2019 SEMIANNUAL REPORT
October 31, 2019
North Capital Emerging Technology Fund
North Capital Treasury Money Market Fund
Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, paper copies of the Funds’ shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from the Funds (or from your financial intermediary, such as a broker-dealer or bank). Instead, the reports will be made available on the Funds’ website www.northcapital.com/northcapitalfunds. You will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Funds electronically anytime by contacting the financial intermediary (such as a broker-dealer or bank) through which you hold your Fund shares or, if you are a direct shareholder, by calling 833-2-NCFUND or 833-262-3863.
You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the Funds, you can call 833-2-NCFUND or 833-262-3863 to let the Funds know you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all Funds held in your account if you invest through your financial intermediary or all Funds held with the fund complex if you invest directly with the Funds.
North Capital Funds Trust
North Capital Emerging Technology Fund Performance (unaudited)
| | October 31, 2019 |
| | Since Inception |
| | 8/9/2019 |
| Average annual return | |
| Institutional Class | 3.90% |
| Investor Class | 3.80% |
| | |
| S&P 500® Total Return Index | 4.52% |
The performance data quoted on this page represents past performance and 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 data quoted. The gross annual operating expenses for the North Capital Emerging Technology Fund are 2.32% for the Investor Class and 2.07% for the Institutional Class per the June 20, 2019 prospectus. Performance data current to the most recent month-end may is available at www.northcapital.com/northcapitalfunds or by calling 833-2-NCFUND or 833-262-3863. Total return includes reinvestment of dividends and capital gains.
Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. Total return calculations reflect expense reimbursements and fee waivers in applicable periods. See financial highlights for periods where fees were waived or reimbursed.
The S&P 500® Total Return Index is a widely recognized, unmanaged index consisting of the approcimately 500 largest companies in the United States as measured by market capitalization. It assumes reinvestment of all dividends and distributions.
North Capital Emerging Technology Fund^
Po
rtfolio Allocation (unaudited)
as of October 31, 2019
| Sector | | % of Net Assets |
| | | |
| Information Technology | | 52.9% |
| Communication Services | | 12.3% |
| Consumer Discretionary | | 11.3% |
| Financials | | 9.8% |
| Healthcare | | 8.5% |
| Industrials | | 2.3% |
| Consumer Staples | | 0.6% |
| Short-Term Investments & Other Assets and Liabilities | | 2.3% |
| | | 100.0% |
North Capital Treasury Money Market Fund^
Portfolio Allocation (unaudited)
as of October 31, 2019
| Sector | | % of Net Assets |
| U.S. Treasury Debt | | 99.5% |
| Other Assets and Liabilities | | 0.5% |
| | | 100.0% |
^Please see the Schedule of Investments for a detailed listing of each Fund’s holdings.
North Capital Funds Trust
E
xpense Example (unaudited)
As a shareholder of one or more of the funds you incur ongoing costs including investment advisory fees, distribution (12b-1) fees and other expenses. The examples are 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 examples are based on an investment of $1,000 invested in a fund at the beginning of the period and held for the entire period from August 9, 2019 to October 31, 2019 for the North Capital Emerging Technology Fund, and from July 17, 2019 to October 31, 2019 for the North Capital Treasury Money Market Fund.
Actual Expenses
For each class of each fund, two lines are presented in the table below - the first line for each class provides information about the actual account values and actual expenses. You may use the information in this table, together with the amount you invested in a particular fund and class, 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 table under the heading entitled “Expenses Paid During Period” for your fund and class to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
For each class of each fund, the second line for each class provide information about hypothetical account values and hypothetical expenses based on the respective 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 balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, as described above. Therefore, second line of the tables for each class of each fund is 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.
Emerging Technology Fund1 | | | | | | Expenses Paid | |
| | | Beginning Account | | Ending Account | | During Period | |
| | | Value (8/9/2019) | | Value (10/31/2019) | | (8/9/2019 to 10/31/2019) | |
Institutional Class Actual2 | | $ | 1,000.00 | | $ | 1,039.00 | | $ | 2.37 | |
Institutional Class Hypothetical (5% return before expenses)3 | | $ | 1,000.00 | | $ | 1,019.86 | | $ | 5.33 | |
| | | | | | | | | | | |
Investor Class Actual2 | | $ | 1,000.00 | | $ | 1,038.00 | | $ | 2.93 | |
Investor Class Hypothetical (5% return before expenses)3 | | $ | 1,000.00 | | $ | 1,018.60 | | $ | 6.60 | |
1Inception date of the fund was August 9, 2019.
2Actual Expenses are equal to the fund’s annualized expense ratio for the period August 9, 2019 through October 31, 2019 of 1.05% and 1.30% for Institutional Class and Investor Class, respectively, multiplied by the average account value over the period, multiplied by 81/366 (to reflect from inception through October 31, 2019). Because the inception date of the fund was August 9, 2019, the information is based on the actual returns for the 81-day period ended October 31, 2019 of 3.90% and 3.80% for Institutional Class and Investor Class, respectively.
3Hypothetical Expenses are equal to the fund’s annualized expense ratio for the period August 9, 2019 through October 31, 2019 of 1.05% and 1.30% for Institutional Class and Investor Class, respectively, multiplied by the average account value over the period, multiplied by 184/366.
| | | | | | | | | | | |
Treasury Money Market Fund4 | | | | | | Expenses Paid | |
| | | Beginning Account | | Ending Account | | During Period | |
| | | Value (7/17/2019) | | Value (10/31/2019) | | (7/17/2019 to 10/31/2019) | |
| | | | | | | | | | | |
Institutional Class Actual5 | | $ | 1,000.00 | | $ | 1,004.40 | | $ | 1.31 | |
Institutional Class Hypothetical (5% return before expenses)6 | | $ | 1,000.00 | | $ | 1,022.87 | | $ | 2.29 | |
4Inception date of the fund was July 17, 2019.
5Actual Expenses are equal to the fund’s annualized expense ratio for the period July 17, 2019 through October 31, 2019 of 0.45%, multiplied by the average account value over the period, multiplied by 106/366 (to reflect from inception through October 31, 2019). Because the inception date of the fund was July 17, 2019, the information is based on the actual returns for the 106-day period ended October 31, 2019 of 0.44%.
6Hypothetical Expenses are equal to the fund’s annualized expense ratio for the period July 17, 2019 through October 31, 2019 of 0.45% multiplied by the account value over the period, multiplied by 184/366.
| North Capital Emerging Technology Fund |
| |
|
| |
| October 31, 2019 (unaudited) |
| | | | | | | | |
| COMMON STOCKS - 97.7% | | Number of Shares | | Value * | |
| Communication Services - 12.3% | | | | | | | |
| Alphabet, Inc. ^ | | | 2 | | $ | 2,518 | |
| Baidu, Inc. ^ | | | 28 | | | 2,852 | |
| Facebook, Inc. ^ | | | 15 | | | 2,875 | |
| Tencent Holdings Ltd. | | | 33 | | | 1,337 | |
| Total Communication Services | | | | | | 9,582 | |
| | | | | | | | |
| | | | | | | | |
| Consumer Discretionary - 11.3% | | | | | | | |
| Alibaba Group Holding Ltd. ^ | | | 17 | | | 3,003 | |
| Amazon.com, Inc. ^ | | | 2 | | | 3,553 | |
| Aptiv Plc | | | 17 | | | 1,522 | |
| Rakuten, Inc. | | | 75 | | | 719 | |
| Total Consumer Discretionary | | | | | | 8,797 | |
| | | | | | | | |
| | | | | | | | |
| Consumer Staples - 0.6% | | | | | | | |
| Carrefour SA | | | 142 | | | 487 | |
| | | | | | | | |
| | | | | | | | |
| Financials - 9.8% | | | | | | | |
| JPMorgan Chase & Co. | | | 20 | | | 2,498 | |
| Mitsubishi UFJ Financial Group, Inc. | | | 183 | | | 948 | |
| Signature Bank/New York NY | | | 15 | | | 1,775 | |
| TriState Capital Holdings, Inc. ^ | | | 104 | | | 2,404 | |
| Total Financials | | | | | | 7,625 | |
| | | | | | | | |
| Healthcare - 8.5% | | | | | | | |
| Anthem, Inc. | | | 8 | | | 2,153 | |
| BioTelemetry, Inc. ^ | | | 43 | | | 1,692 | |
| Intuitive Surgical, Inc. ^ | | | 5 | | | 2,765 | |
| Total Healthcare | | | | | | 6,610 | |
| | | | | | | | |
| Industrials - 2.3% | | | | | | | |
| Allied Motion Technologies, Inc. | | | 46 | | | 1,742 | |
| | | | | | | | |
| | | | | | | | |
| Information Technology - 52.9% | | | | | | | |
| Adobe, Inc. ^ | | | 4 | | | 1,112 | |
| Apple, Inc. | | | 12 | | | 2,985 | |
| Applied Materials, Inc. | | | 32 | | | 1,736 | |
| CACI International, Inc. ^ | | | 5 | | | 1,119 | |
| Cisco Systems, Inc. | | | 30 | | | 1,425 | |
| Descartes Systems Group Inc/The ^ | | | 55 | | | 2,140 | |
| Fortinet, Inc. ^ | | | 23 | | | 1,876 | |
| Intel Corp. | | | 47 | | | 2,657 | |
| International Business Machines Corp. | | | 17 | | | 2,273 | |
| Lam Research Corp. | | | 12 | | | 3,252 | |
| Microchip Technology, Inc. | | | 22 | | | 2,074 | |
| Microsoft Corp. | | | 22 | | | 3,154 | |
| NXP Semiconductors NV | | | 23 | | | 2,615 | |
| Palo Alto Networks, Inc. ^ | | | 13 | | | 2,956 | |
| PayPal Holdings, Inc. ^ | | | 9 | | | 937 | |
| salesforce.com, Inc. ^ | | | 19 | | | 2,973 | |
| Skyworks Solutions, Inc. | | | 12 | | | 1,093 | |
| Splunk, Inc. ^ | | | 20 | | | 2,399 | |
| Square, Inc. ^ | | | 37 | | | 2,273 | |
| Total Information Technology | | | | | | 41,049 | |
| | | | | | | | |
| Total Common Stocks | | | | | | 75,892 | |
| (Cost $72,645) | | | | | | | |
| | | | | | | | |
| SHORT-TERM INVESTMENTS - 27.0% | | | | | | | |
| Money Market Fund - 27.0% | | | | | | | |
| First American Government Obligations Fund, CIass X, 1.757% ʘ | | | 20,935 | | | 20,935 | |
| Total Short-Term investments | | | | | | 20,935 | |
| (Cost $20,935) | | | | | | | |
| Total Investments - 124.7% | | | | | | 96,827 | |
| (Cost $93,580) | | | | | | | |
| Other assets and liabilities - (24.7%) | | | | | | (19,191 | ) |
| TOTAL NET ASSETS - 100.0% | | | | | $ | 77,636 | |
* Securities are valued in accordance with procedures described in note 2 in Notes to Financial Statements.
^ Non-income producing security.
ʘ Rate shown is the annualized seven-day yield as of October 31, 2019.
The accompanying notes are an integral part of the financial statements.
North Capital Treasury Money Market Fund
SCHEDULE OF INVESTMENTS
October 31, 2019 (unaudited)
| DESCRIPTION | | Principal | | | Value * | |
| U.S. Treasury Debt - 99.5% | | | | | | | | |
| U.S. Treasury Bills ʘ | | | | | | | | |
| 1.825%, 11/12/2019 | | $ | 2,000 | | | $ | 1,999 | |
| 1.460%, 11/19/2019 | | | 1,000 | | | | 999 | |
| 1.686%, 12/03/2019 | | | 50,000 | | | | 49,926 | |
Total U.S. Treasury Debt (Cost $52,924) | | | | | | | 52,924 | |
| | | | | | | | | |
Total Investments - 99.5% (Cost $52,924) | | | | | | | 52,924 | |
| Other Assets and Liabilities, Net - 0.5% | | | | | | | 248 | |
| Total Net Assets - 100.0% | | | | | | $ | 53,172 | |
| * | Securities are valued in accordance with procedures described in note 2 in Notes to Financial Statements. |
| ʘ | Rate shown is annualized yield as of October 31, 2019. |
The accompanying notes are an integral part of the financial statements.
| Statements of Assets and Liabilities | October 31, 2019 (unaudited) |
| | | North Capital
Emerging
Technology Fund | | | North Capital
Treasury Money
Market Fund | |
| Investments in securities, at cost (note 2) | | $ | 93,580 | | | $
| 52,924 | |
| ASSETS: | | | | | | | | |
| Investments, in securities, at value (note 2) | | $ | 96,828 | | | $ | 52,924 | |
| Cash | | | — | | | | 22,736 | |
| Receivable for interest and dividends | | | 14 | | | | — | |
| Receivable from adviser (note 3) | | | 19,113 | | | | 15,656 | |
| Deferred offering costs | | | 7,087 | | | | 6,440 | |
| Total assets | | | 123,042 | | | | 97,756 | |
| LIABILITIES: | | | | | | | | |
| Fund administration and accounting fees | | | 21,212 | | | | 19,894 | |
| Transfer agent fees | | | 10,071 | | | | 7,492 | |
| Legal fees | | | 7,469 | | | | 8,431 | |
| Audit fees | | | 3,080 | | | | 3,702 | |
| Trustees’ fees | | | 2,310 | | | | 2,777 | |
| Accrued expenses and other liabilities | | | 1,263 | | | | 2,229 | |
| Dividends payable | | | — | | | | 59 | |
| Distribution fees | | | 1 | | | | — | |
| Total liabilities | | | 45,406 | | | | 44,584 | |
| Net assets | | $ | 77,636 | | | $ | 53,172 | |
| COMPOSITION OF NET ASSETS: | | | | | | | | |
| Portfolio capital | | $ | 75,000 | | | $ | 53,172 | |
| Total distributable earings | | | 2,636 | | | | — | |
| Net assets | | $ | 77,636 | | | $ | 53,172 | |
| Institutional Class: | | | | | | | | |
| Net assets | | $ | 77,117 | | | $ | 53,172 | |
| Shares of beneficial interest outstanding¹ | | | 7,423 | | | | 53,172 | |
| Net asset value, offering price and redemption price per share | | $ | 10.39 | | | $ | 1.00 | |
| Investor Class: | | | | | | | | |
| Net assets | | $ | 519 | | | $ | — | |
| Shares of beneficial interest outstanding¹ | | | 50 | | | | — | |
| Net asset value, offering price and redemption price per share | | $ | 10.38 | | | $ | — | |
1 Unlimited number of shares of beneficial interest with no par value authorized.
The accompanying notes are an integral part of the financial statements.
Statements of Operations
| | | North Capital
Emerging
Technology Fund | | | North Capital
Treasury Money
Market Fund | |
| | | August 9, 2019¹ to
October 31, 2019
(unaudited) | | | July 17, 2019¹ to
October 31, 2019
(unaudited) | |
| INVESTMENT INCOME: | | | | | | | | |
| Dividend income | | $ | 78 | | | $ | — | |
| Interest income | | | — | | | | 300 | |
| Total investment income | | | 78 | | | | 300 | |
| EXPENSES: | | | | | | | | |
| Administration fees and expenses | | | 21,212 | | | | 22,468 | |
| Organizational costs | | | 19,131 | | | | 19,131 | |
| Transfer agent fees and expenses | | | 10,071 | | | | 8,625 | |
| Registration fees | | | 9,530 | | | | 8,418 | |
| Legal fees | | | 7,700 | | | | 9,256 | |
| Audit fees | | | 3,080 | | | | 3,702 | |
| Postage and printing fees | | | 2,310 | | | | 2,777 | |
| Trustees’ fees | | | 2,310 | | | | 2,777 | |
| Offering costs | | | 2,014 | | | | 2,661 | |
| Custodian fees | | | 1,394 | | | | 1,841 | |
| Insurance expense | | | 244 | | | | 322 | |
| Investment advisory fees | | | 116 | | | | 38 | |
| Distribution fees | | | 1 | | | | — | |
| Total expenses | | | 79,113 | | | | 82,016 | |
| Less: Fee waivers (note 3) | | | (78,984) | | | | (81,948) | |
| Total net expenses | | | 130 | | | | 68 | |
| Investment income (loss) - net | | | (51) | | | | 232 | |
| Net loss on investments | | | (561) | | | | — | |
| | | | | | | | | |
| Net change in unrealized appreciation (depreciation) on investments | | | 3,248 | | | | — | |
| Net increase in net assets resulting from operations | | $ | 2,636 | | | $ | — | |
1 Inception date.
The accompanying notes are an integral part of the financial statements.
Statements of Changes in Net Assets
| | | North Capital
Emerging
Technology Fund | | | North Capital
Treasury Money
Market Fund | |
| | | August 9, 2019¹ to
October 31, 2019
(unaudited) | | | July 17, 2019¹ to
October 31, 2019
(unaudited) | |
| | | | | | | | | |
| OPERATIONS: | | | | | | | | |
| Investment income (loss) - net | | $ | (51) | | | $ | 232 | |
| Net realized loss on investments | | | (561) | | | | — | |
| Net change in unrealized appreciation (depreciation) of investments | | | 3,248 | | | | — | |
| Net increase in net assets resulting from operations | | | 2,636 | | | | 232 | |
| DISTRIBUTIONS TO SHAREHOLDERS FROM: | | | | | | | | |
| Institutional Class | | | — | | | | (232) | |
| Total distributions | | | — | | | | (232) | |
| CAPITAL SHARE TRANSACTIONS* | | | | | | | | |
| Institutional Class: | | | | | | | | |
| Proceeds from sales | | | 74,500 | | | | 53,000 | |
| Reinvestment of distributions | | | — | | | | 172 | |
| Increase in net assets from Institutional class transactions | | | 74,500 | | | | 53,172 | |
| Investor Class: | | | | | | | | |
| Proceeds from sales | | | 500 | | | | — | |
| Increase in net assets from Investor class transactions | | | 500 | | | | — | |
| Increase in net assets from capital share transactions (note 4) | | | 75,000 | | | | 53,172 | |
| Total increase in net assets | | | 77,636 | | | | 53,172 | |
| Net assets at beginning of the period | | | — | | | | — | |
| Net assets at end of the period | | $ | 77,636 | | | $ | 53,172 | |
| | | | | | | | | |
1 Inception date.
* North Capital Treasury Money Market Fund transacts at $1.00 per share.
The accompanying notes are an integral part of the financial statements.
Financial Highlights
North Capital Emerging Technology Fund
Selected data for each share of the Fund outstanding throughout the period
August 9, 20191 to October 31, 2019 (unaudited)
| | | Institutional | | | Investor |
| | | Class | | | Class |
| PER SHARE OPERATING PERFORMANCE: | | | | | |
| Net asset value, beginning of period | |
| $10.00 | | |
| $10.00 |
| Investment from investment operations: | | | | | | | |
| Net investment income (loss) | | | (0.01) |
| | | (0.02) |
| Net realized and unrealized gain (loss) on investments | | | 0.40 | | | | 0.40 |
| Total from investment operations | | | 0.39 | | | | 0.38 |
| Net asset value, end of period | |
| $10.39 | | |
| $10.38 |
| Total return2 | | | 3.90% |
| | | 3.80% |
| Net assets end of period | |
| $77,117 | | |
| $519 |
| Ratio of expenses to average net assets | | | 1.05% |
| | | 1.30% |
| Ratio of net investment income to average net assets | | | (0.41%) |
| | | (0.66%) |
| Ratio of expenses to average net assets (excluding waivers) | | | 641.83% |
| | | 642.08% |
| Ratio of net investment income to average net assets (excluding waivers) | | | (641.19%) |
| | | (641.44%) |
| Portfolio turnover rate | | | 24.17% |
| | | 24.17% |
| 1 | Inception date. All ratios for the period have been annualized, except total return and portfolio turnover. |
| 2 | Total return would have been lower had certain expenses not been waived. |
North Capital Treasury Money Market Fund
Selected data for each share of the Fund outstanding throughout the period
July 17, 20191 to October 31, 2019 (unaudited)
| | | Institutional | | | | |
| | | Class | | | | |
| PER SHARE OPERATING PERFORMANCE: | | | | | | |
| Net asset value, beginning of period | |
| $1.00 | | | | |
| Net investment income | | | —3 | | | | |
| Distributions from net investment income | | | —3 | | | | |
| Net asset value, end of period | |
| $1.00 | | | | |
| Total return2 | | | 0.44% | | | | |
| Net assets end of period | |
| $53,172 | | | | |
| Ratio of expenses to average net assets | | | 0.45% | | | | |
| Ratio of net investment income to average net assets | | | 1.53% | | | | |
| Ratio of expenses to average net assets (excluding waivers) | | | 539.84% | | | | |
| Ratio of net investment income to average net assets (excluding waivers) | | | (537.86%) | | | | |
1 | Inception date. All ratios for the period have been annualized, except total return. |
2 | Total return would have been lower had certain expenses not been waived. |
The accompanying notes are an integral part of the financial statements.
North Capital Funds Trust
NOTES TO FINANCIAL STATEMENTS
October 31, 2019 (unaudited)
The North Capital Emerging Technology Fund (“Technology Fund”) and the North Capital Treasury Money Market Fund (“Treasury Fund” and, together with the Technology Fund, each, a “Fund”, and collectively, the “Funds”), are each series of North Capital Funds Trust, a Delaware statutory trust organized on December 10, 2018 (the “Trust”). The inception date for the Technology Fund is August 9, 2019 and the inception date for the Treasury Fund is on July 17, 2019. Each Fund operates as a “diversified” fund (as such term is defined under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust is registered as an open-end management investment company. The Trust is governed by its Board of Trustees (the “Board” or “Trustees”). The investment adviser to the Funds is North Capital, Inc. (the “Adviser”).
The Technology Fund offers two classes of shares: Institutional Class shares and Investor Class shares, which have a distribution fee. The Treasury Fund offers Institutional Class shares. Each share of a series represents an equal proportionate interest in the assets and liabilities belonging to that series with each other share of that series and is entitled to such dividends and distributions out of income belonging to the series as are declared by the Trustees. All shares of the Funds have equal voting rights and liquidation rights, except that each class has exclusive voting rights with respect to its service and/or distribution plans. Each Fund’s income, expenses (other than class-specific distribution fees) and realized and unrealized gains and losses are allocated proportionately each day based on the relevant net assets of each class.
| 2. | Summary of 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 accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and are stated in U.S. dollars. Each Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 “Financial Services – Investment Companies and Accounting Standards Update (“ASU”) 2013-08.
(a) Investment Valuation
Technology Fund. Equity securities are valued by using market quotations but may be valued on the basis of prices furnished by a pricing service when the Adviser, as applicable, believes such prices accurately reflect the fair market value of such securities. Securities that are traded on any stock exchange or on the NASDAQ over-the-counter market are generally valued by the pricing service at the last quoted sale price. Lacking a last sale price, an equity security is generally valued by the pricing service at its last bid price. When market quotations are not readily available, when the Adviser determines that the market quotation or the price provided by the pricing service does not accurately reflect the current market value, or when restricted or illiquid securities are being valued, such securities are valued as determined in good faith by the Adviser, in conformity with guidelines adopted by and subject to review of the Board. Fixed income securities are generally valued by using market quotations but may be valued on the basis of prices furnished by a pricing service when the Adviser believes such prices accurately reflect the fair market value of such securities. A pricing service utilizes electronic data processing techniques based on yield spreads relating to securities with similar characteristics to determine prices for normal institutional-size trading units of debt securities without regard to sale or bid prices. If the Adviser decides that a price provided by the pricing service does not accurately reflect the fair market value of the securities, when prices are not readily available from a pricing service, or when restricted or illiquid securities are being valued, securities are valued at fair value as determined in good faith by the Adviser, in conformity with guidelines adopted by and subject to review of the Board. Short term investments in fixed income securities with maturities of less than 60 days when acquired, or which subsequently are within 60 days of maturity, are valued by using the amortized cost method of valuation, which the Board has determined will represent fair value.
Treasury Fund. Investments are valued using the amortized cost method of valuation in an effort to maintain a constant net asset value of $1.00 per share, which the Board has determined to be in the best interest of the Treasury Fund and its shareholders. This method involves valuing a security at cost on the date of acquisition and thereafter assuming a constant accretion of a discount or amortization of a premium to maturity, regardless of the impact of fluctuating interest rates and other factors on the market value of the instrument. While this method provides certainty in valuation, it may result in periods during which value, as determined by amortized cost, is higher or lower than the price the Fund would receive if it sold the instrument. During such periods, the yield to an investor in the Fund may differ somewhat from that obtained in a similar investment company which uses available market quotations to value all its portfolio securities.
GAAP requires disclosures regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or technique. These principles establish a three-tier fair value hierarchy for inputs used in measuring fair value. Fair value inputs are 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 with similar interest rates, credit risk, etc.). Also includes securities valued at amortized cost.
Level 3 – Significant unobservable inputs (including a fund’s own assumptions in determining the fair value of investments).
The fair value levels are not necessarily an indication of the risk associated with investing in these securities. As of October 31, 2019, each Fund’s investments were classified as follows:
| | | | | | | | Total | |
| Fund | Level 1 | | Level 2 | | Level 3 | | Fair Value | |
| Technology Fund | | | | | | | | | | | | |
| Information Technology | $ | 41,049 | | $ | — | | $ | — | | $ | 41,049 | |
| Communication Services | | 9,582 | | | — | | | — | | | 9,582 | |
| Consumer Discretionary | | 8,797 | | | — | | | — | | | 8,797 | |
| Financials | | 7,625 | | | — | | | — | | | 7,625 | |
| Healthcare | | 6,610 | | | — | | | — | | | 6,610 | |
| Industrials | | 1,742 | | | — | | | — | | | 1,742 | |
| Consumer Staples | | 487 | | | — | | | — | | | 487 | |
| Money Market Fund | | 20,935 | | | — | | | — | | | 20,935 | |
| Total Investments | $ | 96,827 | | | — | | | — | | $ | 96,827 | |
| Treasury Fund | | | | | | | | | | | | |
| U.S. Treasury Debt | $ | — | | $ | 52,924 | | $ | — | | $ | 52,924 | |
| Total Investments | $ | — | | $ | 52,924 | | $ | — | | $ | 52,924 | |
Refer to each Fund’s Schedule of Investments for further security classification.
During the period of 8/9/19 - 10/31/19, and 7/17/19-10/31/19 for the Technology Fund and the Treasury Fund, respectively, there were no transfers between fair value levels, and the Funds’ portfolios did not hold any securities deemed to be Level 3.
(b) 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.
(c) Security Transactions and Investment Income
For financial statement purposes, the Funds record security transactions on the trade date of the security purchase or sale. Interest income, including amortization, is recorded on an accrual basis. Dividend income is recorded on the ex-dividend date, or as soon as information is available to the Fund.
(d) Cash and Cash Equivalents
The Funds consider highly liquid short-term fixed income investments purchased with an original maturity of less than three months to be cash equivalents. Cash equivalents are included in short-term investments on the Schedules of Investments as well as in investments of the Statements of Assets and Liabilities.
(e) 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 Fund will not be subject to federal income tax to the extent it distributes substantially all of its net investment income and capital gains to shareholders. Therefore, no federal income tax provision is required.
As of October 31, 2019, the Funds did not have any tax positions that did not meet the “more-likely-than-not” threshold of being sustained by the applicable tax authority. Generally, tax authorities can examine all tax returns filed for the last three years.
Net investment income and net realized gains (losses) may differ for financial statement and tax purposes because of temporary or permanent book-to-tax differences. To the extent these differences are permanent, reclassifications are made to the appropriate equity accounts in the period in which the differences arise.
(f) Distribution to Shareholders
The Technology Fund intends to distribute substantially all of its net investment income and net capital gains annually. As a government money market fund, the Treasury Fund’s distributions are expected to consist primarily of income dividends, and income dividends will be declared daily and distributed monthly.
The character of distributions made during the year 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 the income or realized gains were recorded by the fund.
The distributions paid during period July 17, 2019 through October 31, 2019 (adjusted by dividends payable as of October 31, 2019) were as follows:
| Fund | Ordinary Income |
| Technology Fund | $— | |
| Treasury Fund | 173 | |
(a) Management Agreement and Transactions with Related Parties
Under the terms of the management agreement between the Trust, on behalf of each Fund, and the Adviser (the “Management Agreement”), the Adviser, subject to the supervision of the Board, provides or arranges to be provided to each Fund such investment advice as its deems advisable and will furnish or arrange to be furnished a continuous investment program for the Fund consistent with the Fund’s investment objective and policies. The monthly compensation paid to the Adviser is accrued daily at an annual rate of 0.95% and 0.25% on the average daily net assets of the Technology Fund and the Treasury Fund, respectively.
As of October 31, 2019, the Adviser beneficially owned 100.00%, 66.69% and 94.35% of the outstanding shares of the Technology Fund Investor Class, the Technology Fund Institutional Class and the Treasury Fund Institutional Class, respectively.
In the interest of limiting the expenses of the Funds, the Adviser has entered into a contractual operating expense limitation agreement with each Fund. Pursuant to the Operating Expense Limitation Agreement, the Adviser has agreed to waive or limit its fees and assume other expenses of the Fund (excluding (i) any front-end or contingent deferred loads; (ii) brokerage fees and commissions; (iii) acquired fund fees and expenses; (iv) fees and expenses associated with investments in other collective investment vehicles or derivative instruments (including for example option and swap fees and expenses); (v) borrowing costs (such as interest and dividend expense on securities sold short); (vi) taxes; (vii) extraordinary expenses such as litigation expenses (which may include indemnification of Fund officers and Trustees, and contractual indemnification of Fund service providers, including the Adviser)) not incurred in the ordinary course of business so that the Funds’ ratio of total annual operating expenses, expresses as a percentage of a share classes’ average daily net assets, is limited to 1.30%, 1.05% and 0.45% of the Technology Fund Investor Class, Technology Fund Institutional Class, and the Treasury Fund Institutional Class, respectively (the “Operating Expense Limitation”). The Adviser retains its right to receive reimbursement of any excess expense payments paid by it pursuant to the Operating Expense Limitation Agreement for 3 years from the date on which the waiver or reimbursement occurs if such reimbursement can be achieved within the lesser of the Operating Expense Limitation or the expense limits in place at the time of recoupment. The Adviser’s right to receive such reimbursement shall survive the termination of either the Operating Expense Limitation Agreement or the Management Agreement.
The following table shows the remaining waived expenses subject to potential recovery expiring:
| | Technology Fund | Treasury Fund |
| October 2022 | $78,984 | $81,948 |
(a) Administrator, Custodian and Transfer Agent
The custodian to the Trust is U.S. Bank, N.A. The administrator and transfer agent to the Trust is U.S. Bancorp Fund Services, LLC, an affiliate of U.S. Bank, N.A.
(b) Distribution Fees
Quasar Distributors, LLC, a subsidiary of U.S. Bancorp, serves as the Funds’ distributor. The Trust has adopted a distribution plan pursuant to Rule 12b-1 of the 1940 Act for the Investor Class of the Technology Fund. There is no Rule 12b-1 distribution plan for the Institutional Class shares of the Funds. The Investor Class Plan provides that the Fund may pay a Rule 12b-1 fee at an annual rate of 0.25% of the Investor Class average net assets on a monthly basis to persons or institutions for performing certain servicing functions for the Investor Class shareholders.
| 4. | Fund Share Transactions |
At October 31, 2019, there were an unlimited number of shares of beneficial interest with no par value authorized. The following table summarizes the activity in shares of the Technology Fund:
| Technology Fund | August 9, 2019(1) through October 31, 2019 | |
| | Shares | | Amount | |
| Sales | | | | |
| Institutional Class | | 7,423
| | $ | 74,500 | |
| Investor Class | | 50
| | | 500 | |
| Reinvestments | | | | | | |
| Institutional Class | | — |
| | — |
|
| Investor Class | | — |
| | — |
|
| Redemptions | | | | | | |
| Institutional Class | | — |
| | — |
|
| Investor Class | | — |
| | — |
|
| Total Institutional Class | | 7,423 | | | 74,500 | |
| Total Investor Class | | 50 | | | 500 | |
| Net increase (decrease) | | 7,473 | | $ | 75,000 | |
| 5. | Purchases and Sales of Investments |
For the period August 9, 2019 to October 31, 2019 aggregate purchases and sales of investment securities (excluding short-term investments) for the Technology Fund were $83,698 and $10,492, respectively.
| 6. | Organization and Offering Costs |
Organization costs consist of costs incurred to establish the Funds and enable them legally to do business. Each Fund expenses organization costs as incurred. Offering costs include state registration fees and legal fees regarding the preparation of the initial registration statement. Offering costs are accounted for as deferred costs until operations begin. Offering costs are then amortized to expense over twelve months on a straight-line basis. These organization and offering expenses will be advanced by the Adviser and the Adviser has agreed to reimburse each Fund for these expenses, subject to potential recovery (see Note 3). Organizational costs which are subject to reimbursement by the Adviser are presented in the Statement of Assets and Liabilities as a receivable from Adviser. The total amount of the organization costs and offering costs incurred by each Fund was $19,131 and $9,101, respectively.
The Funds in the normal course of business make investments in financial instruments where there is risk of potential loss. There can be no assurance that the Funds will achieve their investment objective.
On November 25, 2019, U.S. Bancorp, the parent company of Quasar Distributors, LLC, the Funds’ distributor, announced that it had signed a purchase agreement to sell Quasar to Foreside Financial Group, LLC ("Foreside") such that Quasar will become a wholly-owned broker-dealer subsidiary of Foreside. The transaction is expected to close by the end of March 2020. Quasar will remain the Funds’ distributor at the close of the transaction, subject to Board approval.
Portfolio Holdings
Technology Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q or Part F of Form N-PORT (beginning with the filings after March 31, 2020). Technology Fund’s Forms N-Q or Part F of Form N-PORT and Treasury Fund’s Form N-MFP which has information about the Fund and its portfolio holdings is available without charge: (i) upon request, by calling 833-2-NCFUND or 833-262-3863; and (ii) on the SEC’s web-site at http://www.sec.gov.
Proxy Voting
Information regarding how each Fund voted proxies related to portfolio securities for the most recent 12-month period ended June 30, as well as a description of the policies and procedures each Fund uses to determine how to vote proxies is available without charge, upon request, by calling 833-2-NCFUND or 833-262-386.
Approval of the Funds’ Management Agreement
At the organizational Board meeting held on February 7, 2019, the Board, including the Trustees who are not "interested persons" as defined in the 1940 Act, discussed and approved the Management Agreement. The Board relied upon the advice of independent legal counsel and its own business judgment in determining the material factors to be considered in evaluating the Management Agreement and the weight to be given to each factor considered. The Board’s conclusions were based on a comprehensive evaluation of all of the information provided and were not the result of any one factor. Moreover, each Trustee might have afforded different weight to the various factors in reaching his or her conclusions with respect to the approval of the Management Agreement.
Nature, Extent and Quality of Services. The Board considered that North Capital was established in October 2008 to provide financial planning and investment advisory solutions to individuals, families and institutions. The Board noted that as of November 2018, North Capital had approximately $195 million of assets under management or discretionary supervision, and provided a broad range of consulting services related to real estate and private funds. The Board acknowledged that although North Capital had no quantifiable track record managing mutual funds or money market funds, the Adviser personnel had a depth of knowledge in the technology sector and extensive experience with U.S. Treasury and agency securities. The Board considered the Adviser’s extensive experience in advisory services and understanding of the proposed strategies and risks involved with each Fund. The Board also reviewed certain legal and regulatory matters and evaluated whether they had any impact on the Adviser’s operations. The Board further discussed that the Adviser and its affiliate companies were financially healthy, and would be able to absorb the costs of launching the Funds and also provide quality services. The Board concluded that the Adviser had sufficient quality and depth of personnel, resources, investment methods and compliance policies and procedures essential to perform its duties under the Management Agreement and that the nature, overall quality and extent of the management services that it would provide to the Trust would be satisfactory.
Performance. The Board noted that because the Funds had not yet commenced operations, they could not consider the Funds’ past performance. The Board also considered that the Adviser did not have a record of prior performance for other registered funds or similarly managed accounts. The Board considered the qualifications of the proposed portfolio managers and agreed that North Capital was well positioned to manage the strategies proposed.
Fees and Expenses. The Board considered that the Adviser proposed a 0.95% management fee for the Technology Fund, which was higher than both the Peer Group and Morningstar Category Average. The Board noted, however, that the proposed fee was well within the ranges for both of these categories. Additionally, the Board discussed that the Adviser would waive fees for the Technology Fund when the Technology Fund invested in the Treasury Fund. The Adviser proposed, and the Board discussed, that the Technology Fund would have two share classes, an Investor Class without a sales load, and an Institutional Class. As discussed by the Board, the Adviser had agreed to an expense cap of 1.30% and 1.05% for the Technology Fund’s Investor Class and Institutional Class shares, respectively.
The Board considered that the Adviser proposed a 0.25% management fee for the Treasury Fund, which was higher than both the Peer Group and Morningstar Category Average. The Board noted, however, that the proposed fee was well within the ranges for both of these categories. As discussed by the Board, the Adviser had agreed to an expense cap of 0.45% for the Treasury Fund’s Institutional Class shares, the only proposed share class for the Treasury Fund. The Board discussed the proposed fees of the Adviser, noting that in both cases, while the management fee was higher than average, the fee was competitive and allowed the Adviser to provide quality services. After further discussion, the Board concluded that the proposed fees were not unreasonable.
Profitability. The Board noted that the Adviser did not expect to derive any profits from its services to either Fund for the first year of operations, and expected a modest profit in the second year. The Board concluded that excessive profitability from the Adviser’s relationship with the Funds was not an issue at this time.
Economies of Scale. The Board noted that economies of scale had not yet been reached as the Funds had not yet launched. The Board discussed future opportunities for breakpoints as the assets of each Fund grew.
Conclusion. Having requested and received such information from the Adviser as the Board believed to be reasonably necessary to evaluate the terms of the Management Agreement, and as assisted by the advice of independent counsel, the Board determined that approval of the Management Agreement was in the best interest of each Fund and their future shareholders.
Not applicable for semi-annual reports.
Not applicable for semi-annual reports.
Not applicable for semi-annual reports.
Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934).
of the report to shareholders filed under Item 1 of this Form.
(b) Not Applicable.
Not applicable to open-end investment companies.
Not applicable to open-end investment companies.
Not applicable to open-end investment companies.
Not applicable.
Not applicable to open-end investment companies.
(4) There was no change in registrant’s independent public accountant for the period covered by this report.
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.
James P. Dowd, President of the Trust
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.
James P. Dowd, President of the Trust
