund | U.S. All Cap Fund | |||||||
| ASSETS: | ||||||||
| Investments, at value(1) | $ | 26,063,090 | $ | 126,949,216 | ||||
| Cash | 5,428 | |||||||
| Income receivable | 21,110 | 67,575 | ||||||
| Receivable for investments sold | 38,472 | 289,168 | ||||||
| Other assets | 38,474 | — | ||||||
| Total Assets | 26,161,146 | 127,311,387 | ||||||
| LIABILITIES: | ||||||||
| Payable to Investment Advisor | 19,145 | 30,497 | ||||||
| Other accrued expenses | 37,968 | 10,276 | ||||||
| Total Liabilities | 57,113 | 40,773 | ||||||
| NET ASSETS | $ | 26,104,033 | $ | 127,270,614 | ||||
| NET ASSETS CONSIST OF: | ||||||||
| Capital stock | $ | 20,337,257 | $ | 121,796,247 | ||||
| Unrealized appreciation on investments | 3,907,405 | 5,479,447 | ||||||
| Accumulated net investment income (loss) | (69,764 | ) | 1 | |||||
| Accumulated net realized gain (loss) | 1,929,135 | (5,081 | ) | |||||
| Total Net Assets | $ | 26,104,033 | $ | 127,270,614 | ||||
| NET ASSETS CONSIST OF: | ||||||||
| Class Institutional Shares: | ||||||||
| Net assets | $ | 26,104,033 | $ | 127,270,614 | ||||
| Shares outstanding | 1,972,844 | 12,179,345 | ||||||
| Net Asset Value, Offering and Redemption Price Per Share(2) (Unlimited shares of no par value authorized) | $ | 13.23 | $ | 10.45 | ||||
| (1) Cost of investments | $ | 22,155,387 | $ | 121,469,769 | ||||
| (2) If applicable, redemption price per share may be reduced by a 2.00% redemption fee for shares redeemed within five days of purchase. | ||||||||
See Notes to Financial Statements
| 14 |
EntrepreneurShares Series Trust
STATEMENT OF OPERATIONS
For the periods ended December 31, 2013† (Unaudited)
| EntrepreneurShares | EntrepreneurShares | |||||||
| Global Fund | U.S. All Cap Fund | |||||||
| INVESTMENT INCOME: | ||||||||
| Dividend income* | $ | 182,908 | $ | 105,558 | ||||
| Interest income | — | 66 | ||||||
| 182,908 | 105,624 | |||||||
| EXPENSES: | ||||||||
| Investment advisory fees (see Note 3) | 154,735 | 35,976 | ||||||
| Fund accounting fees | 23,758 | 2,226 | ||||||
| Administration fees | 18,004 | 1,624 | ||||||
| Transfer agent and shareholder service fees | 16,781 | 1,022 | ||||||
| Federal and state registration fees | 12,274 | 2,338 | ||||||
| Custody fees | 11,412 | 504 | ||||||
| Audit fees | 9,590 | 1,218 | ||||||
| Directors’ fees | 2,940 | 728 | ||||||
| Legal fees | 2,753 | 168 | ||||||
| Reports to shareholders | 1,750 | 98 | ||||||
| Other | 11,822 | 350 | ||||||
| Total expenses | 265,819 | 46,252 | ||||||
| Expense waiver/reimbursement (see Note 3) | (55,379 | ) | (5,479 | ) | ||||
| Net expenses | 210,440 | 40,773 | ||||||
| NET INVESTMENT INCOME (LOSS): | (27,532 | ) | 64,851 | |||||
| REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: | ||||||||
| Net realized gain (loss) on investment transactions | 3,156,067 | (5,081 | ) | |||||
| Net realized gain on foreign currency transactions | 4,617 | — | ||||||
| Change in unrealized appreciation on investments | 916,996 | 5,479,447 | ||||||
| Change in unrealized depreciation on foreign currency | (175 | ) | — | |||||
| Net gain on investments | 4,077,505 | 5,474,366 | ||||||
| NET INCREASE IN NET ASSETS RESULTING FROM | ||||||||
| OPERATIONS: | $ | 4,049,973 | $ | 5,539,217 | ||||
| *Net of foreign tax withheld of: | $ | (4,767 | ) | $ | — | |||
†The U.S. All Cap Fund commenced operations on December 17, 2013.
See Notes to Financial Statements
| 15 |
EntrepreneurShares Series Trust
STATEMENT OF CHANGES IN NET ASSETS
| EntrepreneurShares | ||||||||||||
| EntrepreneurShares Global Fund | U.S. All Cap Fund | |||||||||||
| SIX MONTHS | YEAR | PERIOD FROM | ||||||||||
| ENDED | ENDED | December 17, 20132 to | ||||||||||
| December 31, 2013 | JUNE 30, 2013 | December31, 2013 | ||||||||||
| (Unaudited) | (Unaudited) | |||||||||||
| OPERATIONS: | ||||||||||||
| Net investment income (loss) | $ | (27,532 | ) | $ | (44,538 | ) | $ | 64,851 | ||||
| Net realized gain (loss) on investment transactions | 3,156,067 | 462,407 | (5,081 | ) | ||||||||
| Net realized gain (loss) on foreign currency transactions | 4,617 | (3,899 | ) | — | ||||||||
| Change in unrealized appreciation on investments | 916,996 | 2,990,109 | 5,479,447 | |||||||||
| Change in unrealized depreciation on foreign currency | (175 | ) | (145,885 | ) | — | |||||||
| Net increase in net assets resulting from operations | 4,049,973 | 3,258,194 | 5,539,217 | |||||||||
| CAPITAL SHARE TRANSACTIONS: | ||||||||||||
| Proceeds from shares sold - Retail1 | — | 122,008 | — | |||||||||
| Proceeds from exchange of Retail shares - Institutional1 | — | 1,990,198 | — | |||||||||
| Proceeds from shares sold - Institutional | 200 | 5,006,248 | 121,731,397 | |||||||||
| Proceeds from shares issued to holders in reinvestment of dividends - Retail1 | — | 16,726 | ||||||||||
| Proceeds from shares issued to holders in reinvestment of dividends - Institutional | 1,030,819 | 119,226 | 64,850 | |||||||||
| Payment for shares redeemed - Retail1 | — | (2,542,321 | ) | — | ||||||||
| Payment for shares redeemed - Institutional | (209,045 | ) | (1,066,975 | ) | — | |||||||
| Payment for exchange to Institutional - Retail1 | — | (1,990,198 | ) | — | ||||||||
| Net increase from capital share transactions | 821,974 | 1,654,912 | 121,796,247 | |||||||||
| DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||||||
| Distributions from ordinary income - Institutional1 | (64,850 | ) | ||||||||||
| Distributions from realized gains - Retail | (17,728 | ) | — | |||||||||
| Distributions from realized gains - Institutional | (1,320,303 | ) | (147,720 | ) | — | |||||||
| Total dividends and distributions | (1,320,303 | ) | (165,448 | ) | (64,850 | ) | ||||||
| INCREASE IN NET ASSETS | 3,551,644 | 4,747,658 | 127,270,614 | |||||||||
| NET ASSETS: | ||||||||||||
| Beginning of Period | 22,552,389 | 17,804,731 | — | |||||||||
| End of Period* | $ | 26,104,033 | $ | 22,552,389 | $ | 127,270,614 | ||||||
| *Including undistributed net investment income (loss) of: | $ | (69,764 | ) | $ | (42,232 | ) | $ | 1 | ||||
1 Retail class converted to Institutional shares on January 10, 2013. See Notes 1 of the Financial Statements.
2 U.S. All Cap Fund commenced operations on December 17, 2013. See Note 1 of the Financial Statements.
See Notes to Financial Statements
| 16 |
EntrepreneurShares Global Fund
FINANCIAL HIGHLIGHTS
| EntrepreneurShares Global Fund | ||||||||||||||||
| PERIOD | YEAR | YEAR | PERIOD FROM | |||||||||||||
| ENDED | ENDED | ENDED | NOV. 11, 2010(1) | |||||||||||||
| DEC. 31, 2013 | JUNE 30, 2013 | JUNE 30, 2012 | TO JUNE 30, 2011 | |||||||||||||
| (UNAUDITED) | ||||||||||||||||
| Per Share Data: | ||||||||||||||||
| Net asset value, beginning of period | $ | 11.82 | $ | 10.15 | $ | 11.23 | $ | 10.00 | ||||||||
| Income (loss) from investment operations: | ||||||||||||||||
| Net investment loss (2) | (0.01 | ) | (0.02 | ) | (0.01 | ) | (0.04 | ) | ||||||||
| Net realized and unrealized gains (losses) on investments | 2.12 | 1.77 | (1.06 | ) | 1.29 | |||||||||||
| Total from investment operations | 2.11 | 1.75 | (1.07 | ) | 1.25 | |||||||||||
| Less distributions: | ||||||||||||||||
| Dividends from net investment income | — | — | — | (0.02 | ) | |||||||||||
| Distributions from net realized capital gains | (0.70 | ) | (0.08 | ) | (0.01 | ) | — | |||||||||
| Return of capital | — | — | — | (3) | — | |||||||||||
| Total distributions | (0.70 | ) | (0.08 | ) | (0.01 | ) | (0.02 | ) | ||||||||
| Net asset value, end of penod | $ | 13.23 | $ | 11.82 | $ | 10.15 | $ | 11.23 | ||||||||
| Total return | 18.03% | (4) | 17.33% | -9.55% | 12.50%(4 | ) | ||||||||||
| Supplemental data and ratios: | ||||||||||||||||
| Net assets, end of period (000’s) | $ | 26,104 | $ | 22,552 | $ | 15,606 | $ | 16,309 | ||||||||
| Ratio of expenses to average net assets | 1.70% | (5)(7) | 1.71% | (7)(8) | 1.70% | (7) | 1.70% | (5)(6)(7) | ||||||||
| Ratio of net investment loss to average net assets | -0.22% | (5)(7) | -0.21% | (7)(8) | -0.13% | (7) | -0.60% | (5)(6) | ||||||||
| Portfolio turnover rate | 47.88% | (4) | 13.53% | 18.83% | 32.87% | (4) | ||||||||||
(1) The Fund commenced operations on November 11, 2010.
(2) Net investment loss per share has been calculated based on average shares outstanding during the period.
(3) Amount is less than $0.01 per share.
(4) Not annualized.
(5) Annualized.
(6) Including interest expense increases the ratio by 0.07%.
(7) Net of fees waved of 0.45% for the period ended December 31, 2013 and 0.63%, 1.21% and 1.03% for the years ended June 30, 2013 and 2012 and the period ended June 30, 2011, respectively.
(8) Includes expenses related to the Retail Class that was merged into the Institutional Class on January 10, 2013. In the absence of these expenses, the ratio would have been 1.70%.
See Notes to Financial Statements
| 17 |
EntrepreneurShares U.S. All Cap Fund
FINANCIAL HIGHLIGHTS
| EntrepreneurShares | ||||
| U.S. All Cap Fund | ||||
| PERIOD FROM | ||||
| DEC. 17, 2013(1) | ||||
| TO DEC. 31, 2013 | ||||
| (UNAUDITED) | ||||
| Per Share Data: | ||||
| Net asset value, beginning of period | $ | 10.00 | ||
| Income from investment operations: | ||||
| Net investment income (2) | 0.01 | |||
| Net realized and unrealized gains on investments | 0.45 | |||
| Total from investment operations | 0.46 | |||
| Less distributions: | ||||
| Dividends from net investment income | (0.01 | ) | ||
| Total distributions | (0.01 | ) | ||
| Net asset value, end of period | $ | 10.45 | ||
| Total return | 4.55%(3 | ) | ||
| Supplemental data and ratios: | ||||
| Net assets, end of period (000's) | $ | 127,271 | ||
| Ratio of expenses to average net assets | 0.85% | (4)(5) | ||
| Ratio of net investment income to average net assets | 1.35% | (4)(5) | ||
| Portfolio turnover rate | 7.83% | (3) | ||
(1) The Fund commenced operations on December 17, 2013.
(2) Net investment loss per share has been calculated based on average shares outstanding during the period.
(3) Not annualized.
(4) Annualized.
(5) Net of fees waved of 0.11%, for the period ended December 31, 2013.
See Notes to Financial Statements
| 18 |
EntrepreneurShares Series Trust
NOTES TO FINANCIAL STATEMENTS
December 31, 2013 (Unaudited)
1. ORGANIZATION
EntrepreneurShares™ Series Trust, a Delaware statutory trust (the “Trust”), was formed on July 1, 2010, and has authorized capital of unlimited shares of beneficial interest. The Trust is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”), and is authorized to issue multiple series and classes of shares. EntrepreneurShares Global Fund (the “Global Fund”) and the EntrepreneurShares U.S. All Cap Fund (the “U.S. All Cap Fund”) (collectively the “Funds”) are classified as “diversified” series, as defined in the 1940 Act. The Global Fund commenced operations on November 11, 2010. The U.S. All Cap Fund commenced operations on December 17, 2013.
The investment goal of the Global Fund is to seek long-term capital appreciation. The Global Fund seeks these investment results through active principles-based securities selection. The Global Fund mainly invests in equity securities of global companies with market capitalizations that are above $200 million at the time of initial purchase and possess entrepreneurial characteristics, as determined by Weston Capital Advisors, the Global Fund’s investment advisor.
The investment goal of the U.S. All Cap Fund is to seek long-term capital appreciation. The U.S. All Cap Fund seeks investment results that exceed the performance, before fees and expenses, of the Russell 3000 Index. The U.S. All Cap Fund will invest at least 80% of its assets in equity securities of U.S. companies with market capitalization that are above $200 million at the time of initial purchase and possess entrepreneurial characteristics, as determined by Capital Impact Advisors, LLC, the U.S. All Cap Fund’s investment advisor.
The Global Fund and the U.S. All Cap Fund both currently offer one share class, the Institutional Class. Effective June 29, 2012 the Global Fund ceased offering its Class A shares to the public. The remaining Class A shares were converted into Retail shares. Effective January 10, 2013 the Global Fund ceased offering its Retail shares to the public. The remaining Retail shares were converted into Institutional shares. As described in the Global Fund’s prospectus, the Institutional Class shares do not have a 12b-1 fee.
2. SUMMARY OF SIGNIFICANT ACCOUNT POLICIES
The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of its financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America (GAAP).
Investment Valuations
In determining the net asset value (NAV) of the Funds’ shares, securities that are listed on a national securities exchange (other than The Nasdaq OMX Group, Inc., referred to as NASDAQ) are valued at the last sale price on the day the valuation is made. Securities that are traded on NASDAQ under one of its three listing tiers, NASDAQ Global Select Market, NASDAQ Global Market and NASDAQ Capital Market, are valued at the Nasdaq Official Closing Price. Securities price information on listed stocks is taken from the exchange where the security is primarily traded. Securities which are listed on an exchange but which are not traded on the valuation date are valued at the most recent bid price. Unlisted securities held by the Funds are valued at the average of the quoted bid and ask prices in the OTC market. Securities and other assets for which market quotations are not readily available are valued by appraisal at their fair value as determined in good faith by Weston Capital Advisors, LLC for the Global Fund and by Capital Impact Advisors, LLC for the U.S. All Cap Fund (each an “Advisor”, collectively the “Advisors”) under procedures established by and under the general supervision and responsibility of the Board.
Short-term investments held with a remaining maturity of 60 days or less generally are valued at amortized cost, as the Board believes that this method of valuing short-term investments approximates market value. Short-term investments with 61 days or more to maturity at time of purchase are valued at market value through the 61st day prior to maturity, based on quotations received from market makers or other appropriate sources; thereafter, they are generally valued at amortized cost. There is no definitive set of circumstances under which the Funds may elect to use fair value procedures to value a security. Types of securities that the Funds may hold for which fair value pricing might be required include, but are not limited to: (a) illiquid securities, including restricted securities and private placements for which there is no public market; (b) options not traded on a securities exchange; (c) securities of an issuer that has entered into a restructuring; (d) securities whose trading has been halted or suspended, as permitted by the Securities and Exchange Commission (the SEC); (e) foreign securities, if an event or development has occurred subsequent to the close of the foreign market and prior to the close of regular trading on the New York Stock Exchange that would materially affect the value of the security; and (f) fixed income securities that have gone into default and for which there is not a current market value quotation.
| 19 |
EntrepreneurShares Series Trust
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2013 (Unaudited)
Valuing securities at fair value involves greater reliance on judgment than securities that have readily available market quotations. There can be no assurance that the Funds could obtain the fair value assigned to a security if it were to sell the security at approximately the time at which the Funds determines its NAV per share.
Fair-valued securities are valued by their respective Advisors, under the supervision of the Board. There is no single standard for determining the fair value of a security. Rather, in determining the fair value of a security, an Advisor and the Board shall take into account the relevant factors and surrounding circumstances, which may include: (1) the nature and pricing history (if any) of the security; (2) whether any dealer quotations for the security are available; (3) possible valuation methodologies that could be used to determine the fair value of the security; (4) the recommendation of the portfolio manager of the Fund with respect to the valuation of the security; (5) whether the same or similar securities are held by other funds managed by the Advisors or other funds and the method used to price the security in those funds; (6) the extent to which the fair value to be determined for the security will result from the use of data or formulae produced by third parties independent of the Advisors; and (7) the liquidity or illiquidity of the market for the security.
Use of Estimates and Indemnifications
The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in these financial statements. Actual results could differ from those estimates.
In the normal course of business the Trust, on behalf of the Funds, enters into contracts that contain a variety of representations which provide general indemnifications. The Trust’s maximum exposure under these arrangements is unknown; however, the Trust has not had claims or losses pursuant to these contracts and the Trust expects any risk of loss to be remote.
Federal Income Tax
The Funds intends to continue 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 it distributes substantially all of its net investment income and net realized gains to shareholders.
The Global Fund has reviewed all open tax years and major jurisdictions and concluded that the Global Fund did not have any tax positions that did not meet the “more-likely-than-not” threshold of being sustained by the applicable tax authority for the year ended June 30, 2013. The Global Fund would recognize interest and penalties, if any, related to uncertain tax benefits in the Statement of Operations. During the year ended June 30, 2013, the Global Fund did not incur any interest or penalties. Open tax years are those that are open for exam by taxing authorities. As of June 30, 2013, open Federal tax years include the tax years ended June 30, 2011, 2012 and 2013. The Global Fund has no examination in progress.
Tax information for the U.S. All Cap Fund will be available after the completion of its first fiscal year.
Fair Value Measurement
The Funds have adopted authoritative fair valuation accounting standards which establish an authoritative definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion of changes in valuation techniques and related inputs during the period. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
| Level 1: | Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Funds have the ability to access at the measurement date; |
| Level 2: | Significant inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, including inputs in markets that are not considered to be active; |
| Level 3: | Significant inputs that are unobservable. |
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, and other factors. A financial instrument’s level within the fair value hierarchy is based on the lowest
| 20 |
EntrepreneurShares Series Trust
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2013 (Unaudited)
level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the Funds. The Funds consider observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the Funds’ perceived risk of that instrument.
Investments whose values are based on quoted market prices in active markets, and are therefore classified within Level 1, include active listed equities and real estate investment trusts, closed-end mutual funds, and certain money market securities. Investments that trade in markets that are not considered to be active, but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. Investments classified within Level 3 have significant unobservable inputs, as they trade infrequently or not at all. The tables below are a summary of the inputs used to value the Funds’ investments as of December 31, 2013.
EntrepreneurShares Global Fund
| Investments at Value | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
| Total Common Stock* | $ | 23,759,379 | $ | 23,759,379 | $ | — | $ | — | ||||||||
| Total Real Estate Investment Trusts* | 166,867 | 166,867 | — | — | ||||||||||||
| Total Closed-End Mutual Funds* | 582,971 | 582,971 | — | — | ||||||||||||
| Total Money Market Funds | 1,553,873 | 1,553,873 | — | — | ||||||||||||
| Total Investments | $ | 26,063,090 | $ | 26,063,090 | $ | — | $ | — | ||||||||
EntrepreneurShares All Cap Fund
| Investments at Value | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
| Total Common Stock* | $ | 118,529,350 | $ | 118,529,350 | $ | — | $ | — | ||||||||
| Total Real Estate Investment Trusts* | 1,256,973 | 1,256,973 | — | — | ||||||||||||
| Total Closed-End Mutual Funds* | 4,391,067 | 4,391,067 | — | — | ||||||||||||
| Total Money Market Funds | 2,771,826 | 2,771,826 | — | — | ||||||||||||
| Total Investments | $ | 126,949,216 | $ | 126,949,216 | $ | — | $ | — | ||||||||
* For further information regarding security characteristics, please see the Schedules of Investments.
The Funds did not hold any Level 3 securities during the period ended December 31, 2013. There were no transfers of securities between levels during the period ended December 31, 2013. Transfers between levels are recognized at the end of the reporting period. The Funds did not hold any derivate instruments during the period ended December 31, 2013.
Distribution to Shareholders
The Funds intend to continue to distribute to its shareholders any net investment income and any net realized long or short-term capital gains, if any, at least annually. Distributions are recorded on ex-dividend date. The Fund may periodically make reclassifications among certain of its capital accounts as a result of the characterization of certain income and realized gains determined annually in accordance with federal tax regulations that may differ from generally accepted accounting principles.
Foreign Currency Transactions
The Fund’s books and records are maintained in U.S. dollars. Foreign currency denominated transactions (i.e. market value of investment securities, assets and liabilities, purchases and sales of investment securities and income and expenses) are translated into U.S. dollars at the current rate of exchange. The Funds isolate portions of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are reflected as net realized and unrealized gain or loss on foreign currency translation.
Other
Investment transactions are recorded on the trade date. Dividend income, less any foreign tax withheld, is recognized on the ex- dividend date and interest income is recognized on an accrual basis, including amortization/accretion of premiums or discounts.
| 21 |
EntrepreneurShares Series Trust
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2013 (Unaudited)
Net investment income, other than class specific expenses, and realized and unrealized gains and losses are allocated daily to each class of shares based upon the relative net asset value of outstanding shares of each class of shares at the beginning of the day.
3. AGREEMENTS
Global Fund’s Investment Advisory Agreement
Weston Capital Advisors, a related party of the Funds, oversees the performance of the Global Fund and is responsible for overseeing the management of the investment portfolio of the Global Fund. These services are provided under the terms of an Investment Advisory Agreement dated October 14, 2010 (the “Global Fund’s Investment Advisory Agreement”) between the Trust and Weston Capital Advisors, pursuant to which Weston Capital Advisors receives an annual advisory fee equal to 1.25% of the Global Fund’s average net assets.
Through October 31, 2014, the Advisor has agreed to waive and/or reimburse the Global Fund for its advisory fee, and to the extent necessary, bear other expenses, to limit the total annualized expenses (excluding borrowing and investment-related costs and fees, taxes, extraordinary expenses and fees and expenses of underlying funds) of the Institutional Class shares of the Global Fund to the amounts of 1.70% per annum of net assets attributable to such shares of the Global Fund. Weston Capital Advisors shall be permitted to recover expenses it has borne subsequent to the effective date of this agreement (whether through reduction of its advisory fee or otherwise) in later periods to the extent that the Global Fund’s expenses fall below the annual rates set forth above, given that such rate is not greater than the rate that was in place at the time of the waiver, provided, however, that the Global Fund is not obligated to pay any such reimbursed fees more than three years after the end of the fiscal year in which the expense was borne by Weston Capital Advisors. Any such waiver or reimbursement is subject to later adjustment to allow Weston Capital Advisors to recoup amounts waived or reimbursed to the extent actual fees and expenses for the fiscal period are less than the Expense Limitation Cap; provided, however, that Weston Capital Advisor shall only be entitled to recoup such amounts over the following three fiscal years. Weston Capital Advisors has waived $55,379, which expires on June 30, 2017, $131,603, which expires on June 30, 2016, $204,253, which expires on June 30, 2015 and $121,768, which expires on June 30, 2014.
Sub-Advisory services are provided to the Global Fund, pursuant to an agreement between Weston Capital Advisor and EntrepreneurShares, LLC (the “Sub-Advisor”). Under the terms of this sub-advisory agreement, Weston Capital Advisor, not the Global Fund, compensates the Sub-Advisor based on the Global Fund’s average net assets. Certain officers of Weston Capital Advisor are also officers of the Sub-Advisor. Mr. Shulman is a majority owner of both Weston Capital Advisor and the Sub-Advisor.
U.S. All Cap Fund’s Investment Advisory Agreement
Capital Impact Advisors, LLC, a related party of the Funds, oversees the performance of the U.S. All Cap Fund and is responsible for overseeing the management of the investment portfolio of the U.S. All Cap Fund. These services are provided under the terms of an Investment Advisory Agreement dated September 10, 2013 (the “U.S. All Cap Fund’s Investment Advisory Agreement”) between the Trust and Capital Impact Advisors, LLC, pursuant to which Capital Impact Advisors, LLC receives an annual advisory fee equal to 0.75% of the U.S. All Cap Fund’s average net assets.
Through October 31, 2014, the Capital Impact Advisors, LLC has agreed to waive and/or reimburse the U.S. All Cap Fund for its advisory fee, and to the extent necessary, bear other expenses, to limit the total annualized expenses (excluding borrowing and investment-related costs and fees, taxes, extraordinary expenses and fees and expenses of underlying funds) of the Institutional Class shares of the U.S. All Cap Fund to the amounts of 0.85% per annum of net assets attributable to such shares of the U.S. All Cap Fund. Capital Impact Advisors, LLC shall be permitted to recover expenses it has borne subsequent to the effective date of this agreement (whether through reduction of its advisory fee or otherwise) in later periods to the extent that the U.S. All Cap Fund’s expenses fall below the annual rates set forth above, given that such rate is not greater than the rate that was in place at the time of the waiver provided, however, that the U.S. All Cap Fund is not obligated to pay any such reimbursed fees more than three years after the end of the fiscal year in which the expense was borne by Capital Impact Advisors, LLC. Any such waiver or reimbursement is subject to later adjustment to allow Capital Impact Advisors, LLC to recoup amounts waived or reimbursed to the extent actual fees and expenses for the fiscal period are less than the Expense Limitation Cap; provided, however, that Capital Impact Advisors, LLC shall only be entitled to recoup such amounts over the following three fiscal years. Capital Impact Advisors, LLC has waived $5,479, which expires on June 30, 2017.
| 22 |
EntrepreneurShares Series Trust
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2013 (Unaudited)
4. DISTRIBUTION PLAN
The Trust has adopted distribution and service (Rule 12b-1) plans (the “Plans”) for the Funds’ Retail Class shares (which are not available for sale at this time) and Class A shares (which is not available for sale at this time) in accordance with Rule 12b-1 under the Investment Company Act of 1940, as amended. The Plans allows the Funds to use up to 0.25% of the average daily net assets attributable to the relevant classes of Funds’ shares, to pay sales, distribution, and other fees for the sale of that share class and for services provided to holders of that class of shares. Because these fees are paid out of the Funds’ assets, over time, these fees will increase the cost of an investment in Retail Class shares and Class A shares and may cost the shareholder more than paying other types of sales charges. The Funds’ Institutional Class shares are not subject to any distribution and service (Rule 12b-1) fees.
5. INCOME TAXES (GLOBAL FUND)
The tax character of distributions paid by the Global Fund during the periods ended June 30, 2013 and 2012 was as follows:
| Ordinary | Long-Term | Return | ||||||||||||||
| Income | Capital Gain | of Capital | Total | |||||||||||||
| June 30, 2013 | $ | — | $ | 165,448 | $ | — | $ | 165,448 | ||||||||
| June 30, 2012 | $ | 9,374 | $ | 2,597 | $ | 637 | $ | 12,608 | ||||||||
The tax character of the distributions differs from the financial statements due to adjustments relating to REITs and partnerships.
Additionally, GAAP requires that certain components of net assets be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. The following table shows the reclassifications made in the Global Fund:
| Paid in | Accumulated Net | Accumulated | ||||||||||
| Period Ended | Capital | Investment Loss | Realized Gain | |||||||||
| June 30, 2013 | $ | (6,562 | ) | $ | 2,663 | $ | 3,899 | |||||
| June 30, 2012 | $ | (68,879 | ) | $ | 36,944 | $ | 31,935 | |||||
The permanent differences relate primarily to foreign currency reclassifications, partnership adjustments and reclassification of net operating losses.
As of June 30, 2013, the cost of investments, gross unrealized appreciation and depreciation of investments and distributable income for tax purposes are:
| Global Fund | ||||
| Cost of Investments | $ | 19,611,904 | ||
| Unrealized appreciation | 5,118,125 | |||
| Unrealized depreciation | (2,135,577 | ) | ||
| Net unrealized appreciation | 2,982,548 | |||
| Undistributed ordinary income | — | |||
| Undistributed long-term capital gain | 96,913 | |||
| Distributable income | 96,913 | |||
| Other accumulated losses | (42,355 | ) | ||
| Total accumulated losses | $ | 3,037,106 | ||
The table above differs from the financial statements due to timing differences related to the deferral of losses due to wash sales. As of June 30, 2013, the Fund had no capital loss carry forwards which could be used to offset future gains.
At June 30, 2013 the Global Fund had deferred qualified late year ordinary losses of $ 42,232.
Tax information for the U.S. All Cap Fund will be available in the annual report to shareholders dated June 30, 2014.
6. CAPITAL SHARE TRANSACTIONS
The Trust has authorized capital of unlimited shares of no par value which may be issued in more than one class or series. Currently the Trust consists of two series, the Funds. Transactions in shares of the Funds were as follows:
| 23 |
EntrepreneurShares Series Trust
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2013 (Unaudited)
| Global Fund | ||||||||
| Retail Class | ||||||||
| Period Ended December 31, 2013 | Year Ended June 30, 2013 | |||||||
| Shares sold | — | 11,938 | ||||||
| Shares issued in reinvestment of dividends | — | 1,547 | ||||||
| Shares exchanged into Institutional Class | — | (179,287 | ) | |||||
| Shares redeemed | — | (51,668 | ) | |||||
| Net increase | — | (217,470 | ) | |||||
| Shares outstanding | ||||||||
| Beginning of period | — | 217,470 | ||||||
| End of period | — | — | ||||||
| Institutional Class | ||||||||
| Shares sold | 17 | 281,076 | ||||||
| Shares issued in reinvestment of dividends | 80,533 | 10,978 | ||||||
| Shares exchanged from Retail Class | — | 178,347 | ||||||
| Shares redeemed | (16,487 | ) | (98,983 | ) | ||||
| Net increase | 64,063 | 371,418 | ||||||
| Shares outstanding | ||||||||
| Beginning of period | 1,908,781 | 1,537,363 | ||||||
| End of period | 1,972,844 | 1,908,781 | ||||||
| U.S. All Cap Fund | ||||||||
| Institutional Class | ||||||||
| Shares sold | 12,173,139 | — | ||||||
| Shares issue in reinvestment of dividends | 6,206 | — | ||||||
| Shares redeemed | — | — | ||||||
| Net increase | 12,179,345 | — | ||||||
| Shares outstanding | ||||||||
| Beginning of period | — | — | ||||||
| End of period | 12,179,345 | — | ||||||
7. RELATED PARTIES
At December 31, 2013, certain officers of the Trust were also employees of the Advisors. However, these officers were not compensated directly by the Funds. In addition, refer to Note 3, agreements.
8. BENEFICIAL OWNERSHIP
The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a fund creates a presumption of control of a fund, under Section 2(a)(9) of the 1940 Act. At December 31, 2013, for the benefit of its shareholders, FP Capital EntrepreneurShares, an affiliate of the Global Fund, held 71.22% of the total Global Fund shares outstanding. At December 31, 2013, for the benefit of its shareholders, MAC & Co., an affiliate of the U.S. All Cap Fund, held 100.00% of the total U.S. All Cap Fund
shares outstanding.
9. SUBSEQUENT EVENTS EVALUATION
In preparing the financial statements, the Funds have evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued. This evaluation did not result in any subsequent events that necessitated disclosure and/or adjustments.
10. INVESTMENT TRANSACTIONS
During the period ended December 31, 2013, the aggregate purchases and sales of securities (excluding short-term) were:
| 24 |
EntrepreneurShares Series Trust
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2013 (Unaudited)
| EntrepreneurShares Global Fund | EntrepreneurShares U.S. All Cap Fund | ||
| Purchases: | $11,583,600 | $51,472,923 | |
| Sales: | $10,490,636 | $ 4,885,970 |
On December 17, 2013, the U.S. All Cap Fund issued some of its initial shares to an initial investor, by executing a transfer in-kind transaction using certain securities with a market value of $72,116,070. These transactions did not incur any brokerage commissions and have been excluded from the U.S. All Cap Fund’s portfolio turnover and investment transactions as presented on the financial highlights and notes to the financial statements.
11. FOREIGN INVESTMENT RISK
The Global Fund generally invests a significant portion of its total assets in securities principally traded in markets outside the U. S. The foreign markets in which the Global Fund invests in are sometimes open on days when the NYSE is not open and the Global Fund does not calculate its net asset value (NAV), and sometimes are not open on days when the Global Fund does calculate it’s NAV. Even on days on which both the foreign market and the NYSE were open, several hours may have passed between the time when trading in the foreign market closed and the time as of which the Global Fund calculates it’s NAV. That was generally the case for markets in Europe, Asia, Australia and other far eastern markets; the regular closing time of foreign markets in North and South America was generally the same as the closing time of the NYSE and the time as of which the Global Fund calculate its NAV.
Foreign stocks, as an asset, class may underperform U.S. stocks, and foreign stocks may be more volatile than U.S. stocks. Risks relating to investment in foreign securities (including, but not limited to, depositary receipts and participation certificates) include: currency exchange rate fluctuation; less available public information about the issuers of securities; less stringent regulatory standards; lack of uniform accounting, auditing and financial reporting standards; and country risk including less liquidity, high inflation rates, unfavorable economic practices and political instability. The risks of foreign investments are typically greater in emerging and less developed markets.
| 25 |
EntrepreneurShares Series Trust
ADDITIONAL INFORMATION
(Unaudited)
1. RENEWAL OF INVESTMENT ADVISORY AGREEMENT DISCLOSURE GLOBAL FUND
On September 10, 2013, the Board of Trustees of EntrepreneurShares Series Trust approved the investment advisory agreement between the EntrepreneurShares Global Fund (the “Global Fund”) and Weston Capital Advisors, LLC (the “Weston Capital”). The Board also approved a sub-advisory agreement between the Advisor and EntrepreneurShares, LLC (the “Sub-Advisor”) under which Weston Capital agreed to delegate portfolio management decisions, including purchasing and selling portfolio securities, to the Sub- Advisor. Under the sub-advisory agreement, Weston Capital agreed to compensate the Sub-Advisor for its services from it own assets, not those of the Global Fund.
Prior to approving the agreements, the Board considered:
| · | The nature, extent and quality of the services provided by Weston Capital and Sub-Advisor. |
| · | The investment performance of the Global Fund since its inception. |
| · | The cost of the services provided and profits realized by Weston Capital from its relationship with the Global Fund. |
| · | The extent to which economies of scale would be realized as the Global Fund grows and whether fee levels reflect any such economies of scale. |
| · | The expense ratio of the Global Fund. |
In considering the nature, extent and quality of the services to be provided by Weston Capital and EntrepreneurShares, LLC, the Board considered the performance of the Global Fund versus the MSCI The World Index, the Global Fund’s benchmark; and the Small Cap Growth Fund peer group, the Global Fund’s Morningstar assigned peer group; and the Morningstar Foreign Small/Mid Cap Fund peer group. It was noted that the information was used for multiple peer groups because Morningstar does not have a “world” peer group. The peer groups were selected by picking an asset range that puts the Global Fund in the middle of the group. For the Small Cap Growth Fund peer group $1 to $50 million was used and for the Foreign Small/Mid Cap Fund peer group was expanded to $1 to $100 million because there were fewer funds available. The materials showed that the Global Fund had under performed its benchmark and both peer groups since inception of the Global Fund. However, over the six months ended June 30, 2013, the Global Fund has outperformed the Morningstar Foreign Small/Mid Cap Fund peer group and the Global Fund’s benchmark.
Next the Board discussed the profitability of Weston Capital. It was noted that, after waiving a significant portion of its advisory fee, Weston Capital received a net advisory fee of $130,676 for the fiscal year. Per the Morningstar Analysis, the Advisor’s gross fees were 1.25% of net assets but only 0.04% of net assets on a net basis but as of June 30, 2013 the net fee was 0.63%. The Board compared the contractual investment advisory fee and the net advisory fee to those of the Morningstar peer groups. The Board noted that managing the Global Fund is not currently profitable to Weston Capital after paying other expenses of the Advisor.
The Board also discussed other benefits that Weston Capital received from being associated with the Global Fund. It was noted that Dr. Shulman manages other accounts and that the name recognition of the Fund may help him and Weston Capital attract clients. The Advisor then noted that they do not utilize soft dollars for research services.
The Board then discussed the existence of economies of scale and how Weston Capital will pass those benefits on to shareholders as the Global Fund grows and realizes those economies. The Board noted that the investment advisory agreement has breakpoints in its fee structure, so with the growth of assets, the Global Fund will participate in economies of scale. The Board reviewed the break points and fees being paid to Weston Capital at the current asset level and compared those to other investment companies. The Board noted that the contractual advisory fee was within the range of comparable funds but again considered that Weston Capital’s willingness to waive a portion of its advisory fee.
The Board then considered the overall expense structure of the Global Fund. It noted that the expense ratio was slightly higher than the average of both peer groups, but that the difference was not significant. After some discussion, the Board concluded that the expense ratio was reasonable. The Board then determined that the quality of the review and the materials was adequate. They noted that they did not place more emphasis on any one particular aspect of the discussion, but considered them together.
| 26 |
EntrepreneurShares Series Trust
ADDITIONAL INFORMATION (Continued)
(Unaudited)
2. INVESTMENT ADVISORY AGREEMENT DISCLOSURE U.S. ALL CAP FUND
On September 10, 2013, the Board of Trustees of EntrepreneurShares Series Trust approved the investment advisory agreement between the EntrepreneurShares U.S. All Cap Fund (the “U.S. All Cap Fund”) and Capital Impact Advisors, LLC (the “Capital Impact”).
Prior to approving the agreements, the Board considered:
| · | The nature, extent and quality of the services to be provided by the Advisor and Sub-Advisor. |
| · | The investment performance of other funds and strategies managed by the portfolio manager. |
| · | The cost of the services provided and profits realized by Capital Impact Advisors from its relationship with the Fund. |
| · | The extent to which economies of scale would be realized as the Fund grows and whether fee levels reflect any such economies of scale. |
| · | The expense ratio of the Fund. |
First the Board discussed the information presented in comparison to the proposed fees for the U.S. All Cap Fund. The Board noted that the presentation used the Morningstar Small Cap Growth Fund peer group. The peer group was selected by picking an asset range that puts the U.S. All Cap Fund in the middle of the group. The Small Cap Growth Fund peer group with an asset range of $0.5 to $100 million was used. The Board considered the overall estimated expense structure of the U.S. All Cap Fund. It noted that the expense ratio, which is proposed to be 0.85%, was lower than the average of the peer groups, which was shown as 1.34%. After some discussion, the Board concluded that the anticipated expense ratio was reasonable.
The Board then discussed the proposed advisory fees for the U.S. All Cap Fund. After some discussion by the Board, it was noted that the U.S. All Cap Fund’s advisory fees, which were proposed to be 0.75%, were proposed to be less then the industry average, which was 0.95%. The Board also considered the imposition of an expense limitation agreement. After some discussion, the Board concluded that the advisory expenses were reasonable.
The Board was unable to review performance information because the U.S. All Cap Fund has not yet opened, but the Board did consider the fact that Dr. Shulman would be the portfolio manager of the U.S. All Cap Fund and using substantially the same methodology as the Global Fund, but in a different market segment.
The Board also considered other benefits to be realized by Capital Impact. They noted that there would be no monetary benefits, but that the name recognition could help the Capital Impact to gain future business.
The Board then determined that they quality of the review and the materials was adequate. They noted that they did not place more emphasis on any one particular aspect of the discussion, but considered them together.
| 27 |
EntrepreneurShares Series Trust
ADDITIONAL INFORMATION (Continued)
(Unaudited)
3. ADDITIONAL DISCLOSURE REGARDING FUND TRUSTEES AND OFFICERS
| Name, Address and Birth Year | Position(s) Held with Trust | Term of Office(1) and Length of Time Served | Principal Occupation(s) During Past 5 Years | # of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During Past 5 Years |
| Dr. Stephen Sohn 470 Atlantic Avenue, Suite #400 Boston, MA 02210 Birth year: 1944 | Trustee | Since 2010 | Chairman – Quantum Aesthetic Surgery Inc. | 1 | None |
| Thomas T. Stallkamp 470 Atlantic Avenue, Suite #400 Boston, MA 02210 Birth year: 1947 | Trustee | Since 2010 | Founder/Principal Collaborative Management; Former CEO Chairman – MSX International (automotive consulting) (2003 to 2004). | 1 | Baxter International Inc. and Borg Warner Inc. |
| George R. Berbeco 470 Atlantic Avenue, Suite #400 Boston, MA 02210 Birth year: 1944 | Trustee | Since 2010 | Chairman – Bay Colony Development Corporation; Former President – Devon Group and General Partner – Devon Capital Partners, LP. (information systems consulting) (2005 to 2009). | 1 | None |
| Joel M. Shulman, CFA(2) 470 Atlantic Avenue, Suite #400 Boston, MA 02210 Birth year: 1955 | President and Trustee | Since 2010 | Member of the Advisor and the Sub-Advisor since 2010; Chief Executive Officer of the Sub-Advisor since 2010; Tenured professor at Babson College. | 1 | None |
| David Cragg 470 Atlantic Avenue, Suite #400 Boston, MA 02210 Birth year: 1969 | Secretary, Treasurer and Chief Compliance Officer | Since 2010 | Member and Chief Compliance Officer the Advisor since 2010. Former Chief Financial Officer and Chief Operating Officer of the Leuthold Group (institutional research) (1999 to 2009). | N/A | N/A |
| (1) | Each Trustee serves an indefinite term until the election of a successor. Each officer serves an indefinite term, renewed annually, until the election of a successor. |
| (2) | Dr. Shulman is considered an interested Trustee within the meaning of the 1940 Act because of his affiliation with the Advisor and the Sub-Advisor. |
The Statement of Additional Information includes additional information about the Fund’s Trustees and is available free of charge upon request by call the Fund toll free at (877) 271-8811.
| 28 |
EntrepreneurShares Series Trust
ADDITIONAL INFORMATION (Continued)
(Unaudited)
4. SHAREHOLDER NOTIFICATION OF FEDERAL TAX STATUS
For the year ended June 30, 2013, 0% of dividends paid from net ordinary income in the Global Fund qualify for the dividends received deduction available to corporate shareholders.
The Global Fund designates 0% of their ordinary income distributions for the fiscal period as qualified dividend income under the Jobs and Growth Tax Reconciliation Act of 2003.
The Global Fund designates 0% of its ordinary income distributions as short-term capital gain distribution under Internal Revenue Code Section 871(k)(2)(c).
5. AVAILABILITY OF QUARTERLY PORTFOLIO HOLDINGS SCHEDULES
The Funds are required to file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Once filed, the Funds’ Form N-Q is available without charge, upon request on the SEC’s website (http://www.sec.gov) and may be available by calling 1.877.271.8811. You may also obtain copies at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1.800.SEC.0330.
6. PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling 1.877.271.8811 and on the SEC’s website (http://www.sec.gov). The Funds are required to file how they voted proxies related to portfolio securities during the most recent 12-month period ended June 30.
Once filed, the information is available, without charge, upon request, by calling 1.877.271.8811 and on the SEC’s website (http://www.sec.gov).
| 29 |
Global Fund Investment Advisor
Weston Capital Advisors, LLC
470 Atlantic Avenue, Suite #400
Boston, MA 02210
Investment Sub-Advisor
EntrepreneurShares, LLC
470 Atlantic Avenue, Suite #400
Boston, MA 02210
U.S. All Cap Fund Investment Advisor
Capital Impact Advisors, LLC
470 Atlantic Avenue, Suite #400
Boston, MA 02210
Independent Public Accounting Firm
McGladrey LLP
555 Seventeenth St., Suite 1000
Denver, CO 80202
Custodian
U.S. Bank, N.A.
1555 N. RiverCenter Drive, Suite 302
Milwaukee, WI 53212
Distributor
Rafferty Capital Markets, LLC
59 Hilton Ave. Garden City, NY 11530
Administrator, Transfer Agent
And Dividend Disbursing Agent
U.S. Bancorp Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
EPRPSEMI
Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934).
Item 6. Investments.
Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form.
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.
Not Applicable.
Item 11. Controls and Procedures.
| (a) | The Registrant’s President and Treasurer have reviewed the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant’s service provider. |
| (b) | There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. |
Item 12. Exhibits.
| (a) | (1) Any code of ethics or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Not applicable for semi-annual reports. |
(2) A separate certification for each principal executive 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) EntrepreneurShares Series Trust
By (Signature and Title)* /s/ Dr. Joel M. Shulman
Dr. Joel M. Shulman, President
Date March 5, 2014
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/ Dr. Joel M. Shulman
Dr. Joel M. Shulman, President
Date March 4, 2014
By (Signature and Title)* /s/ David Cragg
David Cragg, Treasurer
Date March 4, 2014