| 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, and 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 may invest in these securities directly or indirectly through investments in other investment companies.
The Fund currently has an unlimited number of authorized shares, the Institutional Class 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.
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 pricing and valuation of portfolio securities is determined in good faith in accordance with procedures established by, and under the direction of, the Trustees. Values are determined according to generally accepted accounting practices and all laws and regulations that apply. Using methods approved by the Trustees, the assets of the Fund are valued as follows:
| ROUMELL OPPORTUNISTIC VALUE FUND |
|
| Notes to Financial Statements |
|
| As of August 31, 2021 |
| • | Securities that are listed on a securities exchange are valued at the last quoted sales price provided by a third-party pricing service at the time the valuation is made. Price information on listed securities is taken from the exchange where the security is primarily traded by the Fund. |
| • | Securities that are listed on an exchange and which are not traded on the valuation date are valued at the bid price. |
| • | Unlisted securities for which market quotations are readily available are valued at the latest quoted sales price, if available, at the time of valuation, otherwise, at the latest quoted bid price. |
| • | Options are valued at the mean of the last quoted bid and ask prices at the time of valuation. |
| • | Foreign securities listed on foreign exchanges are valued with quotations from the primary market in which they are traded and are translated from the local currency into U.S. dollars using current exchange rates. |
| • | Temporary cash investments with maturities of 60 days or less will be valued at amortized cost, which approximates market value. |
| • | Securities for which no current quotations are readily available are valued at fair value as determined in good faith using methods approved by the Trustees. Securities may be valued on the basis of prices provided by a pricing service when such prices are believed to reflect the fair market value of such securities. |
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.)
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.
| ROUMELL OPPORTUNISTIC VALUE FUND |
|
| Notes to Financial Statements |
|
| As of August 31, 2021 |
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, 2021 for the Fund’s assets measured at fair value:
Investments in Securities |
|
Total |
|
Level 1
|
|
Level 2 |
|
Level 3 (a)
|
| Assets |
|
|
|
|
|
|
|
|
| Common Stocks* | $
| 100,798,945 | $ | 100,798,945 | $ | - | $ | - |
Private Investment Partnership* |
|
3,508,800 |
|
- |
|
3,508,800 |
| - |
| Warrant* |
| 0
|
| - |
| 0
|
| - |
| U.S. Treasury Security |
| 2,524,414 |
| - |
| 2,524,414 |
| - |
| Corporate Bond* |
| 660,317 |
| - |
| 660,317 |
| - |
| Short-Term Investment |
| 34,322,305 |
| 34,322,305 |
| - |
| - |
| Total Assets | $
| 141,814,781 | $ | 135,121,250 | $ | 6,693,531 | $ | - |
|
|
|
|
|
|
|
|
|
*Please refer to Schedule of Investments for breakdown by Industry.
(a) The Fund had no Level 3 securities during the fiscal year ended August 31, 2021.
| ROUMELL OPPORTUNISTIC VALUE FUND |
|
| Notes to Financial Statements |
|
| As of August 31, 2021 |
The following table represents investments in affiliates during the fiscal year ended August 31, 2021:
Security Name | Share Balance at Beginning of year | Purchases (Shares) | Sales (Shares) | Share Balance at 8/31/2021 | Realized Gain/Loss | Dividend/ Interest Income | Change in
Unrealized Gain (Loss) | Fair Value at 8/31/2021 |
BioCardia, Inc. | 333,000* | 1,324,341 | 630,547 | 1,026,794 | $1,525,159 | $ - | $(1,177,217) | $3,029,042 |
Collplant Biotechnologies Ltd. | - | 563,030 | - | 563,030 | | $ - | $1,717,277 | $9,796,722 |
EAS Investors I, LP | - | N/A | - | N/A | $ - | $ - | $ - | $3,508,800 |
Enzo Biochem, Inc. | 1,979,509* | 907,262 | - | 2,886,771 | $ - | $ - | $4,266,049 | $10,565,582 |
FLYHT Aerospace Solutions Ltd. | - | 2,500,000 | - | 2,500,000 | $ - | $ - | $244,094 | $1,744,094 |
GSI Technology, Inc. | 755,399* | 1,200,704 | - | 1,956,103 | $ - | $ - | $(1,179,446) | $10,954,177 |
Qumu Corp. | - | 1,098,552 | - | 1,098,552 | $ - | $ - | $304,154 | $3,218,757 |
TOTAL | 3,067,908* | 7,593,889 | 630,547 | 10,031,250 | $1,525,159 | $ - | $4,174,911 | $42,817,174 |
*Beginning shares as of the prior fiscal year ended August 31, 2020 were not considered affiliated investments of the Fund.
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.
| ROUMELL OPPORTUNISTIC VALUE FUND |
|
| Notes to Financial Statements |
|
| As of August 31, 2021 |
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, if applicable.
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 Board.
Distributions
The Fund may declare and distribute dividends from net investment income (if any) annually. 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 discourage 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.
| ROUMELL OPPORTUNISTIC VALUE FUND |
|
| Notes to Financial Statements |
|
| As of August 31, 2021 |
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.
Opportunistic Investment Strategy Risk. There are risks associated with the Fund’s opportunistic investment strategy. The Fund is expected to be disciplined with its opportunistic investing, particularly with respect to the price it is willing to pay for the securities in which it is considering investing, and, as a result, may miss out on opportunities that have a reasonable risk/reward trade off. In addition, in periods of overall rising market levels (whether those rises are the result of speculative bubbles or the confirmation of underlying fundamentals), the Fund may not fully participate in market gains when it is heavily invested in Cash and Cash Equivalents. In such periods, mutual funds that are fully invested in equity securities will likely provide superior returns.
Non-diversified Fund Risk. The Fund is a non-diversified fund. In general, a non-diversified fund will invest a greater percentage of its assets in a particular issuer and will own fewer securities than diversified mutual funds. Accordingly, a non-diversified fund is generally subject to the risk that a large loss in an individual issuer will cause a greater loss for the fund than it would if the fund were required to hold a larger number of securities or smaller positions. A non-diversified fund may also have a more volatile NAV per share than diversified mutual funds. The Fund will limit investments in a single industry or group of industries (except U.S. Government and cash items) to less than 25% of the Fund’s total assets.
Sector Risk. Sector risk is the possibility that securities within the same group of industries will decline in price due to sector-specific market or economic developments. If the Fund invests more heavily in a particular sector, the value of its shares may be especially sensitive to factors and economic risks that specifically affect that sector. As a result, the Fund’s share price may fluctuate more widely than the value of shares of a mutual fund that invests in a broader range of industries. Additionally, some sectors could be subject to greater government regulation than other sectors. Therefore, changes in regulatory policies for those sectors may have a material effect on the value of securities issued by companies in those sectors. The sectors in which the Fund may more heavily invest will vary.
| ROUMELL OPPORTUNISTIC VALUE FUND |
|
| Notes to Financial Statements |
|
| As of August 31, 2021 |
COVID-19 Risk. An outbreak of infectious respiratory illness caused by a novel coronavirus known as COVID-19 was first detected in China in December 2019 and has now been detected globally. COVID-19 has resulted in travel restrictions, closed international borders, enhanced health screenings at ports of entry and elsewhere, disruption of and delays in healthcare service preparation and delivery, prolonged quarantines, cancellations, supply chain disruptions, and lower consumer demand, as well as general concern and uncertainty. The impact of COVID-19, and other infectious illness outbreaks that may arise in the future, could adversely affect the economies of many countries or the entire global economy, individual issuers and capital markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illnesses in emerging market countries may be greater due to generally less established healthcare systems. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. As such, issuers of debt securities with operations, productions, offices, and/or personnel in (or other exposure to) areas affected with the virus may experience significant disruptions to their business and/or holdings. The potential impact on the credit markets may include market illiquidity, defaults and bankruptcies, among other consequences, particularly on issuers in the airline, travel and leisure and retail sectors. The extent to which COVID-19 will affect the Fund, the Fund’s service providers’ and/or issuer’s operations and results will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of COVID-19 and the actions taken to contain COVID-19. Economies and financial markets throughout the world are becoming increasingly interconnected. As a result, whether or not the Fund invests in securities of issuers located in or with significant exposure to countries experiencing economic, political and/or financial difficulties, the value and liquidity of the Fund’s investments may be negatively affected by such events. If there is a significant decline in the value of the Fund’s portfolio, this may impact the Fund’s asset coverage levels for certain kinds of derivatives and other portfolio transactions. The duration of the COVID-19 outbreak and its impact on the global economy cannot be determined with certainty.
Cybersecurity Risk. As part of its business, the Advisor processes, stores, and transmits large amounts of electronic information, including information relating to the transactions of the Fund. The Advisor and the Fund are therefore susceptible to cybersecurity risk. Cybersecurity failures or breaches of the Fund or its service providers have the ability to cause disruptions and impact business operations, potentially resulting in financial losses, the inability of Fund shareholders to transact business, violations of applicable privacy and other laws, regulatory fines, penalties, and/or reputational damage. The Fund and its shareholders could be negatively impacted as a result.
| ROUMELL OPPORTUNISTIC VALUE FUND |
|
| Notes to Financial Statements |
|
| As of August 31, 2021 |
| 3. | 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, 2021, $1,120,570 in advisory fees were incurred by the Fund.
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 (i) any front-end or contingent deferred loads; (ii) brokerage fees and commissions, (iii) acquired fund fees and expenses; (iv) fees and expenses associated with investments in other collective investment vehicles or derivative instruments (including for example option and swap fees and expenses); (v) borrowing costs (such as interest and dividend expense on securities sold short); (vi) taxes; and (vii) extraordinary expenses, such as litigation expenses (which may include indemnification of Fund officers and Trustees and contractual indemnification of Fund service providers (other than the Adviser)) to not more than 1.23% of the average daily net assets of the Fund. The current term of the Expense Limitation Agreement remains in effect until January 1, 2022.
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, 2021, the Administrator received $4,203 in miscellaneous expenses.
| ROUMELL OPPORTUNISTIC VALUE FUND |
|
| Notes to Financial Statements |
|
| As of August 31, 2021 |
A breakdown of the fees is provided in the following table:
| Administration Fees* | Custody Fees* | Fund Accounting Fees (base fee) | Fund Accounting Fees (asset- based fee) | Blue Sky Administration Fees (annual) |
Average Net Assets | Annual Rate | Average Net Assets | Annual Rate |
| On the first $49 million | 0.100% | First $200 million | 0.020% | $2,250/month | 0.01% | $150 per state |
| On the next $250 million | 0.090% | Over $200 million | 0.009% | | | |
| On the next $100 million | 0.080% | | | | | |
| On the next $300 million | 0.070% | *Minimum monthly fees of $2,000 and $417 for Administration and Custody, respectively. |
| On the next $500 million | 0.060% |
| On the next $750 million | 0.050% |
| On the next $1 billion | 0.040% |
| On the next $2 billion | 0.030% |
| On all assets over $99 billion | 0.035% |
The Fund incurred $121,952 in administration fees, $36,855 in custody fees, and $39,190 in fund accounting fees for the fiscal year ended August 31, 2021.
Compliance Services
For the fiscal year ended August 31, 2021, The Nottingham Company, Inc. provided services as the Trust’s Chief Compliance Officer. The Nottingham Company, Inc. 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 paid the Transfer Agent $21,243 in transfer agent fees during the fiscal year ended August 31, 2021.
Distributor
Capital Investment Group, Inc. (the “Distributor”) serves as the Fund’s principal underwriter and distributor.
For the period from September 1, 2020 through December 31, 2020, the Distributor was entitled to receive $5,000 per year paid in monthly installments for services provided and expenses assumed.
| ROUMELL OPPORTUNISTIC VALUE FUND |
|
| Notes to Financial Statements |
|
| As of August 31, 2021 |
As of January 1, 2021, the Distributor receives $6,500 per year paid in monthly installments for services provided and expenses assumed.
4. Trustees and Officers
The Trust is governed by the Board of Trustees, which is responsible for the management and supervision of the Fund. The Trustees meet periodically throughout the year to review contractual agreements with 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. Each Trustee who is not an “interested person” of the Trust or the Advisor within the meaning of the Investment Company Act of 1940, as amended (the “Independent Trustee”) receives $2,000 per series per year, $200 per meeting attended, and $500 per series per special meeting related to contract renewal issues. The Trust reimburses each Trustee and officer of the Trust for his or her travel and other expenses related to attendance of Board meetings. Additional fees were incurred during the year as special meetings were necessary in addition to the regularly scheduled meetings of the Board of Trustees.
Certain officers of the Trust may also be officers of the Administrator.
5. Purchases and Sales of Investment Securities
For the fiscal year ended August 31, 2021, 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 |
| $139,967,617 | $151,820,898 |
For the fiscal year ended August 31, 2021, there were no long-term purchases or sales of U.S. government securities.
| ROUMELL OPPORTUNISTIC VALUE FUND |
|
| Notes to Financial Statements |
|
| As of August 31, 2021 |
The following table shows the realized gains and losses that resulted from sales of securities during the fiscal year ended August 31, 2021:
| Description | | Cost ($) | | Sales Proceeds ($) | Realized Gain (Loss) (% of Cost) | | Realized Gain (Loss)($) |
| A10 Networks, Inc. | | $2,783,478 | | $3,388,066 | 21.72% | | $ 604,588 |
| Acacia Research Corp. | | 3,444,996 | | 5,167,075 | 49.99% | | 1,722,079 |
| Allot Ltd. | | 3,797,582 | | 6,059,716 | 59.57% | | 2,262,134 |
| Amtech Systems, Inc. | | 1,990,312 | | 3,971,339 | 99.53% | | 1,981,027 |
| Amyris, Inc. | | 3,953,178 | | 5,938,427 | 50.22% | | 1,985,249 |
| Barnes & Noble Education, Inc. | | 4,465,047 | | 11,385,524 | 154.99% | | 6,920,477 |
| Biocardia, Inc. | | 1,913,315 | | 3,438,474 | 79.71% | | 1,525,159 |
| Capitala Finance Co. | | 2,289,137 | | 2,750,565 | 20.16% | | 461,428 |
| Comscore, Inc. | | 7,641,346 | | 10,420,521 | 36.37% | | 2,779,175 |
| Criteo S.A. | | 2,116,498 | | 2,997,874 | 41.64% | | 881,376 |
| CSI Compressco LP | | 2,957,486 | | 3,549,793 | 20.03% | | 592,307 |
| Dundee Corp. – Class A | | 7,236,072 | | 6,739,151 | (6.87)% | | (496,921) |
| ErosStx Global Corp. | | 3,597,879 | | 1,224,599 | (65.96)% | | (2,373,280) |
| Flotek Industries | | 2,067,397 | | 1,966,908 | (4.86)% | | (100,489) |
| Houston Wire & Cable | | 1,232,892 | | 526,740 | (57.28)% | | (706,152) |
| IP Group PLC | | 3,401,900 | | 3,661,053 | 7.62% | | 259,153 |
| Leaf Group Ltd. | | 3,171,629 | | 4,605,257 | 45.20% | | 1,433,628 |
| Magnite, Inc. | | 9,152,179 | | 12,207,993 | 33.39% | | 3,055,814 |
| Marchex, Inc. | | 6,337,302 | | 7,547,434 | 19.10% | | 1,210,132 |
| Medley Capital Corp. | | 978,935 | | 1,071,339 | 9.44% | | 92,404 |
| Park City Group, Inc. | | 290,672 | | 300,432 | 3.36% | | 9,760 |
| Portman Ridge Financial Co. | | 667,542 | | 746,357 | 11.81% | | 78,815 |
| QEP Resources, Inc. | | 1,193,895 | | 1,268,441 | 6.24% | | 74,546 |
| Quantum Corp. | | 3,123,962 | | 3,606,592 | 15.45% | | 482,630 |
| Ricebran Technologies | | 2,438,878 | | 5,579,934 | 128.79% | | 3,141,056 |
| SandRidge Energy, Inc. | | 1,093,405 | | 316,523 | (71.05)% | | (776,882) |
| SeaChange International, Inc. | | 452,335 | | 806,567 | 78.31% | | 354,232 |
| Sierra Wireless, Inc. | | 7,284,169 | | 9,716,175 | 33.39% | | 2,432,006 |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| ROUMELL OPPORTUNISTIC VALUE FUND |
|
| Notes to Financial Statements |
|
| As of August 31, 2021 |
| Description | | Cost ($) | | Sales
Proceeds ($) | Realized Gain (Loss) (% of Cost) | | Realized Gain (Loss)($) |
| Streamline Health Solutions, Inc. | | $1,854,218 | | $3,891,575 | 109.88% | | $2,037,357 |
| Synalloy Corp. | | 161,176 | | 219,628 | 36.27% | | 58,452 |
| Tetra Technologies | | 6,173,277 | | 24,497,653 | 296.83% | | 18,324,376 |
| Venus Concept, Inc. | | 600,827 | | 764,615 | 27.26% | | 163,788 |
| Wayside Technology Group, Inc. | | 1,065,709 | | 1,488,559 | 39.68% | | 422,850 |
| | | | | | | | |
Net Realized Gain (a) | | | | |
| $ | 50,892,274 |
(a) Net realized gain differs from total realized gains on the Statement of Operations due to realized
loss on foreign currency totaling $(377).
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 taken or to be taken on the federal income tax returns during the years ended August 31, 2018 through August 31, 2021 and 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 fiscal year, the Fund did not incur any interest or penalties.
Distributions during the fiscal year or period ended indicated below were characterized for tax purposes as follows:
Fiscal Years Ended | Distributions from Ordinary Income | Distributions from Long- Term Capital Gains |
| August 31, 2021 | $ 23,660 | $ - |
| August 31, 2020 | 3,640,995 | 4,691,999 |
| ROUMELL OPPORTUNISTIC VALUE FUND |
|
| Notes to Financial Statements |
|
| As of August 31, 2021 |
At August 31, 2021, the tax-basis cost of investments and components of distributable earnings were as follows:
| Cost of Investments | | $ 136,959,375 |
| | | |
| Gross Unrealized Appreciation | | 10,292,942 |
| Gross Unrealized Depreciation | | (5,437,536) |
| Net Unrealized Appreciation | | 4,855,406 |
| | | |
| Accumulated Realized Gains – Short-Term | | 45,208,816 |
| Distributable Earnings | | $ 50,064,222 |
| | | |
The difference between book basis and tax basis is attributable to wash sale deferrals.
7. Beneficial Ownership
The beneficial ownership, either directly or indirectly, of 25% or more of the voting securities of a fund creates a presumption of control of a fund, under Section 2(a)(9) of the Investment Company Act of 1940. As of August 31, 2021, Charles Schwab held 35.24% of the Fund, and National Financial Solutions, Inc. held 39.41% of the Fund. The Fund has no knowledge as to whether all or any portion of the shares owned of record by Charles Schwab or National Financial Solutions, Inc. are also owned beneficially.
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.
| ROUMELL OPPORTUNISTIC VALUE FUND |
|
| Notes to Financial Statements |
|
| As of August 31, 2021 |
9. Subsequent Events
In accordance with GAAP, management has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date of issuance of these financial statements. Management has concluded there are no additional matters, other than those noted above, requiring recognition or disclosure.
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, 2021, 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, 2021, 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 included 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, 2021 by correspondence with the custodian, issuers, transfer agents, and brokers or by other appropriate auditing procedures where replies from brokers were not received. 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 28, 2021
1.
| Proxy Voting Policies and Voting Record
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A copy of the Advisor’s Proxy Voting and Disclosure Policy is included as Appendix B to the Fund’s Statement of Additional Information and is available, without charge, upon request, by calling 800-773-3863, and on the website of the Securities and Exchange Commission (“SEC”) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent twelve-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 http://www.sec.gov.
2.
| Quarterly Portfolio Holdings
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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-PORT. The Fund’s Form N-PORT is available on the SEC’s website at http://www.sec.gov. You may also obtain copies without charge, upon request, by calling the Fund at 800-773-3863.
The following information is provided for the Fund’s fiscal year ended August 31, 2021.
During the fiscal year, the Fund paid $23,660 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.
4.
| Schedule of Shareholder Expenses |
As a shareholder of the Fund, you incur ongoing costs, including management 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.
| ROUMELL OPPORTUNISTIC VALUE FUND |
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Additional Information
(Unaudited) |
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| As of August 31, 2021 |
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, 2021 through August 31, 2021.
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.
| ROUMELL OPPORTUNISTIC VALUE FUND |
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Additional Information
(Unaudited) |
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| As of August 31, 2021 |
| Institutional Class Shares | Beginning Account Value March 1, 2021 | Ending Account Value August 31, 2021 | Expenses Paid During Period* |
Actual Hypothetical (5% annual return before expenses) | $1,000.00 | $1,066.10 | $6.41 |
| | | |
| $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.
| Approval of Investment Advisory Agreement |
In connection with the regular Board meeting held on September 10, 2020, the Board, including a majority of the Independent Trustees, discussed the approval of a management agreement between the Trust and the Advisor, with respect to the Fund (the "Investment Advisory Agreement"). The Trustees were assisted by legal counsel throughout the review process. The Trustees relied upon the advice of legal counsel and their own business judgment in determining the material factors to be considered in evaluating the Investment Advisory Agreement and the weight to be given to each factor considered. The conclusions reached by the Trustees were based on a comprehensive evaluation of all of the information provided and were not the result of any one factor. Moreover, each Trustee may have afforded different weight to the various factors in reaching his conclusions with respect to the approval of the Investment Advisory Agreement. In connection with their deliberations regarding approval of the Investment Advisory Agreement, the Trustees reviewed materials prepared by the Advisor.
In deciding on whether to approve the renewal of the Investment Advisory Agreement, the Trustees considered numerous factors, including:
(i)
| Nature, Extent, and Quality of Services. The Trustees considered the responsibilities of the Advisor under the Investment Advisory Agreement. The Trustees reviewed the services being provided by the Advisor to the Fund including, without limitation, the quality of its investment advisory services since the Fund’s inception (including research and recommendations with respect to portfolio securities); its procedures for formulating investment recommendations and assuring compliance with the Fund’s investment objectives, policies and limitations; its coordination of services for the Fund among the Fund’s service providers; and its efforts to promote the Fund, grow the Fund’s assets, and assist in the distribution of Fund shares. 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 program; and the financial condition of the Advisor. |
| ROUMELL OPPORTUNISTIC VALUE FUND |
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Additional Information
(Unaudited) |
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| As of August 31, 2021 |
| After reviewing the foregoing information and further information in the memorandum from the Advisor (e.g., descriptions of the Advisor’s business, compliance program, and Form ADV), the Board concluded that the nature, extent, and quality of the services provided by the Advisor were satisfactory and adequate for the Fund. |
(ii)
| Performance. The Trustees compared the performance of the Fund with the performance of its benchmark index, comparable funds with similar strategies managed by other investment advisers, and applicable peer group data (e.g., Lipper peer group average). The Trustees noted that the Fund’s year to date performance and its 3 year performance as of June 30, 2020 had outperformed its peer group and Lipper category average although the Fund had underperformed both the peer group and the category averages for the 1 year, 5 year, and since inception periods. The Trustees further noted that negative performance over longer periods was attributable to performance years back. The Trustees also considered the consistency of the Advisor’s management of the Fund with its investment objective, policies and limitations. After reviewing the investment performance of the Fund, the Advisor’s experience managing the Fund, the Advisor’s historical investment performance, and other factors, the Board concluded that the investment performance of the Fund and the Advisor was satisfactory. |
(iii)
| Fees and Expenses. The Trustees first noted the management fee for the Fund under the Investment Advisory Agreement. The Trustees then compared the advisory fee and expense ratio of the Fund to other comparable funds. The Trustees noted that the management fee and expense ratio were higher than the peer group and category averages. The Trustees considered the Advisor’s unique research and investment process in evaluating the reasonableness of its management fee, and the Trustees noted that the Advisor had explained that the Fund’s net expense ratio was higher than the peer group averages due to the small size of the Fund compared to its peers. The Advisor noted that as the Fund’s assets under management grow, the net expense ratio may decline. |
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Additional Information
(Unaudited) |
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| As of August 31, 2021 |
| Following this comparison, and upon further consideration and discussion of the foregoing, the Board concluded that the fees to be paid to the Advisor by the Fund were not unreasonable 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. |
(iv)
| Profitability. The Board reviewed the Advisor’s profitability analysis in connection with its management of the Fund over the past twelve months. The Board noted that the Advisor did not realize a profit and had a small loss for the prior twelve months of operations. The Board considered the quality of the Advisor’s service to the Fund, and after further discussion, concluded that the Advisor’s level of profitability was not excessive. |
(v)
| Economies of Scale. In this regard, the Trustees reviewed the Fund’s operational history and noted that the size of the Fund had not provided an opportunity to realize economies of scale. The Trustees then reviewed the Fund’s fee arrangements for breakpoints or other provisions that would allow the Fund’s shareholders to benefit from economies of scale in the future as the Fund grows. The Trustees determined that the maximum management fee would stay the same regardless of the Fund’s asset levels. The Trustees noted that the Fund was a relatively small size 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 as the Fund grows. |
| Conclusion. Having reviewed and discussed in depth such information from the Advisor as the Trustees believed to be reasonably necessary to evaluate the terms of the Investment Advisory Agreement and as assisted by the advice of legal counsel, the Trustees concluded that renewal of the Investment Advisory Agreement was in the best interest of the shareholders of the Fund. |
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Additional Information
(Unaudited) |
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| As of August 31, 2021 |
6.
| 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 received aggregate compensation of $9,467 during the fiscal year ended August 31, 2021 from the Fund for their services to the Fund and Trust.
| ROUMELL OPPORTUNISTIC VALUE FUND |
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Additional Information
(Unaudited) |
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| As of August 31, 2021 |
Name and
Date of Birth | Position
held with
Funds 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.
(06/1953) | Chairman and Independent Trustee | Trustee since 7/09, Chair since 5/12 | Retired Executive/Private Investor | 12 | Independent Trustee of the Brown Capital Management Mutual Funds for all its series from 2011 to present, Centaur Mutual Funds Trust for all its series from 2013 to present, Chesapeake Investment Trust for all its series from 2016 to present (all registered investment companies). Member of Board of Directors of Communities in Schools of N.C. from 2001 to present. Member of Board of Directors of Investors Title Company from 2010 to present. Member of Board of Directors of AAA Carolinas from 2011 to present. Previously, Independent Trustee of the Hillman Capital Management Trust from 2009 to 2021. Previously, Independent Trustee of the Leeward Investment Trust from 2018 to 2020. Previously, member of Board of Directors of M&F Bancorp Mechanics & Farmers Bank from 2009 to 2019. Previously, member of Board of Visitors of North Carolina Central University School of Business from 1990 to 2016. Previously, Board of Directors of NC Mutual Life Insurance Company from 2004 to 2016. Previously, President and CEO of North Carolina Mutual Life Insurance Company from 2003 to 2015. |
Theo H. Pitt, Jr.
(04/1936) | Independent Trustee | Since 9/10 | Senior Partner, Community Financial Institutions Consulting (financial consulting) since 1999. | 12 | Independent Trustee of World Funds Trust for all its series from 2013 to present, Chesapeake Investment Trust for all its series from 2002 to present, and Hillman Capital Management Investment Trust for all its series from 2000 to present (all registered investment companies). Senior Partner of Community Financial Institutions Consulting from 1997 to present. Previously, Partner at Pikar Properties from 2001 to 2017. Previously, Independent Trustee of the Leeward Investment Trust from 2011 to 2021. |
Michael G. Mosley
(01/1953) | Independent Trustee | Since 7/10 | Owner of Commercial Realty Services (real estate) since 2004. | 12 | None. |
J. Buckley Strandberg
(03/1960) | Independent Trustee | Since 7/09 | President of Standard Insurance and Realty since 1982. | 12 | None. |
| ROUMELL OPPORTUNISTIC VALUE FUND |
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Additional Information
(Unaudited) |
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| As of August 31, 2021 |
Name and
Date of Birth | Position held with
Funds or Trust | Length
of Time Served | Principal Occupation
During Past 5 Years |
| Officers |
Katherine M. Honey
(09/1973) | President and Principal Executive Officer | Since 05/15 | President of The Nottingham Company since 2018. EVP of The Nottingham Company from 2008 to 2018.
|
Ashley H. Lanham (03/1984) | Treasurer, Assistant Secretary, Principal Accounting Officer and Principal Financial Officer | Since 05/15 | Director of Fund Administration, The Nottingham Company since 2008. |
Tracie A. Coop
(12/1976) | Secretary | Since 12/19 | General Counsel, The Nottingham Company since 2019. Formerly, Vice President and Managing Counsel, State Street Bank and Trust Company from 2015 to 2019. Formerly, General Counsel for Santander Asset Management USA, LLC from 2013 to 2015. |
Matthew Baskir
(07/1979) | Chief Compliance Officer | Since 04/20 | Compliance Director, The Nottingham Company, Inc., since 2020. Formerly, Consultant at National Regulatory Services from 2019 to 2020. Formerly, Counsel at Financial Industry Regulatory Authority (FINRA), Member Supervision from 2016-2019. Formerly Counsel at FINRA, Market Regulation Enforcement from 2014 – 2016. |
7.
| Liquidity Risk Management Program |
In October 2016, the Securities and Exchange Commission (“SEC”) adopted Rule 22e-4, or the “Liquidity Rule,” under the Investment Company Act of 1940. The Liquidity Rule requires a mutual fund to adopt a liquidity risk management program (“Program”). In June 2018, the SEC adopted a requirement that a mutual fund disclose information about the operation and effectiveness of its Program in its reports to shareholders.
The Fund has adopted and implemented a Program pursuant to the Liquidity Rule, effective December 1, 2019. The Program is intended to provide a framework for: (1) assessing and managing the Fund’s liquidity risk (i.e., the risk that the Fund could not meet requests to redeem shares without significantly diluting remaining investors’ interests) based on a variety of factors, including the Fund’s investment strategy and liquidity of its portfolio investments, (2) classifying the liquidity of the Fund’s investments, (3) determining the Fund’s highly liquid investment minimum (“HLIM”), if applicable, (4) complying with the Fund’s illiquid investment limit, and (5) reporting to the Fund’s Board of Trustees. The Board of Trustees designated the individuals serving as the Advisor’s liquidity program administrator to serve as the Trust’s program administrator (the “Trust Program Administrator”) to administer the Program. The Trust Program Administrator established a governance committee to assist the Trust Program Administrator in administering the Program.
| ROUMELL OPPORTUNISTIC VALUE FUND |
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Additional Information
(Unaudited) |
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| As of August 31, 2021 |
Under the Program, the Fund’s portfolio investments is classified into one of four liquidity categories defined by the SEC: highly liquid, moderately liquid, less liquid, and illiquid. Liquidity classifications take into account a variety of market, trading, and investment factors, including the Fund’s reasonably anticipated trade size, and the Program Administrator has engaged a third-party vendor to assist with the classification of portfolio investments.
The Liquidity Rule prohibits mutual funds from acquiring investments that would cause their illiquid investments to exceed 15% of net assets. The Liquidity Rule also requires funds that do not primarily hold assets that are highly liquid investments to determine a minimum percentage of net assets to be invested in highly liquid investments (the HLIM). The Program includes provisions designed to comply with the 15% limit on illiquid investments and for determining and complying with the HLIM requirement, as applicable.
In accordance with the Liquidity Rule, the Program Administrator prepared, and the Fund’s Board of Trustees reviewed, a report regarding the operation and effectiveness of the Program for the period from December 1, 2019 through November 30, 2020. During the period, there were no liquidity events that materially impacted the Fund’s ability to timely meet redemptions without significantly diluting remaining investors’ interests. The report concluded that the Program remains reasonably designed to assess and manage the Fund’s liquidity risk, and that during the period the Program was implemented effectively.
