fp0029934

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM N-CSRS

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number: 811-05617

 

SCM Trust

(Exact name of registrant as specified in charter)

 

1050 17th Street, Suite 1710

Denver, CO 80265

 (Address of principal executive offices) (Zip code)

 

Steve Rogers

1050 17th Street, Suite 1710

Denver, CO 80265

(Name and address of agent for service)

 

Registrant’s telephone number, including area code: (800) 955-9988.

 

Date of fiscal year end: April 30

 

Date of reporting period: October 31, 2017

 

 

 

 

SEMI-ANNUAL REPORT

 

 

October 31, 2017

 

Shelton Tactical Credit Fund

Shelton International Select Equity Fund

 

This report is intended only for the information of shareholders or those who have received the offering prospectus covering shares of beneficial interest of The SCM Trust which contains information about the management fee and other costs. Investments in shares of The SCM Trust are neither insured nor guaranteed by the U.S. Government.

 

 

 

About Your Fund’s Expenses (Unaudited)

October 31, 2017

 

 

Beginning
Account Value
May 1, 2017
(in U.S. Dollars)

Ending
Account Value
October 31, 2017
(in U.S. Dollars)

Expenses Paid
During Period*
(in U.S. Dollars)

Net Annual
Expense Ratio

Shelton Tactical Credit Fund

        

Direct Shares

        

Based on Actual Fund Return

$ 1,000

$ 1,016

$7.32

1.44%

Based on Hypothetical 5% Return before expenses

$ 1,000

$ 1,018

$7.32

1.44%

K Shares

        

Based on Actual Fund Return

$ 1,000

$ 1,014

$8.58

1.69%

Based on Hypothetical 5% Return before expenses

$ 1,000

$ 1,016

$8.59

1.69%
         

Shelton International Select Equity Fund

        

Direct Shares

        

Based on Actual Fund Return

$ 1,000

$ 1,157

$5.38

0.99%

Based on Hypothetical 5% Return before expenses

$ 1,000

$ 1,020

$5.04

0.99%

K Shares

        

Based on Actual Fund Return

$ 1,000

$ 1,155

$6.74

1.24%

Based on Hypothetical 5% Return before expenses

$ 1,000

$ 1,019

$6.31

1.24%

 

 

*

Expenses are equal to the Fund’s expense ratio annualized.

 

Top Holdings and Sector Breakdowns (Unaudited)

October 31, 2017

 

Shelton Tactical Credit Fund

 

Security

Maturity
Date

Market Value

Percentage
of Total
Investment

1

Fertitta Entertainment Inc

10/01/2025

$ 2,055,000

8.93%

2

Altice NV

02/15/2025

1,627,500

7.08%

3

Apollo Global Management LLC

11/15/2024

1,579,688

6.87%

4

One Rock Capital Partners LLC

11/01/2024

1,520,625

6.61%

5

Icahn Enterprises LP

02/01/2024

1,323,438

5.75%

6

Apax Partners LLP

11/01/2021

1,112,500

4.84%

7

Transocean Ltd

07/15/2023

1,112,125

4.83%

8

Scientific Games Corp

12/01/2022

1,106,180

4.81%

9

Bain Capital LP

09/15/2023

1,092,500

4.75%

10

Platinum Equity LLC

03/15/2024

1,085,000

4.72%

 

 

 

Shelton International Select Equity Fund

Security

Market Value

Percentage
of Total
Investment
1 Taiwan Semiconductor Manufacturing $ 1,583,142 3.50%
2 Tencent Holdings Ltd 1,537,868 3.40%
3 KBC Group NV 1,449,202 3.20%
4 BNP Paribas SA 1,421,389 3.14%
5 ITOCHU Corp 1,420,442 3.14%
6 Ambu A/S 1,420,033 3.14%
7 AIA Group Ltd 1,412,989 3.12%
8 Thales SA 1,375,965 3.04%
9 Intertek Group PLC 1,347,173 2.98%
10 Bangkok Bank PCL 1,340,202 2.96%

 

 

2 

 

 

Shelton Tactical Credit Fund

Portfolio of Investments (Unaudited)

October 31, 2017

 

Security Description  Shares   Par Value   Rate   Maturity   Value 
Common Stock (3.46%)                         
                          
Communications (0.38%)                         
Cisco Systems Inc   2,900                  $99,035 
                          
Total Communications                       99,035 
                          
Consumer, Cyclical (1.15%)                         
Costco Wholesale Corp   615                   99,064 
McDonald's Corp   610                   101,815 
NIKE Inc   1,875                   103,106 
                          
Total Consumer, Cyclical                       303,985 
                          
Financial (0.76%)                         
Goldman Sachs Group Inc   410                   99,417 
Mastercard Inc   685                   101,907 
                          
Total Financial                       201,324 
                          
Industrial (0.76%)                         
Boeing Co   385                   99,322 
United Technologies Corp   835                   100,000 
                          
Total Industrial                       199,322 
                          
Technology (0.41%)                         
Apple Inc   640                   108,186 
                          
Total Technology                       108,186 
                          
Total Common Stock (Cost $901,383)                       911,852 
                          
Corporate Debt (83.67%)                         
                          
Communications (14.20%)                         
Altice Luxembourg SA        1,500,000    7.625%   

02/15/2025

    1,627,500 
Centurylink Inc        1,000,000    7.500%   

04/01/2024

    1,062,500 
Intelsat Jackson Holdings        1,000,000    8.000%   

02/15/2024

    1,060,000 
                          
Total Communications                       3,750,000 
                          
Consumer, Cyclical (19.64%)                         
BCD Acquisition Inc        1,000,000    9.625%   

09/15/2023

    1,092,500 
Golden Nugget Inc        2,000,000    8.750%   

10/01/2025

    2,055,000 
Rite Aid Corp        1,000,000    6.125%   

04/01/2023

    930,000 
Scientific Games International        1,000,000    10.000%   

12/01/2022

    1,106,180 
                          
Total Consumer, Cyclical                       5,183,680 
                          
Consumer, Non-Cyclical (11.81%)                         
Avantor Inc        1,000,000    9.000%   

10/01/2025

    1,010,080 
Herc Rentals Inc        919,000    7.500%   

06/01/2022

    994,634 
Kinetic Concept/KCI USA        1,000,000    12.500%   

11/01/2021

    1,112,500 
                          
Total Consumer, Non-Cyclical                       3,117,214 

 

See accompanying notes to financial statements.

 

3

 

Shelton Tactical Credit Fund

Portfolio of Investments (Unaudited) (Continued)

October 31, 2017

 

Security Description  Shares   Par Value   Rate   Maturity   Value 
Corporate Debt (83.67%) (Continued)                         
                          
Energy (9.16%)                         
McDermott International        1,015,000    8.000%   

05/01/2021

   $1,047,988 
Transocean Inc        250,000    7.500%   

01/15/2026

    257,500 
Transocean Inc        1,025,000    9.000%   

07/15/2023

    1,112,125 
                          
Total Energy                       2,417,613 
                          
Financial (8.96%)                         
ICAHN Enterprises        1,250,000    6.750%   

02/01/2024

    1,323,438 
Jefferies Financial LLC        1,000,000    7.500%   

04/15/2021

    1,042,500 
                          
Total Financial                       2,365,938 
                          
Industrial (9.87%)                       
Blueline Rental Corp        1,000,000    9.250%   

03/15/2024

    1,085,000 
FXI Holdings Inc        1,500,000    7.875%   

11/01/2024

    1,520,625 
                          
Total Industrial                       2,605,625 
                          
Technology (10.03%)                         
First Data Corp        1,000,000    7.000%   

12/01/2023

    1,070,019 
Rackspace Hosting        1,500,000    8.625%   

11/15/2024

    1,579,687 
                          
Total Technology                       2,649,706 
                          
Total Corporate Debt (Cost $21,093,117)                       22,089,776 
                          

Total Investments (Cost $21,994,500)(a)(87.13%)

                      $23,001,628 
Other Net Assets (12.87%)                       3,398,146 
Net Assets (100.00%)                      $26,399,774 

 

(a)

Aggregate cost for federal income tax purpose is $22,334,738

 

At October 31, 2017, unrealized appreciation (depreciation) of securities for federal income tax purposes is as follows:

Unrealized appreciation  $685,474 
Unrealized depreciation   (18,584)
Net unrealized appreciation  $666,890 

 

See accompanying notes to financial statements.

 

4

 

 

 

Shelton International Select Equity Fund

Portfolio of Investments (Unaudited)

October 31, 2017

 

Security Description  Shares   Value 
Common Stock (98.63%)          
           
Belgium (3.16%)          
KBC Group NV   17,445   $1,449,202 
           
Total Belgium        1,449,202 
           
Brazil (2.07%)          
Banco Bradesco SA   89,975    951,036 
           
Total Brazil        951,036 
           
Britain (7.62%)          
ASOS PLC*   10,690    808,734 
Intertek Group PLC   18,700    1,347,173 
Unilever NV   23,120    1,340,035 
           
Total Britain        3,495,942 
           
Canada (1.76%)          
Alimentation Couche-Tard Inc   17,200    807,096 
           
Total Canada        807,096 
           
China (5.51%)          
Alibaba Group Holding Ltd*   5,350    989,162 
Tencent Holdings Ltd   34,300    1,537,868 
           
Total China        2,527,030 
           
Denmark (3.11%)          
Ambu A/S*   15,400    1,420,033 
           
Total Denmark        1,420,033 
           
France (13.24%)          
BNP Paribas SA   18,200    1,421,389 
L'Oreal SA   5,680    1,264,162 
Thales SA   13,200    1,375,965 
TOTAL SA   17,452    973,231 
Valeo SA   15,300    1,035,560 
           
Total France        6,070,307 
           
Germany (9.36%)          
Adidas AG   4,600    1,023,794 
Beiersdorf AG   10,550    1,183,549 
Siemens AG   5,925    845,536 
Wirecard AG   12,600    1,241,057 
           
Total Germany        4,293,936 
           
Hong Kong (3.08%)          
AIA Group Ltd   187,800    1,412,989 
           
Total Hong Kong        1,412,989 
           
Indonesia (3.00%)          
Bank Rakyat Indonesia Persero   726,630   835,792 
Telekomunikasi Indonesia Persero   18,010    541,020 
           
Total Indonesia        1,376,812 
           
Ireland (2.80%)          
CRH PLC   34,115    1,286,458 
           
Total Ireland        1,286,458 
           
Japan (19.64%)          
CyberAgent Inc   30,400    936,372 
Daikin Industries Ltd   10,100    1,108,396 
ITOCHU Corp   81,600    1,420,442 
Komatsu Ltd   40,000    1,301,417 
Mitsubishi UFJ Financial Group   114,200    766,325 
Murata Manufacturing Co Ltd   6,800    1,058,629 
Start Today Co Ltd   42,750    1,162,523 
Yaskawa Electric Corp   35,300    1,255,056 
           
Total Japan        9,009,160 
           
Luxembourg (2.47%)          
ArcelorMittal*   39,428    1,130,608 
           
Total Luxembourg        1,130,608 
           
Netherlands (2.84%)          
ING Groep NV   70,600    1,304,414 
           
Total Netherlands        1,304,414 
           
Norway (2.09%)          
Norsk Hydro ASA   124,000    957,064 
           
Total Norway        957,064 
           
Singapore (2.61%)          
DBS Group Holdings Ltd   71,650    1,198,023 
           
Total Singapore        1,198,023 
           
Switzerland (7.90%)          
Dormakaba Holding AG   1,180    1,168,399 
Givaudan SA   525    1,173,455 
Nestle SA   15,200    1,280,296 
           
Total Switzerland        3,622,150 
           
Taiwan (3.45%)          
Taiwan Semiconductor Manufacturing   37,400    1,583,142 
           
Total Taiwan        1,583,142 

 

See accompanying notes to financial statements.

 

5

 

Shelton International Select Equity Fund

Portfolio of Investments (Unaudited) (Continued)

October 31, 2017

 

Security Description  Shares   Value 
Thailand (2.92%)          
Bangkok Bank PCL   221,500   $1,340,202 
           
Total Thailand        1,340,202 
           
Total Common Stock (Cost $32,887,617)        45,235,604 
           
Rights (0.00%)          
Tencent Holdings*   27    — 
           
Total Rights (Cost $0)        — 
           

Total Investments (Cost $32,887,617)(A) (98.63%)

       $45,235,604 
Other Net Assets (1.37%)        629,877 
Net Assets (100.00%)       $45,865,481 

 

*

Non-income producing security.

 

(a)

Aggregate cost for federal income tax purpose is $32,897,622

  

At October 31, 2017, unrealized appreciation (depreciation) of securities for federal income tax purposes is as follows:

Unrealized appreciation  $12,416,621 
Unrealized depreciation   (78,639)
Net unrealized appreciation  $12,337,982 

 

See accompanying notes to financial statements.

 

6

 

 

 

Statements of Assets and Liabilities

October 31, 2017 (Unaudited)

 

   Shelton
Tactical Credit
Fund		   Shelton
International
Select Equity
Fund		 
Assets          
Investments in securities          
Cost of investments  $21,994,500   $32,887,617 
Market value of investments (Note 1)   23,001,628    45,235,604 
Cash   4,429,922    380,941 
Dividend receivable   —    74,802 
Interest receivable   413,216    — 
Receivable for securities sold   594,838    — 
Reclaim receivable   —    260,567 
Prepaid expenses   37,589    15,753 
Total assets  $28,477,193   $45,967,667 
           
Liabilities          
Payables and Other Liabilities          
Securities purchased   2,027,500    — 
Investment advisor   24,913    25,886 
12b-1 fees   7,282    3,304 
Administration fees   1,149    6,304 
Audit Fees   7,304    5,440 
Custody fees   —    3,369 
Fund accounting fees   3,986    21,543 
Legal fees   133    16,580 
Transfer agent fees   2,451    4,950 
Other Expenses   2,701    14,810 
Total liabilities  $2,077,419   $102,186 
           

Net assets

  $26,399,774   $45,865,481 
           
Net assets at October 31, 2017 consist of          
Paid-in capital   27,212,180    94,414,326 
Undistributed net investment income   121,470    (2,652)
Accumulated net realized gain (loss)   (1,941,004)   (60,895,926)
Unrealized appreciation (depreciation) of investments   1,007,128    12,349,733 
Total net assets  $26,399,774   $45,865,481 
           
Net assets          
Institutional Shares   17,528,441    42,217,116 
Investor Shares   8,871,333    3,648,365 
           
Shares outstanding          
Institutional Shares (no par value, unlimited shares authorized)   1,673,823    2,067,494 
Investor Shares (no par value, unlimited shares authorized)   850,168    178,965 
           
Net asset value per share          
Institutional Shares   10.47    20.42 
Investor Shares   10.43    20.39 

 

See accompanying notes to financial statements.

 

7

 

 

Statements of Operations

For the Six Months Ended October 31, 2017 (Unaudited)

 

   Shelton
Tactical Credit
Fund		   Shelton
International
Select Equity
Fund		 
Investment income          
Interest income  $1,036,241   $74 
Dividend income (net foreign tax withheld —, $69,369 respectively   21,002    462,490 
Total   1,057,243    462,564 
           
Expenses          
Management fees (Note 2)   178,022    167,421 
Administration fees (Note 2)   16,324    25,469 
Interest Expense   —    989 
Transfer agent fees   4,945    21,507 
Accounting services   10,827    15,402 
Custodian fees   2,707    9,275 
Legal and audit fees   7,526    27,680 
CCO fees (Note 2)   1,218    4,714 
Trustees fees   2,287    3,279 
Insurance   71    162 
Printing   2,994    10,680 
Registration and dues   1,204    18,943 
12b-1 fees Investor Shares (Note 2) (Class A Shares)   16,058    5,177 
Other expenses   6,052    14,805 
Total expenses   250,235    325,503 
Less reimbursement from manager (Note 2)   (18,047)   (94,530)
Net expenses   232,188    230,973 
Net investment income   825,055    231,591 
           
Realized and unrealized gain (loss) on investments          
Net realized gain (loss) from security transactions   (24,371)   2,234,263 
Net change in unrealized appreciation/depreciation of investments   (399,440)   4,011,535 
Net realized and unrealized gain (loss) on investments   (423,811)   6,245,798 
Net increase (decrease) in net assets resulting from operations  $401,244   $6,477,389 

 

See accompanying notes to financial statements.

 

8

 

 

 

Statements of Changes in Net Assets

 

    

Shelton Tactical
Credit Fund

    

Shelton International
Select Equity Fund

 
    

Six Months Ended
October 31,
2017
(Unaudited)

    

Year
Ended
April 30,
2017

    

Six Months Ended
October 31,
2017
(Unaudited)

    

Year
Ended
April 30,
2017

 
Operations                    
Net investment income (loss)  $825,055   $2,000,787   $231,591   $582,141 
Net realized gain (loss) on investments   (24,371)   105,714    2,234,263    1,816,087 
Net realized gain (loss) on written options contracts   —    119,872    —    — 
Net realized gain (loss) from short sale transactions   —    (4,002)   —    — 
Total net realized gain (loss)   (24,371)   221,584    2,234,263    1,816,087 
Net change in unrealized appreciation/depreciation of investments   (399,440)   364,538    4,011,535    3,499,770 
Net change in unrealized appreciation/depreciation of written options   —    (15,735)   —    — 
Total net change in unrealized appreciation (depreciation) of investments   (399,440)   348,803    4,011,535    3,499,770 
Net increase (decrease) in net assets resulting from operations   401,244    2,571,174    6,477,389    5,897,998 
                     
Distributions to shareholders                    
Distributions from net investment income                    
Institutional Shares (Class I Shares)   (515,797)   (1,135,785)   (831,350)   (505,743)
Investor Shares (Class A Shares)   (358,136)   (1,028,152)   (74,983)   (52,217)
Class C Shares   —    (99,729)   —    — 
Distributions from realized capital gains on investments                    
Institutional Shares (Class I Shares)   —    —    —    — 
Investor Shares (Class A Shares)   —    —    —    — 
Class C Shares   —    —    —    — 
Total distributions   (873,933)   (2,263,666)   (906,333)   (557,960)
                     
Capital share transactions                    
Increase (decrease) in net assets resulting from capital share transactions   (8,848,680)   5,945,473    (2,930,316)   (14,737,108)
Total increase (decrease)   (9,321,369)   6,252,981    2,640,740    (9,397,070)
                     
Net assets                    
Beginning of year   35,721,143    29,468,162    43,224,741    52,621,811 
End of year  $26,399,774   $35,721,143   $45,865,481   $43,224,741 
Including undistributed net investment income (loss) of:  $121,470   $168,748   $—   $672,089 

 

See accompanying notes to financial statements.

 

9

 

 

Statements of Changes in Net Assets (Continued)

 

Shelton Tactical Credit Fund  Investor Shares 
   Six Months Ended
October 31, 2017
(Unaudited)		   Year Ended
April 30, 2017		 
   Shares   Value   Shares   Value 
Shares sold   171,830   $1,805,049    1,728,782   $18,230,300 
Shares issued in reinvestment of distributions   34,181    355,979    94,055    981,885 
Shares repurchased   (876,997)   (9,162,526)   (1,389,678)   (14,563,404)
Net increase (decrease)   (670,986)  $(7,001,498)   433,159   $4,648,781 

 

   Institutional Shares 
   Six Months Ended
October 31, 2017
(Unaudited)		   Year Ended
April 30, 2017		 
   Shares   Value   Shares   Value 
Shares sold   382,722   $4,040,674    1,168,883   $12,347,311 
Shares issued in reinvestment of distributions   47,485    495,794    103,675    1,081,813 
Shares repurchased   (603,251)   (6,383,650)   (969,322)   (10,181,672)
Net increase (decrease)   (173,044)  $(1,847,182)   303,236   $3,247,452 

 

Shelton International Select Equity Fund 

Investor Shares (a)

 
   Six Months Ended
October 31, 2017
(Unaudited)		   Year Ended
April 30, 2017		 
   Shares   Value   Shares   Value 
Shares sold   1,055   $20,763    3,796   $61,537 
Shares issued in reinvestment of distributions   3,118    61,964    2,648    43,243 
Shares repurchased   (74,288)   (1,438,724)   (292,063)   (4,797,158)
Net increase (decrease)   (70,115)  $(1,355,997)   (285,619)  $(4,692,378)

 

  

Institutional Shares (a)

 
   Six Months Ended
October 31, 2017
(Unaudited)		   Year Ended
April 30, 2017		 
   Shares   Value   Shares   Value 
Shares sold   127,935   $2,446,535    340,283   $5,634,219 
Shares issued in reinvestment of distributions   40,564    807,223    28,733    468,912 
Shares repurchased   (249,647)   (4,828,077)   (995,347)   (16,147,861)
Net increase (decrease)   (81,148)  $(1,574,319)   (626,331)  $(10,044,730)

 

 

(a)

Following the reorganization on July 28, 2017, Class A Shares and Class I Shares were renamed Investor Shares and Institutonal Shares, respectively. See note 5.

 

See accompanying notes to financial statements.

 

10

 

 

 

Financial Highlights

For a Share Outstanding Throughout Each Year or Period

 

Shelton Tactical Credit Fund

investor shares (c)

  Six Months Ended October 31,
2017
(Unaudited)		   Year Ended
April 30,
2017		  

Year Ended
April 30,
2016 (b)

  

For the Period December 16,
2014*
to April 30, 2015 (b)

 
Net asset value, beginning of year  $10.59   $10.47   $10.38   $10.00 
INCOME FROM INVESTMENT OPERATIONS                    

Net investment income (loss) (a)

   0.28    0.63    0.55    0.11 
Net gain (loss) on securities (both realized and unrealized)   (0.14)   0.26    (0.08)   0.35 
Total from investment operations   0.14    0.89    0.47    0.46 
LESS DISTRIBUTIONS                    
Dividends from net investment income   (0.30)   (0.77)   (0.35)   (0.08)
Distributions from capital gains   —    —    (0.03)     
Total distributions   (0.30)   (0.77)   (0.38)   (0.08)
Net asset value, end of year  $10.43   $10.59   $10.47   $10.38 
                     
Total return   1.35%   8.84%   4.66%   4.57%
                     
RATIOS / SUPPLEMENTAL DATA                    
Net assets, end of year (000s)  $8,871   $16,112   $11,392   $126 
Ratio of expenses to average net assets:                    
Before expense reimbursements   0.90%   2.61%   2.91%   6.60%
After expense reimbursements   0.84%   1.65%   1.86%   1.68%
Ratio of net investment income (loss) to average net assets                    
Before expense reimbursements   2.64%   4.99%          
After expense reimbursements   2.70%   5.96%   5.29%   2.97%
Portfolio turnover   142%   246%   695%   532%

 

Institutional Shares (c)

  Six Months Ended October 31,
2017
(Unaudited)		   Year Ended
April 30,
2017		  

Year Ended
April 30,
2016 (b)

  

For the Period December 16,
2014*
to April 30, 2015 (b)

 
Net asset value, beginning of year  $10.62   $10.46   $10.38   $10.00 
INCOME FROM INVESTMENT OPERATIONS                    

Net investment income (loss) (a)

   0.29    0.67    0.56    0.12 
Net gain (loss) on securities (both realized and unrealized)   (0.13)   0.27    (0.08)   0.34 
Total from investment operations   0.16    0.94    0.48    0.46 
LESS DISTRIBUTIONS                    
Dividends from net investment income   (0.31)   (0.78)   (0.37)   (0.08)
Distributions from capital gains   —    —    (0.03)     
Total distributions   (0.31)   (0.78)   (0.40)   (0.08)
Net asset value, end of year  $10.47   $10.62   $10.46   $10.38 
                     
Total return   1.58%   9.35%   4.78%   4.60%
                     
RATIOS / SUPPLEMENTAL DATA                    
Net assets, end of year (000s)  $17,528   $19,609   $16,139   $4,448 
Ratio of expenses to average net assets:                    
Before expense reimbursements   0.78%   2.34%   2.66%   6.35%
After expense reimbursements   0.72%   1.39%   1.61%   1.42%
Ratio of net investment income (loss) to average net assets                    
Before expense reimbursements   2.70%   5.42%          
After expense reimbursements   2.76%   6.37%   5.54%   3.22%
Portfolio turnover   142%   246%   695%   532%

 

 

*

Commencement of operations.

(a)

Calculated based upon average shares outstanding.

(b)

Audited by other independent registered public accounting firm.

(c)

As of March 17, 2017 Class A Shares and Class I Shares were renamed to Investor Shares and Institutional Shares, respectively.

 

See accompanying notes to financial statements.

 

11

 

 

Financial Highlights

For a Share Outstanding Throughout Each Year or Period

 

Shelton International Select Equity Fund

Investor Shares (d)

  Six Months Ended October 31,
2017
(Unaudited)		   Year Ended
April 30,
2017		  

Year Ended
April 30,
2016 (c)

  

Year Ended
April 30,
2015 (c)

  

Year Ended
April 30,
2014 (c)

 
Net asset value, beginning of year  $18.02   $15.88   $21.16   $23.48   $20.54 
INCOME FROM INVESTMENT OPERATIONS                         

Net investment income (loss) (a)

   0.08    0.17    0.19    0.17    0.14 
Net gain (loss) on securities (both realized and unrealized)   2.69    2.13    (4.97)   (2.34)   2.92 
Total from investment operations   2.77    2.30    (4.78)   (2.17)   3.06 
LESS DISTRIBUTIONS                         
Dividends from net investment income   (0.40)   (0.16)   (0.50)   (0.15)   (0.09)
Distributions from capital gains   —    —    —    —    (0.03)
Total distributions   (0.40)   (0.16)   (0.50)   (0.15)   (0.12)
Redemption Fees   —    —    —    —(b)   —(b)
Net asset value, end of year  $20.39   $18.02   $15.88   $21.16   $23.48 
                          
Total return   15.54%   14.55%   (22.51)%   (9.18)%   14.90%
                          
RATIOS / SUPPLEMENTAL DATA                         
Net assets, end of year (000s)  $3,648   $4,488   $8,488   $31,583   $46,435 
Ratio of expenses to average net assets:                         
Before expense reimbursements   0.85%   2.02%   1.53%   1.45%   1.45%
After expense reimbursements   0.63%   1.24%   1.48%   1.45%   1.49%
Ratio of net investment income (loss) to average net assets                         
Before expense reimbursements   0.19%                    
After expense reimbursements   0.41%   1.06%   1.11%   0.75%   0.67%
Portfolio turnover   23%   41%   40%   8%   6%

 

Institutional Shares (d)

  Six Months
Ended
October 31,
2017
(Unaudited)		   Year Ended
April 30,
2017		  

Year Ended
April 30,
2016 (c)

  

Year Ended
April 30,
2015 (c)

  

Year Ended
April 30,
2014 (c)

 
Net asset value, beginning of year  $18.03   $15.90   $21.20   $23.53   $20.59 
INCOME FROM INVESTMENT OPERATIONS                         

Net investment income (loss) (a)

   0.10    0.22    0.25    0.24    0.20 
Net gain (loss) on securities (both realized and unrealized)   2.69    2.13    (5.01)   (2.36)   2.92 
Total from investment operations   2.79    2.35    (4.76)   (2.12)   3.12 
LESS DISTRIBUTIONS                         
Dividends from net investment income   (0.40)   (0.22)   (0.54)   (0.21)   (0.15)
Distributions from capital gains   —                   (0.03)
Total distributions   (0.40)   (0.22)   (0.54)   (0.21)   (0.18)
Redemption Fees   —    —    —    —(b)   —(b)
Net asset value, end of year  $20.42   $18.03   $15.90   $21.20   $23.53 
                          
Total return   15.67%   14.89%   (22.36)%   (8.94)%   15.18%
                          
RATIOS / SUPPLEMENTAL DATA                         
Net assets, end of year (000s)  $42,217   $38,737   $44,133   $369,610   $347,791 
Ratio of expenses to average net assets:                         
Before expense reimbursements   0.71%   1.76%   1.28%   1.20%   1.20%
After expense reimbursements   0.50%   0.99%   1.23%   1.20%   1.24%
Ratio of net investment income (loss) to average net assets                         
Before expense reimbursements   0.29%                    
After expense reimbursements   0.50%   1.32%   1.36%   1.11%   0.92%
Portfolio turnover   23%   41%   40%   8%   6%

 

 

(a)

Calculated based upon average shares outstanding.

(b)

Amount is less than $0.005 per share.

(c)

Audited by other independent registered public accounting firm.

(d)

As of July 28, 2017 Class A Shares and Class I Shares were renamed to Investor Shares and Institutional Shares, respectively.

 

See accompanying notes to financial statements.

 

12

 

 

 

SCM Trust

Notes to Financial Statements (Unaudited)

October 31, 2017

 

NOTE 1 – ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

 

The SCM Trust (the “Trust”), is registered under the Investment Company Act of 1940, as amended, as a diversified open-end management investment company. The Trust currently consists of five separate series, two of which are included in these financial statements. The SCM Trust is a Massachusetts business trust formed in July 1988.

 

The Shelton Tactical Credit Fund (“Tactical Credit Fund”) is an open-end, non-diversified series of the Trust. The inception date is December 16, 2014. The Fund’s investment objective is to seek current income and capital appreciation. Effective July 1, 2016, Shelton became the advisor to the Fund.

 

The Tactical Credit Fund is a successor to a series of the FundVantage Trust, a Delaware statutory trust, pursuant to a reorganization that took place after the close of business on March 17, 2017. Prior to March 17, 2017, the Successor Fund had no investment operations. As a result of the reorganization, holders of Class A Shares and Class C Shares of the Tactical Credit Fund received Investor Shares of the Shelton Tactical Credit Fund and holders of Advisor Class Shares received Institutional Shares of the Shelton Tactical Credit Fund.

 

The Shelton International Select Equity Fund (“International Select Equity Fund”) is an open-end, diversified series of the Trust. The inception date is July 31, 2009. The Fund’s investment objective is to achieve long-term capital appreciation by creating a portfolio composed of primarily large capitalization international equity growth stocks. Effective July 18, 2016, Shelton became the advisor to the Fund.

 

The International Select Equity Fund is a successor to a series of the FundVantage Trust, a Delaware statutory trust, pursuant to a reorganization that took place after the close of business on July 28, 2017. Prior to July 28, 2017, the Successor Fund had no investment operations. As a result of the reorganization, holders of Class A Shares of the International Select Equity Fund received Investor Shares of the Shelton International Select Equity Fund and holders of Class I Shares received Institutional Shares of the Shelton International Select Equity Fund.

 

The Trust follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946, “Financial Services – Investment Companies”.

 

(a)    Security Valuation — Equity securities listed on a national or international exchange are valued at the last reported sales price. Futures contracts are valued at the settle price, depending on the exchange the contract trades on, typically as of 4:15 p.m., Eastern Time. Municipal securities are valued by an independent pricing service at a price determined by a matrix pricing method. This technique generally considers such factors as yields or prices of bonds of comparable quality, type of issue, coupon, maturity, ratings and general market conditions. U.S. government securities for which market quotations are readily available are valued at the mean between the closing bid and asked prices provided by an independent pricing service. U.S. agency securities consisting of mortgage pass-through certificates are valued using dealer quotations provided by an independent pricing service. U.S. Treasury Bills are valued at amortized cost which approximates market value. Securities with remaining maturities of 60 days or less are valued on the amortized cost basis as reflecting fair value.

 

Securities for which market quotes are not readily available from the Trust’s third-party pricing service are valued at fair value, determined in good faith and in accordance with procedures adopted by the Board of Trustees. The Board has delegated to its Pricing Committee the responsibility for determining the fair value, subject to the Board oversight and the review of the pricing decisions at its quarterly meetings.

 

(b)     Federal Income Taxes — No provision is considered necessary for federal income taxes. The Funds intend to qualify for and elect the tax treatment applicable to regulated investment companies under the Internal Revenue Code and to distribute all of their taxable income to shareholders.

 

(c)     Security Transactions, Investment Income and Distributions to Shareholders — Security transactions are recorded on the trade date. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. Withholding taxes on foreign dividends have been provided for, in accordance with the Trust’s understanding of the applicable country’s tax rules and rates. Distributions to shareholders are recorded on the ex-dividend Income distributions and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to differing treatments for PFICs, wash sales, REIT adjustments and post-October capital losses.

 

Distributions received from investments in securities that represent a return of capital or capital gains are recorded as a reduction of cost of investment or as a realized gain, respectively. The calendar year-end amounts of ordinary income, capital gains, and return of capital included in distributions received from a Fund’s investments in real estate investment trusts (“REITs”) are reported to the Fund after the end of the calendar year; accordingly, a Fund estimates these amounts for accounting purposes until the characterization of REIT distributions is reported to the Fund after the end of the calendar year. Estimates are based on the most recent REIT distribution information available.

 

These “Book/tax” differences are considered either temporary (i.e., deferred losses, capital loss carry forwards) or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the composition of net assets based on their federal tax basis treatment; temporary differences do not require reclassification.

 

(d)     Foreign Currency Translation — Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Trust does not isolate that portion 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 included with the net realized and unrealized gain or loss from investments.

 

Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the company’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.

 

(e) The Fund aims to use related credit asset classes on both the long and short side to generate an attractive rate of return with low volatility. Portfolio construction is implemented with a relative value framework and looks across the entire balance sheet of a corporation from senior secured down through subordinated, equity-linked bonds. This hedged approach is designed to generate performance that is less reliant on the direction of the overall market than a typical credit-based fund.

 

(f)     Use of Estimates in Financial Statements — In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as the reported amounts of income and expense during the year. Actual results may differ from these estimates.

 

(g)     Share Valuations — The net asset value (“NAV”) per share of each Fund is calculated by dividing the sum of the value of the securities held by the Fund, plus cash or other assets, minus all liabilities (including estimated accrued expenses) by the total number of shares outstanding of the Fund, rounded to the nearest cent. A Fund’s shares will not be priced on the days on which the NYSE is closed for trading. The offering and redemption price per share of each Fund is equal to a Fund’s NAV per share.

 

13

 

 

SCM Trust

Notes to Financial Statements (Unaudited) (Continued)

October 31, 2017

 

(h)    Accounting for Uncertainty in Income Taxes — The Funds recognize the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. Management has analyzed the Fund’s tax positions, and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years (2013-2015), or expected to be taken in the Fund’s 2016 tax returns. The Fund identifies its major tax jurisdictions as U.S. Federal, however the Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months.

 

(i)     Fair Value Measurements — The Funds utilize various methods to measure the fair value of most of its investments on a recurring basis. U.S. GAAP establishes a hierarchy that prioritizes inputs to valuation methods. The three levels of inputs are:

 

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the company has the ability to access.

 

Level 2 – Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.

 

Level 3 – Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available.

 

The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.

 

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

 

The following table summarizes the valuation of the Fund’s securities at October 31, 2017 using fair value hierarchy:

 

Fund 

Level 1(a)

  

Level 2(a)

  

Level 3(a)

   Total 
Tactical Credit Fund  $911,852   $22,089,766(b)  $—   $23,001,628 
International Select Equity Fund  $45,235,604   $—   $—   $45,235,604 
Total investments in securities  $46,147,456   $22,089,776   $—   $68,237,232 

 

 

(a)

It is the Fund’s policy to recognize transfers between levels on the last day of the fiscal reporting period.

(b)

For a detailed break-out of Corporate Debt by major industry classification, please refer to the Portfolio of Investments.

 

NOTE 2 - INVESTMENT MANAGEMENT FEE AND OTHER RELATED PARTY TRANSACTIONS

 

Shelton Capital Management (“Shelton Capital” or the “Advisor”), a California limited partnership, provides each Fund with management and administrative services pursuant to investment management and administration servicing agreements.

 

In accordance with the terms of the management agreement, the Advisor receives compensation at the following annual rates:

 

Net
Assets

Tactical Credit Fund

1.17%

International Select Equity Fund

0.74%

 

The Advisor contractually agreed to reduce total operating expense to certain Funds of the Trust. This additional contractual reimbursement is effective until March 20, 2018 for the Tactical Credit Fund and July 29, 2018 for the International Select Equity Fund, unless renewed. Reimbursement is subject to recoupment within three fiscal years following reimbursement. Recoupment is limited to the extent the reimbursement does not exceed any applicable expense limit and the effect of the reimbursement is measured after all ordinary operating expenses are calculated; any such reimbursement is subject to the Board of Trustees’ review and approval. Reimbursements from the Advisor to affected Funds, and the voluntary expense limits, for the period ended October 31, 2017 are as follows:

 

 

Voluntary Expense Limitation

Fund

Institutional Shares

Investor
Shares

Expiration

Tactical Credit Fund

1.42%

1.67%

3/20/18

International Select Equity Fund

0.99%

1.24%

7/28/18

 

At April 30, 2017, the remaining cumulative unreimbursed amount paid and/or waived by the Advisor on behalf of the Funds that may be reimbursed was $992,652. The Advisor may recapture a portion of the above amount no later than the dates as stated below.

 

Fund  Expires
4/30/18		   Expires
4/30/19		   Expires
4/30/20		   Total 
Tactical Credit Fund  $45,147   $359,405   $315,415   $719,967 
International Select Equity Fund  $—   $—   $272,685   $272,865 
Total  $45,147   $359,405   $588,100   $992,652 

 

A Fund must pay its current ordinary operating expenses before the Advisor is entitled to any reimbursement of fees and/or expenses. Any such reimbursement is contingent upon Board of trustee review and approval prior to the time the reimbursement is initiated.

 

14

 

 

 

SCM Trust

Notes to Financial Statements (Unaudited) (Continued)

October 31, 2017

 

As compensation for administrative duties not covered by the management agreement, Shelton Capital receives an administration fee, which was revised on January 1, 2011. The administration fee is based on assets held, in aggregate, by the SCM Trust and other funds within the same “family” of investment companies managed and administered by Shelton Capital. The fee rates are 0.10% on the first $500 million, 0.08% on the next $500 million, and 0.06% on combined assets over $1 billion. Administration fees are disclosed on the Statement of Operations.

 

Certain officers and trustees of the Trust are also partners of Shelton Capital. Gregory T. Pusch has served as the Chief Compliance Officer (“CCO”) of the Trust since March 2017. Mr. Pusch is also employed by Shelton Capital, the Advisor and Administrator to the Trust. The Trust is responsible for the portion of his salary allocated to his duties as the CCO of the Trust during his employment, and Shelton Capital is reimbursed by the Trust for this portion of his salary. The level of reimbursement is reviewed and determined by the Board of Trustees at least annually.

 

The SCM Trust adopted a Distribution Plan (the “Plan”), as amended (date), pursuant to Rule 12b-1 under the Investment Company Act of 1940, whereby the Advisor Shares of each Fund of the Shelton Funds pays the Distributor for expenses that relate to the promotion and distribution of shares. Under the Plan, the Advisor Shares of the Funds will pay the Distributor a fee at an annual rate of 0.25%, payable monthly, of the daily net assets attributable to such Fund’s Investor Shares. For the period of July 28, 2017 to October 31, 2017, the Distributor, an affiliate of Shelton, acted as the Funds' principal underwriter in a continuous public offering of the Institutional and Investor Shares of the International Select Equity Fund.

 

For the six months ended October 31, 2017, the following were paid:

 

Fund  Investor Shares
12b-1 Fees		 
Tactical Credit Fund  $16,058 
International Select Equity Fund  $2,538 

 

For the period of May 1, 2017 to July 28, 2017, Foreside Funds Distributors LLC provided principal underwriting services to for public offering of the Class I and Investor Class shares of the International Select Equity Fund.

 

Fund  Class I
12b-1 Fees		 
International Select Equity Fund  $2,639 

 

NOTE 3 - PURCHASES AND SALES OF SECURITIES

 

Purchases and sales of securities other than short-term instruments for the period ended October 31, 2017 were as follows:

 

Fund  Purchases   Sales 
Tactical Credit Fund  $35,917,390   $45,305,850 
International Select Equity Fund   8,766,772    10,660,527 

 

NOTE 4 - TAX CHARACTER

 

Reclassifications: Accounting principles generally accepted in the United States of America require 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. For the year ended April 30, 2017, permanent differences resulting from different book and tax accounting for net operating losses, expiration of capital loss carryforwards and treatment of foreign currency gains have been reclassified. The reclassifications were as follows:

 

   Increase
(Decrease)
Paid-In Capital		   Increase
(Decrease)
Undistributed
Net Investment
Income (Loss)		   Increase (Decrease) Accumulated
Gain (Loss)		 
Tactical Credit Fund  $—   $1,600   $(1,600)
International Select Equity Fund  $—   $241,174   $(241,174)

 

Tax Basis of Distributable Earnings: The tax character of distributable earnings at April 30, 2017 was as follows:

 

   Undistributed Ordinary
Income		   Undistributed Long-Term
Capital Gain		   Capital
Loss Carry
Forwards		   Unrealized
Appreciation
(Depreciation)		  

Post October
and Other
Losses (b)

   Total
Distributable
Earnings		 
Tactical Credit Fund  $168,748   $—   $(1,271,351)  $1,066,330   $(303,444)  $(339,717)
International Select
Equity Fund		  $672,089   $—   $(63,120,184)  $8,328,193   $—   $(54,119,902)

 

The difference between book basis and tax basis unrealized appreciation/(depreciation) is attributable primarily to wash sales and to the timing and recognition of income and gains for federal income tax purposes

 

Elective Deferrals: The Tactical Credit Fund has elected to defer $303,444 of capital losses recognized during the period November 1, 2016-April 30, 2017. The International Select Equity Fund has not elected to defer any capital losses.

 

The Tactical Credit Fund and International Select Equity Fund did not elect to defer ordinary losses to the period ending April 30, 2018.

 

15

 

 

SCM Trust

Notes to Financial Statements (Unaudited) (Continued)

October 31, 2017

 

Capital Losses: Capital loss carry forwards, as of April 30, 2017, available to offset future capital gains, if any, are as follows:

 

Expiring  Tactical Credit Fund   International Select Equity Fund 
Long Term with No Expiration  $—   $4,973,686 
Short Term with No Expiration  $1,271,351   $58,146,498 
Total  $1,271,351   $63,120,184 

 

Distributions to Shareholders: Income distributions and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. These differences are primarily due to differing treatments of income and gains on various investment securities held by each Fund, timing differences and differing characterization of distributions made by each Fund.

 

The tax character of distributions paid during are as follows:

 

Fund  Year   Return of
Capital		   Ordinary
Income		  

Long-Term
Capital Gains (a)

   Total
Distributions		 
Tactical Credit Fund   

April 30, 2016

   $—   $1,630,748   $—   $1,630,748 
    

April 30 , 2017

   $—   $2,263,666   $—   $2,263,666 
International Select Equity Fund   

April 30, 2016

   $—   $5,610,353   $—   $5,610,353 
    

April 30, 2017

   $—   $557,960   $—   $557,960 

 

 

(a)

The Funds designate Long-Term Capital Gain dividends pursuant to Section 852(b)(3) of the Internal Revenue Code for the year ended December 31, 2016.

 

NOTE 5 – REORGANIZATIONS

 

On February 22, 2017, the shareholders of the Tactical Credit Fund approved the agreement and plan of reorganization providing for the transfer of assets and assumption of liabilities of such funds by the Tactical Credit Fund shell. The reorganization was effective as of the close of business on March 17, 2017. The following table illustrates the specifics of the Fund’s reorganization:

 

Pre-Reorganization
Fund Net Assets		   Shares issued
to Shareholders
of Tactical
Credit Fund		   Tactical Credit
Shell Fund
Net Assets		   Combined
Net Assets		   Tax Status
of Transfer
$36,963,194    3,492,932   $—   $36,963,194(a)  Non-taxable

 

 

(a)

Includes undistributed net investment income, accumulated realized losses and unrealized appreciation in the amounts of $387,984, $2,179,299 and $1,377,741 respectively.

 

As of close of business on March 17, 2017, the classes were converted at the following rates:

 

Pre-Merger Class

Pre-Merger NAV

Rate

Shares

Dollars

Post-Merger NAV

Post Merger Class

Tactical Credit Fund Class A

10.58

1

1,566,704

16,568,594

10.58

Shelton Tactical Credit Fund
Investor Class

Tactical Credit Fund Class C

10.53

.99573 to 1

165,472

1,751,497

10.58

Shelton Tactical Credit Fund
Investor Class

Tactical Credit Fund Class I

10.59

1

1,760,756

18,643,103

10.59

Shelton Tactical Credit Fund
Institutional Class

 

On July 14, 2017, the shareholders of the International Select Equity Fund approved the agreement and plan of reorganization providing for the transfer of assets and assumption of liabilities of such funds by the International Select Equity Fund shell. The reorganization was effective as of the close of business on July 28, 2017. The following table illustrates the specifics of the Fund’s reorganization:

 

Pre-Reorganization
Fund Net Assets		   Shares issued
to Shareholders
of International
Select Equity
Fund		   International
Select Equity
Shell Fund
Net Assets		   Combined
Net Assets		   Tax Status
of Transfer
$45,550,734    2,333,659   $—   $45,550,734(a)  Non-taxable

 

 

(a)

Includes undistributed net investment income, accumulated realized losses and unrealized appreciation in the amounts of $235,356, $$61,630,095 and $10,776,849 respectively.

 

16

 

 

 

SCM Trust

Notes to Financial Statements (Unaudited) (Continued)

October 31, 2017

 

As of close of business on July 28, 2017, the classes were converted at the following rates:

 

Pre-Merger Class

Pre-Merger NAV

Rate

Shares

Dollars

Post-Merger NAV

Post Merger Class

International Select Equity Fund Class A

19.50

1

213,948

4,171,487

19.50

Shelton International Select Equity Fund
Investor Class

International Select Equity Fund Class I

19.52

1

2,119,711

41,379,247

19.52

Shelton International Select Equity Fund
Institutional Class

 

Note 6 – SUBSEQUENT EVENTS

 

In preparing the financial statements as of October 31, 2017, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements through the date of issuance of the financial statements, and has determined that there were no subsequent events requiring recognition or disclosure.

 

17

 

 

Board of Trustees and Executive Officers (Unaudited)

 

Overall responsibility for management of the Fund rests with the Board of Trustees. 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 Fund 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 Fund:

Name

Address

Year of Birth

Position Held with the Trust

Length of
Time Served

Stephen C. Rogers

1050 17th Street,
Suite 1710
Denver, CO 80265

1966

Chairman and Trustee

Since June, 2011

Kevin T. Kogler

1050 17th Street,
Suite 1710 Denver,
CO 80265

1966

Trustee

Since June, 2011

Marco L. Quazzo

1050 17th Street,
Suite 1710
Denver, CO 80265

1962

Trustee

Since August, 2014

Stephen H. Sutro

1050 17th Street,
Suite 1710
Denver, CO 80265

1969

Trustee

Since June, 2011

William P. Mock

1050 17th Street,
Suite 1710
Denver, CO 80265

1966

Treasurer

Since June, 2011

Gregory T. Pusch

1050 17th Street,
Suite 1710
Denver, CO 80265

1966

Chief Compliance Officer

Since March, 2017

 

The principal occupations of the Trustees and Executive Officers of the Fund during the past five years and public directorships held by the Trustees are set forth below:

 

Stephen C. Rogers*

Chief Executive Officer, Shelton Capital Management, 1999 to present. ETF Spreads, 2007 to present.

Kevin T. Kogler

President & Founder of MicroBiz LLC, 2012 to present; Principal, Robertson Piper Software Group, 2006 to 2012; Senior Vice President, Investment Banking, Friedman, Billings Ramsey, 2005 to 2006. ETF Spreads, 2007 to present.

Marco L. Quazzo

Principal, Bartko Zankel Bunzel & Miller, March, 2015 to present; Partner, Barg Coffin Lewis & Trapp LLP (law firm), 2008 to March 2015.

Stephen H. Sutro

Managing Partner, Duane Morris LLP (law firm), 2014 to present; Partner, Duane Morris LLP (law firm), 2003 to Present. ETF Spreads, 2007 to present.

William P. Mock

Portfolio Manager, Shelton Capital Management, 2010 to present; Portfolio Manager, ETSpreads, 2007 to present.

Gregory T. Pusch

Global Head of Risk & Compliance, Matthews Asia 2015-2016; Head of Legal & Regulatory Compliance/CCO, HarbourVest Partners, 2012-2015

 

Additional information about the Trustees may be found in the SAI, which is available without charge by calling (800) 955-9988.

 
 

*

Trustee deemed to be an “interested person” of the Trust, as defined in the Investment Company Act of 1940. Mr. Rogers is an interested person because he is the CEO of Shelton Capital Management, the Trust’s Advisor and Administrator.

 

18

 

 

 

Board Approval of the Advisory Agreement (Unaudited)
October 31, 2017

 

The 1940 Act requires that the full Board and a majority of the Independent Trustees initially approve the Investment Advisory Agreement dated October 11, 2016 between SCM Trust and CCM Partners D/B/A Shelton Capital Management (“SCM”) (the “Investment Advisory Agreement”), with respect to each of the Shelton Tactical Credit Fund and the Shelton International Select Equity Fund (together, the “Funds”). At a meeting held in-person on June 28, 2016, the Board, including a majority of the Independent Trustees of SCM Trust, on behalf of each of the Funds, considered and approved the Investment Advisory Agreement with CCM Partners D/B/A Shelton Capital Management for an initial two-year period from the effective date of the Management Agreement with respect to each Fund.

 

Prior to the meeting, the Independent Trustees requested information from SCM. This information, together with other information provided by SCM, and the information provided to the Independent Trustees throughout the course of the year, formed the primary (but not exclusive) basis for the Board’s determinations as summarized below. In addition to the information identified above, other material factors and conclusions that formed the basis for the Board’s subsequent approval are described below.

 

Information Received

 

Materials Received. During the course of each year, the Independent Trustees receive a wide variety of materials relating to the services provided by Shelton to the other series of the Trust, and to funds advised by Shelton in a related trust for which the Board also serves. That information includes reports on each such fund’s investment results; portfolio composition; third party fund rankings; investment strategy; portfolio trading practices; shareholder services; and other information relating to the nature, extent and quality of services provided by Shelton to those funds. In addition, the Board requests and reviews supplementary information that includes materials regarding each such fund’s investment results, advisory fee and expense comparisons, the costs of operating those funds and financial and profitability information regarding Shelton (the principal business activity of which is managing the funds), description of various functions such as compliance monitoring and portfolio trading practices, and information about the personnel providing investment management services to each fund. As such, the Board, and the Independent Trustees, are acquainted with Shelton and its performance of investment management services for registered investment companies. For the meeting at which the Advisory Agreement was approved, the Independent Trustees requested information regarding Shelton’s financial condition and profitability, services, operations and personnel, and compliance procedures.

 

Review Process. The Board received assistance and advice regarding legal and industry standards from independent legal counsel to the Independent Trustees. The Board discussed the approval of the Investment Advisory Agreement both with Shelton representatives and in a private session with independent legal counsel at which representatives of Shelton were not present. In deciding to approve the Investment Advisory Agreement, the Independent Trustees considered the total mix of information requested by and made available to them and did not identify any single issue or particular information that, in isolation, was the controlling factor. This summary describes the most important, but not all, of the factors considered by the Board.

 

Nature, Extent and Quality of Services

 

The Board considered the depth and quality of Shelton’s investment management process; the experience, capability and integrity of its senior management and other personnel; operating performance and the overall financial strength and stability of its organization. The Board also considered that SCM made available to its investment professionals a variety of resources relating to investment management, compliance, trading, performance and portfolio accounting. The Board further considered SCM’s continuing need to attract and retain qualified personnel and, noting SCM’s additions over recent years, determined that SCM was adequately managing matters related to the existing series of the Trust and would be expected to make appropriate investments for the Funds. Because each of the Funds employs the same investment strategy of the predecessor funds and the same key management personnel, the nature and quality of the management of each Fund is expected to reflect that of the predecessor fund. This, in turn, assisted the Board in reaching a conclusion that the nature, extent and quality of Shelton’s services were such as to warrant approval of the Investment Advisory Agreement.

 

The Board considered, in connection with the performance of its investment management services to the other series of the Trust, and the services to be provided to the Funds, the following: SCM’s policies, procedures and systems to ensure compliance with applicable laws and regulations and its commitment to these programs; its efforts to keep the Board informed; and its attention to matters that may involve conflicts of interest with the Funds. As a point of comparison, the Board also considered the nature, extent, quality and cost of certain non-investment related administrative services provided by SCM to the Funds under the administration servicing agreements.

 

The Board concluded that SCM had the quality and depth of personnel and investment methods essential to performing its duties under the Investment Advisory Agreement, and that the nature, extent and overall quality of such services are satisfactory and reliable.

 

Investment Performance

 

The Board considered that there was no performance history at the time of the meeting for the Funds.

 

Management Fees and Total Operating Expenses

 

The Board reviewed the proposed management fees and proposed total operating expenses of each Fund with SCM, and compared such amounts with the management fees and total operating expenses of other funds in the industry. The Trustees considered both the gross advisory fee rates, as well as the effective advisory rates proposed to be charged by SCM after taking into consideration the expense limitation arrangements and voluntary fee waivers. The Board noted that the total net management fees charged to each Fund, after taking into account these expense limitations and voluntary waivers, appeared to be competitive with comparable funds. The Trustees noted the Funds would be paying for certain administrative services provided to the Funds by SCM under the fund administration servicing agreement that would take effect upon the transition of the Funds to the SCM Trust.

 

Adviser, Costs, Level of Profits, Economies of Scale and Ancillary Benefits

 

The Board reviewed information regarding SCM’s anticipated costs of providing services to the Funds, as well as the resulting level of profits to SCM. The Independent Trustees received financial and other information from SCM, in addition to a representation from SCM that its profits were not excessive and that SCM’s profitability was low by industry standards. The Board noted its intention to monitor assets under management, and the resulting impact on SCM’s profitability, in order to ensure that SCM has sufficient resources to provide the services that shareholders in the Funds require. The Board considered SCM’s need to invest in technology, data services, infrastructure and staff to provide the expected quality of investment advisory services to the Funds. The Board also noted that SCM has contractually agreed to limit its advisory fees on the Funds so that those Funds do not exceed their respective specified operating expense limitations. Such voluntary fee limitations may be decreased or eliminated at the option of SCM in the future, a factor that was also considered by the Board. The Board considered possible indirect benefits that may accrue to SCM as a result of the acquisition, and concluded that it was very difficult to determine whether any such benefits would accrue before the Funds have experienced any meaningful operating history. Nevertheless, in connection with its governance of the other series of the Trust, the Board regularly receives financial information regarding SCM and the compensation and benefits that SCM derives from its relationship with that fund, and noted that SCM does not presently receive substantial indirect benefits from managing the other series of the Trust (one example of an indirect benefit is research paid for by Fund brokerage commissions – SCM currently does not utilize soft-

 

19

 

 

Board Approval of the Advisory Agreement (Unaudited) (Continued)
October 31, 2017

 

dollar arrangements or enjoy the benefit of such arrangements). On the basis of the foregoing, together with the other information provided to it at the June 28th, 2016 meeting and throughout the year, the Board concluded that the advisory fee to be charged to each Fund was reasonable in relation to the services to be provided.

 

Conclusions

 

Based on their review of the totality of the circumstances and relevant factors, the Board’s decision to approve the proposed Investment Advisory Agreement reflected its determination that, based upon the information requested and supplied, SCM’s proposal to establish and maintain each Fund, and its past performance and actions in providing services to other mutual funds (which the Board has found to be satisfactory), provide a reasonable basis to support the business judgment to approve the proposed Investment Advisory Agreement and other proposed arrangements.

 

20

 

 

 

 

 

 

THIS PAGE INTENTIONALLY LEFT BLANK

 

 

 

 

 

 

 

THIS PAGE INTENTIONALLY LEFT BLANK

 

 

 

 

 

 

 

 

THIS PAGE INTENTIONALLY LEFT BLANK

 

 

 

 

 

 

 

 

 

ITEM 2. CODE OF ETHICS.

 

Not applicable for semi-annual report.

 

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

 

Not applicable for semi-annual report.

 

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

 

Not applicable for semi-annual report.

 

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

 

Not applicable for semi-annual report.

 

ITEM 6. SCHEDULE OF INVESTMENTS.

 

(a) Investments in securities of unaffiliated issuers as of the close of the reporting period are included as part of the report to shareholders filed under Item 1 of this Form N-CSR.

 

(b) Not applicable.

 

 

 

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

 

Not applicable.

 

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

 

Not applicable.

 

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

 

Not applicable.

 

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

 

There have been no material changes to the procedures by which the shareholders may recommend nominees to the Registrant's board of trustees since the Registrant last provided disclosure in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A or this Item.

 

ITEM 11. CONTROLS AND PROCEDURES.

 

(a)   The Registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c)) are effective as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).

 

(b) There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act that occurred during the Registrant's last fiscal half-year (the Registrant's second fiscal half- year in the case of an annual 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) Code of Ethics not applicable for semi-annual report.

(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002, as amended (“SOX”), are filed as Exhibit 12(a)(2) to this Form N-CSR.

(b) Certifications required by Rule 30a-2(b) under the 1940 Act, Section 906 of SOX, Rule 13a-14(b) under the Exchange Act, and Section 1350 of Chapter 63 of Title 18 of the United States Code are furnished as Exhibit 12(b) to this Form N-CSR.

 

 

 

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.

 

Shelton Greater China Fund

 

By /s/ Stephen C. Rogers  
  Stephen C. Rogers, Chairman  
  Date: December 29, 2017  

 

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 /s/ Stephen C. Rogers  
  Stephen C. Rogers, Chairman  
  Date: December 29, 2017  
     
By /s/ William P. Mock  
  William P. Mock, Treasurer  
  Date: December 29, 2017