This report and the financial statements contained herein are submitted for the general information of the shareholders of the Sirius S&P Strategic Large-Cap Allocation Fund (the "Fund"). The Fund's shares are not deposits or obligations of, or guaranteed by, any depository institution. The Fund's shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested. Neither the Fund nor the Fund's distributor is a bank.
The Sirius S&P Strategic Large-Cap Allocation Fund is distributed by Capital Investment Group, Inc., Member FINRA/SIPC, 17 Glenwood Ave, Raleigh, NC, 27603. There is no affiliation between the Sirius S&P Strategic Large-Cap Allocation Fund, including its principals, and Capital Investment Group, Inc.
This Annual Report was first distributed to shareholders on or about May 29, 2015.
PO Box 277
Lovettsville, VA 20180
844-438-7474
www.SiriusFunds.com
April 22, 2015
Dear Fellow Shareholders of the Sirius S&P Strategic Large-Cap Allocation Fund:
First, I want to thank the initial shareholders of the Sirius S&P Strategic Large-Cap Allocation Fund for putting your faith in us. Welcome to the Sirius mutual fund.
The Sirius S&P Strategic Large-Cap Allocation Fund seeks long-term growth and preservation of capital through investment in large cap equity and market index funds. A portion of the Fund may be in cash and cash equivalents awaiting investment opportunities. The Advisor may increase the level of cash and cash equivalents and money market funds to preserve capital.
The Sirius S&P Strategic Large-Cap Allocation Fund launched on October 1, 2014 into a sharp US equities market pullback. This pullback gave the Fund a nice entry opportunity, setting the stage for the Fund's performance. As you can see from the table below, the Fund has returned 6.40% since its inception. The S&P has returned 6.25% for the same period. We feel that the Fund is on track and performing well.
A chart detailing the Fund's performance is shown below.
Average Annual Total Returns
| Period Ended March 31, 2015 | Three Months* | Since Inception1 | Net Expense Ratio2 | Gross Expense Ratio3 |
| Sirius S&P Strategic Allocation Fund | 2.41% | 6.40% | 1.85% | 2.22% |
S&P 500 Total Return Index4 | 0.44% | 6.25% | N/A | N/A |
*For the initial period from October 1, 2014 to March 31, 2015.
The performance information quoted above represents past performance and past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Performance data, current to the most recent month end, may be obtained by calling Shareholder Services at 800-773-3863. Fee waivers and expense reimbursements have positively impacted Fund performance.
1The Fund's Inception date is October 1, 2014.
2 The Advisor has entered into an Expense Limitation Agreement with the Fund under which it has agreed to waive or reduce its fees and to assume other expenses of the Fund, if necessary, in an amount that limits the Fund's annual operating expenses (exclusive of interest, taxes, brokerage fees and commissions, extraordinary expenses, payments under the Rule 12b-1 distribution plan, and acquired fund fees and expenses) to not more than 1.60% of the average daily net assets of the Fund through January 31, 2016. The Fund's net expense ratio will be higher than 1.60% to the extent the Fund incurs expenses excluded from this arrangement. The Expense Limitation Agreement may not be terminated prior to that date. The Advisor cannot recoup from the Fund any amounts paid by the Advisor under the Expense Limitation Agreement. Further, net annual operating expenses for the Fund may exceed those contemplated by the waiver due to acquired fund fees and other expenses that are not waived under the Expense Limitation Agreement.
3Gross expense ratio is from the Fund's prospectus dated August 15, 2014.
4You cannot invest directly in the S&P 500 Total Return index. This index does not have an investment advisor and does not pay any commissions, expenses, or taxes. If this index did pay commissions, expenses, or taxes, its returns would be lower.
Expectation for the Economy
As the Fund launched on October 1, 2014, the economy was showing signs of a struggle between slowing forces and rising ones. The Federal Reserve's bond buying program was ending, the oil industry was in a fallout, and the turmoil overseas in foreign economies were all putting the brakes on market advances. However, strong consumer spending driven by job growth and lower gas prices in the midst of a long bull market were working to propel the market higher. Despite the push-pull action seen in the fourth quarter, the economy continued to record positive growth.
Since the market low in 2009, the US economy has experienced five years of expansion and has begun its sixth this year in 2015. Real GDP growth is expected to be 3% for 2015, and Sirius Financial Advisors, Inc. ("SFA") believes earnings will support a bullish performance in markets during the year.
Expectation for the US Equities Market
The S&P has returned more than 245% since the 2009 market low. Since the Fund launch, the equities market saw the S&P reach new all-time highs in the fourth quarter of 2014, only to retreat from those levels at the end of the year1. As the New Year unfolded, investors were faced with continuing gloomy news concerning the oil industry and concerns about overseas economies. However, other central banks announced stimulus plans that helped ease investor fears over future earnings abroad and the situation in foreign markets began to show signs of recovery. In the US, the Federal Open Market Committee (FOMC) modified language about how much longer they would keep the Federal Funds Rate at historically low levels, stating that it would be 'patient', allowing for a change in rates based on economic trends instead of calendar–based moves. The stance was received well in the equities market, but did not dissipate the mixed performance that has pervaded much of the first quarter. Much like the snows of this winter on the east coast, the sideways motion of the market has persisted in a much more volatile manner than in the prior six months. Despite the indecision in the markets, SFA is still expecting a bullish stance in the US Equity markets in 2015.
We appreciate your support of the Sirius S&P Strategic Large-Cap Allocation Fund and look forward to opportunities in 2015. If you have any questions about the Fund, please don't hesitate to call our Shareholder Services at (800) 773-3868.
Sincerely,
Stacey D Russello
President
Sirius Funds Advisors, Inc.
The views in the foregoing discussion were those of the Fund's investment advisor as of the date set forth above and may not reflect its views on the date this Annual Report is first published or anytime thereafter. These views are intended to assist shareholders in understanding their investment in the Fund and do not constitute investment advice.
1 "Economic and Market Overview: First Quarter 2015," Envestnet PMC.
| Sirius S&P Strategic Large-Cap Allocation Fund | | | | | | | | | | | | |
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| Performance Update | | | | | | | | | | | | | | |
| (Unaudited) | | | | | | | | | | | | | | |
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| For the period from October 1, 2014 (Date of Initial Public Investment) to March 31, 2015 | | |
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| Comparison of the Change in Value of a $10,000 Investment | | | | | | | | |
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| This graph assumes an initial investment of $10,000 on October 1, 2014 (Date of Initial Public Investment). All dividends and distributions, if any, are reinvested. This graph depicts the performance of the Sirius S&P Strategic Large-Cap Allocation Fund versus the S&P 500 Total Return Index. It is important to note that the Fund is a professionally managed mutual fund while the indices are not available for investment and are unmanaged. The comparison is shown for illustrative purposes only. |
| | | | | | | | | | | | | | | | | | | | |
| | Average Annual Total Returns | |
| | | | | | | | | | | | | | | | Gross | | Net | | |
| | | As of | | | | | Three | | Since | | Inception | | Expense | | Expense | | |
| | | March 31, 2015 | | | | Months | | Inception | | Date | | Ratio* | | Ratio* | | |
| | | Sirius S&P Strategic Large-Cap Allocation Fund | 2.41% | | 6.40% | | 10/01/14 | | 2.22% | | 1.85% | | |
| | | S&P 500 Total Return Index | | | 0.44% | | 6.25% | | N/A | | N/A | | N/A | | |
| | | | | | | | | | | | | | | | | | | | |
| * The gross and net expense ratios shown are from the Fund's prospectus dated August 15, 2014. | | |
| | | | | | | | | | | | | | | | | | | | |
| Performance quoted above represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. An investor may obtain performance data, current to the most recent month-end, by visiting ncfunds.com. |
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| The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Average annual total returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestments of distributions, if any. |
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Sirius S&P Strategic Large-Cap Allocation Fund
Notes to Financial Statements
1. Organization and Significant Accounting Policies
The Sirius S&P Strategic Large-Cap Allocation Fund (the "Fund") is a series of the Starboard Investment Trust (the "Trust"). The Trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. The Fund is a separate non-diversified series of the Trust.
The Fund commenced operations on October 1, 2014. The investment objective of the Fund is long-term growth and preservation of capital. The Fund's investment advisor, Sirius Funds Advisors, Inc. (the "Advisor"), seeks to achieve its investment objective by investing primarily in exchange-traded funds ("ETFs") and secondarily in mutual funds. The Fund is a "fund of funds," which means it invests, under normal circumstances, at least 80% of its net assets (excluding collateral held from securities lending), plus the amount of any borrowings for investment purposes, in ETFs, and mutual funds that hold securities in the S&P 500 Total Return Index and large-cap S&P sectors.
The following is a summary of significant accounting policies consistently followed by the Fund. The policies are in conformity with accounting principles generally accepted in the United States of America ("GAAP").
Investment Valuation
The Fund's investments in securities are carried at value. Securities listed on an exchange or quoted on a national market system are valued at the last sales price as of 4:00 p.m. Eastern Time. Securities traded in the NASDAQ over-the-counter market are generally valued at the NASDAQ Official Closing Price. Other securities traded in the over-the-counter market and listed securities for which no sale was reported on that date are valued at the most recent bid price. Securities and assets for which representative market quotations are not readily available (e.g., if the exchange on which the security is principally traded closes early or if trading of the particular security is halted during the day and does not resume prior to the Fund's net asset value calculation) or which cannot be accurately valued using the Fund's normal pricing procedures are valued at fair value as determined in good faith under policies approved by the Trustees. A security's "fair value" price may differ from the price next available for that security using the Fund's normal pricing procedures. Instruments with maturities of 60 days or less are valued at amortized cost, which approximates market value.
The Fund may invest in portfolios of open-end investment companies (the "Underlying Funds"). The Underlying Funds value securities in their portfolios for which market quotations are readily available at their market values (generally the last reported sale price) and all other securities and assets at their fair value to the methods established by the Board of the Underlying Funds. Open-ended funds are valued at their respective net asset values as reported by such investment companies.
Fair Value Measurement
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: unadjusted quoted prices in active markets for identical securities
Level 2: other significant observable inputs (including quoted prices for similar securities and identical securities in inactive markets, interest rates, credit risk, etc.)
Level 3: significant unobservable inputs (including the Fund's own assumptions in determining fair value of investments)
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.
(Continued)
Sirius S&P Strategic Large-Cap Allocation Fund
Notes to Financial Statements
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 inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following table summarizes the inputs as of March 31, 2015 for the Fund's assets measured at fair value:
| | | |
| Investments in Securities (a) | | Total | | Level 1 | | Level 2 | | Level 3 |
| | | | | | | | | |
| Short-Term Investment | $ | 24,589,400 | $ | 24,589,400 | $ | - | $ | - |
| Total | $ | 24,589,400 | $ | 24,589,400 | $ | - | $ | - |
| | | | | | | | | |
| (a) | The Fund had no transfers into or out of Level 1, 2, or 3 during the initial period ended March 31, 2015. The Fund did not hold any Level 3 securities during the period. The Fund recognizes transfers at the end of each period. |
Investment Transactions and Investment Income
Investment transactions are accounted for as of the date purchased or sold (trade date). Dividend income is recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded as soon as the Fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date. Gains and losses are determined on the identified cost basis, which is the same basis used for Federal income tax purposes.
Expenses
The Fund bears expenses incurred specifically on its behalf as well as a portion of general expenses, which are allocated according to methods reviewed annually by the Trustees.
Distributions
The Fund may declare and distribute dividends from net investment income (if any), quarterly. Distributions from capital gains (if any) are generally declared and distributed annually. Dividends and distributions to shareholders are recorded on ex-date.
Exchange Traded Funds
The Fund may invest in exchange traded funds ("ETFs"). ETFs are a type of index fund bought and sold on a securities exchange. An ETF trades like common stock and represents a fixed portfolio of securities designed to track the performance and dividend yield of a particular domestic or foreign market index. The Fund may purchase an ETF to temporarily gain exposure to a portion of the U.S. or a foreign market while awaiting purchase of underlying securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities they are designed to track, although the lack of liquidity on an ETF could result in it being more volatile. Additionally, ETFs have fees and expenses that reduce their value.
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 at the date of the financial statements and the reported amounts of increases and decreases in the net assets from operations during the reporting period. Actual results could differ from those estimates.
Federal Income Taxes
No provision for income taxes is included in the accompanying financial statements, as the Fund intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code applicable to regulated investment companies.
(Continued)
Sirius S&P Strategic Large-Cap Allocation Fund
Notes to Financial Statements
| 2. | Transactions with Related Parties and Service Providers |
Advisor
The Fund pays a monthly fee to the Advisor calculated at the annual rate of 1.20% of the Fund's average daily net assets. For the initial period ended March 31, 2015, $136,613 in advisory fees were incurred by the Fund, of which $39,924 were waived by the Advisor.
The Advisor has entered into a contractual agreement (the "Expense Limitation Agreement") with the Trust, on behalf of the Fund, under which it has agreed to waive or reduce its fees and to assume other expenses of the Fund, if necessary, in amounts that limit the Fund's total operating expenses (exclusive of interest, taxes, brokerage commissions, other expenditures which are capitalized in accordance with GAAP, other extraordinary expenses not incurred in the ordinary course of the Fund's business, and amounts, if any, payable under a Rule 12b-1 distribution plan) to not more than 1.60% of the average daily net assets of the Fund for the current fiscal period. The current term of the Expense Limitation Agreement remains in effect until January 31, 2016. While there can be no assurance that the Expense Limitation Agreement will continue after that date, it is expected to continue from year-to-year thereafter.
Administrator
The Nottingham Company (the "Administrator") provides the Fund with administrative and fund accounting services. The Fund pays a monthly fee to the Administrator based upon the average daily net assets of the Fund and calculated at the annual rates as shown in the schedule below subject to a minimum of $2,000 per month. The Administrator also receives a fee as to procure and pay the Fund's custodian, as additional compensation for fund accounting and recordkeeping services, and additional compensation for certain costs involved with the daily valuation of securities and as reimbursement for out-of-pocket expenses. A breakdown of these fees is provided in the following table.
| Administration Fees* | Custody Fees* | Fund Accounting Fees (monthly) | Fund Accounting Fees (annual) | Blue Sky Administration Fees (annual) |
Average Net Assets | Annual Rate | Average Net Assets | Annual Rate |
| First $100 million | 0.100% | First $100 million | 0.020% | $2,250 | 0.01% | $150 per state |
| Next $150 million | 0.080% | Over $100 million | 0.009% | | | |
| Next $250 million | 0.060% | | | | | |
| Next $500 million | 0.050% | *Minimum monthly fees of $2,000 and $416 for Administration and Custody, respectively. |
| Over $1 billion | 0.040% |
The fund incurred $12,248 in administration fees, $14,638 in fund accounting fees, and $4,622 in custody fees for the initial period ended March 31, 2015.
Compliance Services
Cipperman Compliance Services, LLC provides services as the Trust's Chief Compliance Officer. Cipperman Compliance Services, LLC is entitled to receive customary fees from the Fund for their services pursuant to the Compliance Services agreement with the Fund.
Transfer Agent
Nottingham Shareholder Services, LLC ("Transfer Agent") serves as transfer, dividend paying, and shareholder servicing agent for the Fund. It receives compensation for its services based upon $21 per shareholder per year, subject to a minimum fee of $1,750 per month.
Distributor
Capital Investment Group, Inc. (the "Distributor") serves as the Fund's principal underwriter and distributor. The Distributor receives $5,000 per year paid in monthly installments for services provided and expenses assumed.
Certain Trustees and officers of the Trust are also officers of the Advisor or the Administrator.
(Continued)
Sirius S&P Strategic Large-Cap Allocation Fund
Notes to Financial Statements
| 3. | Distribution and Service Fees |
The Trustees, including a majority of the Trustees who are not "interested persons" of the Trust as defined in the 1940 Act and who have no direct or indirect financial interest in such plan or in any agreement related to such plan, adopted a distribution plan pursuant to Rule 12b-1 of the 1940 Act (the "Plan"). The 1940 Act regulates the manner in which a regulated investment company may assume expenses of distributing and promoting the sales of its shares and servicing of its shareholder accounts. The Plan provides that the Fund may incur certain expenses, which may not exceed 0.25% per annum of the Fund's average daily net assets for each year elapsed subsequent to adoption of the Plan, for payment to the Distributor and others for items such as advertising expenses, selling expenses, commissions, travel or other expenses reasonably intended to result in sales of shares of the Fund or support servicing of shareholder accounts. For the initial period ended March 31, 2015, $28,461 in fees were incurred by the Fund.
| 4. | Purchases and Sales of Investment Securities |
For the initial period ended March 31, 2015, the aggregate cost of purchases and proceeds from sales of investment securities (excluding short-term securities) were as follows:
| Period Ended | Purchases of Securities | Proceeds from Sales of Securities |
| March 31, 2015 | $45,515,751 | $47,075,100 |
There were no long-term purchases or sales of U.S Government Obligations during the initial period ended March 31, 2015.
5. Federal Income Tax
Distributions are determined in accordance with Federal income tax regulations, which differ from GAAP, and, therefore, may differ significantly in amount or character from net investment income and realized gains for financial reporting purposes. Financial reporting records are adjusted for permanent book/tax differences to reflect tax character but are not adjusted for temporary differences.
Management reviewed the Fund's tax positions taken on federal income tax returns for the open tax year/period ended March 31, 2015. As of and during the initial period ended March 31, 2015, the Fund does not have a liability for uncertain tax positions. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the initial period, the Fund did not incur any interest or penalties.
There were no distributions from the Fund for the initial period ended March 31, 2015.
For the initial period ended March 31, 2015, the following reclassifications were made:
| Undistributed Net Investment Income | $ | 193,310 |
| Accumulated Net Realized Gain on Investments | | (193,310) |
At March 31, 2015, the tax-basis cost of investments and components of distributable earnings were as follows:
| Cost of Investments | $ | 24,589,400 |
| | | |
| Undistributed Ordinary Income | $ | 1,366,039 |
| | | |
| Distributable Earnings | $ | 1,366,039 |
| | | | | | |
(Continued)
Sirius S&P Strategic Large-Cap Allocation Fund
Notes to Financial Statements
6. Commitments and Contingencies
Under the Trust's organizational documents, its officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Trust entered into contracts with its service providers, on behalf of the Fund, and others that provide for general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund. The Fund expects risk of loss to be remote.
7. Underlying Investment in Other Investment Company
The Fund currently invests a significant portion of its assets in the Fidelity Institutional Money Market Funds ("Fidelity Fund"). The Fund may redeem its investment from the Fidelity Fund at any time if the Advisor determines that it is in the best interest of the Fund and its shareholders to do so. The performance of the Fund may be directly affected by the performance of the Fidelity Fund. The financial statements of the Fidelity Fund, including the portfolio of investments, can be found at Fidelity's website www.fidelity.com or the Securities and Exchange Commission's website www.sec.gov and should be read in conjunction with the Fund's financial statements. As of March 31, 2015, the Fund's net assets invested in the Fidelity Fund was 100.06%.
8. Subsequent Events
The Fund has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date of issuance of these financial statements. This evaluation did not result in any additional subsequent events that necessitated disclosures and/or adjustments in addition to the disclosure above.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders of Sirius S&P Strategic Large-Cap Allocation Fund
and the Board of Trustees of Starboard Investment Trust
We have audited the accompanying statement of assets and liabilities of the Sirius S&P Strategic Large-Cap Allocation Fund (the "Fund"), a series of shares of beneficial interest in the Starboard Investment Trust, including the schedule of investments, as of March 31, 2015, and the related statements of operations and changes in net assets and the financial highlights for the period October 1, 2014 (commencement of operations) through March 31, 2015. 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 March 31, 2015 by correspondence with the custodian. 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 the Sirius S&P Strategic Large-Cap Allocation Fund as of March 31, 2015, and the results of its operations, the changes in its net assets and its financial highlights for the period October 1, 2014 through March 31, 2015, in conformity with accounting principles generally accepted in the United States of America.
BBD, LLP
Philadelphia, Pennsylvania
May 29, 2015
Sirius S&P Strategic Large-Cap Allocation Fund
Additional Information
(Unaudited)
| 1. | Proxy Voting Policies and Voting Record |
A copy of the Trust's Proxy Voting and Disclosure Policy and the Advisor's Disclosure Policy are included as Appendix B to the Fund's Statement of Additional Information and are available, without charge, upon request, by calling 800-773-3863, and on the website of the Securities and Exchange Commission ("SEC") at sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent period ended June 30 is available (1) without charge, upon request, by calling the Fund at the number above and (2) on the SEC's website at sec.gov.
| 2. | Quarterly Portfolio Holdings |
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q are available on the SEC's website at sec.gov. You may review and make copies at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 800-SEC-0330. You may also obtain copies without charge, upon request, by calling the Fund at 800-773-3863.
| 3. | Schedule of Shareholder Expenses |
As a shareholder of the Fund, you incur ongoing costs, including investment advisory fees; distribution (12b-1) fees; and other Fund expenses. This example is 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. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Expenses – The first line of the table below provides information about the actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes – The last line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
| | Beginning Account Value October 1, 2014 | Ending Account Value March 31, 2015 | Expenses Paid During Period* |
Actual Hypothetical (5% annual return before expenses) | | | |
| $1,000.00 | $1,064.00 | $9.47 |
| $1,000.00 | $1,015.71 | $9.25 |
*Expenses are equal to the average account value over the period multiplied by the Fund's annualized expense ratio of 1.85%, multiplied by 182/365 (to reflect the initial period).
| 4. | Approval of Advisory Agreement |
The Advisor supervises the Fund's investments pursuant to an Investment Advisory Agreement. At a quarterly meeting of the Fund's Board of Trustees on April 24, 2014, the Trustees approved the Investment Advisory Agreement for an initial two year term. In considering whether to approve the Investment Advisory Agreement, the Trustees reviewed and considered the information they deemed reasonably necessary, including the following material factors: (i) the nature, extent, and quality of the services provided by the Advisor; (ii) investment performance of the Advisor; (iii) the costs of the services to be provided and profits to be realized by the Advisor and its affiliates from the relationship with the Fund; (iv) the extent to which economies of scale would be realized as the Fund grows and whether advisory fee levels reflect those economies of scale for the benefit of the Fund's investors; (v) the Advisor's practices regarding brokerage and portfolio transactions; and (vi) the Advisor's practices regarding possible conflicts of interest.
(Continued)
Sirius S&P Strategic Large-Cap Allocation Fund
Additional Information
(Unaudited)
At the meeting, the Trustees reviewed various informational materials including, without limitation, the Investment Advisory Agreement for the Fund; a memorandum from the Advisor to the Trustees containing information about the Advisor, its business, its finances, its personnel, its services to the Fund, and comparative expense ratio information for other mutual funds with a strategy similar to the Fund; and a memorandum from the Fund's legal counsel that summarized the fiduciary duties and responsibilities of the Board of Trustees in reviewing and approving the Investment Advisory Agreement, including the types of information and factors that should be considered in order to make an informed decision.
In considering the nature, extent, and quality of the services provided by the Advisor, the Trustees reviewed the responsibilities of the Advisor under the Investment Advisory Agreement. The Trustees reviewed the services to be provided by the Advisor to the Fund including, without limitation, the Advisor's procedures for formulating investment recommendations and assuring compliance with the Fund's investment objectives and limitations, proposed efforts during the Fund's start-up phase, coordination of services for the Fund among the Fund's service providers, and efforts to promote the Fund, grow the Fund's assets, and assist in the distribution of Fund shares. The Trustees considered that the Advisor specializes in portfolio management services to investment companies. The Trustees further noted that the Fund's principal officers are the President and Chief Operating Officer of the Advisor and will serve the Fund without additional compensation. After reviewing the foregoing information and further information in the memorandum from the Advisor (e.g., the Advisor's Form ADV and descriptions of the Advisor's business and compliance program), the Board of Trustees concluded that the nature, extent, and quality of the services to be provided by the Advisor were satisfactory and adequate for the Fund.
In considering the investment performance of the Advisor, the Trustees noted that the Fund had not commenced operations and consequently had no performance history. The Trustees considered the experience of the personnel of the Advisor in pursuing investment strategies similar to the Fund, and determined at that time that the performance of the Advisor was satisfactory. Thus, after considering the Advisor's experience and other factors as the Trustees deemed appropriate, the Board concluded that the investment performance and the Advisor was satisfactory.
In considering the costs of the services to be provided and profits to be realized by the Advisor and its affiliates from the relationship with the Fund, the Trustees first noted that the management fee for the Fund would be 1.20% of the average daily net assets. The Trustees evaluated the Advisor's staffing, personnel, and methods of operating; the education and experience of the Advisor's personnel; the Advisor's compliance programs, policies, and procedures; the financial condition of the Advisor; the level of commitment to the Fund and the Advisor by the principals of the Advisor; the projected asset levels of the Fund; the Advisor's payment of startup costs for the Fund; and the overall expenses of the Fund, including the nature and frequency of advisory fee payments. The Trustees reviewed the financial statements of the Advisor and discussed the financial stability and profitability of the firm. The Advisor responded to several questions about the financial condition of the firm and its principals. The Trustees discussed the Fund's Expense Limitation Agreement, including the nature and scope of the cost allocation for such fees. The Trustees also considered potential benefits for the Advisor in managing the Fund, including promotion of the Advisor's name, the ability for the Advisor to place small accounts into the Fund, and the potential for the Advisor to generate soft dollars from Fund trades that may benefit the Advisor's other clients. The Trustees then compared the expected fees and expenses of the Fund (including the management fee) to other funds comparable in terms of the type of fund, the nature of its investment strategy, and its style of investment management, among other factors. The Trustees determined that the Fund's management fee was higher than the comparable funds, and that the management fee was higher than the peer group average. The Trustees also determined that the Fund's net expense ratio was higher than all but two of the comparable funds and higher than the peer group average. The Trustees noted that the Fund was in a start-up phase and would be much smaller than the comparable funds and peer group average in the near future. Following further consideration and discussion of the foregoing, the Board of Trustees concluded that the fees to be paid to the Advisor by the Fund were fair and reasonable in relation to the nature and quality of the services provided by the Advisor and that they reflected charges that were within a range of what could have been negotiated at arm's length.
(Continued)
Sirius S&P Strategic Large-Cap Allocation Fund
Additional Information
(Unaudited)
In considering the extent to which economies of scale would be realized as the Fund grows and whether advisory fee levels reflect those economies of scale for the benefit of the Fund's investors, the Trustees noted that the Fund had not commenced operations yet and, consequently, had no operational history with which to evaluate economies of scale. The Trustees reviewed the fee arrangements for breakpoints or other provisions that would allow the Fund's shareholders to benefit from economies of scale as the Fund grows. The Trustees determined that the management fee would remain the same when the Fund reaches higher asset levels and, therefore, did not reflect economies of scale. The Trustees noted that the Fund was in a start-up phase and economies of scale were unlikely to be achievable in the near future. It was pointed out that breakpoints in the advisory fee could be reconsidered in the future. The Trustees noted that the Fund will benefit from economies of scale under the agreement with the Fund's administrator since it utilized breakpoints. The Trustees also noted that the Advisor was contractually bound to make payments to the Fund's administrator at lower asset levels in order to help limit the Fund's expenses. Following further discussion of the Fund's projected asset levels, expectations for growth, and fee levels, the Board of Trustees determined that the Fund's fee arrangements with the Advisor were fair and reasonable in relation to the nature and quality of the services provided by the Advisor and that the Expense Limitation Agreement provided potential savings for the benefit of the Fund's investors.
In considering the Advisor's practices regarding brokerage and portfolio transactions, the Trustees reviewed the Advisor's standards, and performance in utilizing those standards, for seeking best execution for Fund portfolio transactions. The Trustees also considered the projected portfolio turnover rate for the Fund; the process by which evaluations are made of the overall reasonableness of commissions paid; the method and basis for selecting and evaluating the broker-dealers used; any anticipated allocation of portfolio business to persons affiliated with the Advisor; and the extent to which the Fund allocates portfolio business to broker-dealers who provide research, statistical, or other services ("soft dollars"). After further review and discussion, the Board of Trustees determined that the Advisor's practices regarding brokerage and portfolio transactions were satisfactory.
In considering the Advisor's practices regarding conflicts of interest, the Trustees evaluated the potential for conflicts of interest and considered such matters as the experience and ability of the advisory personnel assigned to the Fund; the basis of decisions to buy or sell securities for the Fund and the Advisor's other accounts; the method for bunching of portfolio securities transactions; and the substance and administration of the Advisor's code of ethics. Following further consideration and discussion, the Board of Trustees indicated that the Advisor's standards and practices relating to the identification and mitigation of potential conflicts of interests were satisfactory.
Based upon all of the foregoing considerations, the Board of Trustees, including a majority of the Independent Trustees, approved the Investment Advisory Agreement for the Fund.
| 5. | Information about Trustees and Officers |
The business and affairs of the Fund and the Trust are managed under the direction of the Board of Trustees of the Trust. Information concerning the Trustees and officers of the Trust and Fund is set forth below. Generally, each Trustee and officer serves an indefinite term or until certain circumstances such as their resignation, death, or otherwise as specified in the Trust's organizational documents. Any Trustee may be removed at a meeting of shareholders by a vote meeting the requirements of the Trust's organizational documents. The Statement of Additional Information of the Fund includes additional information about the Trustees and officers and is available, without charge, upon request by calling the Fund toll-free at 800-773-3863. The address of each Trustee and officer, unless otherwise indicated below, is 116 South Franklin Street, Rocky Mount, North Carolina 27804. The Independent Trustees each received aggregate compensation of $2,000 during the initial period ended March 31, 2015 from the Fund for their services to the Fund and Trust.
(Continued)
Sirius S&P Strategic Large-Cap Allocation Fund
Additional Information
(Unaudited)
Name, Age
and Address | 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 5 Years |
| Independent Trustees |
| |
Michael G. Mosley
Age: 62 | Independent Trustee | Since 7/10 | Owner of Commercial Realty Services (real estate) since 2004. | 28 | None. |
Theo H. Pitt, Jr.
Age: 79 | Independent Trustee | Since 9/10 | Senior Partner, Community Financial Institutions Consulting (financial consulting) since 1999; Partner, Pikar Properties (real estate) since 2001. | 28 | Independent Trustee of World Funds Trust for its twelve series, Gardner Lewis Investment Trust for its two series, Vertical Capital Investors Trust for its two series and Hillman Capital Management Investment Trust for its one series (all registered investment companies). |
James H. Speed, Jr.
Age: 61 | Independent Trustee, Chairman | Trustee since 7/09, Chair since 5/12 | President and CEO of NC Mutual Insurance Company (insurance company) since 2003. | 28 | Independent Trustee of the Brown Capital Management Mutual Funds for its three series, Hillman Capital Management Investment Trust for its one series, and Centaur Mutual Funds Trust for its one series (all registered investment companies). Member of Board of Directors of NC Mutual Life Insurance Company. Member of Board of Directors of M&F Bancorp. Previously, Independent Trustee of Nottingham Investment Trust II for its four series from 2000 until 2010 and New Providence Investment Trust for its one series from 2009 until 2011 (registered investment company). |
J. Buckley Strandberg
Age: 55 | Independent Trustee | Since 7/09 | President of Standard Insurance and Realty (insurance and property management) since 1982. | 28 | None. |
Other Officers |
Constance D. Russello
Age: 51
PO Box 277
Lovettsville, VA 20180 | President and Treasurer
(Sirius S&P Strategic Large-Cap Allocation Fund) | Since 1/14 | Chief Financial Officer of ARES Engineering Inc. from 2002-2014; Owner of RBS Construction, LLC from 2009-2012. | n/a | n/a |
(Continued)
Sirius S&P Strategic Large-Cap Allocation Fund
Additional Information
(Unaudited)
Name, Age
and Address | 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 5 Years |
Katherine M. Honey
Age: 41 | Secretary | Since 10/13 | EVP of The Nottingham Company since 2008. | n/a | n/a |
Ashley E. Harris
Age: 31 | Assistant Treasurer of the Trust | Since 1/14 | Fund Accounting Manager and Financial Reporting, The Nottingham Company since 2008. | n/a | n/a |
John Canning
Age: 43 | Chief Compliance Officer | Since 8/14 | Managing Director, Cipperman Compliance Services, LLC (2011-present). Formerly, Director of Mutual Fund Administration of Nationwide Fund Group (2008-2011). | n/a | n/a |
