Penn Capital Management Company, LLC (“Penn Capital”), is based in Philadelphia, Pennsylvania. Penn
Capital has been an investment adviser registered with the SEC since 1988. Interest in Penn Capital is held
by 525 Holding Company, Inc., Penn Capital employees, and Spouting Rock Asset Management, LLC
(“SRAM”). In the near future there will be a transaction transferring ownership from SRAM to another
entity.
Since its inception, Penn Capital has followed its core belief that understanding a company’s entire capital
structure is the best way to identify investment opportunities with the most value. In fact, the portfolio
managers and research analysts (the “Investment Team”) have found that managing fixed income
portfolios makes Penn Capital a better equity manager and managing equity portfolios makes Penn Capital
a better fixed income manager. Integrating credit and equity research allows Penn Capital’s team to
construct a more comprehensive mosaic and identify inefficient security pricing. This process is called
Complete Capital Structure Analysis®.
Penn Capital’s Complete Capital Structure Analysis® is executed by the Investment Team, which is
comprised of capital structure generalists, responsible for understanding the entire capital structure of
the companies they follow. All ideas are vetted through Penn Capital’s Investment Committees and
investment decisions are made by senior investment professionals. Penn Capital seeks to select for its
portfolios those securities with the greatest potential to provide the risk-adjusted returns that clients
expect.
As of December 31, 2023, Penn Capital managed approximately $1.7 billion in regulatory assets under
management, of which approximately $1.4 billion was managed on a discretionary basis, and
approximately $261 million was managed on a non-discretionary basis.
Investment Strategies:
Penn Capital’s investment strategies focus on micro-to mid-capitalization equity securities, fixed income
and high yield securities. The investment strategies are:
Micro Cap Equity
Small to Micro Cap Equity (SMICRO)
Small Cap Equity
Small Cap Value Equity
Small to Mid Cap Equity (SMID)
Mid Cap Equity
Ultra-Short Duration Corporate Income
Defensive Short Duration High Income
Defensive High Yield Fixed Income
Opportunistic High Yield Fixed Income
Penn Capital provides investment advisory services primarily through the following investment vehicles:
registered mutual funds, separately managed accounts, and investment advisory programs offered
through wrap fee programs or model portfolio distribution channels. Each of these is described in more
detail below.
Registered Mutual Funds:
Penn Capital serves as a discretionary investment adviser to affiliated mutual funds and subadvises
through a model delivery program, non- affiliated mutual funds registered under the Investment Company
Act of 1940, as amended (“Investment Company Act”). Penn Capital also provides non-discretionary sub-
advisory services to non-affiliated registered mutual funds. Whether acting as investment adviser or sub-
adviser, it is Penn Capital’s responsibility to manage mutual fund investments in accordance with the
investment strategy described in each mutual fund’s prospectus and statement of additional information.
Penn Capital does not perform any sales, custodial, or administrative functions on behalf of the non-
affiliated mutual funds Penn Capital sub-advises.
Penn Capital is the discretionary investment adviser to four mutual funds within (“funds”) the RBB Funds
Trust (the “Trust”), an investment company registered under the Investment Company Act. Penn
subadvises the funds via a model-delivery program. Penn Capital will recommend the funds as an
investment option for its clients. Penn Capital has an incentive and inherent conflict of interest to
recommend and favor the funds because the firm receives advisory fees from the funds. These fees are
described in Item 5—Fees and Compensation below and are detailed in each fund’s prospectus. Increases
in the funds’ assets will result in increases in the advisory fees paid to Penn Capital.
Collective Investment Trust (“CIT”) Funds:
Penn Capital serves as the investment adviser to a CIT that is available only to certain retirement plans, as
permitted under the U.S. Treasury Department’s guidance for such a group trust. The CIT’s independent
trustee manages the CIT and is responsible for CIT-related disclosures and ensuring that each participating
retirement plan’s independent plan fiduciary receives the CIT’s Offering Memorandum and executes a
Participation Agreement (including a Fee Schedule) with the trustee.
Separately Managed Accounts (“SMAs”):
SMAs are primarily available to: corporate retirement, pension, and profit-sharing plans; Taft-Hartley
plans; registered mutual funds; US and international pooled investment vehicles and private investment
funds; insurance companies; charitable institutions; foundations; endowments; municipalities; banking or
thrift institutions; corporations; non-US funds; and other institutions, investment advisers, institutional
investors, individuals, and high net-worth individuals. Penn Capital is an approved SMA manager on
various banking and brokerage platforms. The minimum account size for Penn Capital strategies, typically,
is $250,000 for equity and fixed income/bond portfolios. Penn Capital reserves the right to waive the
account size minimums. SMA clients have the option to negotiate individualized investment guidelines or
directives. If agreed to in advance, some SMA clients also are permitted to impose allocation and/or
security-specific restrictions to either individual securities, asset classes, industries, or types of securities.
Certain SMA clients also can engage Penn Capital to provide non-discretionary investment advisory
services.
Wrap Fee Program Accounts:
Penn Capital serves as the investment adviser to wrap fee programs that are sponsored by unaffiliated
third parties, typically, broker-dealers (“Wrap Fee Accounts”). Wrap fee programs are advisory programs
in which the underlying clients pay a single fee to the wrap fee program sponsor for access to the
investment advisory services of multiple investment advisers such as Penn Capital. Wrap Fee Account
clients typically are high net worth individuals. The sponsors of wrap fee programs have the primary
responsibility for the underlying clients’ servicing, communications, custody, and conduct some (or all,
depending upon the program) of the trading for client accounts. Wrap Fee Account clients enter into
agreements either directly with both the sponsor and Penn Capital (“dual contract” agreements) or solely
with the wrap fee program sponsor (“single contract” agreements). Typically, underlying Wrap Fee
Account clients do not pay Penn Capital directly for investment advisory services. Instead, Penn Capital
receives a (separately negotiated) portion of the wrap fee program sponsor’s fee for managing those
Wrap Fee Account assets that are invested in a Penn Capital investment strategy.
For single contract agreements, Penn Capital makes no determination of the suitability of the sponsor’s
wrap fee program product for such sponsor’s underlying clients. Penn Capital is responsible only for
managing the Wrap Fee Account client’s assets in the specified investment strategy. Unless specific
program or account restrictions are imposed, Penn Capital manages Wrap Fee Accounts in a similar
manner as Penn Capital’s other clients in the same investment strategy. On a limited basis, Penn Capital
permits Wrap Fee Account clients and/or the wrap fee program sponsor to impose restrictions or limits
on certain individual securities or types of securities. Any restrictions or limits imposed by these Wrap Fee
Account clients and/or the wrap fee program sponsors would likely affect the performance of those
accounts (e.g., it could be either higher or lower) than the performance received by Penn Capital’s other
clients invested in the same strategy. Also, Wrap Fee Accounts are excluded from participating in initial
public offerings (IPOs) because securities for these accounts are purchased through either the wrap fee
program sponsor’s or a step out broker’s desk, neither of which meet the conditions described in Item 12
- Brokerage Practices under the heading IPO Allocations required for Penn Capital’s trading desk to
purchase IPOs shares. To the extent that Penn Capital’s discretionary clients participate in IPOs, such
participation likely will result in better performance than that of the Wrap Fee Accounts that did not
participate in the IPO.
Penn Capital is not responsible for overseeing the provision of services by a wrap fee program sponsor
and cannot assure the quality of such services. Wrap Fee Account clients should review all materials
relating to their program (including the program brochure) regarding the wrap fee program sponsor’s
terms, conditions and fees, and consider the advantages, disadvantages and overall appropriateness of
the program in light of the client’s particular circumstances.
Model Delivery Accounts:
Penn Capital provides non-discretionary investment advisory services to certain clients who in turn offer
Penn Capital’s investment strategies to their own underlying clients (“Model Accounts”). Penn Capital
provides model portfolios to several Model Accounts, including, but not limited to, unified management
account sponsors (“UMA”), SMA clients, and unaffiliated registered mutual funds. Penn Capital provides
its Model Account clients with a model portfolio for the applicable investment strategy, subject to
negotiated fees. Penn Capital constructs the model portfolio for the applicable strategy once the model
portfolio’s allocations, investments and weightings have been established, which typically occurs at the
end of each trading day. Once completed, the model portfolio is provided to Model Accounts prior to the
next day’s market open unless a Model Account client requests an alternative delivery schedule for the
model portfolio (e.g., weekly, rather than daily). For Model Accounts, Penn Capital provides only the
model portfolio, but does not assume responsibility for executing trades, performing recordkeeping,
accessing performance data, or providing underlying client reporting. Model Accounts clients, in their sole
discretion, choose to act or to not act upon any or all of Penn Capital’s model portfolio recommendations.
The recommendations in the model portfolios reflect the recommendations made to Penn Capital’s
discretionary accounts. Penn Capital typically delivers the model portfolios to the Model Accounts
through the various proprietary systems of each Model Account. The availability of such proprietary
systems is beyond the control of Penn Capital. To the extent such system is unavailable, Penn Capital
likely would be unable to deliver the model portfolio to such Model Account timely.
Since Penn Capital provides Model Accounts with the relevant model portfolios prior to the next day’s
market open (or at such time as has been separately negotiated), Penn Capital will have already traded
on its recommendations during the prior trading day, which trading was used to establish the model
portfolio’s actual weightings and holdings that are then communicated to the Model Accounts prior to
the next day’s market open (or at such time as has been separately negotiated). In the instances where
the Model Accounts choose to act upon Penn Capital’s model portfolio recommendations, Penn Capital
will likely be trading in the same securities for its discretionary client accounts before, concurrently, or
after the Model Accounts determine to act on Penn Capital’s recommendations. In this way, and because
of intra-day price movements, particularly with large orders or thinly traded securities, timing delays, or
other operational factors associated with the implementation of trades, the trades executed by Model
Accounts could result in the Model Accounts’ underlying clients receiving prices that are materially
different (i.e., at prices that are either higher or lower) than the prices obtained by Penn Capital’s
discretionary account clients. Because it does not execute trades on behalf of Model Accounts, Penn
Capital cannot seek to manage through its trading strategy the market impact (including such factors as
liquidity and price) of securities transactions for Model Accounts in the same way that it seeks to manage
market impact for its discretionary client accounts on whose behalf Penn Capital trades. Since Model
Accounts are unable to participate in initial public offerings (IPOs) so to the extent that Penn Capital’s
discretionary clients participate in IPOs, such participation likely will result in better performance than
that of the Model Accounts that did not participate in the IPO. Because Model Accounts exercise
investment and trading discretion, the investment performance experienced by the underlying clients of
Model Accounts could be higher or lower than the investment performance experienced by Penn Capital’s
discretionary clients with the same or similar investment mandates.
Penn Capital generally has no direct advisory relationship with any underlying clients of the Model
Accounts. Penn Capital is not responsible for the underlying client accounts as part of the investment
programs operated by Model Accounts for which Penn Capital provides model portfolios and therefore
cannot assess or guarantee the quality of those services or the investment performance experienced by
such underlying clients of Model Accounts. Since Penn Capital does not have investment discretion, Penn
Capital does not consider itself to have an advisory relationship with underlying clients of the Model
Accounts or the sponsor programs of Model Accounts. To the extent that this Brochure is delivered to the
underlying clients of Model Accounts with whom Penn Capital has no such advisory relationship, or under
circumstances where it is not legally required to be delivered, this Brochure is provided solely for
informational purposes. Furthermore, because Model Accounts either directly or through an overlay
manager generally exercise investment discretion and, in many cases, brokerage discretion, any
performance or other information relating to Penn Capital’s services for which it exercises investment
and/or brokerage discretion should be considered to have been provided for informational purposes only,
and likely would not be representative of any Model Account’s underlying clients’ results or experience.
Penn Capital is not responsible for overseeing the provision by Model Accounts of brokerage or client
services to their underlying clients and therefore Penn Capital cannot ensure the quality of such services.
Underlying clients of Model Accounts should review all materials relating to their Model Account program
(including the relevant program brochure or other documentation) regarding the Model Account
program’s terms, conditions and fees, and consider the advantages, disadvantages, and overall
appropriateness of the Model Account in light of the client’s particular circumstances.