ROUMELL OPPORTUNISTIC VALUE FUND
Notes to Financial Statements
| 1. | Organization and Significant Accounting Policies |
The Roumell Opportunistic Value Fund ("Fund") is a series of the Starboard Investment Trust ("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 investment objective of the Fund is to seek capital appreciation and income. Roumell Asset Management, LLC ("Roumell Asset Management" or the "Advisor") seeks to achieve the Fund's investment objective by using an opportunistic investment strategy. The Fund's portfolio will primarily consist of (i) domestic and foreign equity securities (common stock, preferred stock, warrants, securities convertible into common stocks); (ii) domestic and foreign fixed income securities consisting of government and corporate debt securities, "junk" bonds, municipal securities, and real estate investment trusts ("REITs"); and (iii) interest-bearing instruments consisting of treasury bills, other U.S. government obligations and bonds, collateralized repurchase contracts, money market instruments, and money market funds (collectively referred to as cash and cash equivalents).
The Fund currently has an unlimited number of authorized shares. Fund shares are subject to redemption fees of 1.00% if redeemed within 60 days of the issuance. The Date of Initial Public Investment of the Fund shares was December 31, 2010. Those shares were previously available in three classes - Institutional Class Shares, Class A Shares, and Class C Shares. Through a written consent dated October 20, 2017, the Board of Trustees (the "Board" or "Trustees") approved the liquidation of the Class A Shares and the Class C Shares and the discontinuation of all agreements associated with Class A Shares and Class C Shares effective December 19, 2017. Investors in the Class A Shares and the Class C Shares fully liquidated as of December 19, 2017.
Each class of shares had equal rights as to assets of the Fund, and the classes were identical except for differences in sales charges and ongoing distribution and service fees. Class A Shares were subject to an initial sales charge of 4.50%. Class C Shares were subject to a contingent deferred sales charge of 1% of the proceeds redeemed within one year of the purchase date. Class A Shares and Class C Shares were subject to distribution plan fees. The Class A and Class C Shares were subject to redemption fees of 1.00% if redeemed within 60 days of the issuance. Income, expenses (other than distribution and service fees), and realized and unrealized gains or losses on investments were allocated to each class of shares based upon its relative net assets. All classes had equal voting privileges, except where otherwise required by law or when the Trustees determined that the matter to be voted on affects only the interests of the shareholders of a particular class. The Date of Initial Public Investment of the Institutional Class Shares and the Class A Shares was December 31, 2010. The Date of Initial Public Investment of the Class C Shares was July 30, 2013.
(Continued)
ROUMELL OPPORTUNISTIC VALUE FUND
Notes to Financial Statements
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"). The Fund follows the accounting and reporting guidance in the Financial Accounting Standards Board ("FASB") Accounting Standards Codification 946 "Financial Services – Investment Companies," and Financial Accounting Standards Update ("ASU") 2013-08.
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.
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: Quoted prices in active markets for identical securities
Level 2: Other significant observable inputs (including quoted prices for similar securities, interest rates, credit risk, etc.)
(Continued)
ROUMELL OPPORTUNISTIC VALUE FUND
Notes to Financial Statements
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.
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 August 31, 2018 for the Fund's assets measured at fair value:
| Investments in Securities (a) | | Total | | Level 1 | | Level 2 | | Level 3(b) |
| Assets | $ | | | | | | | |
| Common Stocks* | | 41,378,926 | $ | 41,378,926 | $ | - | $ | - |
| Closed-End Fund | | 3,805,972 | | 3,805,972 | | - | | - |
| Preferred Stocks | | 14,506,188 | | 14,506,188 | | - | | - |
| U.S. Treasury Securities | | 11,380,469 | | - | | 11,380,469 | | - |
| Warrants | | 6,339 | | - | | - | | 6,339 |
| Short-Term Investment | | 4,347,747 | | 4,347,747 | | - | | - |
| Total Assets | $ | 75,425,641 | $ | 64,038,833 | $ | 11,380,469 | $ | 6,339 |
| | | | | | | | | |
| Liabilities | | | | | | | | |
| Put Options Written | $ | 88,500 | $ | - | $ | 88,500 | $ | - |
| Total Liabilities | $ | 88,500 | $ | - | $ | 88,500 | $ | - |
| | | | | | | | | |
*Refer to Schedule of Investments for breakdown by Sector.
(Continued)
ROUMELL OPPORTUNISTIC VALUE FUND
Notes to Financial Statements
(a) The Fund had no significant transfers into or out of Level 1, 2, or 3 during the year ended August 31, 2018. It is the Fund's policy to record transfers at the end of the year.
(b) At the beginning and the end of the reporting period, Level 3 investments were not considered a material portion of the Fund, and hence, a reconciliation is not provided.
Option Writing
When the Fund writes an option, an amount equal to the premium received by the Fund is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains from options written. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain or loss (depending on if the premium is less than the amount paid for the closing purchase transaction). If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security in determining whether the Fund has realized a gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchased by the Fund. The Fund, as the writer of an option, bears the market risk of an unfavorable change in the price of the security underlying the written option. Written options are non-income producing securities.
Derivative Financial Instruments
The Fund may invest in derivative financial instruments (derivatives) in order to manage risk or gain exposure to various other investments or markets. Derivatives may contain various risks including the potential inability of the counterparty to fulfill their obligations under the terms of the contract, the potential for an illiquid secondary market, and the potential for market movements which may expose the Fund to gains or losses in excess of the amounts shown on the Statement of Assets and Liabilities.
Derivatives are marked to market daily based upon quotations from market makers or the Fund's independent pricing services and the Fund's net benefit or obligation under the contract, as measured by the fair market value of the contract, is included in Investments, at value on the Statement of Assets and Liabilities for options purchased and the Options Written, at value on the Statement of Assets and Liabilities for options written. Net realized gains and losses and net change in unrealized appreciation and depreciation on these contracts for the year are included in the Realized and Unrealized Gain on Investments on the Statement of Operations for options purchased and Realized and Unrealized Gain on Options Written on the Statement of Operations for options written.
(Continued)
ROUMELL OPPORTUNISTIC VALUE FUND
Notes to Financial Statements
The derivative instruments outstanding as of August 31, 2018 are disclosed below and the amounts of realized and changes in unrealized gains and losses on derivative instruments during the year as disclosed below serve as indicators of the volume of derivative activity for the Fund.
The following table sets forth the effect of the derivative instruments on the Statement of Assets and Liabilities as of August 31, 2018:
Derivative Type | Location | | Market Value | Notional Value |
| | | | | |
| Equity Contracts – written options | Liabilities-Options written, at value | | $ 88,500 | $4,440,000 |
The following table sets forth the effect of the derivative instruments on the Statement of Operations for the fiscal year ended August 31, 2018:
| Derivative Type | Location | Gains |
| | | |
| Equity Contracts – written options | Net realized gain from options written | $ 511,774 |
| | | |
| Equity Contracts – written options | Net change in unrealized appreciation on options written | $ 6,959 |
| | | |
ROUMELL OPPORTUNISTIC VALUE FUND
Notes to Financial Statements
The following table presents the Fund's liabilities available for offset under a master netting arrangement of collateral pledged as of August 31, 2018:
Gross Amounts of Assets Presented in the Statement of Assets & Liabilities |
| | Gross Amounts of Recognized Liabilities | Financial Instruments Pledged | Cash Collateral Pledged | Net Amount of Assets |
Description of Liability: | | | | |
Options Written | $ 88,500 | $ 88,500 | $ - | $ - |
Total | $ 88,500 | $ 88,500 | $ - | $ - |
The actual financial instruments and cash collateral pledged may be in excess of the amounts shown in the table. The table only reflects collateral amounts up to the amount of the financial instrument disclosed on the Statement of Assets and Liabilities.
Foreign Currency Translation
Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments.
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 recorded amounts of dividends, interest, and foreign withholding taxes, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period. These amounts can be found on the Statement of Operations.
(Continued)
ROUMELL OPPORTUNISTIC VALUE FUND
Notes to Financial Statements
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. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums. 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.
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 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 reported period. Actual results could differ from those estimates.
Fees on Redemptions
The Fund charges a redemption fee of 1.00% on redemptions of Fund shares occurring within 60 days following the issuance of such shares. The redemption fee is not a fee to finance sales or sales promotion expenses, but is paid to the Fund to defray the costs of liquidating an investor and discouraging short-term trading of the Fund's shares. No redemption fee will be imposed on the redemption of shares representing dividends or capital gains distributions, or on amounts representing capital appreciation of shares.
(Continued)
ROUMELL OPPORTUNISTIC VALUE FUND
Notes to Financial Statements
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.
| 2. | Transactions with Affiliates and Service Providers |
Advisor
The Fund pays a monthly fee to the Advisor calculated at the annual rate of 0.92% of the Fund's average daily net assets. For the fiscal year ended August 31, 2018, $642,134 in advisory fees were incurred by the Fund, of which $40,256 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 expenses and other expenditures which are capitalized in accordance with generally accepted accounting principles, acquired fund fees and expenses, other extraordinary expenses not incurred in the ordinary course of the Fund's business, and amounts, if any, payable pursuant to a plan adopted in accordance with Rule 12b-1 under the Investment Company Act of 1940) to not more than 1.23% of the average daily net assets of the Fund for the current fiscal year. The current term of the Expense Limitation Agreement remains in effect until December 31, 2018.
Administrator
The Fund pays a monthly fee to The Nottingham Company (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 to procure and pay the Fund's custodian, 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. The Administrator also receives a miscellaneous compensation fee for peer group, comparative analysis, and compliance support totaling $350 per month. As of August 31, 2018, the Administrator received $4,200 in miscellaneous expenses.
(Continued)
ROUMELL OPPORTUNISTIC VALUE FUND
Notes to Financial Statements
A breakdown of the fees is provided in the following table:
| Administration Fees* | Custody Fees* | Fund Accounting Fees (minimum monthly) | Fund Accounting Fees (asset- based fee) | Blue Sky Administration Fees (annual) |
Average Net Assets | Annual Rate | Average Net Assets | Annual Rate |
| First $250 million | 0.100% | First $200 million | 0.020% | $2,250 | 0.01% | $150 per state |
| Next $250 million | 0.080% | Over $200 million | 0.009% | | | |
| Next $250 million | 0.060% | | | | | |
| Next $250 million | 0.050% | *Minimum monthly fees of $2,000 and $417 for Administration and Custody, respectively. |
| Next $1 billion | 0.040% |
| Over $2 billion | 0.035% |
The Fund incurred $69,797 in administration fees, $15,445 in custody fees, and $38,593 in fund accounting fees for the fiscal year ended August 31, 2018.
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. For its services, the Transfer Agent is entitled to receive compensation from the Fund pursuant to the Transfer Agent's fee arrangements with the Fund. The Fund incurred $24,613 in transfer agent fees during the fiscal year ended August 31, 2018.
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.
3. Trustees and Officers
The Board of Trustees is responsible for the management and supervision of the Fund. The Trustees approve all significant agreements between the Trust, on behalf of the Fund, and those companies that furnish services to the Fund; review performance of the Advisor and the Fund; and oversee activities of the Fund. Officers of the Trust and Trustees who are interested persons of the Trust or the Advisor will receive no salary or fees from the Trust. Trustees who are not "interested persons" of the Trust or the Advisor within the meaning of the 1940 Act (the "Independent Trustees") receive $2,000 each year from each Fund. The Trust will reimburse each Trustee and officer of the Trust for his or her travel and other expenses relating to attendance of Board meetings. Additional fees may also be incurred during the year as special meetings are necessary in addition to the regularly scheduled meetings of the Board of Trustees.
(Continued)
ROUMELL OPPORTUNISTIC VALUE FUND
Notes to Financial Statements
Certain officers of the Trust may also be officers of the Administrator.
4. Distribution and Service Fees
The Board of Trustees, including a majority of the Independent Trustees, adopted a distribution and service plan pursuant to Rule 12b-1 of the 1940 Act (the "Plan") for the Class A Shares and Class C Shares. The 1940 Act regulates the manner in which a registered investment company may assume costs of distributing and promoting the sales of its shares and servicing of its shareholder accounts. The Plan provided that the Fund may incur certain costs, which may not exceed 0.25% per annum of the average daily net assets of the Class A Shares and 1.00% per annum of the average daily net assets of the Class C Shares 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 the Class A Shares and Class C Shares or servicing of Class A Shares and Class C Shares shareholder accounts. For the fiscal year ended August 31, 2018, $836 in fees were incurred by the Class C Shares of the Fund and $349 in fees were incurred by the Class A Shares of the Fund until the discontinuation of the Plans on December 19, 2017 when the Class A and Class C Shares were liquidated.
5. Purchases and Sales of Investment Securities
For the fiscal year ended August 31, 2018, the aggregate cost of purchases and proceeds from sales of investment securities (excluding short-term securities) were as follows:
| Purchases of Securities | Proceeds from Sales of Securities |
| $49,315,344 | $34,713,799 |
(Continued)
ROUMELL OPPORTUNISTIC VALUE FUND
Notes to Financial Statements
For the fiscal year ended August 31, 2018, there were no long-term purchases or sales of U.S. government securities.
The following table shows the realized gains and losses that resulted from sales of securities during the fiscal year ended August 31, 2018:
| Description | | Cost ($) | | Sales Proceeds ($) | Realized Gain (Loss) (% of Cost) | | Realized Gain (Loss)($) |
| Aimia, Inc. | | 1,472,818 | | 2,715,495 | 84.37% | | 1,242,676 |
| BPZ Resources, Inc.* | | 1,570 | | - | (100.00)% | | (1,570) |
| Colossus Minerals, Inc. | | 1,670,969 | | - | (100.00)% | | (1,670,969) |
| Covisint Corp. | | - | | 35,234 | 0.00% | | 35,234 |
| CSI Compressco LP* | | 1,428,572 | | 1,779,350 | 24.55% | | 350,778 |
| DSW, Inc. 10/20/2017 @ $15** | | (7,140) | | (70,444) | 89.86% | | 63,304 |
| DSW, Inc. 4/20/2018 @ $15** | | - | | (114,155) | 100.00% | | 114,155 |
Foot Locker, Inc. 2/16/2018 @ $28** | | - | | (66,243) | 100.00% | | 66,243 |
Ford Motor Co. 12/15/2017 @ $10** | | (15,337) | | (95,957) | 84.02% | | 80,620 |
| Goodrich Petroleum, Corp. | | 1,535,477 | | 423,263 | (72.43)% | | (1,112,214) |
| Great Elm Capital Group, Inc. | | 1,234,739 | | 1,370,238 | 10.97% | | 135,499 |
| Lai Fung Holdings Ltd. | | 26,410 | | 39,818 | 50.77% | | 13,408 |
| Liquidity Services, Inc. | | 1,549,852 | | 1,524,303 | (1.65)% | | (25,549) |
| Oxford Lane Capital Corp. | | 1,586,529 | | 1,599,338 | 0.81% | | 12,809 |
| Oxford Square Capital Corp. | | 1,936,541 | | 2,288,802 | 18.19% | | 352,261 |
Palo Alto Networks, Inc. 12/15/2017 @ $90** | | - | | (44,880) | 100.00% | | 44,880 |
| Paratek Pharmaceuticals, Inc. | | 907,440 | | 1,588,486 | 75.05% | | 681,046 |
Rivernorth Marketplace Lending Corp.* | | 1,700,000 | | 1,716,514 | 0.97% | | 16,514 |
| Rosetta Stone, Inc. | | 4,449,249 | | 7,350,995 | 65.22% | | 2,901,746 |
(Continued)
ROUMELL OPPORTUNISTIC VALUE FUND
Notes to Financial Statements
| Description | | Cost ($) | | Sales Proceeds ($) | Realized Gain (Loss) (% of Cost) | | Realized Gain (Loss)($) |
| Sandridge Energy, Inc. | | 2,740,978 | | 2,722,205 | (0.68)% | | (18,773) |
| Sandstorm Gold Ltd. | | 2,503,067 | | 3,490,037 | 39.43% | | 986,970 |
| Seachange International, Inc. | | 2,588,545 | | 3,605,743 | 39.30% | | 1,017,198 |
Signet Jewelers, Inc. 7/20/2018 @ $35** | | - | | (142,572) | 100.00% | | 142,572 |
| The Rubicon Project, Inc. | | 2,499,824 | | 1,351,565 | (45.93)% | | (1,148,259) |
| Tidewater, Inc. | | 1,048,280 | | 1,112,414 | 6.12% | | 64,134 |
| U.S. Treasury Bill 4/12/2018 | | 13,073,740 | | 13,072,773 | (0.01)% | | (967) |
| Net Realized Gain | | | | | - | $ | 4,343,746 |
*Excludes interest earned on bonds over the holding period
**Put options written.
6. 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 has reviewed the Fund's tax positions to be taken on the federal income tax return and, during the years ended August 31, 2015 through August 31, 2018, determined that 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 year, the Fund did not incur any interest or penalties.
Reclassifications relate primarily to passive foreign investment company gains. For the year ended August 31, 2018, the following reclassifications were made:
| Undistributed Net Investment Income | $986,966 |
| Accumulated Net Realized Gain on Investments | | (986,966) |
ROUMELL OPPORTUNISTIC VALUE FUND
Notes to Financial Statements
Distributions during the fiscal years ended were characterized for tax purposes as follows:
| | | Distributions from |
For the Fiscal Years Ended | | | Ordinary Income |
| 08/31/2018 | | | $ 32,212 |
| 08/31/2017 | | | 78,273* |
*The Roumell Opportunistic Value Fund paid $78,273 in distributions for excise requirements at December 30, 2016.
At August 31, 2018, the tax-basis cost of investments and components of distributable earnings were as follows:
| Cost of Investments | $ | 73,681,092 |
| | | |
| Gross Unrealized Appreciation | $ | 6,560,449 |
| Gross Unrealized Depreciation | | (4,904,400) |
| Net Unrealized Appreciation | | 1,656,049 |
| | | |
| Undistributed Net Investment Income | | 3,498,732 |
| | | |
| Accumulated Earnings | $ | 5,154,781 |
The difference between book-basis and tax-basis net unrealized appreciation (depreciation) is attributable to the tax deferral of losses from wash sales. The Fund also had an adjustment relating to mark-to-market appreciation on PFIC lots totaling $16,691 for the fiscal year ended August 31, 2018.
7. New Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in the ASU shorten the amortization period for certain callable debt securities, held at a premium, to be amortized to the earliest call date. The ASU does not require an accounting change for securities held at a discount; which continues to be amortized to maturity. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Management is currently evaluating the impact, if any, of applying this provision.
(Continued)
ROUMELL OPPORTUNISTIC VALUE FUND
Notes to Financial Statements
In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-13, Fair Value Measurement (Topic 820) – Disclosure Framework–Changes to the Disclosure Requirements for Fair Value Measurement. The amendments eliminate certain disclosure requirements for fair value measurements for all entities, requires public entities to disclose certain new information and modifies some disclosure requirements. The new guidance is effective for all entities for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years. An entity is permitted to early adopt either the entire standard or only the provisions that eliminate or modify requirements. The Adviser is currently evaluating the impact of this new guidance on the Funds' financial statements.
8. 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.
9. Subsequent Events
Management 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.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Starboard Investment Trust and the Shareholders of Roumell Opportunistic Value Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of Roumell Opportunistic Value Fund, a series of shares of beneficial interest in Starboard Investment Trust(the "Fund"), including the schedule of investments, as of August 31, 2018, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the five-year period then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of August 31, 2018, and the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended and its financial highlights for each of the years in the five-year period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Fund in accordance with the U.S. federal securities law and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risk of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of August 31, 2018 by correspondence with the custodian and broker. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
BBD, LLP
We have served as the auditor of one or more of the Funds in the Starboard Investment Trust since 2012.
Philadelphia, Pennsylvania October 26, 2018
ROUMELL OPPORTUNISTIC VALUE 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 12-month 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 Form N-Qs 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. Tax Information
The following information is provided for the Fund's fiscal year ended August 31, 2018.
During the fiscal year, the Fund paid $32,212 in income distributions but no long-term capital gain distributions.
Dividend and distributions received by retirement plans such as IRAs, Keogh-type plans, and 403(b) plans need not be reported as taxable income. However, many retirement plans may need this information for their annual information meeting.
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ROUMELL OPPORTUNISTIC VALUE FUND
Additional Information (Unaudited)
4. Schedule of Shareholder Expenses
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution [and/or service] (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 from March 1, 2018 through August 31, 2018.
Actual Expenses – The first line of the table below provides information about 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 (e.g., 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 second 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 rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
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ROUMELL OPPORTUNISTIC VALUE FUND
Additional Information (Unaudited)
| Institutional Class Shares | Beginning Account Value March 1, 2018 | Ending Account Value August 31, 2018 | Expenses Paid During Period* |
Actual Hypothetical (5% annual return before expenses) | $1,000.00 | $1,073.90 | $6.43 |
| | | |
| $1,000.00 | $1,019.00 | $6.26 |
*Expenses are equal to the average account value over the period multiplied by the Fund's annualized expense ratio of 1.23%, multiplied by 184/365 (to reflect the one-half year period).
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 fiscal year ended August 31, 2018 from the Administrator for their services to the Fund and Trust.
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ROUMELL OPPORTUNISTIC VALUE 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 |
James H. Speed, Jr.
Date of Birth: 06/1953 | Independent Trustee, Chairman | Trustee since 7/09, Chair since5/12 | Previously President and CEO of NC Mutual Insurance Company (insurance company) from 2003 to 2015. | 16 | Independent Trustee of the Brown Capital Management Mutual Funds for its four series, Hillman Capital Management Investment Trust for its one series, Centaur Mutual Funds Trust for its one series, Chesapeake Investment Trust for its one series and WST Investment Trust for its two series (all registered investment companies). Member of Board of Directors of M&F Bancorp. Member of Board of Directors of Investors Title Company. Previously, Board of Directors of NC Mutual Life Insurance Company. |
Theo H. Pitt, Jr.
Date of Birth: 04/1936 | Independent Trustee | Since 9/10 | Senior Partner, Community Financial Institutions Consulting (financial consulting) since 1999; Partner, Pikar Properties (real estate) since 2001. | 16 | Independent Trustee of World Funds Trust for its twenty-eight series, Chesapeake Investment Trust for its one series, DGHM Investment Trust for its one series, Leeward Investment Trust for its two series and Hillman Capital Management Investment Trust for its one series (all registered investment companies). |
Michael G. Mosley
Date of Birth: 01/1953 | Independent Trustee | Since 7/10 | Owner of Commercial Realty Services (real estate) since 2004. | 16 | None. |
J. Buckley Strandberg
Date of Birth: 03/1960 | Independent Trustee | Since 7/09 | President of Standard Insurance and Realty since 1982. | 16 | None. |
| Other Officers |
Katherine M. Honey
Date of Birth: 09/1973 | President and Principal Executive Officer | Since 05/15 | EVP of The Nottingham Company since 2008. | n/a | n/a |
Ashley E. Harris Date of Birth: 03/1984 | Treasurer, Assistant Secretary and Principal Financial Officer | Since 05/15 | Fund Accounting Manager and Financial Reporting, The Nottingham Company since 2008. | n/a | n/a |
Stacey Gillespie Date of Birth: 05/1974 | Chief Compliance Officer | Since 03/16 | Compliance Director, Cipperman Compliance Services, LLC (09/15-present). Formerly, Chief Compliance Officer of Boenning & Scattergood, Inc. (2013-2015) and Director of Investment Compliance at Boenning & Scattergood, Inc. (2007-2013). | n/a | n/a |
