BROADMARK TACTICAL PLUS FUND
STATEMENT OF OPERATIONS
For the Period Ended November 30, 2013
(a)
|
INVESTMENT INCOME
|
|
|
|
|
Dividends
|
|
$
|
10,624
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
Offering costs (Note 1)
|
|
|
100,167
|
|
|
Professional fees
|
|
|
67,135
|
|
|
Trustees’ fees and expenses (Note 4)
|
|
|
59,636
|
|
|
Registration and filing fees
|
|
|
39,121
|
|
|
Organization expense (Note 1)
|
|
|
30,536
|
|
|
Fund accounting fees (Note 4)
|
|
|
27,593
|
|
|
Compliance services fees (Note 4)
|
|
|
24,000
|
|
|
Administration fees (Note 4)
|
|
|
22,000
|
|
|
Transfer agent fees, Investor Class (Note 4)
|
|
|
11,000
|
|
|
Transfer agent fees, Institutional Class (Note 4)
|
|
|
11,000
|
|
|
Insurance expense
|
|
|
16,729
|
|
|
Investment advisory fees (Note 4)
|
|
|
16,356
|
|
|
Postage and supplies
|
|
|
8,580
|
|
|
Custodian and bank service fees
|
|
|
7,914
|
|
|
Shareholder service fees, Institutional Class (Note 4)
|
|
|
192
|
|
|
Distribution fees, Investor Class (Note 4)
|
|
|
161
|
|
|
Other expenses
|
|
|
11,984
|
|
|
TOTAL EXPENSES
|
|
|
454,104
|
|
|
Fee reductions and expense reimbursements by the Adviser (Note 4):
|
|
|
|
|
|
Common
|
|
|
(380,016
|
)
|
|
Investor Class
|
|
|
(26,527
|
)
|
|
Institutional Class
|
|
|
(26,137
|
)
|
|
NET EXPENSES
|
|
|
21,424
|
|
|
|
|
|
|
|
|
NET INVESTMENT LOSS
|
|
|
(10,800
|
)
|
|
|
|
|
|
|
|
REALIZED AND UNREALIZED GAINS (LOSSES) ON
INVESTMENTS AND OPTION AND FUTURES CONTRACTS
|
|
|
|
|
|
Net realized gains from:
|
|
|
|
|
|
Investments
|
|
|
53,988
|
|
|
Option contracts written
|
|
|
568
|
|
|
Futures contracts
|
|
|
151,553
|
|
|
Net change in unrealized appreciation (depreciation) on:
|
|
|
|
|
|
Investments
|
|
|
43,158
|
|
|
Futures contracts
|
|
|
87,742
|
|
|
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS AND
OPTION AND FUTURES CONTRACTS
|
|
|
337,009
|
|
|
|
|
|
|
|
|
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
|
|
$
|
326,209
|
|
|
(a)
|
Represents the period from the commencement of operations (December 31, 2012) through November 30, 2013.
|
|
See accompanying notes to financial statements.
|
BROADMARK TACTICAL PLUS FUND
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
Period
Ended
November 30,
2013
(a)
|
|
|
FROM OPERATIONS
|
|
|
|
|
Net investment loss
|
|
$
|
(10,800
|
)
|
|
Net realized gains (losses) from:
|
|
|
|
|
|
Investments
|
|
|
53,988
|
|
|
Option contracts written
|
|
|
568
|
|
|
Futures contracts
|
|
|
151,553
|
|
|
Net change in unrealized appreciation (depreciation) on:
|
|
|
|
|
|
Investments
|
|
|
43,158
|
|
|
Futures contracts
|
|
|
87,742
|
|
|
Net increase in net assets resulting from operations
|
|
|
326,209
|
|
|
|
|
|
|
|
|
FROM CAPITAL SHARE TRANSACTIONS
|
|
|
|
|
|
Investor Class
|
|
|
|
|
|
Proceeds from shares sold
|
|
|
150,000
|
|
|
|
|
|
|
|
|
Institutional Class
|
|
|
|
|
|
Proceeds from shares sold
|
|
|
9,435,619
|
|
|
Payments for shares redeemed
|
|
|
(9,793
|
)
|
|
Net increase in Institutional Class net assets
from capital share transactions
|
|
|
9,425,826
|
|
|
|
|
|
|
|
|
TOTAL INCREASE IN NET ASSETS
|
|
|
9,902,035
|
|
|
|
|
|
|
|
|
NET ASSETS
|
|
|
|
|
|
Beginning of period
|
|
|
100,000
|
|
|
End of period
|
|
$
|
10,002,035
|
|
|
|
|
|
|
|
|
ACCUMULATED NET INVESTMENT LOSS
|
|
$
|
—
|
|
|
|
|
|
|
|
|
CAPITAL SHARE ACTIVITY
|
|
|
|
|
|
Investor Class
|
|
|
|
|
|
Shares sold
|
|
|
13,333
|
|
|
Shares outstanding, beginning of period
|
|
|
5,000
|
|
|
Shares outstanding, end of period
|
|
|
18,333
|
|
|
|
|
|
|
|
|
Institutional Class
|
|
|
|
|
|
Shares sold
|
|
|
835,410
|
|
|
Shares redeemed
|
|
|
(878
|
)
|
|
Net increase in shares outstanding
|
|
|
834,532
|
|
|
Shares outstanding, beginning of period
|
|
|
5,000
|
|
|
Shares outstanding, end of period
|
|
|
839,532
|
|
|
(a)
|
Represents the period from the commencement of operations (December 31, 2012) through November 30, 2013.
|
|
See accompanying notes to financial statements.
|
BROADMARK TACTICAL PLUS FUND
FINANCIAL HIGHLIGHTS
Per Share Data for a Share Outstanding Throughout the Period
|
|
|
Period
Ended
November 30,
2013
(a)
|
|
|
Net asset value at beginning of period
|
|
$
|
10.00
|
|
|
|
|
|
|
|
|
Income (loss) from investment operations:
|
|
|
|
|
|
Net investment loss
|
|
|
(0.04
|
)
|
|
Net realized and unrealized gains on investments
|
|
|
1.66
|
|
|
Total from investment operations
|
|
|
1.62
|
|
|
|
|
|
|
|
|
Net asset value at end of period
|
|
$
|
11.62
|
|
|
|
|
|
|
|
|
Total return
(b)
|
|
|
16.20%
|
(c)
|
|
|
|
|
|
|
|
Net assets at end of period
|
|
$
|
213,118
|
|
|
|
|
|
|
|
|
Ratios/supplementary data:
|
|
|
|
|
|
Ratio of total expenses to average net assets
(d)
|
|
|
74.87%
|
(e)
|
|
|
|
|
|
|
|
Ratio of net expenses to average net assets
(d) (f)
|
|
|
1.84%
|
(e)
|
|
|
|
|
|
|
|
Ratio of net investment loss to average net assets
(d) (f) (g)
|
|
|
(1.16%
|
)
(e)
|
|
|
|
|
|
|
|
Portfolio turnover rate
|
|
|
1,814%
|
(c)
|
|
(a)
|
Represents the period from the commencement of operations (December 31, 2012) through November 30, 2013.
|
|
(b)
|
Total return is a measure of the change in value of an investment in the Fund over the period covered, which assumes any dividends and capital gain distributions are reinvested in shares of the Fund. The return shown does not reflect the deduction of taxes a shareholder would pay on Fund distributions, if any, or the redemption of Fund shares. Had the Adviser not reduced its fees and reimbursed expenses, the total return would have been lower.
|
|
(c)
|
Not annualized.
|
|
(d)
|
Does not include expenses from investment companies in which the Fund invests.
|
|
(e)
|
Annualized.
|
|
(f)
|
Ratio was determined after advisory fee reductions and expense reimbursements (Note 4).
|
|
(g)
|
The recognition of net investment loss is affected by the timing and declaration of dividends by the underlying investment companies in which the Fund invests.
|
|
See accompanying notes to financial statements.
|
BROADMARK TACTICAL PLUS FUND
FINANCIAL HIGHLIGHTS
Per Share Data for a Share Outstanding Throughout the Period
|
|
|
Period
Ended
November 30,
2013
(a)
|
|
|
Net asset value at beginning of period
|
|
$
|
10.00
|
|
|
|
|
|
|
|
|
Income (loss) from investment operations:
|
|
|
|
|
|
Net investment loss
|
|
|
(0.01
|
)
|
|
Net realized and unrealized gains on investments
|
|
|
1.67
|
|
|
Total from investment operations
|
|
|
1.66
|
|
|
|
|
|
|
|
|
Net asset value at end of period
|
|
$
|
11.66
|
|
|
|
|
|
|
|
|
Total return
(b)
|
|
|
16.60%
|
(c)
|
|
|
|
|
|
|
|
Net assets at end of period
|
|
$
|
9,788,917
|
|
|
|
|
|
|
|
|
Ratios/supplementary data:
|
|
|
|
|
|
Ratio of total expenses to average net assets
(d)
|
|
|
29.89%
|
(e)
|
|
|
|
|
|
|
|
Ratio of net expenses to average net assets
(d) (f)
|
|
|
1.49%
|
(e)
|
|
|
|
|
|
|
|
Ratio of net investment loss to average net assets
(d) (f) (g)
|
|
|
(0.74%
|
)
(e)
|
|
|
|
|
|
|
|
Portfolio turnover rate
|
|
|
1,814%
|
(c)
|
|
(a)
|
Represents the period from the commencement of operations (December 31, 2012) through November 30, 2013.
|
|
(b)
|
Total return is a measure of the change in value of an investment in the Fund over the period covered, which assumes any dividends and capital gain distributions are reinvested in shares of the Fund. The return shown does not reflect the deduction of taxes a shareholder would pay on Fund distributions, if any, or the redemption of Fund shares. Had the Adviser not reduced its fees and reimbursed expenses, the total return would have been lower.
|
|
(c)
|
Not annualized.
|
|
(d)
|
Does not include expenses from investment companies in which the Fund invests.
|
|
(e)
|
Annualized.
|
|
(f)
|
Ratio was determined after advisory fee reductions and expense reimbursements (Note 4).
|
|
(g)
|
The recognition of net investment loss is affected by the timing and declaration of dividends by the underlying investment companies in which the Fund invests.
|
See accompanying notes to financial statements.
BROADMARK TACTICAL PLUS FUND
NOTES TO FINANCIAL STATEMENTS
1. Organization
Broadmark Tactical Plus Fund (the “Fund”) is a diversified series of Broadmark Funds (the “Trust”), an open-end management investment company organized as a Delaware statutory trust and registered under the Investment Company Act of 1940 (the “1940 Act”). The Fund commenced operations on December 31, 2012.
The investment objective of the Fund is to seek to produce, in any market environment, above-average risk-adjusted returns with less downside volatility than the S&P 500 Index.
The Fund offers two classes of shares: Investor Class shares (sold without any sales loads, but subject to a distribution fee of up to 0.25% of the average annual daily net assets attributable to Investor Class shares and a shareholder service fee of up to 0.15% of the average annual daily net assets attributable to Investor Class shares) and Institutional Class shares (sold without any sales loads or distribution fees, but subject to a shareholder service fee of up to 0.05% of the average annual daily net assets attributable to Institutional Class shares). Each share class represents an ownership interest in the same investment portfolio.
On December 24, 2012, 5,000 shares each of the Investor Class shares and the Institutional Class shares of the Fund were issued for cash, at $10.00 per share to Broadmark Asset Management LLC (the “Adviser”), the investment adviser to the Fund. All costs incurred by the Fund in connection with its organization and offering of shares were borne by the Adviser, for which the Adviser may seek reimbursement by the Fund as described in Note 4. Organizational costs were charged to expenses as incurred. Offering costs incurred by the Fund prior to the start of operations were treated as deferred charges. Offering costs are amortized over the twelve month period following the commencement of operations using the straight line method. The Fund incurred $100,167 of offering costs and $30,536 of organizational costs for the period ended November 30, 2013.
2. Significant Accounting Policies
The following is a list of the Fund’s significant accounting policies. The policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
Securities, Options and Futures Valuation
– The Fund’s portfolio securities are valued as of the close of regular trading on the New York Stock Exchange (“NYSE”) (normally 4:00 p.m. Eastern Time) on each business day that the NYSE is open for business. The pricing and valuation of portfolio securities is determined in accordance with procedures approved by, and under the direction of, the Trust’s Board of Trustees (the “Board”). Securities listed on an exchange or quoted on a national market system are valued at the last sale price or, if it was not traded
BROADMARK TACTICAL PLUS FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
during the day, at the most recent bid price. Securities traded only on over-the-counter markets are valued at the last sale price on days when the security is traded; otherwise, they are valued at closing over-the-counter bid prices. If a security is traded on more than one exchange, it is valued at the last sale price on the exchange where it is principally traded. Options on securities and options on indexes listed on an exchange are valued at the mean of the closing bid and ask price on the exchange on which they are traded on the day of valuation. Futures contracts which are traded on a commodities exchange are valued at their closing settlement price on the exchange on which they are primarily traded. Over-the-counter futures contracts for which market quotations are readily available are valued based on quotes received from third party pricing services or one or more dealers that make markets in such securities. If quotes are not available from a third party pricing service or one or more dealers, quotes shall be determined based on the fair value of such securities. Short-term obligations (debt securities that mature in less than 60 days) are generally valued at amortized cost.
Securities for which market quotations are not readily available and securities for which the Fund has reason to believe the market quote should not be relied upon are valued by the Fund’s investment adviser in accordance with procedures approved by the Board. Other times when the investment adviser would make a fair value determination would be when trading in a security held by the Fund is halted and not resumed prior to the end of the market close, or if exchanges were required to close before the anticipated end of the trading day. In such cases, the value for a security may be different from most recent quoted market values. Fair valued securities will be classified as Level 2 or 3 within the fair value hierarchy (see below), depending on the inputs used.
GAAP establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and requires additional disclosures about fair value measurements.
Various inputs are used in determining the value of the Fund’s investments. These 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
|
|
•
|
Level 3 – significant unobservable inputs
|
The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement.
BROADMARK TACTICAL PLUS FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
The following is a summary of the inputs used to value the Fund’s investments as of November 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange-Traded Funds
|
|
$
|
2,970,010
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,970,010
|
|
|
Money Market Funds
|
|
|
6,764,231
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,764,231
|
|
|
Total
|
|
$
|
9,734,241
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,734,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Financial Instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures Contracts
|
|
$
|
86,166
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
86,166
|
|
|
Futures Contracts Sold Short
|
|
|
1,576
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,576
|
|
|
Total
|
|
$
|
87,742
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
87,742
|
|
As of November 30, 2013, the Fund did not have any transfers in and out of any Level. The Fund did not have any assets or liabilities that were measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of November 30, 2013. It is the Fund’s policy to recognize transfers into and out of any Level, if any, at the end of the reporting period.
Share valuation
– The net asset value per share of each class of the Fund is calculated as of the close of trading on the NYSE (normally 4:00 p.m., Eastern time) on each day the NYSE is open for business. The net asset value per share of each class of the Fund is calculated by dividing the total value of the assets attributable to that class, less liabilities attributable to that class, by the number of shares of that class outstanding. The offering price and redemption price per share of each class of Fund shares is equal to the net asset value per share of each class.
Security transactions and investment income
– Security transactions are accounted for on their trade date. Cost of securities sold is determined on a specific identification basis. Dividend income is recorded on the ex-dividend date. Interest income is accrued as earned and includes amortization of discounts and premiums.
Allocation between classes
– Investment income earned, realized capital gains and losses, and unrealized appreciation and depreciation are allocated daily to each class of shares based upon its proportionate share of total net assets of the Fund. Class specific expenses are charged directly to the class incurring the expense. Common expenses which are not attributable to a specific class are allocated daily to each class based upon its proportionate share of total net assets of the Fund.
BROADMARK TACTICAL PLUS FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
Distributions to shareholders
– Dividends arising from net investment income and net capital gains, if any, are typically declared and paid one time during each calendar year. The amount of distributions from net investment income and net realized gains are determined in accordance with income tax regulations, which may differ from GAAP, and are recorded on the ex-dividend date. There were no distributions paid to shareholders during the period ended November 30, 2013. On December 6, 2013, capital gain distributions totaling $0.3272 per share were declared for each Class of the Fund. The dividend was paid on December 6, 2013 to shareholders of record on December 5, 2013. Additionally, on December 31, 2013, a capital gain distribution of $0.0095 per share was declared for each Class of the Fund. The dividend was paid on December 31, 2013 to shareholders of record on December 30, 2013.
Futures Contracts and Option Transactions
– The Fund may purchase and write (sell) put and call options on broad-based stock indices and on individual securities and may enter into futures contracts. The Fund may engage in these techniques as part of its investment strategy and for hedging purposes.
When the Fund writes an option, an amount equal to the net premium (the premium less the commission) received by the Fund is recorded as a liability in the Fund’s Statement of Assets and Liabilities and is subsequently marked-to-market daily. If an option expires unexercised on the stipulated expiration date or if the Fund enters into a closing purchase transaction, it will realize a gain (or a loss if the cost of a closing purchase transaction exceeds the net premium received when the option is sold) and the liability related to such option will be eliminated. If an index option is exercised, the Fund will be required to pay the difference between the closing index value and the exercise price of the option. In this event, the proceeds of the sale will be increased by the net premium originally received and the Fund will realize a gain or loss.
When the Fund purchases or sells a stock index futures contract, no price is paid to or received by the Fund upon the purchase or sale of the futures contract. Instead, the Fund is required to deposit with the futures commission merchant an amount of cash or qualifying securities currently ranging from 5% to 10% of the contract amount. This is called the “initial margin deposit.” Subsequent payments, known as “variation margin,” are made or received by the Fund each day, depending on the daily fluctuations in the fair value of the underlying stock index. The Fund recognizes an unrealized gain or loss equal to the daily variation margin. If market conditions move unexpectedly, the Fund may not achieve the anticipated benefits of the futures contracts and may realize a loss. The margin deposits for futures contracts and the variation margin receivable or payable are reported on the Statement of Assets and Liabilities.
Estimates
– The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
BROADMARK TACTICAL PLUS FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
Federal income tax
– The Fund intends to qualify each year as a “regulated investment company” under Subchapter M of the Internal Revenue Code of 1986 (the “Code”). By so qualifying, the Fund will not be subject to federal income taxes to the extent that it distributes its net investment income and any realized capital gains in accordance with the Code. Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated investment companies, it is also the Fund’s intention to declare as dividends in each calendar year at least 98% of its net investment income (earned during the calendar year) and 98.2% of its net realized capital gains (earned during the twelve months ended November 30) plus undistributed amounts from prior years.
The following information is computed on a tax basis for each item as of November 30, 2013:
|
Tax cost of portfolio investments
|
|
$
|
9,691,083
|
|
|
Gross unrealized appreciation
|
|
$
|
43,158
|
|
|
Gross unrealized depreciation
|
|
|
—
|
|
|
Net unrealized appreciation on investments
|
|
|
43,158
|
|
|
Undistributed ordinary income
|
|
|
151,146
|
|
|
Undistributed long-term capital gains
|
|
|
131,905
|
|
|
Total distributable earnings
|
|
$
|
326,209
|
|
During the period ended November 30, 2013, the Fund reclassified $10,800 of net investment loss against undistributed net realized gains from securities transactions and other financial instruments on the Statement of Assets and Liabilities. Such reclassification, the result of permanent differences between the financial statement and income tax reporting requirements, has no effect on the Fund’s net assets or net asset value per share.
The Fund recognizes the tax benefits or expenses of uncertain tax positions only when the position is “more likely than not” to be sustained assuming examination by tax authorities. Management has reviewed the Fund’s tax positions for the current tax year ended November 30, 2013 and has concluded that no provision for unrecognized tax benefits or expenses is required in these financial statements and does not expect this to change over the next twelve months. The Fund identifies its major tax jurisdiction as U.S. Federal.
3. Investment Transactions
During the period ended November 30, 2013, the total cost of purchases and the total proceeds from sales of investment securities, other than short-term investments, amounted to $14,585,856 and $11,736,989, respectively.
BROADMARK TACTICAL PLUS FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
4. Transactions with Related Parties
INVESTMENT ADVISORY AGREEMENT
Under the terms of the Investment Management Agreement between the Trust, on behalf of the Fund, and the Adviser, the Adviser serves as the investment adviser to the Fund. For its services, the Fund pays the Adviser an investment advisory fee at the annual rate of 1.15% of the Fund’s average daily net assets.
The Adviser has contractually agreed pursuant to a written Expense Limitation Agreement to reduce its investment management fees and/or reimburse other operating expenses of the Fund in order to limit total operating expenses (exclusive of brokerage costs, interest, taxes, dividends or interest on short positions, any acquired funds fees and expenses and any extraordinary expenses, such as litigation or indemnification costs) to an annual rate (as a percentage of average daily net assets) of 1.84% for Investor Class shares and 1.49% for Institutional Class shares. Accordingly, during the period ended November 30, 2013, the Adviser did not collect any of its advisory fee of $16,356 and, in addition, reimbursed the Fund for $363,660 of expenses not attributable to a particular class, $26,527 of Investor Class expenses and $26,137 of Institutional Class expenses.
Any such fee reductions or expense reimbursements by the Adviser may be reimbursed by the Fund pursuant to the terms of the expense limitation agreement, provided that the Fund is able to make such repayment without causing total ordinary operating expenses to exceed the annual rates of 1.84% and 1.49% for Investor Class shares and Institutional Class shares, respectively, and provided further that the fees and expenses for which the Adviser has requested reimbursement were incurred within the preceding three fiscal years of the repayment. As of November 30, 2013, the Adviser may in the future recover advisory fee reductions and expense reimbursements totaling $569,680. The Adviser may recover a portion of this amount no later than the dates as stated below:
COMPLIANCE CONSULTING SERVICES
Alaric Compliance Services, LLC (“Alaric”) provides ongoing regulatory compliance consulting, monitoring and reporting services for the Fund. In addition, a Director of Alaric serves as the Trust’s Chief Compliance Officer. For these services, Alaric receives $2,000 per month from the Fund.
OTHER SERVICE PROVIDERS
Ultimus Fund Solutions, LLC (“Ultimus”) provides fund administration, fund accounting and transfer agency services to the Fund. Pursuant to separate servicing agreements with Ultimus, the Fund pays Ultimus customary fees for its services.
BROADMARK TACTICAL PLUS FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS
The Trust has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act (the “Plan”), pursuant to which the Fund may pay intermediaries and other persons for rendering distribution services and for bearing any related expenses with respect to the Investor Class shares of the Fund, which fees will not exceed the annual rate of 0.25% of the Fund’s average daily net assets attributable to Investor Class shares. During the period ended November 30, 2013, the Investor Class shares incurred $161 in distribution fees under the Plan.
The Fund has also adopted a shareholder services plan, pursuant to which the Fund is authorized to pay third party service providers for non-distribution related services. These payments, which are calculated daily and paid monthly, may not exceed the annual rate of 0.15% with respect to Investor Class shares and 0.05% with respect to Institutional Class shares. During the period ended November 30, 2013, the Institutional Class shares incurred $192 in shareholder services fees under the shareholder services plan. The Investor Class shares did not incur shareholder services fees during the period ended November 30, 2013.
DISTRIBUTION AGREEMENT
The Trust has entered into a Distribution Agreement with Foreside Fund Services, LLC (the “Distributor”), pursuant to which the Distributor provides distribution services and serves as the principal underwriter to the Fund.
COMPENSATION OF TRUSTEES
The Co-Chief Executive Officer of the Adviser is also the President and a Trustee of the Trust. Certain other officers of the Trust are also officers of the Adviser, or of Ultimus. Trustees affiliated with the Adviser are not compensated by the Trust for their services. Each Trustee who is not an affiliated person of the Adviser receives from the Trust an annual retainer of $25,000, payable quarterly, plus reimbursement of travel and other expenses incurred in attending meetings.
5. Derivatives Risk and Transactions
Investing in derivatives, including futures contracts, involves the risk of sustaining large and sudden losses. The Fund’s use of derivatives may reduce its returns and/or increase its volatility, and fluctuations in the value of a derivative may not correlate perfectly with the overall securities markets.
BROADMARK TACTICAL PLUS FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
Transactions in put option contracts written by the Fund during the period ended November 30, 2013 were as follows:
|
|
|
|
|
|
|
|
|
Options outstanding, beginning of the period
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Options written
|
|
|
12
|
|
|
|
5,904
|
|
|
Options expired
|
|
|
(6
|
)
|
|
|
(1,722
|
)
|
|
Options cancelled in a closing purchase transaction
|
|
|
(6
|
)
|
|
|
(4,182
|
)
|
|
Options outstanding, end of the period
|
|
$
|
—
|
|
|
$
|
—
|
|
The average monthly notional amount of put options purchased during the period ended November 30, 2013 was $54,358.
The Fund’s positions in derivative instruments as of November 30, 2013 are recorded in the following locations in the Statement of Assets and Liabilities:
|
|
|
|
|
|
|
Gross
Notional
Amount Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity contracts –
Futures contracts
purchased
|
Variation margin
receivable (payable)
|
|
$
|
24,996
|
|
|
$
|
—
|
|
|
$
|
7,533,000
|
|
|
Equity contracts –
Futures contracts
sold short
|
Variation margin
receivable (payable)
|
|
|
270
|
|
|
|
(868
|
)
|
|
|
(2,435,535
|
)
|
|
|
|
|
$
|
25,266
|
|
|
$
|
(868
|
)
|
|
$
|
5,097,465
|
|
The average monthly notional amount of futures contracts purchased and sold short during the period ended November 30, 2013 was $1,115,984 and $290,068, respectively.
BROADMARK TACTICAL PLUS FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
Transactions in derivative instruments for the Fund during the period ended November 30, 2013 are recorded in the following locations in the Statement of Operations:
|
|
|
|
|
|
|
|
Change in
Unrealized Appreciation (Depreciation)
|
|
|
Equity contracts –
Option contracts
written
|
Net realized
gains from option
contracts written
|
|
$
|
568
|
|
Net change in unrealized
appreciation (depreciation)
on option contracts written
|
|
$
|
—
|
|
|
Equity contracts –
Futures contracts
|
Net realized
gains from futures
contracts
|
|
|
168,894
|
|
Net change in unrealized
appreciation (depreciation)
on futures contracts
|
|
|
86,166
|
|
|
Equity contracts –
Futures contracts
sold short
|
Net realized
gains from futures
contracts
|
|
|
(17,341
|
)
|
Net change in unrealized
appreciation (depreciation)
on futures contracts
|
|
|
1,576
|
|
6. Investment in Other Investment Companies
The Fund may invest a significant portion of its assets in shares of one or more investment companies (i.e., money market mutual funds and exchange-traded funds (“ETFs”)). The Fund will incur additional indirect expenses due to acquired fund fees and other costs to the extent it invests in shares of investment companies. As of November 30, 2013, the Fund had 67.6% of the value of its net assets invested in a money market mutual fund registered under the 1940 Act and 24.7% of the value of its net assets invested in a broad based index ETF.
7. Contingencies and Commitments
The Trust indemnifies the Trust’s officers and Trustees for certain liabilities that might arise from their performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Fund, enters into contracts that contain a variety of representations and warranties and which provide general indemnifications. The maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred.
BROADMARK TACTICAL PLUS FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
8. Recent Accounting Pronouncement
In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The amendments in ASU No. 2011-11 enhance disclosures about offsetting of financial assets and liabilities to enable investors to understand the effect of these arrangements on a fund’s financial position. In January 2013, FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. The amendments in ASU No. 2013-01 clarify the intended scope of disclosures required by ASU No. 2011-11. These ASUs are effective for interim and annual reporting periods beginning on or after January 1, 2013. Management believes the adoption of these ASUs will not have a material impact on the financial statements.
9. Subsequent Events
The Fund is required to recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed as of the date of the Statement of Assets and Liabilities. For non-recognized subsequent events that must be disclosed to keep the financial statements from being misleading, the Fund is required to disclose the nature of the event as well as an estimate of its financial effect, or a statement that such an estimate cannot be made. Management has evaluated subsequent events through the issuance of these financial statements and has noted no such events.
BROADMARK TACTICAL PLUS FUND
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Shareholders of Broadmark Tactical Plus Fund
and the Board of Trustees of Broadmark Funds
We have audited the accompanying statement of assets and liabilities of Broadmark Tactical Plus Fund (the
“Fund”
), a series of shares of beneficial interest of Broadmark Funds, including the schedule of investments, as of November 30, 2013, and the related statements of operations and changes in net assets and the financial highlights for the period December 31, 2012 (commencement of operations) through November 30, 2013. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of November 30, 2013 by correspondence with the custodian and broker. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Broadmark Tactical Plus Fund as of November 30, 2013, and the results of its operations, changes in its net assets and its financial highlights for the period December 31, 2012 through November 30, 2013, in conformity with accounting principles generally accepted in the United States of America.
|
|
|
|
|
BBD, LLP
|
Philadelphia, Pennsylvania
January 28, 2014
BROADMARK TACTICAL PLUS FUND
ABOUT YOUR FUND’S EXPENSES (Unaudited)
We believe it is important for you to understand the impact of costs on your investment. All mutual funds have operating expenses. As a shareholder of the Fund, you incur ongoing costs, including management fees, class specific fees (such as Rule 12b-1 distribution fees) and other Fund expenses. The following examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
A mutual fund’s ongoing costs are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The expenses in the table that follows are based on an investment of $1,000 made at the beginning of the most recent period (June 1, 2013) and held until the end of the period (November 30, 2013).
The table that follows illustrates the Fund’s ongoing costs in two ways:
Actual fund return
– This section helps you to estimate the actual expenses that you paid over the period. The “Ending Account Value” shown is derived from the Fund’s actual return, and the third column shows the dollar amount of operating expenses that would have been paid by an investor who started with $1,000 in the Fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.
To do so, 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 given for the Fund under the heading “Expenses Paid During Period.”
Hypothetical 5% return
– This section is intended to help you compare the Fund’s ongoing costs with those of other mutual funds. It assumes that the Fund had an annual return of 5% before expenses during the period shown, but that the expense ratio is unchanged. In this case, because the return used is not the Fund’s actual return, the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission (“SEC”) requires all mutual funds to calculate expenses based on a 5% return. You can assess the Fund’s ongoing costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
Note that expenses shown in the table are meant to highlight and help you compare ongoing costs only. The Fund does not charge transactions fees, such as purchase or redemptions fees, and does not charge a “sales load.”
The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.
BROADMARK TACTICAL PLUS FUND
ABOUT YOUR FUND’S EXPENSES (Unaudited) (Continued)
More information about the Fund’s expenses can be found in this report. For additional information on operating expenses and other shareholder costs, please refer to the Fund’s prospectus.
|
|
Beginning
Account Value
June 1, 2013
|
Ending
Account Value
November 30,
2013
|
Expenses
Paid During
Period*
|
|
Based on Actual Fund Return
|
$1,000.00
|
$1,091.10
|
$9.65
|
|
Based on Hypothetical 5% Return
(before expenses)
|
$1,000.00
|
$1,015.84
|
$9.30
|
|
*
|
Expenses are equal to Investor Class shares’ annualized expense ratio of 1.84% for the period, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period).
|
|
|
Beginning
Account Value
June 1, 2013
|
Ending
Account Value
November 30,
2013
|
Expenses
Paid
During
Period*
|
|
Based on Actual Fund Return
|
$1,000.00
|
$1,093.80
|
$7.82
|
|
Based on Hypothetical 5% Return
(before expenses)
|
$1,000.00
|
$1,017.60
|
$7.54
|
|
*
|
Expenses are equal to Institutional Class shares’ annualized expense ratio of 1.49% for the period, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period).
|
BROADMARK TACTICAL PLUS FUND
OTHER INFORMATION (Unaudited)
The Trust files a complete listing of the Fund’s portfolio holdings with the SEC as of the end of the first and third quarters of each fiscal year on Form N-Q. The filings are available free of charge, upon request, by calling the Trust toll-free at 1-877-742-8061. Furthermore, you may obtain a copy of these filings on the SEC’s website at http://www.sec.gov. The Trust’s Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge upon request by calling the Trust toll-free at 1-877-742-8061, or on the SEC’s website at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent period ended June 30 is available without charge upon request by calling the Trust toll-free at 1-877-742-8061, or on the SEC’s website at http://www.sec.gov.
SUPPLEMENTAL INFORMATION (Unaudited)
As a supplement to Note 6 to the financial statements, the financial statements of the aforementioned money market mutual fund, Fidelity Institutional Money Market Portfolio – Class I (the “Portfolio”), can be found at http://www.ultimusfundsolutions.com/FMPXX. This link is the latest semi-annual report published for the Portfolio, dated September 30, 2013. Only data presented for the Portfolio is pertinent to the overall review of the financial statements of the Fund.
BROADMARK TACTICAL PLUS FUND
BOARD OF TRUSTEES AND EXECUTIVE OFFICERS
(Unaudited)
The Board of Trustees has overall responsibility for management of the Trust’s affairs. The Trustees serve during the lifetime of the Trust and until its termination, or until death, resignation, retirement, or removal. The Trustees, in turn, elect the officers of the Trust to actively supervise its day-to-day operations. The officers have been elected for an annual term. The following are the Trustees and executive officers of the Trust. The address of each Trustee and officer, unless otherwise indicated, is c/o Broadmark Funds, 300 Drake’s Landing Road, Suite 150, Greenbrae, CA 94904.
|
Name
(Year of Birth)
|
Position
Held with
Fund or
Trust
|
Length
of Time
Served
|
Principal
Occupation
During Past
5 Years
|
Number of Portfolios
in Fund
Complex Overseen
by Trustee*
|
Other
Directorships
Held by Trustee
|
|
Independent Trustees
1
|
|
|
|
|
|
Robert S. Basso
(1945)
|
Trustee
|
Since
inception
|
Founder and Managing Partner of BEST Partners LLC (independent consulting firm) since 2007.
|
2
|
None
|
|
Patrick Dumas
(1944)
|
Trustee
|
Since
inception
|
Adjunct Professor at St. John's University since 2002.
|
2
|
None
|
|
Rick L. Frimmer (1951)
|
Trustee
|
Since
inception
|
Partner at Schiff Hardin LLP since 2011 and Chief Executive Officer and Manager of Techno Sweat LLC (digital music provider) since 2007. Partner at Luce Forward Hamilton & Scripps LLP from 2006 to 2011.
|
2
|
None
|
BROADMARK TACTICAL PLUS FUND
BOARD OF TRUSTEES AND EXECUTIVE OFFICERS
(Unaudited) (Continued)
|
Name
(Year of Birth)
|
Position
Held with
Fund or
Trust
|
Length
of Time
Served
|
Principal
Occupation
During Past
5 Years
|
Number of Portfolios
in Fund
Complex
Overseen
by Trustee*
|
Other
Directorships
Held by Trustee
During Past
6 Years
|
|
Interested Trustees
|
|
|
|
|
|
Daniel J. Barnett
2
(1948)
|
Trustee
|
Since
inception
|
Chairman and Manager of the Management Committee of the Adviser since 1999, and Chief Executive Officer of Revere Capital Advisors, LLC (investment management firm) since 2007.
|
2
|
None
|
|
Christopher J. Guptill
2
(1956)
|
Trustee and President
|
Since
inception
|
Co-Chief Executive Officer of the Adviser since 2009, and Chief Investment Officer and Manager of the Management Committee of the Adviser since 1999.
|
2
|
None
|
BROADMARK TACTICAL PLUS FUND
BOARD OF TRUSTEES AND EXECUTIVE OFFICERS
(Unaudited) (Continued)
|
Name
(Year of Birth)
|
Position Held
with Fund
or Trust
|
Length of
Time Served
|
Principal Occupation
During Past 5 Years
|
|
Other Officers
|
|
|
|
Theresa M. Bridge
(1969)
225 Pictoria Drive
Suite 450
Cincinnati, OH 45246
|
Treasurer
|
Since inception
|
Vice President and Mutual Fund Controller of Ultimus Fund Solutions, LLC and Vice President of Ultimus Fund Distributors, LLC since 2000.
|
|
Edward J. Cook
(1964)
|
Chief Compliance
Officer
|
Since inception
|
Director at Alaric Compliance Services, LLC since 2007.
|
|
Frank L. Newbauer
(1954)
225 Pictoria Drive
Suite 450
Cincinnati, OH 45246
|
Secretary
|
Since inception
|
Assistant Vice President of Ultimus Fund Solutions, LLC since 2010. Prior thereto, Assistant Vice President of JPMorgan Chase Bank, N.A. from 1999 to 2010.
|
|
*
|
The Fund Complex is comprised of the Fund and Broadmark Tactical Fund (which has not commenced operations), the two series of the Trust.
|
|
1
|
An “Independent Trustee” is a Trustee who is not considered an “interested person” of the Trust, as that term is defined in the 1940 Act.
|
|
2
|
Each of Mr. Barnett and Mr. Guptill is an “interested person” of the Trust, as that term is defined in the 1940 Act, due to his affiliation with the Adviser. In addition to holding the positions described in the table above, Mr. Barnett currently serves as a director of the Adviser, and as a director of the following affiliates of the Adviser: Revere Securities Corp. (a registered broker-dealer), Revere Capital Investors Ltd. (a U.K.-based holding company), Revere Capital Advisors Ltd. (a U.K.-based holding company) and a pooled investment vehicle managed by the Adviser.
|
Additional information about members of the Board and executive officers is available in the Fund’s Statement of Additional Information (“SAI”). To obtain a free copy of the SAI, please call 1-877-742-8061.