OMB APPROVAL |
OMB Number: 3235-0570 Expires: January 31, 2017 Estimated average burden hours per response: 20.6 |
Investment Company Act file number | 811-22680 |
Ultimus Managers Trust |
(Exact name of registrant as specified in charter) |
225 Pictoria Drive, Suite 450 Cincinnati, Ohio | 45246 |
(Address of principal executive offices) | (Zip code) |
Ultimus Fund Solutions, LLC 225 Pictoria Drive, Suite 450 Cincinnati, Ohio 45246 |
(Name and address of agent for service) |
Registrant's telephone number, including area code: | (513) 587-3400 |
Date of fiscal year end: | May 31 | |
Date of reporting period: | May 31, 2016 |
Item 1. | Reports to Stockholders. |
APEXcm SMALL/MID-CAP GROWTH FUND
(APSGX)
Annual Report
May 31, 2016
APEXcm SMALL/MID-CAP GROWTH FUND | May 31, 2016 |
Dear APEXcm Small/Mid-Cap Growth Fund Shareholder:
For the year ended May 31, 2016, the APEX Small/Mid-Cap Growth Fund (the “Fund”) returned -11.34% (net of fees). For the same period, the benchmark, the Russell 2500 Growth Index (the “Index”) returned -7.31%. During this period of high volatility (represented by a compounding gyration between risk-on/risk-off influences which produced two corrections in excess of 10% in a six- month time frame), markets have been driven more by macroeconomic and policy factors than by specific company considerations. Our long-term, consistent process (driven by our demonstrated philosophy below) has seen performance challenged during this one-year cycle. Although the Fund did not commence operations until June 29, 2012, we thought it was important to highlight the fact that the firm has been managing assets using this same strategy for over 16 years and has navigated our clients through tough markets before. As all long-term investors know, styles and philosophies have historically gone in cycles and factors tend to be cyclical in nature, with the course-plotting process providing the guidance to change paths quickly if need be. While we are disappointed in our short-term performance and continue to challenge our assumptions, we remain steadfast in our process that has endured many different market climates. We believe maintaining this longer view, across market cycles, continues to be the prudent approach.
APEX PHILOSOPHY
We believe that the best way to provide value-added returns is to identify companies that exhibit certain favorable fundamental advantages and benefit from secular growth trends, allowing us to structure the portfolio in high-conviction areas of longer-term sustainable growth. Embedded in our portfolio construction is the recognition of companies at different stages of their growth cycle, which we designate as “stable” and “emerging” growth stocks. We believe that having the spectrum of growth companies that are truly innovative and growing rapidly, combined with established growth companies, can provide relative stability while allowing the opportunity to drive outperformance versus our benchmark and peers over time. In addition, we believe the SMID style provides the opportunity to invest in higher growth companies and capture a longer period of growth as these companies mature.
MARKET ENVIRONMENT
As previously mentioned, macroeconomic events have driven a significant increase in volatility in the financial markets. The change really started last summer. As China moved to devalue their currency (in an effort to increase the competitiveness of their economy), the U.S. approached a telegraphed rate increase by the Federal Reserve (which helped drive the U.S. dollar stronger). The eventual increase in rates by the Federal Reserve in December brought an end to seven years of unprecedented monetary easing, which had helped fuel a global commodity bubble and stoked fears about the fate of emerging market countries (which had issued enormous debt
1
denominated in U.S. dollars). Commodity-related investment tumbled globally along with the slowdown in China and a corresponding capital flight from China and other emerging markets. Although the level of the advance in the U.S. dollar has waned and commodity prices and China have stabilized, it is unclear whether the heavy intervention by the Central Banks has provided enough buoyancy to lift the economies out of the malaise. What is clear is a high level of distortion and uncertainty with the unprecedented unknown in the new reality of negative interest rates and competitive currency devaluations. What continues to frustrate the market is the inability of the U.S. economy to meaningfully accelerate its pace to a level that can drive quality earnings growth, which has, in turn, put a damper on business investment. Indeed, quarterly U.S. corporate profits have been declining on a year-to-year basis since late 2015, with much of the weakness traced to the effect of low oil prices and a strong dollar. Although there are always clouds on the horizon, a strong case can be made for continued expansion, as healthy labor markets and strong wage growth are allowing consumer spending to climb at a solid pace following a winter slowdown.
FUND PERFORMANCE FOR THE YEAR ENDED MAY 31, 2016
The Fund benefitted from strong stock selection relative to the Index within Energy and Financials, adding approximately 1% to performance. Overall stock selection was negative by approximately 2% as all other sectors, especially Industrials, Health Care, Consumer Discretionary, Materials and Information Technology marred performance by an approximate 3%.
Sector allocation detracted 2% from performance. Given the volatility within the sectors, our slight overweight in the two worst performing sectors (Energy and Health Care) lessened performance by 1%. As noted, the volatility and sector leadership has emerged numerous times throughout this year. One of the key factors that has changed is the performance of companies exposed to higher growth and momentum, which are often denoted as our “emerging growth companies.” This change is reflected in the underlying breakout of the Index. Although the decline in the Index of 7.31% is challenging enough, the dispersion between companies exhibiting less earnings volatility and stable characteristics (Russell 2500 Growth Defensive (+3.51%)) and those companies with more volatile earnings, higher growth and momentum characteristics (Russell 2500 Growth Dynamic (-12.51%)), was unusually high at negative 16%. Although we had some excellent stock selection during this one-year period, several of our higher growth and secular focused companies performed even worse.
PERFORMANCE OBSERVATIONS FOR THE YEAR ENDED MAY 31, 2016
Information Technology
Technology is an excellent example of the volatility witnessed in this market environment. Our overweight slightly benefitted portfolio performance and our stock selection detracted from performance by 0.74%. Within the sector, our focus on the payments and processing trend produced three huge winners - Heartland Payments (+96%), Total
2
System Services (+34%) and Global Payments (+22%), which were offset by business intelligence and cybersecurity high growth names such as Tableau (-55%), FireEye (-62%) and Verint Systems (-47%).
E-commerce and Internet Applications
We view usage and application of the internet as a key secular differentiator across verticals. Strong performance by Expedia (Consumer Discretionary) (+21%) and MarketAxess (Financials) (+59%) was offset by IAC/Interactive (Technology) (-25%) and Bitauto (Consumer Discretionary) (-69%).
Specialty Pharmaceutical and Biotechnology
Strong performance in Receptos (+40%) and Supernus (+37%) was mitigated by Ionis (-66%), Akorn (-35%) and Enanta (-40%).
These are just a few examples that highlight the challenge within this volatile environment where if a high growth name took one misstep, the fall was steep and swift. We continue to believe there is tremendous value in those businesses which have strong strategic importance in some of these higher secular growth opportunities.
OUTLOOK
At Apex, one of the foundations of our firm is focusing on the long-term sustainability of secular growth trends. During challenging times, we remain committed to the opportunities provided in such areas as payments and processing, consumer mobility, big data and cloud computing, cybersecurity, the millennial generation, personalized medicine and genomics, and energy independence. The U.S. economy is in the midst of one of the longest expansions on record, but not everything is positive. In fact, with low productivity and a challenging business investment, in many ways, the recovery feels like it never really took off. The impact of the global downturn during the last year has had a disproportionate effect on cyclical sectors such as Energy, Materials and Industrials, which have now turned into frontrunners in the 2016 market. However, we question the sustainability of their leadership. As we move towards the end of the first half of 2016, economic and company fundamental data has undeniably improved. We believe that although the recovery has been quite slow, it has been steady and should continue to move forward as the consumer sees the benefits of tighter labor markets and lower gas prices. The confluence of factors that yielded a challenging environment for our performance are often driven by short-term distortions which are likely to reverse in the future. These are always humbling phases; in a more virtuous cycle, we are confident our focus on company fundamentals and growth opportunities in areas of unmatched secular growth will continue to work its way back to the forefront. Roger Staubach once said, “Confidence doesn’t come out of nowhere. It’s a result of something ... hours and days and weeks and years of constant work and dedication.” We are confident and continue to work hard with a passionate belief that our process will achieve a level of excellence you have come to expect from the Apex Capital Management team.
3
Lastly, as of June 1, 2016, the acquisition of Apex Capital Management was completed by Fiera US Holding Inc., a wholly-owned subsidiary of Fiera Capital Corporation. In connection with the acquisition, all assets of Apex, including its advisory contracts, have been assigned to Fiera Capital Inc. (“Fiera”), a wholly-owned subsidiary of Fiera US Holding Inc. The entire team has continued with Fiera with no change or disruption to the process or management of your entrusted assets. For marketing and branding purposes with respect to the Fund, Fiera expects to use the name Apex Capital Management for a period of time. We thank you for your continued confidence in the APEXcm Small/Mid Cap Growth Fund.
Sincerely,
Nitin N. Kumbhani
Vice Chairman and Chief of Growth Equity Strategies
Apex Capital Management
Fiera Capital Inc.
Past performance is not predictive of future performance. Investment results and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data quoted. Performance data current to the most recent month end are available by calling 1-888-575-4800.
An investor should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. The Fund’s prospectus contains this and other important information. To obtain a copy of the Fund’s prospectus please visit our website at www.apexcmfund.com or call 1-888-575-4800 and a copy will be sent to you free of charge. Please read the prospectus carefully before you invest. The APEXcm Small/Mid Cap Growth Fund is distributed by Ultimus Fund Distributors, LLC.
This Letter to Shareholders seeks to describe some of the Adviser’s current opinions and views of the financial markets. Although the Adviser believes it has a reasonable basis for any opinions or views expressed, actual results may differ, sometimes significantly so, from those expected or expressed. The securities held by the Fund that are discussed in the Letter to Shareholders were held during the period covered by this Report. They do not comprise the entire investment portfolio of the Fund, may be sold at any time and may no longer be held by the Fund. For a complete list of securities held by the Fund as of May 31, 2016, please see the Schedule of Investments section of the annual report. The opinions of the Adviser with respect to those securities may change at any time.
Statements in the Letter to Shareholders that reflect projections or expectations for future financial or economic performance of the Fund and the market in general and statements of the Fund’s plans and objectives for future operations are forward-looking statements. No assurance can be given that actual results or events will not differ materially from those projected, estimated, assumed, or anticipated in any such forward-looking statements. Important factors that could result in such differences, in addition to factors noted with such forward-looking statements include, without limitation, general economic conditions, such as inflation, recession, and interest rates. Past performance is not a guarantee of future results.
4
APEXcm SMALL/MID-CAP GROWTH FUND
PERFORMANCE INFORMATION
May 31, 2016 (Unaudited)
Comparison of the Change in Value of a $10,000 Investment in APEXcm Small/Mid-Cap Growth Fund versus the Russell 2500TM Growth Index
Average Annual Total Returns | |||
1 Year | 3 Years | Since | |
APEXcm Small/Mid-Cap Growth Fund(a) | (11.34%) | 6.93% | 12.02% |
Russell 2500TM Growth Index | (7.31%) | 8.89% | 13.11% |
(a) | The Fund’s total returns do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. |
(b) | The Fund commenced operations on June 29, 2012. |
5
APEXcm SMALL/MID-CAP GROWTH FUND
PORTFOLIO INFORMATION
May 31, 2016 (Unaudited)
Sector Diversification (% of Net Assets)
Top 10 Equity Holdings
Security Description | % of |
HD Supply Holdings, Inc. | 2.3% |
MercadoLibre, Inc. | 2.2% |
Medivation, Inc. | 2.2% |
First Republic Bank/CA | 2.2% |
Foot Locker, Inc. | 2.1% |
Align Technology, Inc. | 1.9% |
CBRE Group, Inc. - Class A | 1.9% |
Sabre Corporation | 1.9% |
Total System Services, Inc. | 1.8% |
Middleby Corporation (The) | 1.8% |
6
APEXcm SMALL/MID-CAP GROWTH FUND | ||||||||
COMMON STOCKS — 97.1% | Shares | Value | ||||||
Consumer Discretionary — 17.6% | ||||||||
Auto Components — 1.6% | ||||||||
Autoliv, Inc. | 33,305 | $ | 4,083,526 | |||||
Hotels, Restaurants & Leisure — 5.0% | ||||||||
China Lodging Group Ltd. | 34,261 | 1,161,791 | ||||||
Dave & Buster's Entertainment, Inc. * | 61,634 | 2,405,575 | ||||||
Dunkin' Brands Group, Inc. | 55,383 | 2,397,530 | ||||||
Norwegian Cruise Line Holdings Ltd. * | 78,890 | 3,661,285 | ||||||
Wyndham Worldwide Corporation | 49,309 | 3,322,934 | ||||||
12,949,115 | ||||||||
Media — 1.0% | ||||||||
IMAX Corporation * | 78,684 | 2,623,325 | ||||||
Multi-line Retail — 1.8% | ||||||||
Burlington Stores, Inc. * | 75,611 | 4,563,880 | ||||||
Specialty Retail — 5.6% | ||||||||
Foot Locker, Inc. | 97,195 | 5,435,144 | ||||||
Michaels Companies, Inc. (The) * | 66,100 | 1,937,391 | ||||||
Signet Jewelers Ltd. | 30,349 | 3,003,641 | ||||||
Williams-Sonoma, Inc. | 78,340 | 4,155,154 | ||||||
14,531,330 | ||||||||
Textiles, Apparel & Luxury Goods — 2.6% | ||||||||
Carter's, Inc. | 36,467 | 3,666,392 | ||||||
Skechers U.S.A., Inc. - Class A * | 102,311 | 3,189,034 | ||||||
6,855,426 | ||||||||
Consumer Staples — 2.3% | ||||||||
Food Products — 2.3% | ||||||||
Hain Celestial Group, Inc. (The) * | 61,626 | 3,046,789 | ||||||
WhiteWave Foods Company (The) * | 64,462 | 2,878,228 | ||||||
5,925,017 | ||||||||
Energy — 2.9% | ||||||||
Energy Equipment & Services — 0.8% | ||||||||
Core Laboratories N.V. | 15,904 | 1,928,360 | ||||||
Oil, Gas & Consumable Fuels — 2.1% | ||||||||
Cheniere Energy, Inc. * | 67,895 | 2,181,466 | ||||||
Diamondback Energy, Inc. * | 36,904 | 3,356,419 | ||||||
5,537,885 |
7
APEXcm SMALL/MID-CAP GROWTH FUND | ||||||||
COMMON STOCKS — 97.1% (Continued) | Shares | Value | ||||||
Financials — 7.7% | ||||||||
Banks — 3.1% | ||||||||
Bank of the Ozarks, Inc. | 59,141 | $ | 2,301,176 | |||||
First Republic Bank/CA | 78,555 | 5,688,168 | ||||||
7,989,344 | ||||||||
Capital Markets — 1.8% | ||||||||
Affiliated Managers Group, Inc. * | 14,636 | 2,539,639 | ||||||
Interactive Brokers Group, Inc. - Class A | 51,792 | 2,081,003 | ||||||
4,620,642 | ||||||||
Diversified Financial Services — 0.9% | ||||||||
MarketAxess Holdings, Inc. | 17,269 | 2,416,624 | ||||||
Real Estate Management & Development — 1.9% | ||||||||
CBRE Group, Inc. - Class A * | 163,823 | 4,890,117 | ||||||
Health Care — 24.0% | ||||||||
Biotechnology — 7.4% | ||||||||
Agios Pharamceuticals, Inc. * | 13,056 | 730,483 | ||||||
Anacor Pharmaceuticals, Inc. * | 18,704 | 1,857,307 | ||||||
Enanta Pharmaceuticals, Inc. * | 78,193 | 1,918,074 | ||||||
Ionis Pharmaceuticals, Inc. * | 77,187 | 1,751,373 | ||||||
Medivation, Inc. * | 94,600 | 5,719,516 | ||||||
Momenta Pharmaceuticals, Inc. * | 146,114 | 1,721,223 | ||||||
Ophthotech Corporation * | 43,778 | 2,350,879 | ||||||
Radius Health, Inc. * | 38,480 | 1,395,285 | ||||||
United Therapeutics Corporation * | 14,891 | 1,773,071 | ||||||
19,217,211 | ||||||||
Health Care Equipment & Supplies — 4.7% | ||||||||
Align Technology, Inc. * | 62,067 | 4,892,742 | ||||||
DexCom, Inc. * | 54,680 | 3,526,313 | ||||||
IDEXX Laboratories, Inc. * | 38,636 | 3,383,355 | ||||||
Tandem Diabetes Care, Inc. * | 49,488 | 324,146 | ||||||
12,126,556 | ||||||||
Health Care Providers & Services — 3.2% | ||||||||
Centene Corporation * | 68,566 | 4,275,090 | ||||||
Universal Health Services, Inc. - Class B | 28,870 | 3,893,408 | ||||||
8,168,498 | ||||||||
Health Care Technology — 1.8% | ||||||||
Medidata Solutions, Inc. * | 64,219 | 2,950,221 | ||||||
Veeva Systems, Inc. - Class A * | 50,350 | 1,659,032 | ||||||
4,609,253 | ||||||||
Life Sciences Tools & Services — 1.4% | ||||||||
ICON plc * | 53,015 | 3,734,377 |
8
APEXcm SMALL/MID-CAP GROWTH FUND | ||||||||
COMMON STOCKS — 97.1% (Continued) | Shares | Value | ||||||
Health Care — 24.0% (Continued) | ||||||||
Pharmaceuticals — 5.5% | ||||||||
Akorn, Inc. * | 136,941 | $ | 4,093,166 | |||||
Horizon Pharmaceutical plc * | 92,893 | 1,600,546 | ||||||
Jazz Pharmaceuticals plc * | 26,901 | 4,077,116 | ||||||
Prestige Brands Holdings, Inc. * | 43,949 | 2,375,004 | ||||||
Supernus Pharmaceuticals, Inc. * | 110,045 | 2,146,978 | ||||||
14,292,810 | ||||||||
Industrials — 12.2% | ||||||||
Aerospace & Defense — 0.7% | ||||||||
B/E Aerospace, Inc. | 39,902 | 1,900,931 | ||||||
Airlines — 1.1% | ||||||||
Hawaiian Holdings, Inc. * | 72,282 | 2,924,530 | ||||||
Machinery — 6.7% | ||||||||
Middleby Corporation (The) * | 36,905 | 4,583,601 | ||||||
Nordson Corporation | 44,199 | 3,844,429 | ||||||
Proto Labs, Inc. * | 41,043 | 2,700,629 | ||||||
Wabtec Corporation | 47,444 | 3,671,217 | ||||||
Xylem, Inc. | 59,552 | 2,659,592 | ||||||
17,459,468 | ||||||||
Road & Rail — 1.4% | ||||||||
Old Dominion Freight Line, Inc. * | 54,539 | 3,509,585 | ||||||
Trading Companies & Distributors — 2.3% | ||||||||
HD Supply Holdings, Inc. * | 166,136 | 5,864,601 | ||||||
Information Technology — 28.4% | ||||||||
Communications Equipment — 2.8% | ||||||||
F5 Networks, Inc. * | 39,774 | 4,383,095 | ||||||
Infinera Corporation * | 213,567 | 2,799,863 | ||||||
7,182,958 | ||||||||
Electronic Equipment, Instruments & Components — 1.2% | ||||||||
Dolby Laboratories, Inc. - Class A | 64,981 | 3,083,348 | ||||||
Internet Software & Services — 4.2% | ||||||||
IAC/InterActiveCorp | 53,888 | 3,011,261 | ||||||
MercadoLibre, Inc. | 42,608 | 5,815,992 | ||||||
YY, Inc. - ADR * | 49,772 | 2,162,593 | ||||||
10,989,846 |
9
APEXcm SMALL/MID-CAP GROWTH FUND | ||||||||
COMMON STOCKS — 97.1% (Continued) | Shares | Value | ||||||
Information Technology — 28.4% (Continued) | ||||||||
IT Services — 9.1% | ||||||||
Broadridge Financial Solutions, Inc. | 63,565 | $ | 4,080,237 | |||||
Gartner, Inc. * | 33,554 | 3,409,757 | ||||||
Genpact Ltd. * | 92,183 | 2,598,639 | ||||||
Global Payments, Inc. | 48,798 | 3,791,094 | ||||||
Sabre Corporation | 173,240 | 4,880,171 | ||||||
Total System Services, Inc. | 87,441 | 4,695,582 | ||||||
23,455,480 | ||||||||
Semiconductors & Semiconductor Equipment — 2.8% | ||||||||
Advanced Energy Industries, Inc. * | 55,025 | 2,100,304 | ||||||
Entegris, Inc. * | 198,012 | 2,823,651 | ||||||
Power Integrations, Inc. | 48,583 | 2,423,806 | ||||||
7,347,761 | ||||||||
Software — 8.3% | ||||||||
ACI Worldwide, Inc. * | 127,620 | 2,636,629 | ||||||
BroadSoft, Inc. * | 78,057 | 3,403,285 | ||||||
Fortinet, Inc. * | 119,110 | 4,074,753 | ||||||
Guidewire Software, Inc. * | 25,568 | 1,500,842 | ||||||
Manhattan Associates, Inc. * | 42,140 | 2,778,290 | ||||||
Splunk, Inc.* | 69,359 | 3,984,675 | ||||||
Tableau Software, Inc. - Class A * | 58,422 | 3,005,228 | ||||||
21,383,702 | ||||||||
Materials — 2.0% | ||||||||
Containers & Packaging — 1.3% | ||||||||
Silgan Holdings, Inc. | 65,537 | 3,351,562 | ||||||
Paper & Forest Products — 0.7% | ||||||||
KapStone Paper and Packaging Corporation | 123,470 | 1,882,917 | ||||||
Total Common Stocks (Cost $249,586,779) | $ | 251,399,985 |
10
APEXcm SMALL/MID-CAP GROWTH FUND | ||||||||
MONEY MARKET FUNDS — 2.8% | Shares | Value | ||||||
Fidelity Institutional Money Market Portfolio - Class I, 0.33% (a) (Cost $7,185,749) | 7,185,749 | $ | 7,185,749 | |||||
Total Investments at Value — 99.9%(Cost $256,772,528) | $ | 258,585,734 | ||||||
Other Assets in Excess of Liabilities — 0.1% | 365,369 | |||||||
Net Assets — 100.0% | $ | 258,951,103 |
ADR - American Depositary Receipt. | |
* | Non-income producing security. |
(a) | The rate shown is the 7-day effective yield as of May 31, 2016. |
See accompanying notes to financial statements. |
11
APEXcm SMALL/MID-CAP GROWTH FUND | ||||
ASSETS | ||||
Investments in securities: | ||||
At acquisition cost | $ | 256,772,528 | ||
At value (Note 2) | $ | 258,585,734 | ||
Dividends receivable | 128,679 | |||
Receivable for capital shares sold | 592,900 | |||
Other assets | 16,712 | |||
Total assets | 259,324,025 | |||
LIABILITIES | ||||
Payable for capital shares redeemed | 144,177 | |||
Payable to Adviser (Note 4) | 186,190 | |||
Payable to administrator (Note 4) | 2,256 | |||
Other accrued expenses and liabilities | 40,299 | |||
Total liabilities | 372,922 | |||
NET ASSETS | $ | 258,951,103 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 260,484,177 | ||
Accumulated net investment loss | (529,959 | ) | ||
Accumulated net realized losses from security transactions | (2,816,321 | ) | ||
Net unrealized appreciation on investments | 1,813,206 | |||
NET ASSETS | $ | 258,951,103 | ||
Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) | 16,850,156 | |||
Net asset value, offering price and redemption price per share (Note 2) | $ | 15.37 |
See accompanying notes to financial statements. |
12
APEXcm SMALL/MID-CAP GROWTH FUND | ||||
INVESTMENT INCOME | ||||
Dividend income (net of foreign taxes of $5,309) | $ | 1,614,622 | ||
EXPENSES | ||||
Investment advisory fees (Note 4) | 2,576,530 | |||
Administration fees (Note 4) | 255,747 | |||
Fund accounting fees (Note 4) | 55,808 | |||
Registration and filing fees | 42,540 | |||
Professional fees | 35,753 | |||
Transfer agent fees (Note 4) | 32,486 | |||
Custody and bank service fees | 29,943 | |||
Excise tax | 28,004 | |||
Compliance fees (Note 4) | 27,781 | |||
Postage and supplies | 11,554 | |||
Trustees' fees and expenses (Note 4) | 9,795 | |||
Insurance expense | 3,911 | |||
Other expenses | 21,736 | |||
Total expenses | 3,131,588 | |||
Less fee reductions by the Adviser (Note 4) | (398,226 | ) | ||
Excise tax reimbursed by the administrator | (28,004 | ) | ||
Net expenses | 2,705,358 | |||
NET INVESTMENT LOSS | (1,090,736 | ) | ||
REALIZED AND UNREALIZED LOSSES ON INVESTMENTS | ||||
Net realized losses from security transactions | (677,149 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | (29,749,518 | ) | ||
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS | (30,426,667 | ) | ||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (31,517,403 | ) |
See accompanying notes to financial statements. |
13
APEXcm SMALL/MID-CAP GROWTH FUND | ||||||||
Year | Year | |||||||
FROM OPERATIONS | ||||||||
Net investment loss | $ | (1,090,736 | ) | $ | (704,526 | ) | ||
Net realized gains (losses) from security transactions | (677,149 | ) | 830,411 | |||||
Net change in unrealized appreciation (depreciation) on investments | (29,749,518 | ) | 21,795,162 | |||||
Net increase (decrease) in net assets resulting from operations | (31,517,403 | ) | 21,921,047 | |||||
DISTRIBUTIONS TO SHAREHOLDERS | ||||||||
From net realized gains | (1,414,635 | ) | — | |||||
CAPITAL SHARE TRANSACTIONS | ||||||||
Proceeds from shares sold | 149,542,431 | 154,037,822 | ||||||
Net asset value of shares issued in reinvestment of distributions to shareholders | 1,277,590 | — | ||||||
Payments for shares redeemed | (99,682,011 | ) | (23,690,438 | ) | ||||
Net increase in net assets from capital share transactions | 51,138,010 | 130,347,384 | ||||||
TOTAL INCREASE IN NET ASSETS | 18,205,972 | 152,268,431 | ||||||
NET ASSETS | ||||||||
Beginning of year | 240,745,131 | 88,476,700 | ||||||
End of year | $ | 258,951,103 | $ | 240,745,131 | ||||
ACCUMULATED NET INVESTMENT LOSS | $ | (529,959 | ) | $ | (395,464 | ) | ||
CAPITAL SHARE ACTIVITY | ||||||||
Shares sold | 9,569,552 | 9,429,777 | ||||||
Shares reinvested | 81,740 | — | ||||||
Shares redeemed | (6,609,395 | ) | (1,443,740 | ) | ||||
Net increase in shares outstanding | 3,041,897 | 7,986,037 | ||||||
Shares outstanding at beginning of year | 13,808,259 | 5,822,222 | ||||||
Shares outstanding at end of year | 16,850,156 | 13,808,259 |
See accompanying notes to financial statements. |
14
APEXcm SMALL/MID-CAP GROWTH FUND | ||||||||||||||||
Per Share Data for a Share Outstanding Throughout Each Period | ||||||||||||||||
| Year | Year | Year | Period | ||||||||||||
Net asset value at beginning of period | $ | 17.43 | $ | 15.20 | $ | 12.69 | $ | 10.00 | ||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income (loss) | (0.06 | ) | (0.04 | ) | (0.03 | ) | 0.04 | (b) | ||||||||
Net realized and unrealized gains (losses) | (1.92 | ) | 2.27 | 2.60 | 2.72 | |||||||||||
Total from investment operations | (1.98 | ) | 2.23 | 2.57 | 2.76 | |||||||||||
Less distributions: | ||||||||||||||||
From net investment income | — | — | — | (0.07 | ) | |||||||||||
From net realized gains | (0.08 | ) | — | (0.06 | ) | — | ||||||||||
Total distributions | (0.08 | ) | — | (0.06 | ) | (0.07 | ) | |||||||||
Net asset value at end of period | $ | 15.37 | $ | 17.43 | $ | 15.20 | $ | 12.69 | ||||||||
Total return (c) | (11.34 | %) | 14.67 | % | 20.26 | % | 27.65 | %(d) | ||||||||
Net assets at end of period (000's) | $ | 258,951 | $ | 240,745 | $ | 88,477 | $ | 13,153 | ||||||||
Ratios/supplementary data: | ||||||||||||||||
Ratio of total expenses to average net assets | 1.21 | % | 1.26 | % | 1.49 | % | 4.87 | %(e) | ||||||||
Ratio of net expenses to average net assets (f) | 1.05 | % | 1.05 | % | 1.05 | % | 1.05 | %(e) | ||||||||
Ratio of net investment income (loss) to average net assets (f) | (0.42 | %) | (0.48 | %) | (0.38 | %) | 0.26 | %(e) | ||||||||
Portfolio turnover rate | 35 | % | 58 | % | 47 | % | 18 | %(d) |
(a) | Represents the period from the commencement of operations (June 29, 2012) through May 31, 2013. |
(b) | Calculated using weighted average shares outstanding during the period. |
(c) | Total return is a measure of the change in value of an investment in the Fund over the periods covered. The returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions, if any, or the redemption of Fund shares. The total returns would be lower if the Adviser had not reduced advisory fees and/or reimbursed expenses (Note 4). |
(d) | Not annualized. |
(e) | Annualized. |
(f) | Ratio was determined after advisory fee reductions and/or expense reimbursements (Note 4). |
See accompanying notes to financial statements. |
15
APEXcm SMALL/MID-CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
May 31, 2016
1. Organization
APEXcm Small/Mid-Cap Growth Fund (the “Fund”) is a diversified series of Ultimus Managers Trust (the “Trust”), an open-end investment company established as an Ohio business trust under a Declaration of Trust dated February 28, 2012. Other series of the Trust are not incorporated in this report. The Fund commenced operations on June 29, 2012.
The investment objective of the Fund is long-term capital growth.
2. Significant Accounting Policies
The following is a summary of the Fund’s significant accounting policies. These policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”). As an investment company, as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Update 2013-08, the Fund follows accounting and reporting guidance under FASB Accounting Standards Codification Topic 946, “Financial Services – Investment Companies.”
Securities valuation – The Fund values its portfolio securities at market value as of the close of regular trading on the New York Stock Exchange (the “NYSE”) (normally 4:00 p.m. Eastern time) on each business day the NYSE is open for business. The Fund values its listed securities on the basis of the security’s last sale price on the security’s primary exchange, if available, otherwise at the exchange’s most recently quoted mean price. NASDAQ-listed securities are valued at the NASDAQ Official Closing Price. In the event that market quotations are not readily available or are considered unreliable due to market or other events, the Fund values its securities and other assets at fair value in accordance with procedures established by and under the general supervision of the Board of Trustees (the “Board”). Under these procedures, the securities will be classified as Level 2 or 3 within the fair value hierarchy (see below), depending on the inputs used. Unavailable or unreliable market quotes may be due to the following factors: a substantial bid-ask spread; infrequent sales resulting in stale prices; insufficient trading volume; small trade sizes; a temporary lapse in any reliable pricing source; and actions of the securities or futures markets, such as the suspension or limitation of trading. As a result, the prices of securities used to calculate the Fund’s net asset value (“NAV”) may differ from quoted or published prices for the same securities.
16
APEXcm SMALL/MID-CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
GAAP establishes a single authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair value measurements.
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 |
● | Level 3 – significant unobservable inputs |
The inputs or methods used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. 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.
The following is a summary of the inputs used to value the Fund’s investments as of May 31, 2016:
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 251,399,985 | $ | — | $ | — | $ | 251,399,985 | ||||||||
Money Market Funds | 7,185,749 | — | — | 7,185,749 | ||||||||||||
Total | $ | 258,585,734 | $ | — | $ | — | $ | 258,585,734 |
Refer to the Fund’s Schedule of Investments for a listing of the common stocks by industry type. As of May 31, 2016, the Fund did not have any transfers between Levels. In addition, the Fund did not hold derivative instruments or any assets or liabilities that were measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of May 31, 2016. It is the Fund’s policy to recognize transfers between Levels at the end of the reporting period.
Share valuation – The NAV per share of the Fund is calculated daily by dividing the total value of the Fund’s assets, less liabilities, by the number of shares outstanding. The offering price and redemption price per share of the Fund is equal to the NAV per share.
Investment income – Dividend income is recorded on the ex-dividend date. Interest income is accrued as earned. Withholding taxes on foreign dividends have been recorded in accordance with the Fund’s understanding of the appropriate country’s rules and tax rates.
17
APEXcm SMALL/MID-CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
Security transactions – Security transactions are accounted for on the trade date. Realized gains and losses on securities sold are determined on a specific identification basis.
Common expenses – Common expenses of the Trust are allocated among the Fund and the other series of the Trust based on the relative net assets of each series or the nature of the services performed and the relative applicability to each series.
Distributions to shareholders – The Fund will distribute to shareholders any net investment income dividends and net realized capital gains distributions at least once each year. The amount of such dividends and distributions are determined in accordance with federal income tax regulations, which may differ from GAAP. Dividends and distributions are recorded on the ex-dividend date. The tax character of the Fund’s distributions paid during the years ended May 31, 2016 and May 31, 2015 was as follows:
Year Ended | Ordinary Income | Long-Term Capital Gains | Total Distributions | |||||||||
May 31, 2016 | $ | 353,659 | $ | 1,060,976 | $ | 1,414,635 | ||||||
May 31, 2015 | $ | — | $ | — | $ | — |
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 as of the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Federal income tax – The Fund has qualified and intends to continue to qualify as a regulated investment company under the Internal Revenue Code of 1986 (the “Code”). Qualification generally will relieve the Fund of liability for federal income taxes to the extent 100% of its net investment income and net realized capital gains are distributed in accordance with the Code.
In order to avoid imposition of the excise tax applicable to regulated investment companies, it is also the Fund’s intention to declare as dividends in each calendar year at least 98% of its net investment income (earned during the calendar year) and 98.2% of its net realized capital gains (earned during the twelve months ended October 31) plus undistributed amounts from prior years.
18
APEXcm SMALL/MID-CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
The following information is computed on a tax basis for each item as of May 31, 2016:
Tax cost of portfolio investments | $ | 256,901,562 | ||
Gross unrealized appreciation | $ | 25,479,980 | ||
Gross unrealized depreciation | (23,795,808 | ) | ||
Net unrealized appreciation | 1,684,172 | |||
Accumulated capital and other losses | (3,217,246 | ) | ||
Accumulated deficit | $ | (1,533,074 | ) |
The federal income tax cost of portfolio investments and the tax components of accumulated earnings may temporarily differ from the financial statement cost of portfolio investments and components of net assets (“book/tax difference”). These book/tax differences are due to the recognition of capital gains or losses under income tax regulations and GAAP, primarily due to the tax deferral of losses on wash sales.
Certain capital losses incurred after October 31, 2015 and within the current taxable year are deemed to arise on the first business day of the Fund’s following taxable year. For the year ended May 31, 2016, the Fund deferred until June 1, 2016, post-October capital losses in the amount of $2,687,287.
Qualified late year losses incurred after December 31, 2015 and within the taxable year are deemed to arise on the first day of the Fund’s next taxable year. For the year ended May 31, 2016, the Fund intends to defer $529,959 of late year ordinary losses to June 1, 2016 for federal income tax purposes.
For the year ended May 31, 2016, the Fund reclassified $1,097,623 of accumulated net realized losses against accumulated net investment loss and paid-in capital in the amounts of $956,241 and $141,382, respectively, on its Statement of Assets and Liabilities. Such reclassification, the result of permanent differences between financial statement and income tax reporting requirements, had no effect on the Fund’s total net assets or NAV per share.
The Fund recognizes the tax benefits or expenses of uncertain tax positions only when the position is “more likely than not” to be sustained assuming examination by tax authorities. Management has reviewed the Fund’s tax positions for all open tax periods (periods ended May 31, 2013 through May 31, 2016) and has concluded that no provision for unrecognized tax benefits or expenses is required in these financial statements. The Fund identifies its major tax jurisdiction as U.S. Federal.
19
APEXcm SMALL/MID-CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
3. Investment Transactions
During the year ended May 31, 2016, cost of purchases and proceeds from sales of investment securities, other than short-term investments, were $136,231,805 and $86,857,644, respectively.
4. Transactions with Related Parties
INVESTMENT ADVISORY AGREEMENT
The Fund’s investments are managed by Apex Capital Management, Inc. (the “Adviser”) pursuant to the terms of an Investment Advisory Agreement. Under the Investment Advisory Agreement, the Fund pays the Adviser an advisory fee, computed and accrued daily and paid monthly, at the annual rate of 1.00% of its average daily net assets.
Pursuant to an Expense Limitation Agreement (“ELA”) between the Fund and the Adviser, the Adviser has contractually agreed, until October 1, 2017, to reduce investment advisory fees and reimburse other operating expenses to limit total annual operating expenses of the Fund (exclusive of brokerage costs, taxes, interest, acquired fund fees and expenses, extraordinary expenses such as litigation and merger or reorganization costs, and other expenses not incurred in the ordinary course of the Fund’s business) to an amount not exceeding 1.05% of the Fund’s average daily net assets. Accordingly, during the year ended May 31, 2016, the Adviser reduced its advisory fees in the amount of $398,226.
Under the terms of the ELA, investment advisory fee reductions and expense reimbursements by the Adviser are subject to recoupment by the Adviser for a period of three years after such fees and expenses were incurred, provided the recoupments do not cause total annual operating expenses of the Fund to exceed 1.05% of average daily net assets. As of May 31, 2016, the Adviser may seek recoupment of investment advisory fee reductions and expense reimbursements in the amount of $939,379 no later than the dates as stated below:
May 31, 2017 | May 31, 2018 | May 31, 2019 | ||
$223,293 | $317,860 | $398,226 |
Certain officers of the Fund are also officers of the Adviser.
OTHER SERVICE PROVIDERS
Ultimus Fund Solutions, LLC (“Ultimus”) provides fund administration, fund accounting, compliance and transfer agency services to the Fund. The Fund pays Ultimus fees in accordance with the agreements for such services. In addition, the Fund pays out-of-pocket expenses including but not limited to postage, supplies and costs of pricing the Fund’s portfolio securities.
20
APEXcm SMALL/MID-CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
Under the terms of a Distribution Agreement with the Trust, Ultimus Fund Distributors, LLC (the “Distributor”) serves as principal underwriter to the Fund. The Distributor is a wholly-owned subsidiary of Ultimus. The Distributor is compensated by the Adviser (not the Fund) for acting as principal underwriter.
Certain officers and a Trustee of the Trust are also officers of Ultimus and the Distributor.
TRUSTEE COMPENSATION
Each Trustee who is not an “interested person” of the Trust (“Independent Trustee”) receives from the Fund a fee of $500 for each Board meeting attended plus reimbursement of travel and other meeting-related expenses. In addition, each Independent Trustee also receives a $500 annual retainer from the Fund. Trustees affiliated with the Adviser or Ultimus are not compensated by the Trust for their services.
PRINICIPAL HOLDERS OF FUND SHARES
As of May 31, 2016, the following shareholders owned of record 5% or more of the outstanding shares of the Fund:
Name of Record Owner | % Ownership |
UBS Financial Services, Inc. (for the benefit of its customers) | 41% |
Charles Schwab & Company, Inc. (for the benefit of its customers) | 26% |
A beneficial owner of 25% or more of a Fund’s outstanding shares may be considered a controlling person. That shareholder’s vote could have a more significant effect on matters presented at a shareholder’s meeting.
5. Sector Risk
If a Fund has significant investments in the securities of issuers within a particular sector, any development affecting that sector will have a greater impact on the value of the net assets of the Fund than would be the case if the Fund did not have significant investments in that sector. In addition, this may increase the risk of loss in the Fund and increase the volatility of the Fund’s NAV per share. For instance, economic or market factors, regulatory changes or other developments may negatively impact all companies in a particular sector, and therefore the value of the Fund’s portfolio will be adversely affected. As of May 31, 2016, the Fund had 28.4% of the value of its net assets invested in stocks within the Information Technology sector.
21
APEXcm SMALL/MID-CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
6. Contingencies and Commitments
The Fund indemnifies the Trust’s officers and Trustees for certain liabilities that might arise from their performance of their duties to the Fund. Additionally, in the normal course of business the Fund enters into contracts that contain a variety of representations and warranties and which provide 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 that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote.
7. Subsequent Events
The Fund is required to recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed as of the date of the Statement of Assets and Liabilities. For non-recognized subsequent events that must be disclosed to keep the financial statements from being misleading, the Fund is required to disclose the nature of the event as well as an estimate of its financial effect, or a statement that such an estimate cannot be made. Management has evaluated subsequent events through the issuance of these financial statements and has noted no such events except as reflected in the following paragraph.
The Adviser, who served as investment adviser to the Fund since the Fund’s inception, was acquired on June 1, 2016 in a transaction (the “Transaction”) by Fiera US Holding, Inc. (“Fiera Holding”), a wholly-owned subsidiary of Fiera Capital Corporation. Under the 1940 Act, an investment advisory agreement automatically terminates upon an “assignment”. The closing of the Transaction was considered an “assignment” under applicable law. This resulted in termination of the original investment advisory agreement between the Adviser and the Trust. In anticipation of the closing of the Transaction, the Board of Trustees of the Trust (the “Board of Trustees”) met and approved an interim investment advisory agreement, which is substantially similar to the original investment advisory agreement, between Fiera Capital Inc. (a wholly-owned subsidiary of Fiera Holding) (“Fiera Capital”) (as successor to the Adviser) and the Trust on behalf of the Fund (the “Interim Advisory Agreement”) that became effective upon the closing of the Transaction. The Board of Trustees also approved a proposed new investment advisory agreement between Fiera Capital and the Trust, on behalf of the Fund (the “New Investment Advisory Agreement”). Under the 1940 Act, the New Advisory Agreement requires shareholder approval in order to become effective. The Interim Advisory Agreement terminates upon the earlier of 150 days from the date of its effectiveness or upon the date the New Investment Advisory agreement is approved by the shareholders of the Fund. Therefore, the Board of Trustees will be submitting the New Advisory Agreement to a vote of the shareholders of the Fund.
22
APEXcm SMALL/MID-CAP GROWTH FUND
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Ultimus Managers Trust
and the Shareholders of APEXcm Small/Mid Cap Growth Fund
We have audited the accompanying statement of assets and liabilities of APEXcm Small/Mid Cap Growth Fund (the “Fund”), a series of shares of beneficial interest in Ultimus Managers Trust, including the schedule of investments, as of May 31, 2016, 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 three-year period then ended and for the period June 29, 2012 (commencement of operations) through May 31, 2013. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2016 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of APEXcm Small/Mid Cap Growth Fund as of May 31, 2016, 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 three-year period then ended and for the period June 29, 2012 to May 31, 2013, in conformity with accounting principles generally accepted in the United States of America.
BBD, LLP |
Philadelphia, Pennsylvania
July 28, 2016
23
APEXcm SMALL/MID-CAP GROWTH FUND
ABOUT YOUR FUND’S EXPENSES (Unaudited)
We believe it is important for you to understand the impact of costs on your investment. As a shareholder of the Fund, you incur ongoing costs, including management fees and other operating expenses. The following examples are 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.
A mutual fund’s ongoing costs are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The expenses in the table below are based on an investment of $1,000 made at the beginning of the most recent period (December 1, 2015) and held until the end of the period (May 31, 2016).
The table below illustrates the Fund’s ongoing costs in two ways:
Actual fund return – This section helps you to estimate the actual expenses that you paid over the period. The “Ending Account Value” shown is derived from the Fund’s actual return, and the third column shows the dollar amount of operating expenses that would have been paid by an investor who started with $1,000 in the Fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for the Fund under the heading “Expenses Paid During Period.”
Hypothetical 5% return – This section is intended to help you compare the Fund’s ongoing costs with those of other mutual funds. It assumes that the Fund had an annual return of 5% before expenses during the period shown, but that the expense ratio is unchanged. In this case, because the return used is not the Fund’s actual return, the results do not apply to your investment. The example is useful in making comparisons because the U.S. Securities and Exchange Commission (“SEC”) requires all mutual funds to calculate expenses based on a 5% return. You can assess the Fund’s ongoing costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
Note that expenses shown in the table are meant to highlight and help you compare ongoing costs only. The Fund does not charge transaction fees, such as purchase or redemption fees, nor does it carry a “sales load.”
The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.
24
APEXcm SMALL/MID-CAP GROWTH FUND
ABOUT YOUR FUND’S EXPENSES (Unaudited) (Continued)
More information about the Fund’s expenses can be found in this report. For additional information on operating expenses and other shareholder costs, please refer to the Fund’s prospectus.
Beginning | Ending | Expenses | |
Based on Actual Fund Return | $ 1,000.00 | $ 946.90 | $ 5.11 |
Based on Hypothetical 5% Return (before expenses) | $ 1,000.00 | $ 1,019.75 | $ 5.30 |
* | Expenses are equal to the Fund’s annualized net expense ratio of 1.05% for the period, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). |
OTHER INFORMATION (Unaudited)
A description of the policies and procedures that the Fund uses to vote proxies relating to portfolio securities is available without charge upon request by calling toll-free 1-888-575-4800, or on the SEC’s website at http://www.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 without charge upon request by calling toll-free 1-888-575-4800, or on the SEC’s website at http://www.sec.gov.
The Trust files a complete listing of portfolio holdings for the Fund with the SEC as of the end of the first and third quarters of each fiscal year on Form N-Q. These filings are available upon request by calling 1-888-575-4800. Furthermore, you may obtain a copy of the filings on the SEC’s website at http://www.sec.gov. The Trust’s Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
25
APEXcm SMALL/MID-CAP GROWTH FUND
FEDERAL TAX INFORMATION (Unaudited)
In accordance with federal tax requirements, the following provides shareholders with information concerning distributions from ordinary income and net realized capital gains made by the Fund during the fiscal year ended May 31, 2016. Certain dividends paid by the Fund may be subject to a maximum tax rate of 23.8%. The Fund intends to designate up to a maximum amount of $353,659 as taxed at a maximum rate of 23.8%. Additionally, the Fund intends to designate up to a maximum amount of $1,060,976 as a long-term capital gain distribution. For the fiscal year ended May 31, 2016, 100% of the dividends paid from ordinary income by the Fund qualified for the dividends received deduction for corporations.
As required by federal regulations, complete information was computed and reported in conjunction with your 2015 form 1099-DIV.
26
APEXcm SMALL/MID-CAP GROWTH FUND
BOARD OF TRUSTEES AND EXECUTIVE OFFICERS
(Unaudited)
The Board of Trustees has overall responsibility for management of the Trust’s affairs. The Trustees serve during the lifetime of the Trust and until its termination, or until death, resignation, retirement, or removal. The Trustees, in turn, elect the officers of the Fund to actively supervise its day-to-day operations. The officers have been elected for an annual term. Unless otherwise noted, each Trustee’s and officer’s address is 225 Pictoria Drive, Suite 450, Cincinnati, Ohio 45246. The following are the Trustees and executive officers of the Fund:
Name and | Length of Time Served | Position(s) Held with Trust | Principal Occupation(s) During Past 5 Years | Number of Funds in Trust Overseen by Trustee | Directorships of Public Companies Held by Trustee During Past 5 Years |
Interested Trustees: | |||||
Robert G. Dorsey* Year of Birth: 1957 | Since February 2012 | Trustee (February 2012 to present)
President (June 2012 to October 2013) | Managing Director of Ultimus Fund Solutions, LLC and Ultimus Fund Distributors, LLC (1999 to present) | 21 | None |
Independent Trustees: | |||||
Janine L. Cohen Year of Birth: 1952 | Since January 2016 | Trustee | Retired since 2013; Chief Financial Officer from 2004 to 2013 and Chief Compliance Officer from 2008 to 2013 at AER Advisors, Inc. | 21 | None |
David M. Deptula Year of Birth: 1958 | Since June 2012 | Trustee | Vice President of Legal and Special Projects at Dayton Freight Lines, Inc. since 2016; Vice President of Tax Treasury at Standard Register Inc. (formerly The Standard Register Company) from 2011 to 2016 | 21 | None |
27
APEXcm SMALL/MID-CAP GROWTH FUND
BOARD OF TRUSTEES AND EXECUTIVE OFFICERS
(Unaudited) (Continued)
Name and | Length Of Time Served | Position(s) Held with Trust | Principal Occupation(s) During Past 5 Years | Number of Funds in Trust Overseen by Trustee | Directorships of Public Companies Held by Trustee During Past 5 Years |
Independent Trustees (Continued): | |||||
John J. Discepoli Year of Birth: 1963 | Since June 2012 | Chairman (June 2016 to present)
Trustee (June 2012 to present) | Owner of Discepoli Financial Planning, LLC (personal financial planning company) since 2004 | 21 | None |
* | Mr. Dorsey is considered an “interested person” of the Trust within the meaning of Section 2(a)(19) of the 1940 Act because of his relationship with the Trust’s administrator, transfer agent and distributor. |
Name and | Length of Time Served | Position(s) Held with Trust | Principal Occupation(s) During Past 5 Years |
Executive Officers: | |||
Nitin N. Kumbhani 10050 Innovation Drive, Suite 120 Miamisburg, Ohio 45342 Year of Birth: 1948 | Since June 2012 | Principal Executive Officer of APEXcm Small/Mid-Cap Growth Fund | Vice Chairman and Chief of Growth Equity Strategies, Fiera Capital, Inc. (June 2016 to present); President and Chief Investment Officer of Apex Capital Management, Inc. (1987 to May 2016) |
Michael Kalbfleisch 10050 Innovation Drive, Suite 120 Miamisburg, Ohio 45342 Year of Birth: 1959 | Since June 2012 | Vice President of APEXcm Small/Mid-Cap Growth Fund | Senior Vice President and Portfolio Manager, Fiera Capital, Inc. (June 2016 to present); Vice President and Chief Compliance Officer of Apex Capital Management, Inc. (2001 to May 2016) |
David R. Carson Year of Birth: 1958 | Since April 2013 | President (October 2013 to present)
Vice President (April 2013 to October 2013) | Vice President and Director of Client Strategies of Ultimus Fund Solutions, LLC (2013 to present); Chief Compliance Officer, FSI LBAR Fund (2013 to present), The Huntington Funds (2005 to 2013), The Flex-Funds (2006 to 2011), Meeder Financial (2007 to 2011), Huntington Strategy Shares (2012 to 2013), and Huntington Asset Advisors (2013); Vice President, Huntington National Bank (2001 to 2013) |
28
APEXcm SMALL/MID-CAP GROWTH FUND
BOARD OF TRUSTEES AND EXECUTIVE OFFICERS
(Unaudited) (Continued)
Name and | Length of Time Served | Position(s) Held with Trust | Principal Occupation(s) During Past 5 Years |
Executive Officers (Continued): | |||
Jennifer L. Leamer Year of Birth: 1976 | Since April 2014 | Treasurer (October 2014 to present)
Assistant Treasurer (April 2014 to October 2014) | V.P., Mutual Fund Controller of Ultimus Fund Solutions, LLC (2014 to present); Business Analyst of Ultimus Fund Solutions, LLC (2007 to 2014) |
Bo J. Howell Year of Birth: 1981 | Since October 2014 | Secretary (April 2015 to present)
Assistant Secretary (October 2014 to April 2015) | V.P., Director of Fund Administration for Ultimus Fund Solutions, LLC (2014 to present); Counsel – Securities and Mutual Funds for Western & Southern Financial Group (2012 to 2014); U.S. Securities and Exchange Commission, Senior Counsel (2009 to 2012) |
Charles C. Black Year of Birth: 1979 | Since April 2015 | Chief Compliance Officer (January 2016 to present)
Assistant Chief Compliance Officer (April 2015 to January 2016) | Senior Compliance Officer of Ultimus Fund Solutions, LLC (2015 to present); Senior Compliance Manager for Touchstone Mutual Funds (2013 to 2015); Senior Compliance Manager for Fund Evaluation Group (2011 to 2013); Regulatory Administration Specialist for JPMorgan Chase Bank (2006 to 2011) |
Additional information about members of the Board and executive officers is available in the Fund’s Statement of Additional Information (“SAI”). To obtain a free copy of the SAI, please call 1-888-575-4800.
29
APEXcm SMALL/MID-CAP GROWTH FUND
DISCLOSURE REGARDING APPROVAL OF INVESTMENT ADVISORY AGREEMENT (Unaudited)
The Board of Trustees (the “Board”), including the Independent Trustees voting separately, has reviewed and approved the Fund’s Investment Advisory Agreement with Apex Capital Management, Inc. (the “Adviser”) for an additional annual term. Approval took place at an in-person meeting held on April 25-26, 2016, at which all of the Trustees were present.
In the course of their deliberations, the Board was advised by legal counsel. The Board received and reviewed a substantial amount of information provided by the Adviser in response to requests of the Board and counsel.
In considering the Investment Advisory Agreement and reaching their conclusions with respect thereto, the Board reviewed and analyzed various factors that they determined were relevant, including the factors described below.
The nature, extent, and quality of the services provided by the Adviser. In this regard, the Board reviewed the services being provided by the Adviser to the Fund including, without limitation, its investment advisory services since the Fund’s inception, the Adviser’s compliance policies and procedures, and its efforts to promote the Fund and assist in its distribution. The Board also noted that a principal of the Adviser serves as the Fund’s Principal Executive Officer without additional compensation. After reviewing the foregoing information and further information regarding the Adviser’s business, the Board concluded that the quality, extent, and nature of the services provided by the Adviser were satisfactory and adequate for the Fund.
The investment performance of the Fund. In this regard, the Board compared the performance of the Fund with the performance of its benchmark index and related Morningstar category. The Board also considered the consistency of the Adviser’s management with the Fund’s investment objective and policies. The Board noted that while relative to its peers group and funds of similar size and structure in the Fund’s Morningstar category (Mid Cap Growth, True No Load, $100 million to $500 million), the Fund had underperformed the peer group’s and Morningstar category’s average and median for the one and three year periods, the Adviser had provided a reasonable explanation for the differences in performance. Following discussion of the investment performance of the Fund, the Adviser’s experience in managing mutual funds, its historical investment performance, and other factors, the Board concluded that the investment performance of the Fund has been satisfactory.
The costs of the services provided and profits realized by the Adviser and its affiliates from its relationship with the Fund. In this regard, the Board considered the Adviser’s staffing, personnel, and methods of operations; the education and experience of its personnel; compliance program, policies, and procedures; financial condition and the level of commitment to the Fund, and, generally, the Adviser’s advisory business; the asset level of the Fund; the overall expenses of the Fund, including the advisory
30
APEXcm SMALL/MID-CAP GROWTH FUND
DISCLOSURE REGARDING APPROVAL OF INVESTMENT ADVISORY AGREEMENT (Unaudited) (Continued)
fee; and the differences in fees and services to the Adviser’s other similar clients that may be similar to the Fund. The Board considered the Adviser’s Expense Limitation Agreement (the “ELA”) with the Fund, and considered the Adviser’s current and past fee reductions and expense reimbursements for the Fund. The Board further took into account Apex’s commitment to continue the ELA for the Fund until at least October 1, 2017.
The Board also considered potential benefits for the Adviser in managing the Fund, including promotion of the Adviser’s name and the potential for it to receive research, statistical, or other services from the Fund’s trades. The Board compared the Fund’s advisory fee and overall expense ratio to the average advisory fees and average expense ratios for its peer group and the Morningstar category. The Board noted that the 1.00% advisory fee was above the average and the median for the Fund’s peer group and Morningstar category, but was less than the highest advisory fee among its peer group and Morningstar category. The Board further noted that the Fund’s overall annual expense ratio of 1.05% is lower than the Morningstar category’s average expense ratio, but higher than the category’s median expense ratio and was higher than its peer group’s average and median expense ratio. The Board also compared the fees paid by the Fund to the fees paid by other clients of the Adviser, and considered the similarities and differences of services received by such other clients as compared to the service provided to the Fund. Following these comparisons and upon further consideration and discussion of the foregoing, the Board concluded that the advisory fee paid to the Adviser by the Fund is fair and reasonable.
The extent to which economies of scale would be realized as the Fund grows and whether advisory fee levels reflect these economies of scale for the benefit of the Fund’s investors. In this regard, the Board considered that the Fund’s fee arrangements with the Adviser involve both the advisory fee and the ELA. The Board determined that while the advisory fee remained the same as asset levels increased, the shareholders of the Fund have experienced benefits from the ELA and will continue to experience benefits from the ELA until the Fund’s assets grow to a level where its expenses otherwise fall below the expense limit. Following further discussion of the Fund’s asset level, expectations for growth, and level of fees, the Board determined that the Fund’s fee arrangements with the Adviser would continue to provide benefits. The Board also determined that the fee arrangements were fair and reasonable given the Fund’s projected asset levels for the next year.
Brokerage and portfolio transactions. In this regard, the Board considered the Adviser’s trading policies, procedures, and performance in seeking best execution for the Fund. The Board also considered the historical portfolio turnover rate for the Fund; the process by which evaluations are made of the overall reasonableness of
31
APEXcm SMALL/MID-CAP GROWTH FUND
DISCLOSURE REGARDING APPROVAL OF INVESTMENT ADVISORY AGREEMENT (Unaudited) (Continued)
commissions paid; the method and basis for selecting and evaluating the broker-dealers used; any anticipated allocation of portfolio business to persons affiliated with the Adviser; and the extent to which the Fund’s trades are allocated to soft-dollar arrangements. After further review and discussion, the Board determined that the Adviser’s practices regarding brokerage and portfolio transactions were satisfactory.
Possible conflicts of interest. In evaluating the possibility for conflicts of interest, the Board considered such matters as the experience and abilities of the advisory personnel assigned to the Fund, the Adviser’s process for allocating trades among its different clients, and the substance and administration of the Adviser’s code of ethics. Following further consideration and discussion, the Board found that the Adviser’s standards and practices relating to the identification and mitigation of potential conflicts of interests were satisfactory.
Conclusion
After full consideration of the above factors as well as other factors, the Board unanimously concluded that continuance of the Investment Advisory Agreement was in the best interests of the Fund and its shareholders.
Interim and New Investment Advisory Agreement
The Adviser was acquired on June 1, 2016 in a transaction (the “Transaction”) by Fiera US Holding Inc. (“Fiera Holding”) a wholly-owned subsidiary of Fiera Capital Corporation. Under the Investment Company Act of 1940, as amended (“Investment Company Act”), an investment advisory agreement automatically terminates upon an “assignment”. The closing of the Transaction was considered an “assignment” under applicable law. This resulted in termination of the original investment advisory agreement between the Adviser and the Trust. In anticipation of the closing of the Transaction, the Board approved an interim investment advisory agreement, which is substantially similar to the original investment advisory agreement, between Fiera Capital Inc. (a wholly-owned subsidiary of Fiera Holding) (“Fiera Capital”) (as successor to the Adviser) and the Trust on behalf of the Fund (the “Interim Advisory Agreement”) that became effective upon the closing of the Transaction. The Board of Trustees also approved a proposed new investment advisory agreement between Fiera Capital and the Trust, on behalf of the Fund (the “New Investment Advisory Agreement”), which must be approved by the shareholders of the Fund at a meeting called for that purpose.
In the course of their deliberations, the Board was advised by legal counsel. The Board received and reviewed a substantial amount of information provided by the Adviser, Fiera Holding and Fiera Capital in response to requests of the Board and counsel.
32
APEXcm SMALL/MID-CAP GROWTH FUND
DISCLOSURE REGARDING APPROVAL OF INVESTMENT ADVISORY AGREEMENT (Unaudited) (Continued)
In considering the Interim Advisory Agreement and the New Investment Advisory Agreement and reaching their conclusions with respect thereto, the Board reviewed and analyzed various factors that they determined were relevant, including the factors described below.
The nature, extent, and quality of the services to be provided by Fiera Capital. In this regard, the Board reviewed the services being provided by the current portfolio management team to the Fund including, without limitation, the investment advisory services since the Fund’s inception, and their efforts to promote the Fund and assist in its distribution. The Board also considered Fiera Capital’s proposed services to the Fund including, without limitation, Fiera Capital’s procedures for formulating investment recommendations and assuring compliance with the Fund’s investment objective and limitations; proposed marketing and distribution efforts; and Fiera Capital’s compliance procedures and practices. The Board considered representations by the Adviser and Fiera Capital that no changes are anticipated in the portfolio management team or investment approach as a result of the Transaction. The Board also noted that the principal at the Adviser serving as the Fund’s Principal Executive Officer has agreed to continuing serving in such a role without additional compensation. After reviewing the foregoing information and further information regarding Fiera Capital’s business, the Board concluded that the quality, extent, and nature of the services to be provided by Fiera Capital were satisfactory and adequate for the Fund.
The investment management capabilities and experience of Fiera Capital. In this regard, the Board considered the representations by the Adviser and Fiera Capital that the portfolio management team at the Adviser providing investment management services to the Fund is expected to remain at Fiera Capital and will continue providing the same management services to the Fund after the closing of the Transaction. The Board also considered the investment management experience of other personnel at Fiera Capital. After consideration of these and other factors, the Board determined that Fiera Capital will have the requisite experience to serve as investment adviser for the Fund.
The investment performance of the Fund. In this regard, the Board compared the performance of the Fund with the performance of its benchmark index and related Morningstar category. The Board also considered the consistency of the Adviser’s management with the Fund’s investment objective and policies and representations by the Adviser and Fiera Capital that no anticipated changes to the Fund’s portfolio management team is expect as a result of the Transaction. The Board noted that while relative to its peer group and funds of similar size and structure in the Fund’s Morningstar category (Mid Cap Growth, True No Load, $100 million to $500 million), the Fund had underperformed the peer groups’ and the Morningstar category’s
33
APEXcm SMALL/MID-CAP GROWTH FUND
DISCLOSURE REGARDING APPROVAL OF INVESTMENT ADVISORY AGREEMENT (Unaudited) (Continued)
average and median for the one and three year periods, the Fund’s portfolio management team had provided a reasonable explanation for the differences in performance. Following discussion of the investment performance of the Fund, the experience of Fiera Capital and the Fund’s portfolio management team in managing mutual funds, and other factors, the Board concluded that the investment performance of the Fund has been satisfactory.
The costs of the services to be provided and profits to be realized by Fiera Capital and its affiliates from its relationship with the Fund. In analyzing the cost of services and potential profitability of Fiera Capital from its relationship with the Fund, the Board considered that the Transaction would result in no changes to the advisory fee charged to the Fund under the New Advisory Agreement and that the Fund would pay the same advisory fee it currently pays under the existing investment advisory agreement. Further, the Board noted that Fiera Capital has agreed to a new expense limitation agreement (“New ELA”) substantially similar to the existing expense limitation agreement with the Adviser and Fiera Capital’s commitment to continue the New ELA for the Fund until at least October 1, 2017. The Board also considered Fiera Capital’s proposed staffing, personnel, and methods of operations; the education and experience of its personnel; compliance program, policies, and procedures; financial condition and the level of commitment to the Fund, and, generally, Fiera Capital’s advisory business; the asset level of the Fund; the overall expenses of the Fund, including the advisory fee; and the differences in fees and services to Fiera Capital’s other clients that may be similar to the Fund.
The Board also considered potential benefits for Fiera Capital in managing the Fund, including promotion of Fiera Capital’s name and the potential for it to receive research, statistical, or other services from the Fund’s trades. The Board compared the Fund’s advisory fee and overall expense ratio under the proposed New Advisory Agreement and New ELA with Fiera Capital to the average advisory fees and average expense ratios for its peer group and Morningstar category. The Board further noted that the proposed Fund’s overall annual expense ratio of 1.05% is lower than the Morningstar category’s average expense ratio, but higher than the category’s median expense ratio and was higher than its peer group’s average and median expense ratio. The Board also compared the fees paid by the Fund to the fees paid by other clients of Fiera Capital, and considered the similarities and differences of services received by such other clients as compared to the service provided to the Fund. Following these comparisons and upon further consideration and discussion of the foregoing, the Board concluded that the proposed advisory fee to be paid to Fiera Capital and expense cap under the New ELA with Fiera Capital is fair and reasonable.
34
APEXcm SMALL/MID-CAP GROWTH FUND
DISCLOSURE REGARDING APPROVAL OF INVESTMENT ADVISORY AGREEMENT (Unaudited) (Continued)
The extent to which economies of scale would be realized as the Fund grows and whether advisory fee levels reflect these economies of scale for the benefit of the Fund’s investors. In this regard, the Board considered that the Fund’s fee arrangements with Fiera Capital involve both the advisory fee and the New ELA. The Board determined that while the advisory fee remained the same as asset levels increased, the shareholders of the Fund will continue to experience benefits from the New ELA until the Fund assets grow to a level where its expenses otherwise fall below the expense limit. Following further discussion of the Fund’s asset level, expectations for growth, and level of fees, the Board determined that the Fund’s proposed fee arrangements with Fiera Capital would provide benefits for the next two years, and the Board could review the arrangements going forward as necessary. After further discussion, the Board concluded the Fund’s arrangements with Fiera Capital were fair and reasonable in relationship to the nature and quality of services to be provided by Fiera Capital.
Brokerage and portfolio transactions. In this regard, the Board considered Fiera Capital’s policies and procedures as it relates to seeking best execution for its clients. The Board also considered the historical portfolio turnover rate for the Fund; the method and basis for selecting and evaluating the broker-dealers used; any anticipated allocation of portfolio business to persons affiliated with Fiera Capital; and the extent to which the Fund’s trades may be allocated to soft-dollar arrangements. After further review and discussion, the Board determined that Fiera Capital’s practices regarding brokerage and portfolio transactions were satisfactory.
Possible conflicts of interest. In evaluating the possibility for conflicts of interest, the Board considered such matters as the experience and abilities of the advisory personnel to be assigned to the Fund, Fiera Capital’s process for allocating trades among its different clients, and the substance and administration of Fiera Capital’s code of ethics. The Board also considered Fiera Capital’s other clients, including clients that may have similar types of investment objectives and strategies as the Fund. Following further consideration and discussion, the Board determined that Fiera Capital’s standards and practices relating to the identification and mitigation of potential conflicts of interests were satisfactory.
Conclusion
After full consideration of the above factors as well as other factors, the Board unanimously concluded that approval of the Interim Investment Advisory Agreement and New Investment Advisory Agreement were in the best interests of the Fund and its shareholders.
35
This page intentionally left blank.
This page intentionally left blank.
BARROW VALUE OPPORTUNITY FUND
(BALIX)
BARROW LONG/SHORT OPPORTUNITY FUND
(BFSLX)
Annual Report
May 31, 2016
BARROW VALUE OPPORTUNITY FUND | July 14, 2016 |
Dear Shareholder,
We are pleased to report on the status and performance of the Barrow Value Opportunity Fund (“the Fund”) for the year ended May 31, 2016.
We believe that the Fund owns a well-positioned portfolio of equity interests in excellent businesses at attractive valuations. This portfolio is highly diversified by market capitalization segments (large, middle, small), industry sectors, and issuers. In selecting investments for the Fund, we search for businesses that feature high returns on capital, wide operating margins, and low debt loads. Based on our estimates of intrinsic value, we believe our portfolio’s valuation is attractively low on an absolute basis and less expensive than the U.S. stock market as represented by the S&P 500® Index (the “S&P 500”).
On August 30, 2013, the Fund was reorganized as a mutual fund from a private limited partnership, which had commenced operations on December 31, 2008. Please refer to the Performance Information on pages 4 and 5 for a summary of Fund performance versus the S&P 500 over various periods since the Fund’s inception.
The Fund’s long-term performance has been excellent relative to the S&P 500. The Fund has exceeded the total return of the S&P 500 in five of the past seven calendar years1. During the most recent year ended May 31, 2016, the Fund returned -5.29% net of all fees and expenses, which underperformed the S&P 500 by 7.01%. This underperformance is primarily attributable to the Fund’s mid and small-cap positions which make up roughly 80% of our long book. The year ended May 31, 2016 was an especially difficult period for small-cap stocks as the S&P 600 Value Index (for small-caps) returned -9.89% and the S&P 600 Growth Index returned -5.69%.
Barrow Street Advisors LLC (the “Adviser”) continues to use its proprietary private-equity approach to uncover companies that exhibit its Quality-meets-Value criteria. Based on extensive research by the Adviser, the Fund seeks to generate long-term capital appreciation by investing in companies with fundamental operating and financial attributes representative of both quality and value. To increase the Fund’s chances for success, we invest in a variety of positions that are diversified across market capitalization and industry sectors.
Over the past year, we uncovered 102 new investment opportunities, composed of 41 small-caps, 28 mid-caps, and 33 large-caps, and representing seven different industry sectors. We believe all of these new additions to the Fund’s portfolio are excellent companies with strong balance sheets. These companies are generally using their ample free cash flow to: a) re-invest in growth opportunities at high rates of return on investment; b) pay dividends; c) repurchase stock at attractive valuations; and/or d) retire outstanding debt.
1
In keeping with our practice since the beginning of 2009, over the past year the Fund’s investments were sourced by taking account of the opportunity set of all companies in our broad investment universe each time we committed capital to a new position. We think this approach allows us to uncover excellent investment opportunities that arise from temporary market inefficiencies and to gather up the most compelling investments across a wide array of industries and market capitalizations, while avoiding the destructive behavioral biases inherent in concentrated-stock and sector-specialized investing.
Thirteen of the Fund’s holdings were announced as take-over targets over the past year, which was approximately 2.4x the market average. The Fund has had investments in 80 take-overs since December 31, 20081, or roughly 3.5x the market average2. The control premiums we have captured by virtue of holding stocks that end up being merger targets has made repeated and meaningful contributions to the Fund’s total returns, and we expect continued benefits from this effect going forward. We typically sell companies from the Fund’s portfolio soon after they are announced as take-over targets and re-invest that capital.
Over the past year, the Fund’s portfolio generated total returns, before fees and expenses, of -4.31%, including +7.49% for large-caps, -9.51% for mid-caps and -4.44% for small-caps. This compares to +1.72% for the S&P 500 (for large-caps), -0.42% for the S&P 400 Midcap (for mid-caps), and -5.97% for the Russell 2000 (for small-caps) over the same period. The Fund’s sectors with the best absolute performance were Consumer Staples and Health Care, which generated total returns of +17.62% and +5.58%, respectively. The Fund’s sectors with the worst absolute performance were Energy and Consumer Discretionary, which returned -34.12% and -13.01%, respectively.
You can find additional commentary and reports about the Adviser’s management of the Fund’s portfolio on the Barrow Funds’ website (www.barrowfunds.com).
Sincerely,
Nicholas Chermayeff | Robert F. Greenhill, Jr. | David R. Bechtel |
Co-Portfolio Manager, | Co-Portfolio Manager, | Principal, |
Investment Committee | Investment Committee | Investment Committee |
1 | The investment related and performance information discussed above for periods prior to Barrow Value Opportunity Fund’s reorganization date (August 30, 2013) are based on the activities of the Fund’s predecessor, the Barrow Street Fund L.P., an unregistered limited partnership managed by the portfolio managers of Barrow Value Opportunity Fund (the “Predecessor Private Fund”). The Predecessor Private Fund was reorganized into the Institutional Class shares of the Barrow Value Opportunity Fund on August 30, 2013, the date that the Fund commenced operations (the “Reorganization”). Barrow Value Opportunity Fund has been managed in the same style and by the same portfolio managers since the Predecessor Private Fund’s inception on December 31, 2008. The performance information shows the Predecessor Private Fund’s returns calculated using the actual fees and expenses charged by the Predecessor Private Fund. This prior performance is net of management fees and other expenses, but does not include the effect of the Predecessor Private Fund’s performance fee, which was in place until October 7, 2012. Prior to the Reorganization, the Predecessor Private Fund was not subject to certain investment restrictions, diversification requirements, and other restrictions of the Investment Company Act of 1940, as amended, or Subchapter M of the Internal Revenue Code of 1986, as amended, which, if they had been applicable, might have adversely affected Barrow Value Opportunity Fund’s performance. |
2
2 | The frequency of merger and acquisition (“M&A”) activity in the Fund’s portfolio is calculated on a quarterly basis by dividing the cumulative number of portfolio holdings that have been announced as merger or acquisition targets by the cumulative number of unique holdings held in the Fund’s portfolio. The frequency of M&A activity in the market is calculated on a quarterly basis by dividing the cumulative number of publicly-traded U.S. common stocks that have been announced as acquisition targets per Bloomberg by the total universe of publicly-traded U.S. common stocks as identified by Bloomberg (approximately 10,000). |
Past performance is not predictive of future performance. Investment results and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data quoted. Performance data current to the most recent month end are available by calling 1-877-767-6633.
An investor should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. The Fund’s prospectus contains this and other important information. To obtain a copy of the Fund’s prospectus please visit our website at www.barrowfunds.com or call 1-877-767-6633 and a copy will be sent to you free of charge. Please read the prospectus carefully before you invest. The Fund is distributed by Ultimus Fund Distributors, LLC.
The Letter to Shareholders seeks to describe some of the Adviser’s current opinions and views of the financial markets. Although the Adviser believes it has a reasonable basis for any opinions or views expressed, actual results may differ, sometimes significantly so, from those expected or expressed. The securities held by the Fund that are discussed in the Letter to Shareholders were held during the period covered by this Report. They do not comprise the entire investment portfolio of the Fund, may be sold at any time and may no longer be held by the Fund. For a complete list of securities held by the Fund as of May 31, 2016, please see the Schedule of Investments section of the Annual Report. The opinions of the Fund’s Adviser with respect to those securities may change at any time.
Statements in the Letter to Shareholders that reflect projections or expectations for future financial or economic performance of the Fund and the market in general and statements of the Fund’s plans and objectives for future operations are forward-looking statements. No assurance can be given that actual results or events will not differ materially from those projected, estimated, assumed, or anticipated in any such forward-looking statements. Important factors that could result in such differences, in addition to factors noted with such forward-looking statements include, without limitation, general economic conditions, such as inflation, recession, and interest rates. Past performance is not a guarantee of future results.
3
BARROW VALUE OPPORTUNITY FUND
PERFORMANCE INFORMATION
May 31, 2016 (Unaudited)
Comparison of the Change in Value of a $10,000 Investment in
Barrow Value Opportunity Fund(a)
versus the S&P 500® Index
Average Annual Total Returns | |||
1 Year | 5 Years | Since | |
Barrow Value Opportunity Fund(a)(b) | (5.29%) | 9.80% | 14.96% |
S&P 500® Index | 1.72% | 11.67% | 14.47% |
4
BARROW VALUE OPPORTUNITY FUND
PERFORMANCE INFORMATION
May 31, 2016 (Unaudited) (Continued)
Comparison of Yearly Returns with the S&P 500® Index | |||
Barrow Value Opportunity Fund(a) | S&P 500® Index | Difference | |
Yearly Total Returns for Calendar Years: | |||
2009 | 30.10% | 26.46% | 3.64% |
2010 | 18.75% | 15.06% | 3.69% |
2011 | 5.50% | 2.11% | 3.39% |
2012 | 18.77% | 16.00% | 2.77% |
2013 | 36.69% | 32.39% | 4.30% |
2014 | 5.13% | 13.69% | (8.56%) |
2015 | 0.81% | 1.38% | (0.57%) |
Total Return Since Inception (not annualized, as of 12/31/15) | 180.48% | 163.02% | 17.46% |
(a) | The Barrow Value Opportunity Fund (the "Fund") performance includes the performance of the Barrow Street Fund L.P. (the "Predecessor Private Fund"), the Fund's predecessor, for the periods before the Fund's registration statement became effective. The Predecessor Private Fund was reorganized into the Fund at the close of business on August 30, 2013 (the "Reorganization"), the date the Fund commenced operations. The Fund has been managed in the same style and by the same portfolio managers since the Predecessor Private Fund’s inception on December 31, 2008. The Fund’s investment goals, policies, guidelines and restrictions are, in all material respects, equivalent to those of the Predecessor Private Fund. The performance of the Predecessor Private Fund is net of management fees of 1.50% of assets but does not include the effect of a 20% performance fee which was in place until October 7, 2012. Prior to the Reorganization, the Predecessor Private Fund was not subject to certain investment restrictions, diversification requirements and other restrictions of the Investment Company Act of 1940, as amended, or Subchapter M of the Internal Revenue Code of 1986, as amended. If such restrictions had been applicable, they might have adversely affected the Predecessor Private Fund’s performance. |
(b) | The Fund’s total returns do not reflect the deduction of taxes a shareholder would pay on Fund distributions, if any, or the redemption of Fund shares. |
(c) | Represents the period from December 31, 2008(a) through May 31, 2016. |
5
BARROW LONG/SHORT OPPORTUNITY FUND | |
LETTER TO SHAREHOLDERS |
Dear Shareholder,
We are pleased to report on the status and performance of the Barrow Long/Short Opportunity Fund (“the Fund”) for the year ended May 31, 2016.
We believe the Fund owns a well-positioned long portfolio of equity positions in excellent businesses at attractive valuations that feature high returns on capital, wide operating margins, and low debt load. The Fund also maintains short positions in the common stock of companies that we believe have poor business characteristics and are trading at high prices. The Fund’s long and short portfolios are highly diversified by market cap segments (large, mid, small), industry sectors, and issuers.
We believe the Fund is well positioned to do well in most future market conditions, especially a bear market. In our opinion, the Fund’s long and short portfolios are cheap and expensive, respectively, on an absolute basis and in relation to the U.S. stock market as represented by the S&P 500® Index (“S&P 500”). We believe the Fund’s short portfolio provides a meaningful hedge against the market’s potential downside volatility.
For the year ended May 31, 2016, the Fund posted a total return of -2.45%, which compares to 1.72% for the S&P 500 and -5.33% for the HFRI Equity Hedge Index. The Fund underperformed the S&P 500 due primarily to the negative returns of its mid and small-cap long positions which make up roughly 80% of our long book. The year ended May 31, 2016 was an especially difficult period for small-cap stocks as the S&P 600 Value Index (for small-caps) returned -9.89% and the S&P 600 Growth Index returned -5.69%.
The Fund maintains a target gross exposure of approximately 220% of its net assets, with long exposure of 130%, short exposure of 90%, and net exposure of 40%. For the year ended May 31, 2016, the Fund’s long portfolio generated an unleveraged total return before fees and expenses of -4.31%, which underperformed the S&P 500 by 6.03%. This underperformance is primarily attributable to the Fund’s mid-cap and small-cap long positions. With respect to its short portfolio, the Fund experienced attractive performance as the companies that the Fund sold short had a negative overall return (positive for the Fund). The Fund’s short portfolio generated an unleveraged total return, before fees and expenses, of -5.82%, or 7.54% less than the S&P 500, with strong contributions from all three market cap segments.
Barrow Street Advisors LLC (the “Adviser”) continues to use its proprietary private equity approach to uncover companies that exhibit its Quality-meets-Value criteria. Based on extensive research by the Adviser, the Fund seeks to generate above-average returns through capital appreciation by investing long in companies with fundamental operating and financial attributes representative of both quality and value and selling short companies of both lower quality and high price. Using this approach the Fund continued to uncover potential opportunities to: 1) purchase quality companies trading
6
at temporary discounts to their intrinsic values; and 2) sell short the stock of lower quality companies trading at prices well above their intrinsic values. To increase the Fund’s chances for success, we invest in a variety of positions diversified across market capitalization and industry sectors.
Over the past year, we uncovered 102 new long opportunities in seven industry sectors, including 41 small-caps, 28 mid-caps, and 33 large-caps. We believe all of these new additions to the Fund’s portfolio are excellent companies with strong balance sheets. They are generally using their ample free cash flow to: a) re-invest in growth opportunities at high rates of return on investment; b) pay dividends; c) repurchase stock at attractive valuations; and/or d) retire outstanding debt. In tandem, we initiated 343 new short positions, including 173 small-caps, 85 mid-caps and 85 large-caps. We believe these companies are overpriced and exhibit weak quality characteristics.
In keeping with our past practice, over the past year the Fund’s investments were sourced by taking account of the opportunity set of all companies in our broad investment universe each time we committed capital to a new position. We think this approach allows us to uncover excellent investment opportunities that arise from temporary market inefficiencies and to gather up the most compelling investments across a wide array of industries and market capitalizations while avoiding the destructive behavioral biases inherent in concentrated-stock and sector-specialized investing.
Thirteen of the Fund’s long positions were announced as take-over targets over the past year, which was approximately 2.4x the market average. On the short side, 42 of the Fund’s positions were announced as take-over targets over the past year, which was approximately 2.1x the market average1. The control premiums we have captured by virtue of holding stocks that end up being merger targets has made repeated and meaningful contributions to the Fund’s total returns, and we expect continued benefits from this effect going forward. We typically sell companies from the Fund’s portfolio soon after they are announced as take-over targets and re-invest that capital.
Over the past year, the Fund’s long portfolio generated unleveraged total returns before fees and expenses of -4.31%, including +7.49% for large-caps, -9.51% for mid-caps and -4.44% for small-caps. This compares to +1.72% for the S&P 500 (for large-caps), -0.42% for the S&P 400 Midcap (for mid-caps), and -5.97% for the Russell 2000 (for small-caps) over the same period. The Fund’s sectors with the best absolute performance were Consumer Staples and Health Care, which generated total returns of +17.62% and +5.58%, respectively. The Fund’s sectors with the worst absolute performance were Energy and Consumer Discretionary, which returned -34.12% and -13.01%, respectively.
7
Over the same period, the Fund’s short portfolio generated total returns before fees and expenses of -0.82%, including -0.85% for large-caps, -8.02% for mid-caps and -6.41% for small-caps. The Fund’s sectors with the best absolute performance were Energy and Information Technology, which returned -20.39% and -10.86%, respectively. The Fund’s sectors that did least well were Consumer Staples and Industrials, which generated total returns of +4.40% and -2.81%, respectively.
You can find more information about the Fund’s portfolio on the Barrow Funds website (www.barrowfunds.com).
Sincerely,
Nicholas Chermayeff | Robert F. Greenhill, Jr. | David R. Bechtel |
Co-Portfolio Manager, | Co-Portfolio Manager, | Principal, |
Investment Committee | Investment Committee | Investment Committee |
1 | The frequency of merger and acquisition (“M&A”) activity in the Fund’s portfolio is calculated on a quarterly basis by dividing the cumulative number of portfolio holdings that have been announced as merger or acquisition targets by the cumulative number of unique holdings held in the Fund’s portfolio. The frequency of M&A activity in the market is calculated on a quarterly basis by dividing the cumulative number of publicly-traded U.S. common stocks that have been announced as acquisition targets per Bloomberg by the total universe of publicly-traded U.S. common stocks as identified by Bloomberg (approximately 10,000). |
Past performance is not predictive of future performance. Investment results and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data quoted. Performance data current to the most recent month end are available by calling 1-877-767-6633.
An investor should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. The Fund’s prospectus contains this and other important information. To obtain a copy of the Fund’s prospectus please visit our website at www.barrowfunds.com or call 1-877-767-6633 and a copy will be sent to you free of charge. Please read the prospectus carefully before you invest. The Fund is distributed by Ultimus Fund Distributors, LLC.
The Letter to Shareholders seeks to describe some of the Adviser’s current opinions and views of the financial markets. Although the Adviser believes it has a reasonable basis for any opinions or views expressed, actual results may differ, sometimes significantly so, from those expected or expressed. The securities held by the Fund that are discussed in the Letter to Shareholders were held during the period covered by this Report. They do not comprise the entire investment portfolio of the Fund, may be sold at any time and may no longer be held by the Fund. For a complete list of securities held by the Fund as of May 31, 2016, please see the Schedule of Investments and Schedule of Securities Sold Short sections of the Annual Report. The opinions of the Fund’s Adviser with respect to those securities may change at any time.
8
Statements in the Letter to Shareholders that reflect projections or expectations for future financial or economic performance of the Fund and the market in general and statements of the Fund’s plans and objectives for future operations are forward-looking statements. No assurance can be given that actual results or events will not differ materially from those projected, estimated, assumed, or anticipated in any such forward-looking statements. Important factors that could result in such differences, in addition to factors noted with such forward-looking statements include, without limitation, general economic conditions, such as inflation, recession, and interest rates. Past performance is not a guarantee of future results.
9
BARROW LONG/SHORT OPPORTUNITY FUND
PERFORMANCE INFORMATION
May 31, 2016 (Unaudited)
Comparison of the Change in Value of a $10,000 Investment in
Barrow Long/Short Opportunity Fund
versus the S&P 500® Index
Average Annual Total Returns | ||
1 Year | Since | |
Barrow Long/Short Opportunity Fund(a) | (2.45%) | 2.01% |
S&P 500® Index | 1.72% | 11.85% |
(a) | The Fund's total returns do not reflect the deduction of taxes a shareholder would pay on Fund distributions, if any, or the redemption of Fund shares. |
(b) | The Fund commenced operations on August 30, 2013. |
10
BARROW VALUE OPPORTUNITY FUND
PORTFOLIO INFORMATION
May 31, 2016 (Unaudited)
Sector Diversification
Top 10 Long Equity Holdings
Security Description | % of |
WD-40 Company | 1.6% |
Altria Group, Inc. | 1.4% |
Anika Therapeutics, Inc. | 1.4% |
Herbalife Ltd. | 1.3% |
USANA Health Sciences, Inc. | 1.3% |
Lancaster Colony Corporation | 1.3% |
Reynolds American, Inc. | 1.3% |
InterDigital, Inc. | 1.3% |
Deluxe Corporation | 1.3% |
Omnicom Group, Inc. | 1.2% |
11
BARROW LONG/SHORT OPPORTUNITY FUND
PORTFOLIO INFORMATION
May 31, 2016 (Unaudited)
Net Sector Exposure Diversification*
* | The net percentages are computed by taking the net dollar exposure, including short positions, and dividing by the net assets of the Fund. Consequently, the percentages will not total to 100%. |
Top 10 Long Equity Holdings | Top 10 Short Equity Holdings | |||
Security Description | % of | Security Description | % of | |
WD-40 Company | 2.1% | Fresh Del Monte Produce, Inc. | 0.9% | |
Altria Group, Inc. | 1.9% | Calavo Growers, Inc. | 0.8% | |
Anika Therapeutics, Inc. | 1.8% | Anderson's, Inc. (The) | 0.8% | |
Herbalife Ltd. | 1.8% | TreeHouse Foods, Inc. | 0.8% | |
USANA Health Sciences, Inc. | 1.8% | Casey's General Stores, Inc. | 0.7% | |
Lancaster Colony Corporation | 1.7% | Dean Foods Company | 0.7% | |
Reynolds American, Inc. | 1.7% | SpartanNash Company | 0.7% | |
InterDigital, Inc. | 1.7% | West Pharmaceutical Services, Inc. | 0.6% | |
Deluxe Corporation | 1.7% | Snyder's-Lance, Inc. | 0.6% | |
Omnicom Group, Inc. | 1.7% | Integra LifeSciences Holdings Corporation | 0.6% |
12
BARROW VALUE OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 99.5% | Shares | Value | ||||||
Consumer Discretionary — 17.7% | ||||||||
Auto Components — 1.6% | ||||||||
Gentex Corporation | 23,415 | $ | 388,221 | |||||
Visteon Corporation | 2,055 | 154,084 | ||||||
542,305 | ||||||||
Automobiles — 1.0% | ||||||||
Thor Industries, Inc. | 5,315 | 345,475 | ||||||
Diversified Consumer Services — 0.5% | ||||||||
H&R Block, Inc. (a) | 7,496 | 160,114 | ||||||
Hotels, Restaurants & Leisure — 0.8% | ||||||||
DineEquity, Inc. | 379 | 31,859 | ||||||
Interval Leisure Group, Inc. | 16,923 | 243,014 | ||||||
274,873 | ||||||||
Household Durables — 0.4% | ||||||||
GoPro, Inc. - Class A (b) | 6,490 | 66,652 | ||||||
Tupperware Brands Corporation | 1,065 | 60,258 | ||||||
126,910 | ||||||||
Internet & Catalog Retail — 0.1% | ||||||||
Lands' End, Inc. (b) | 2,495 | 41,841 | ||||||
Leisure Products — 1.2% | ||||||||
Nautilus, Inc. (b) | 12,856 | 265,219 | ||||||
Polaris Industries, Inc. | 1,461 | 124,214 | ||||||
Smith & Wesson Holding Corporation (b) | 1,448 | 35,288 | ||||||
424,721 | ||||||||
Media — 5.6% | ||||||||
AMC Networks, Inc. - Class A (b) | 2,169 | 138,686 | ||||||
Interpublic Group of Companies, Inc. (The) (a) | 12,245 | 292,656 | ||||||
Meredith Corporation | 576 | 28,512 | ||||||
MSG Networks, Inc. - Class A (b) | 6,138 | 106,249 | ||||||
National CineMedia, Inc. | 4,182 | 61,057 | ||||||
Omnicom Group, Inc. (a) | 5,164 | 430,316 | ||||||
Scripps Networks Interactive, Inc. - Class A | 4,437 | 285,477 | ||||||
TEGNA, Inc. | 8,966 | 205,859 | ||||||
Time, Inc. | 4,993 | 79,239 | ||||||
Time Warner, Inc. | 432 | 32,685 | ||||||
Viacom, Inc. - Class B | 6,241 | 276,913 | ||||||
1,937,649 |
13
BARROW VALUE OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 99.5% (Continued) | Shares | Value | ||||||
Consumer Discretionary — 17.7% (Continued) | ||||||||
Specialty Retail — 5.5% | ||||||||
Bed Bath & Beyond, Inc. (b) | 501 | $ | 22,420 | |||||
Best Buy Company, Inc. | 885 | 28,470 | ||||||
Buckle, Inc. (The) | 11,641 | 287,882 | ||||||
Cato Corporation (The) - Class A | 8,533 | 322,974 | ||||||
Express, Inc. (b) | 1,767 | 25,692 | ||||||
Foot Locker, Inc. | 556 | 31,092 | ||||||
Francesca's Holdings Corporation (b) | 13,713 | 142,889 | ||||||
GameStop Corporation - Class A (a) | 12,308 | 358,163 | ||||||
Gap, Inc. (The) | 2,575 | 46,324 | ||||||
GNC Holdings, Inc. - Class A | 5,569 | 145,072 | ||||||
Hibbett Sports, Inc. (b) | 4,850 | 167,519 | ||||||
Michaels Companies, Inc. (The) (b) | 989 | 28,988 | ||||||
Outerwall, Inc. | 3,433 | 141,611 | ||||||
Select Comfort Corporation (b) | 3,157 | 70,780 | ||||||
Winmark Corporation | 652 | 64,059 | ||||||
Zumiez, Inc. (b) | 1,478 | 21,993 | ||||||
1,905,928 | ||||||||
Textiles, Apparel & Luxury Goods — 1.0% | ||||||||
Deckers Outdoor Corporation (b) | 478 | 25,138 | ||||||
Fossil Group, Inc. (b) | 1,043 | 29,068 | ||||||
Steven Madden Ltd. (b) | 8,153 | 279,730 | ||||||
333,936 | ||||||||
Consumer Staples — 22.9% | ||||||||
Beverages — 3.0% | ||||||||
Boston Beer Company, Inc. (The) - Class A (b) | 1,303 | 202,486 | ||||||
Dr Pepper Snapple Group, Inc. (a) | 4,518 | 412,945 | ||||||
MGP Ingredients, Inc. | 1,075 | 35,174 | ||||||
National Beverage Corporation (a)(b) | 7,575 | 394,506 | ||||||
1,045,111 | ||||||||
Food & Staples Retailing — 0.5% | ||||||||
Smart & Final Stores, Inc. (b) | 2,308 | 36,628 | ||||||
Sprouts Farmers Market, Inc. (b) | 3,956 | 97,951 | ||||||
United Natural Foods, Inc. (b) | 851 | 31,708 | ||||||
166,287 | ||||||||
Food Products — 6.0% | ||||||||
Amplify Snack Brands, Inc. (b) | 15,265 | 199,208 | ||||||
B&G Foods, Inc. | 3,565 | 153,259 | ||||||
Cal-Maine Foods, Inc. | 2,457 | 109,337 | ||||||
Hormel Foods Corporation | 2,378 | 81,827 |
14
BARROW VALUE OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 99.5% (Continued) | Shares | Value | ||||||
Consumer Staples — 22.9% (Continued) | ||||||||
Food Products — 6.0% (Continued) | ||||||||
John B. Sanfilippo & Son, Inc. | 2,447 | $ | 115,792 | |||||
Lancaster Colony Corporation | 3,714 | 450,248 | ||||||
Mead Johnson Nutrition Company | 1,676 | 137,901 | ||||||
Mondelēz International, Inc. - Class A | 5,898 | 262,402 | ||||||
Pilgrim's Pride Corporation | 12,650 | 314,606 | ||||||
Pinnacle Foods, Inc. | 832 | 35,052 | ||||||
Sanderson Farms, Inc. | 2,126 | 190,724 | ||||||
Seaboard Corporation (b) | 10 | 30,200 | ||||||
2,080,556 | ||||||||
Household Products — 2.7% | ||||||||
Central Garden & Pet Company (b) | 8,789 | 164,179 | ||||||
Clorox Company (The) | 1,662 | 213,633 | ||||||
WD-40 Company (a) | 5,007 | 557,630 | ||||||
935,442 | ||||||||
Personal Products — 5.3% | ||||||||
Avon Products, Inc. | 5,079 | 19,808 | ||||||
Herbalife Ltd. (a)(b) | 8,030 | 464,857 | ||||||
Inter Parfums, Inc. | 8,913 | 260,616 | ||||||
Natural Health Trends Corporation | 4,253 | 126,952 | ||||||
Nu Skin Enterprises, Inc. - Class A | 9,381 | 370,080 | ||||||
Revlon, Inc. - Class A (b) | 4,510 | 140,622 | ||||||
USANA Health Sciences, Inc. (a)(b) | 3,783 | 456,419 | ||||||
1,839,354 | ||||||||
Tobacco — 5.4% | ||||||||
Altria Group, Inc. | 7,660 | 487,482 | ||||||
Philip Morris International, Inc. (a) | 4,103 | 404,884 | ||||||
Reynolds American, Inc. | 8,877 | 441,187 | ||||||
Universal Corporation | 2,661 | 145,557 | ||||||
Vector Group Ltd. | 16,908 | 363,015 | ||||||
1,842,125 | ||||||||
Energy — 6.8% | ||||||||
Energy Equipment & Services — 1.6% | ||||||||
Dril-Quip, Inc. (b) | 3,192 | 194,808 | ||||||
Forum Energy Technologies, Inc. (b) | 2,565 | 43,041 | ||||||
Helmerich & Payne, Inc. | 331 | 20,240 | ||||||
National Oilwell Varco, Inc. | 3,752 | 123,628 | ||||||
Oceaneering International, Inc. | 1,848 | 61,095 | ||||||
Oil States International, Inc. (b) | 1,166 | 38,315 | ||||||
RPC, Inc. (b) | 4,321 | 63,735 | ||||||
544,862 |
15
BARROW VALUE OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 99.5% (Continued) | Shares | Value | ||||||
Energy — 6.8% (Continued) | ||||||||
Oil, Gas & Consumable Fuels — 5.2% | ||||||||
Alliance Resource Partners, L.P. | 4,259 | $ | 62,394 | |||||
Alon USA Energy, Inc. | 2,184 | 16,489 | ||||||
Alon USA Partners, L.P. | 16,779 | 158,562 | ||||||
BP Prudhoe Bay Royalty Trust | 5,338 | 74,465 | ||||||
CVR Energy, Inc. | 1,151 | 22,606 | ||||||
CVR Refining, L.P. | 13,285 | 134,976 | ||||||
Green Plains, Inc. | 1,778 | 33,000 | ||||||
HollyFrontier Corporation | 2,700 | 72,252 | ||||||
Marathon Petroleum Corporation (a) | 6,552 | 228,206 | ||||||
PBF Logistics, L.P. | 3,491 | 76,069 | ||||||
Sabine Royalty Trust | 2,744 | 93,680 | ||||||
Tesoro Corporation | 2,606 | 203,476 | ||||||
Valero Energy Corporation | 5,362 | 293,301 | ||||||
Western Refining, Inc. (a) | 12,059 | 256,133 | ||||||
World Fuel Services Corporation | 1,899 | 87,297 | ||||||
1,812,906 | ||||||||
Health Care — 20.7% | ||||||||
Health Care Equipment & Supplies — 4.9% | ||||||||
Align Technology, Inc. (b) | 563 | 44,381 | ||||||
Anika Therapeutics, Inc. (b) | 9,930 | 469,888 | ||||||
Atrion Corporation | 75 | 29,455 | ||||||
C.R. Bard, Inc. | 751 | 164,499 | ||||||
Edwards Lifesciences Corporation (b) | 438 | 43,143 | ||||||
Globus Medical, Inc. - Class A (a)(b) | 15,398 | 373,248 | ||||||
LivaNova plc (b) | 1,700 | 82,977 | ||||||
Meridian Bioscience, Inc. | 18,759 | 365,425 | ||||||
Varian Medical Systems, Inc. (b) | 1,250 | 103,487 | ||||||
1,676,503 | ||||||||
Health Care Providers & Services — 11.4% | ||||||||
Aceto Corporation | 1,391 | 31,033 | ||||||
AmerisourceBergen Corporation | 388 | 29,092 | ||||||
AmSurg Corporation (b) | 5,096 | 381,130 | ||||||
Cardinal Health, Inc. | 4,606 | 363,644 | ||||||
Chemed Corporation (a) | 2,796 | 364,626 | ||||||
CorVel Corporation (b) | 1,911 | 91,996 | ||||||
Ensign Group, Inc. (The) | 1,340 | 26,599 | ||||||
Express Scripts Holding Company (b) | 1,644 | 124,204 | ||||||
HCA Holdings, Inc. (b) | 776 | 60,543 | ||||||
HealthSouth Corporation | 9,234 | 372,315 |
16
BARROW VALUE OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 99.5% (Continued) | Shares | Value | ||||||
Health Care — 20.7% (Continued) | ||||||||
Health Care Providers & Services — 11.4% (Continued) | ||||||||
LHC Group, Inc. (b) | 4,477 | $ | 188,034 | |||||
McKesson Corporation | 1,098 | 201,088 | ||||||
MEDNAX, Inc. (a)(b) | 5,315 | 363,812 | ||||||
Patterson Companies, Inc. | 718 | 35,046 | ||||||
Premier, Inc. - Class A (b) | 10,195 | 324,201 | ||||||
Quest Diagnostics, Inc. (a) | 5,531 | 426,827 | ||||||
Surgical Care Affiliates, Inc. (b) | 4,296 | 192,332 | ||||||
U.S. Physical Therapy, Inc. | 6,401 | 369,786 | ||||||
3,946,308 | ||||||||
Health Care Technology — 0.5% | ||||||||
Computer Programs & Systems, Inc. | 3,460 | 143,071 | ||||||
Inovalon Holdings, Inc. - Class A (b) | 1,987 | 36,938 | ||||||
180,009 | ||||||||
Pharmaceuticals — 3.9% | ||||||||
ANI Pharmaceuticals, Inc. (b) | 2,857 | 154,706 | ||||||
Depomed, Inc. (b) | 5,651 | 115,450 | ||||||
Johnson & Johnson (a) | 3,282 | 369,849 | ||||||
Lannett Company, Inc. (b) | 2,787 | 67,975 | ||||||
Prestige Brands Holdings, Inc. (b) | 7,817 | 422,431 | ||||||
Sucampo Pharmaceuticals, Inc. - Class A (b) | 14,883 | 175,024 | ||||||
Supernus Pharmaceuticals, Inc. (b) | 1,749 | 34,123 | ||||||
1,339,558 | ||||||||
Industrials — 9.0% | ||||||||
Aerospace & Defense — 0.6% | ||||||||
Honeywell International, Inc. | 183 | 20,831 | ||||||
Northrop Grumman Corporation | 300 | 63,801 | ||||||
Raytheon Company | 833 | 108,015 | ||||||
United Technologies Corporation | 185 | 18,607 | ||||||
211,254 | ||||||||
Air Freight & Logistics — 0.9% | ||||||||
C.H. Robinson Worldwide, Inc. | 657 | 49,262 | ||||||
Expeditors International of Washington, Inc. | 5,719 | 277,657 | ||||||
326,919 | ||||||||
Commercial Services & Supplies — 1.4% | ||||||||
Deluxe Corporation | 6,670 | 434,417 | ||||||
Pitney Bowes, Inc. | 1,934 | 36,030 | ||||||
UniFirst Corporation | 74 | 8,560 | ||||||
479,007 |
17
BARROW VALUE OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 99.5% (Continued) | Shares | Value | ||||||
Industrials — 9.0% (Continued) | ||||||||
Electrical Equipment — 1.5% | ||||||||
Emerson Electric Company | 3,145 | $ | 163,603 | |||||
Generac Holdings, Inc. (b) | 272 | 10,312 | ||||||
Hubbell, Inc. | 197 | 20,935 | ||||||
Rockwell Automation, Inc. | 2,039 | 236,626 | ||||||
Thermon Group Holdings, Inc. (b) | 4,072 | 81,847 | ||||||
513,323 | ||||||||
Machinery — 2.0% | ||||||||
Douglas Dynamics, Inc. | 2,201 | 47,806 | ||||||
Federal Signal Corporation | 12,480 | 162,365 | ||||||
Greenbrier Companies, Inc. (The) | 6,637 | 190,482 | ||||||
ITT, Inc. | 887 | 31,497 | ||||||
PACCAR, Inc. | 563 | 31,387 | ||||||
Sun Hydraulics Corporation | 456 | 13,347 | ||||||
Wabash National Corporation (b) | 14,095 | 199,867 | ||||||
676,751 | ||||||||
Professional Services — 1.7% | ||||||||
Dun & Bradstreet Corporation (The) | 68 | 8,629 | ||||||
Insperity, Inc. | 297 | 21,375 | ||||||
Korn/Ferry International | 386 | 11,136 | ||||||
Resources Connection, Inc. | 756 | 11,778 | ||||||
Robert Half International, Inc. | 5,208 | 216,601 | ||||||
RPX Corporation (b) | 32,072 | 322,324 | ||||||
591,843 | ||||||||
Road & Rail — 0.8% | ||||||||
Landstar System, Inc. | 3,695 | 250,706 | ||||||
Universal Logistics Holdings, Inc. | 847 | 12,231 | ||||||
262,937 | ||||||||
Trading Companies & Distributors — 0.1% | ||||||||
Grainger (W.W.), Inc. | 89 | 20,323 | ||||||
MSC Industrial Direct Company, Inc. - Class A | 132 | 9,894 | ||||||
30,217 | ||||||||
Information Technology — 13.7% | ||||||||
Communications Equipment — 3.4% | ||||||||
Brocade Communications Systems, Inc. | 36,618 | 331,759 | ||||||
Cisco Systems, Inc. | 2,358 | 68,500 | ||||||
InterDigital, Inc. | 7,531 | 439,057 | ||||||
QUALCOMM, Inc. | 3,606 | 198,042 | ||||||
Ubiquiti Networks, Inc. (b) | 3,280 | 130,741 | ||||||
1,168,099 |
18
BARROW VALUE OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 99.5% (Continued) | Shares | Value | ||||||
Information Technology — 13.7% (Continued) | ||||||||
Electronic Equipment, Instruments & Components — 1.6% | ||||||||
Dolby Laboratories, Inc. - Class A | 1,045 | $ | 49,585 | |||||
Fitbit, Inc. - Class A (b) | 4,059 | 57,557 | ||||||
IPG Photonics Corporation (b) | 825 | 71,263 | ||||||
Methode Electronics, Inc. | 9,883 | 291,647 | ||||||
Park Electrochemical Corporation | 1,596 | 26,111 | ||||||
PC Connection, Inc. | 2,798 | 64,326 | ||||||
560,489 | ||||||||
Internet Software & Services — 0.9% | ||||||||
eBay, Inc. (b) | 7,468 | 182,667 | ||||||
NIC, Inc. | 6,008 | 119,259 | ||||||
301,926 | ||||||||
IT Services — 3.6% | ||||||||
Computer Services, Inc. | 785 | 29,045 | ||||||
NeuStar, Inc. - Class A (b) | 15,081 | 355,158 | ||||||
Science Applications International Corporation | 3,532 | 192,741 | ||||||
Syntel, Inc. (b) | 8,501 | 391,726 | ||||||
Western Union Company (The) | 15,010 | 291,944 | ||||||
1,260,614 | ||||||||
Software — 2.9% | ||||||||
ACI Worldwide, Inc. (b) | 1,457 | 30,102 | ||||||
Aspen Technology, Inc. (b) | 1,745 | 66,519 | ||||||
CA, Inc. | 10,339 | 334,157 | ||||||
ePlus, Inc. (b) | 1,875 | 164,119 | ||||||
MicroStrategy, Inc. - Class A (b) | 732 | 136,547 | ||||||
Silver Spring Networks, Inc. (b) | 11,822 | 154,277 | ||||||
VASCO Data Security International, Inc. (b) | 6,247 | 103,263 | ||||||
988,984 | ||||||||
Technology Hardware, Storage & Peripherals — 1.3% | ||||||||
Apple, Inc. | 3,531 | 352,605 | ||||||
CPI Card Group, Inc. | 3,211 | 13,358 | ||||||
HP, Inc. | 7,492 | 100,243 | ||||||
466,206 | ||||||||
Materials — 8.7% | ||||||||
Chemicals — 8.1% | ||||||||
Chase Corporation | 524 | 30,780 | ||||||
Chemtura Corporation (b) | 10,573 | 282,088 | ||||||
Ciner Resources, L.P. | 4,338 | 122,765 | ||||||
FutureFuel Corporation | 5,732 | 63,797 | ||||||
Innospec, Inc. | 7,428 | 360,704 |
19
BARROW VALUE OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 99.5% (Continued) | Shares | Value | ||||||
Materials — 8.7% (Continued) | ||||||||
Chemicals — 8.1% (Continued) | ||||||||
LyondellBasell Industries N.V. - Class A | 4,275 | $ | 347,814 | |||||
NewMarket Corporation | 566 | 229,230 | ||||||
PolyOne Corporation | 1,058 | 39,643 | ||||||
Terra Nitrogen Company, L.P. | 3,258 | 336,226 | ||||||
Trinseo S.A. (b) | 4,658 | 219,345 | ||||||
W.R. Grace & Company | 772 | 59,938 | ||||||
Westlake Chemical Corporation | 7,067 | 311,867 | ||||||
Westlake Chemical Partners, L.P. | 16,763 | 385,381 | ||||||
2,789,578 | ||||||||
Containers & Packaging — 0.1% | ||||||||
Sonoco Products Company | 774 | 36,897 | ||||||
Metals & Mining — 0.5% | ||||||||
Compass Minerals International, Inc. | 2,419 | 188,561 | ||||||
Total Common Stocks (Cost $31,753,588) | $ | 34,356,378 |
| ||||||||
MONEY MARKET FUNDS — 0.4% | Shares | Value | ||||||
Fidelity Institutional Money Market Government Portfolio - Class I, 0.24% (c) (Cost $145,555) | 145,555 | $ | 145,555 | |||||
Total Investments at Value — 99.9% (Cost $31,899,143) | $ | 34,501,933 | ||||||
Other Assets in Excess of Liabilities — 0.1% | 20,538 | |||||||
Net Assets — 100.0% | $ | 34,522,471 |
(a) | All or a portion of the shares have been pledged as collateral for trading purposes. |
(b) | Non-income producing security. |
(c) | The rate shown is the 7-day effective yield as of May 31, 2016. |
See accompanying notes to financial statements. |
20
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 129.9% | Shares | Value | ||||||
Consumer Discretionary — 23.3% | ||||||||
Auto Components — 2.1% | ||||||||
Gentex Corporation (a) | 34,363 | $ | 569,738 | |||||
Visteon Corporation (a) | 2,957 | 221,716 | ||||||
791,454 | ||||||||
Automobiles — 1.3% | ||||||||
Thor Industries, Inc. (a) | 7,785 | 506,025 | ||||||
Diversified Consumer Services — 0.6% | ||||||||
H&R Block, Inc. (a) | 10,883 | 232,461 | ||||||
Hotels, Restaurants & Leisure — 1.1% | ||||||||
DineEquity, Inc. | 554 | 46,569 | ||||||
Interval Leisure Group, Inc. (a) | 24,823 | 356,458 | ||||||
403,027 | ||||||||
Household Durables — 0.5% | ||||||||
GoPro, Inc. - Class A (a)(b) | 9,719 | 99,814 | ||||||
Tupperware Brands Corporation (a) | 1,563 | 88,435 | ||||||
188,249 | ||||||||
Internet & Catalog Retail — 0.2% | ||||||||
Lands' End, Inc. (a)(b) | 3,610 | 60,540 | ||||||
Leisure Products — 1.6% | ||||||||
Nautilus, Inc. (a)(b) | 18,923 | 390,381 | ||||||
Polaris Industries, Inc. (a) | 2,182 | 185,514 | ||||||
Smith & Wesson Holding Corporation (a)(b) | 2,053 | 50,032 | ||||||
625,927 | ||||||||
Media — 7.3% | ||||||||
AMC Networks, Inc. - Class A (a)(b) | 3,138 | 200,644 | ||||||
Interpublic Group of Companies, Inc. (The) (a) | 17,779 | 424,918 | ||||||
Meredith Corporation | 818 | 40,491 | ||||||
MSG Networks, Inc. - Class A (a)(b) | 9,117 | 157,815 | ||||||
National CineMedia, Inc. (a) | 6,023 | 87,936 | ||||||
Omnicom Group, Inc. (a) | 7,567 | 630,558 | ||||||
Scripps Networks Interactive, Inc. - Class A (a) | 6,483 | 417,116 | ||||||
TEGNA, Inc. (a) | 13,163 | 302,222 | ||||||
Time, Inc. (a) | 5,250 | 83,317 | ||||||
Time Warner, Inc. | 629 | 47,590 | ||||||
Viacom, Inc. - Class B (a) | 9,110 | 404,211 | ||||||
2,796,818 |
21
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 129.9% (Continued) | Shares | Value | ||||||
Consumer Discretionary — 23.3% (Continued) | ||||||||
Specialty Retail — 7.3% | ||||||||
Bed Bath & Beyond, Inc. (b) | 723 | $ | 32,354 | |||||
Best Buy Company, Inc. (a) | 1,295 | 41,660 | ||||||
Buckle, Inc. (The) (a) | 17,042 | 421,449 | ||||||
Cato Corporation (The) - Class A (a) | 12,427 | 470,362 | ||||||
Express, Inc. (b) | 2,585 | 37,586 | ||||||
Foot Locker, Inc. (a) | 798 | 44,624 | ||||||
Francesca's Holdings Corporation (a)(b) | 19,768 | 205,983 | ||||||
GameStop Corporation - Class A (a) | 18,008 | 524,033 | ||||||
Gap, Inc. (The) (a) | 3,852 | 69,297 | ||||||
GNC Holdings, Inc. - Class A (a) | 8,020 | 208,921 | ||||||
Hibbett Sports, Inc. (a)(b) | 7,142 | 246,685 | ||||||
Michaels Companies, Inc. (The) (a)(b) | 1,439 | 42,177 | ||||||
Outerwall, Inc. (a) | 5,028 | 207,405 | ||||||
Select Comfort Corporation (a)(b) | 4,614 | 103,446 | ||||||
Winmark Corporation (a) | 934 | 91,765 | ||||||
Zumiez, Inc. (a)(b) | 2,128 | 31,665 | ||||||
2,779,412 | ||||||||
Textiles, Apparel & Luxury Goods — 1.3% | ||||||||
Deckers Outdoor Corporation (a)(b) | 689 | 36,234 | ||||||
Fossil Group, Inc. (a)(b) | 1,531 | 42,669 | ||||||
Steven Madden Ltd. (a)(b) | 11,960 | 410,348 | ||||||
489,251 | ||||||||
Consumer Staples — 29.1% | ||||||||
Beverages — 4.0% | ||||||||
Boston Beer Company, Inc. (The) - Class A (a)(b) | 1,827 | 283,916 | ||||||
Brown-Forman Corporation - Class B (a) | 2 | 196 | ||||||
Dr Pepper Snapple Group, Inc. (a) | 6,554 | 599,035 | ||||||
MGP Ingredients, Inc. | 1,526 | 49,931 | ||||||
National Beverage Corporation (a)(b) | 11,065 | 576,265 | ||||||
1,509,343 | ||||||||
Food & Staples Retailing — 0.3% | ||||||||
Smart & Final Stores, Inc. (a)(b) | 881 | 13,981 | ||||||
Sprouts Farmers Market, Inc. (a)(b) | 4,226 | 104,636 | ||||||
118,617 | ||||||||
Food Products — 7.3% | ||||||||
Amplify Snack Brands, Inc. (a)(b) | 22,206 | 289,788 | ||||||
B&G Foods, Inc. (a) | 3,031 | 130,303 | ||||||
Cal-Maine Foods, Inc. (a) | 3,574 | 159,043 | ||||||
Hormel Foods Corporation (a) | 3,428 | 117,957 |
22
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 129.9% (Continued) | Shares | Value | ||||||
Consumer Staples — 29.1% (Continued) | ||||||||
Food Products — 7.3% (Continued) | ||||||||
John B. Sanfilippo & Son, Inc. (a) | 2,950 | $ | 139,594 | |||||
Kellogg Company (a) | 69 | 5,132 | ||||||
Lancaster Colony Corporation (a) | 5,427 | 657,915 | ||||||
Mead Johnson Nutrition Company (a) | 2,492 | 205,042 | ||||||
Mondelēz International, Inc. - Class A (a) | 7,368 | 327,802 | ||||||
Pilgrim's Pride Corporation (a) | 17,634 | 438,558 | ||||||
Pinnacle Foods, Inc. (a) | 105 | 4,424 | ||||||
Sanderson Farms, Inc. (a) | 3,117 | 279,626 | ||||||
2,755,184 | ||||||||
Household Products — 3.5% | ||||||||
Central Garden & Pet Company (a)(b) | 11,957 | 223,357 | ||||||
Clorox Company (The) (a) | 2,378 | 305,668 | ||||||
WD-40 Company (a) | 7,320 | 815,228 | ||||||
1,344,253 | ||||||||
Personal Products — 7.0% | ||||||||
Avon Products, Inc. (a) | 3,593 | 14,013 | ||||||
Herbalife Ltd. (a)(b) | 11,703 | 677,487 | ||||||
Inter Parfums, Inc. (a) | 13,072 | 382,225 | ||||||
Natural Health Trends Corporation (a) | 6,254 | 186,682 | ||||||
Nu Skin Enterprises, Inc. - Class A (a) | 13,749 | 542,398 | ||||||
Revlon, Inc. - Class A (a)(b) | 6,513 | 203,075 | ||||||
USANA Health Sciences, Inc. (a)(b) | 5,535 | 667,798 | ||||||
2,673,678 | ||||||||
Tobacco — 7.0% | ||||||||
Altria Group, Inc. (a) | 11,146 | 709,332 | ||||||
Philip Morris International, Inc. (a) | 5,995 | 591,587 | ||||||
Reynolds American, Inc. (a) | 12,942 | 643,217 | ||||||
Universal Corporation (a) | 3,244 | 177,447 | ||||||
Vector Group Ltd. (a) | 24,707 | 530,459 | ||||||
2,652,042 | ||||||||
Energy — 8.8% | ||||||||
Energy Equipment & Services — 1.8% | ||||||||
Dril-Quip, Inc. (a)(b) | 4,671 | 285,071 | ||||||
Forum Energy Technologies, Inc. (a)(b) | 1,716 | 28,794 | ||||||
Helmerich & Payne, Inc. (a) | 476 | 29,107 | ||||||
National Oilwell Varco, Inc. (a) | 4,929 | 162,411 | ||||||
Oceaneering International, Inc. (a) | 2,727 | 90,155 | ||||||
Oil States International, Inc. (a)(b) | 1,271 | 41,765 | ||||||
RPC, Inc. (a)(b) | 3,119 | 46,005 | ||||||
683,308 |
23
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 129.9% (Continued) | Shares | Value | ||||||
Energy — 8.8% (Continued) | ||||||||
Oil, Gas & Consumable Fuels — 7.0% | ||||||||
Alliance Resource Partners, L.P. (a) | 6,158 | $ | 90,215 | |||||
Alon USA Energy, Inc. (a) | 3,682 | 27,799 | ||||||
Alon USA Partners, L.P. (a) | 24,378 | 230,372 | ||||||
BP Prudhoe Bay Royalty Trust (a) | 7,922 | 110,512 | ||||||
CVR Energy, Inc. (a) | 1,681 | 33,015 | ||||||
CVR Refining, L.P. (a) | 19,704 | 200,193 | ||||||
Green Plains, Inc. (a) | 2,596 | 48,182 | ||||||
HollyFrontier Corporation | 3,866 | 103,454 | ||||||
Marathon Oil Corporation (a) | 209 | 2,732 | ||||||
Marathon Petroleum Corporation (a) | 9,634 | 335,552 | ||||||
PBF Logistics, L.P. (a) | 5,172 | 112,698 | ||||||
Phillips 66 (a) | 57 | 4,581 | ||||||
Sabine Royalty Trust | 3,931 | 134,204 | ||||||
Tesoro Corporation (a) | 3,806 | 297,172 | ||||||
Valero Energy Corporation (a) | 7,832 | 428,410 | ||||||
Western Refining, Inc. (a) | 17,590 | 373,612 | ||||||
World Fuel Services Corporation (a) | 2,750 | 126,417 | ||||||
2,659,120 | ||||||||
Financials — 0.0% | ||||||||
Insurance — 0.0% | ||||||||
Gerova Financial Group Ltd. (a)(b)(c) | 2 | 0 | ||||||
Health Care — 27.2% | ||||||||
Health Care Equipment & Supplies — 6.3% | ||||||||
Align Technology, Inc. (a)(b) | 904 | 71,262 | ||||||
Anika Therapeutics, Inc. (a)(b) | 14,546 | 688,317 | ||||||
Atrion Corporation (a) | 105 | 41,237 | ||||||
C.R. Bard, Inc. (a) | 1,115 | 244,229 | ||||||
Globus Medical, Inc. - Class A (a)(b) | 22,505 | 545,521 | ||||||
LivaNova plc (a)(b) | 2,454 | 119,780 | ||||||
Meridian Bioscience, Inc. (a) | 27,387 | 533,499 | ||||||
Varian Medical Systems, Inc. (a)(b) | 1,832 | 151,671 | ||||||
2,395,516 | ||||||||
Health Care Providers & Services — 15.0% | ||||||||
Aceto Corporation | 1,975 | 44,062 | ||||||
AmerisourceBergen Corporation (a) | 88 | 6,598 | ||||||
AmSurg Corporation (a)(b) | 7,464 | 558,233 | ||||||
Cardinal Health, Inc. (a) | 6,740 | 532,123 | ||||||
Chemed Corporation (a) | 4,086 | 532,855 |
24
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 129.9% (Continued) | Shares | Value | ||||||
Health Care — 27.2% (Continued) | ||||||||
Health Care Providers & Services — 15.0% (Continued) | ||||||||
CorVel Corporation (a)(b) | 2,768 | $ | 133,252 | |||||
Ensign Group, Inc. (The) (a) | 1,967 | 39,045 | ||||||
Express Scripts Holding Company (a)(b) | 2,367 | 178,827 | ||||||
HCA Holdings, Inc. (a)(b) | 1,109 | 86,524 | ||||||
HealthSouth Corporation (a) | 13,558 | 546,659 | ||||||
Laboratory Corporation of America Holdings (a)(b) | 23 | 2,943 | ||||||
LHC Group, Inc. (a)(b) | 6,508 | 273,336 | ||||||
McKesson Corporation (a) | 1,608 | 294,489 | ||||||
MEDNAX, Inc. (a)(b) | 7,776 | 532,267 | ||||||
Patterson Companies, Inc. (a) | 768 | 37,486 | ||||||
Premier, Inc. - Class A (a)(b) | 14,929 | 474,742 | ||||||
Quest Diagnostics, Inc. (a) | 8,107 | 625,617 | ||||||
Surgical Care Affiliates, Inc. (a)(b) | 6,296 | 281,872 | ||||||
U.S. Physical Therapy, Inc. (a) | 9,301 | 537,319 | ||||||
5,718,249 | ||||||||
Health Care Technology — 0.7% | ||||||||
Computer Programs & Systems, Inc. (a) | 5,040 | 208,404 | ||||||
Inovalon Holdings, Inc. - Class A (b) | 2,955 | 54,933 | ||||||
263,337 | ||||||||
Pharmaceuticals — 5.2% | ||||||||
ANI Pharmaceuticals, Inc. (a)(b) | 4,183 | 226,510 | ||||||
Depomed, Inc. (a)(b) | 8,435 | 172,327 | ||||||
Johnson & Johnson (a) | 4,832 | 544,518 | ||||||
Lannett Company, Inc. (a)(b) | 4,148 | 101,170 | ||||||
Prestige Brands Holdings, Inc. (a)(b) | 11,435 | 617,947 | ||||||
Sucampo Pharmaceuticals, Inc. - Class A (a)(b) | 21,894 | 257,473 | ||||||
Supernus Pharmaceuticals, Inc. (a)(b) | 2,548 | 49,712 | ||||||
1,969,657 | ||||||||
Industrials — 11.9% | ||||||||
Aerospace & Defense — 0.8% | ||||||||
BWX Technologies, Inc. (a) | 41 | 1,442 | ||||||
Honeywell International, Inc. (a) | 261 | 29,709 | ||||||
Northrop Grumman Corporation (a) | 440 | 93,575 | ||||||
Raytheon Company (a) | 1,201 | 155,734 | ||||||
United Technologies Corporation (a) | 271 | 27,257 | ||||||
307,717 | ||||||||
Air Freight & Logistics — 1.3% | ||||||||
C.H. Robinson Worldwide, Inc. (a) | 941 | 70,556 | ||||||
Expeditors International of Washington, Inc. (a) | 8,387 | 407,189 | ||||||
477,745 |
25
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 129.9% (Continued) | Shares | Value | ||||||
Industrials — 11.9% (Continued) | ||||||||
Commercial Services & Supplies — 1.8% | ||||||||
Deluxe Corporation (a) | 9,765 | $ | 635,995 | |||||
Pitney Bowes, Inc. (a) | 2,788 | 51,940 | ||||||
UniFirst Corporation (a) | 109 | 12,608 | ||||||
700,543 | ||||||||
Electrical Equipment — 2.0% | ||||||||
Emerson Electric Company (a) | 4,635 | 241,113 | ||||||
Generac Holdings, Inc. (a)(b) | 84 | 3,184 | ||||||
Hubbell, Inc. (a) | 288 | 30,606 | ||||||
Rockwell Automation, Inc. (a) | 3,014 | 349,775 | ||||||
Thermon Group Holdings, Inc. (a)(b) | 5,990 | 120,399 | ||||||
745,077 | ||||||||
Machinery — 2.6% | ||||||||
Douglas Dynamics, Inc. (a) | 3,175 | 68,961 | ||||||
Federal Signal Corporation (a) | 18,149 | 236,118 | ||||||
Greenbrier Companies, Inc. (The) (a) | 9,717 | 278,878 | ||||||
ITT, Inc. (a) | 1,278 | 45,382 | ||||||
Joy Global, Inc. (a) | 86 | 1,465 | ||||||
PACCAR, Inc. (a) | 810 | 45,157 | ||||||
Sun Hydraulics Corporation (a) | 659 | 19,289 | ||||||
Wabash National Corporation (a)(b) | 20,861 | 295,809 | ||||||
991,059 | ||||||||
Professional Services — 2.3% | ||||||||
Dun & Bradstreet Corporation (The) (a) | 102 | 12,944 | ||||||
Insperity, Inc. (a) | 464 | 33,394 | ||||||
Korn/Ferry International (a) | 497 | 14,338 | ||||||
Resources Connection, Inc. (a) | 1,101 | 17,154 | ||||||
Robert Half International, Inc. (a) | 7,601 | 316,126 | ||||||
RPX Corporation (a)(b) | 46,901 | 471,355 | ||||||
865,311 | ||||||||
Road & Rail — 1.0% | ||||||||
Landstar System, Inc. (a) | 5,451 | 369,850 | ||||||
Universal Logistics Holdings, Inc. (a) | 1,231 | 17,776 | ||||||
387,626 | ||||||||
Trading Companies & Distributors — 0.1% | ||||||||
Grainger (W.W.), Inc. (a) | 125 | 28,544 | ||||||
MSC Industrial Direct Company, Inc. - Class A (a) | 187 | 14,015 | ||||||
42,559 | ||||||||
Information Technology — 18.2% | ||||||||
Communications Equipment — 4.5% | ||||||||
Brocade Communications Systems, Inc. (a) | 53,571 | 485,353 |
26
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 129.9% (Continued) | Shares | Value | ||||||
Information Technology — 18.2% (Continued) | ||||||||
Communications Equipment — 4.5% (Continued) | ||||||||
Cisco Systems, Inc. (a) | 3,494 | $ | 101,501 | |||||
InterDigital, Inc. (a) | 11,027 | 642,874 | ||||||
QUALCOMM, Inc. (a) | 5,315 | 291,900 | ||||||
Ubiquiti Networks, Inc. (a)(b) | 4,865 | 193,919 | ||||||
1,715,547 | ||||||||
Electronic Equipment, Instruments & Components — 2.1% | ||||||||
Dolby Laboratories, Inc. - Class A (a) | 1,527 | 72,456 | ||||||
Fitbit, Inc. - Class A (b) | 5,931 | 84,102 | ||||||
IPG Photonics Corporation (a)(b) | 1,209 | 104,433 | ||||||
Methode Electronics, Inc. (a) | 14,494 | 427,718 | ||||||
Park Electrochemical Corporation (a) | 2,296 | 37,562 | ||||||
PC Connection, Inc. (a) | 4,027 | 92,581 | ||||||
818,852 | ||||||||
Internet Software & Services — 1.2% | ||||||||
eBay, Inc. (a)(b) | 10,867 | 265,807 | ||||||
NIC, Inc. (a) | 8,841 | 175,494 | ||||||
441,301 | ||||||||
IT Services — 4.8% | ||||||||
Computer Services, Inc. | 1,114 | 41,218 | ||||||
NeuStar, Inc. - Class A (a)(b) | 22,079 | 519,960 | ||||||
Science Applications International Corporation (a) | 5,132 | 280,053 | ||||||
Syntel, Inc. (a)(b) | 12,432 | 572,867 | ||||||
Western Union Company (The) (a) | 21,970 | 427,317 | ||||||
1,841,415 | ||||||||
Software — 3.8% | ||||||||
ACI Worldwide, Inc. (b) | 2,068 | 42,725 | ||||||
Aspen Technology, Inc. (a)(b) | 2,601 | 99,150 | ||||||
CA, Inc. (a) | 15,183 | 490,714 | ||||||
ePlus, Inc. (a)(b) | 2,737 | 239,570 | ||||||
MicroStrategy, Inc. - Class A (a)(b) | 1,045 | 194,934 | ||||||
Silver Spring Networks, Inc. (a)(b) | 16,397 | 213,981 | ||||||
VASCO Data Security International, Inc. (b) | 9,190 | 151,911 | ||||||
1,432,985 | ||||||||
Technology Hardware, Storage & Peripherals — 1.8% | ||||||||
Apple, Inc. (a) | 5,162 | 515,477 | ||||||
CPI Card Group, Inc. | 4,538 | 18,878 | ||||||
HP, Inc. | 10,740 | 143,701 | ||||||
678,056 |
27
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 129.9% (Continued) | Shares | Value | ||||||
Materials — 11.4% | ||||||||
Chemicals — 10.6% | ||||||||
Chase Corporation | 744 | $ | 43,703 | |||||
Chemtura Corporation (a)(b) | 15,375 | 410,205 | ||||||
Ciner Resources, L.P. (a) | 6,294 | 178,120 | ||||||
Ferro Corporation (a)(b) | 179 | 2,476 | ||||||
FutureFuel Corporation (a) | 8,404 | 93,537 | ||||||
Innospec, Inc. (a) | 10,862 | 527,459 | ||||||
Koppers Holdings, Inc. (a)(b) | 196 | 4,961 | ||||||
LyondellBasell Industries N.V. - Class A (a) | 6,254 | 508,825 | ||||||
NewMarket Corporation (a) | 831 | 336,555 | ||||||
PolyOne Corporation | 473 | 17,723 | ||||||
Terra Nitrogen Company, L.P. (a) | 4,776 | 492,883 | ||||||
Trinseo S.A. (a)(b) | 6,477 | 305,002 | ||||||
W.R. Grace & Company | 978 | 75,932 | ||||||
Westlake Chemical Corporation (a) | 10,357 | 457,054 | ||||||
Westlake Chemical Partners, L.P. (a) | 24,472 | 562,611 | ||||||
4,017,046 | ||||||||
Containers & Packaging — 0.1% | ||||||||
Sonoco Products Company (a) | 1,111 | 52,961 | ||||||
Metals & Mining — 0.7% | ||||||||
Compass Minerals International, Inc. (a) | 3,554 | 277,034 | ||||||
Reliance Steel & Aluminum Company (a) | 7 | 521 | ||||||
277,555 | ||||||||
Total Common Stocks (Cost $47,530,455) | $ | 49,408,823 |
28
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
MONEY MARKET FUNDS — 7.3% | Shares | Value | ||||||
Fidelity Institutional Money Market Government Portfolio - Class I, 0.24% (d) (Cost $2,780,114) | 2,780,114 | $ | 2,780,114 | |||||
Total Investments at Value — 137.2% (Cost $50,310,569) | $ | 52,188,937 | ||||||
Liabilities in Excess of Other Assets (e) — (37.2%) | (14,136,719 | ) | ||||||
Net Assets — 100.0% | $ | 38,052,218 |
(a) | All or a portion of the shares have been pledged as collateral for open short positions and trading purposes. |
(b) | Non-income producing security. |
(c) | Security value has been determined in good faith pursuant to procedures adopted by the Board of Trustees. The total value of such securities is $0 at May 31, 2016 representing 0.0% of net assets (Note 2). |
(d) | The rate shown is the 7-day effective yield as of May 31, 2016. |
(e) | Includes cash held as margin deposits for short positions. |
See accompanying notes to financial statements. |
29
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 90.5% | Shares | Value | ||||||
Consumer Discretionary — 17.2% | ||||||||
Auto Components — 0.4% | ||||||||
BorgWarner, Inc. | 161 | $ | 5,479 | |||||
Cooper-Standard Holdings, Inc. | 221 | 18,995 | ||||||
Fox Factory Holding Corporation | 2,250 | 37,440 | ||||||
Modine Manufacturing Company | 1,368 | 13,680 | ||||||
Superior Industries International, Inc. | 2,317 | 62,883 | ||||||
Tower International, Inc. | 294 | 6,371 | ||||||
144,848 | ||||||||
Automobiles — 0.0% (a) | ||||||||
General Motors Company | 220 | 6,881 | ||||||
Tesla Motors, Inc. | 16 | 3,572 | ||||||
10,453 | ||||||||
Distributors — 0.3% | ||||||||
Core-Mark Holding Company, Inc. | 834 | 71,407 | ||||||
LKQ Corporation | 1,067 | 35,286 | ||||||
106,693 | ||||||||
Diversified Consumer Services — 0.4% | ||||||||
LifeLock, Inc. | 2,867 | 37,472 | ||||||
Matthews International Corporation - Class A | 629 | 34,513 | ||||||
Regis Corporation | 3,922 | 51,143 | ||||||
Service Corporation International | 565 | 15,481 | ||||||
Sotheby's | 567 | 16,953 | ||||||
155,562 | ||||||||
Hotels, Restaurants & Leisure — 5.7% | ||||||||
Aramark | 1,423 | 47,372 | ||||||
Biglari Holdings, Inc. | 148 | 59,246 | ||||||
BJ's Restaurants, Inc. | 1,135 | 50,848 | ||||||
Bloomin' Brands, Inc. | 3,817 | 72,714 | ||||||
Bob Evans Farms, Inc. | 1,273 | 56,789 | ||||||
Buffalo Wild Wings, Inc. | 455 | 66,152 | ||||||
Carnival Corporation | 872 | 41,629 | ||||||
Carrols Restaurant Group, Inc. | 1,096 | 13,283 | ||||||
Cedar Fair, L.P. | 1,260 | 75,638 | ||||||
Cheesecake Factory, Inc. (The) | 1,303 | 64,981 | ||||||
Chipotle Mexican Grill, Inc. | 57 | 25,192 | ||||||
Churchill Downs, Inc. | 527 | 66,144 | ||||||
Chuy's Holdings, Inc. | 1,538 | 50,677 | ||||||
ClubCorp Holdings, Inc. | 1,920 | 23,174 | ||||||
Darden Restaurants, Inc. | 667 | 45,243 |
30
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 90.5% (Continued) | Shares | Value | ||||||
Consumer Discretionary — 17.2% (Continued) | ||||||||
Hotels, Restaurants & Leisure — 5.7% (Continued) | ||||||||
Dave & Buster's Entertainment, Inc. | 1,283 | $ | 50,075 | |||||
Del Taco Restaurants, Inc. | 1,219 | 11,385 | ||||||
Extended Stay America, Inc. | 4,221 | 60,191 | ||||||
Fiesta Restaurant Group, Inc. | 634 | 15,932 | ||||||
Four Corners Property Trust, Inc. | 124 | 2,411 | ||||||
Habit Restaurants, Inc. (The) - Class A | 1,470 | 26,298 | ||||||
Hilton Worldwide Holdings, Inc. | 1,969 | 40,916 | ||||||
Hyatt Hotels Corporation - Class A | 967 | 44,395 | ||||||
International Speedway Corporation - Class A | 1,534 | 50,745 | ||||||
Jack in the Box, Inc. | 580 | 49,416 | ||||||
La Quinta Holdings, Inc. | 2,295 | 27,265 | ||||||
Las Vegas Sands Corporation | 857 | 39,628 | ||||||
Lindblad Expeditions Holdings, Inc. | 748 | 7,480 | ||||||
Marcus Corporation (The) | 2,534 | 49,160 | ||||||
Marriott Vacations Worldwide Corporation | 858 | 51,995 | ||||||
McDonald's Corporation | 257 | 31,369 | ||||||
MGM Resorts International | 1,866 | 42,638 | ||||||
Norwegian Cruise Line Holdings Ltd. | 886 | 41,119 | ||||||
Panera Bread Company - Class A | 250 | 54,787 | ||||||
Papa John's International, Inc. | 356 | 22,549 | ||||||
Penn National Gaming, Inc. | 1,980 | 31,027 | ||||||
Red Robin Gourmet Burgers, Inc. | 677 | 34,331 | ||||||
Royal Caribbean Cruises Ltd. | 548 | 42,410 | ||||||
Ruth's Hospitality Group, Inc. | 1,414 | 23,487 | ||||||
SeaWorld Entertainment, Inc. | 2,191 | 38,255 | ||||||
Six Flags Entertainment Corporation | 1,296 | 74,766 | ||||||
Sonic Corporation | 861 | 25,649 | ||||||
Speedway Motorsports, Inc. | 2,932 | 50,753 | ||||||
Starbucks Corporation | 755 | 41,442 | ||||||
Texas Roadhouse, Inc. | 1,896 | 84,960 | ||||||
Vail Resorts, Inc. | 600 | 78,750 | ||||||
Wendy's Company (The) | 6,758 | 69,472 | ||||||
Wingstop, Inc. | 277 | 7,728 | ||||||
Wynn Resorts Ltd. | 189 | 18,178 | ||||||
Yum! Brands, Inc. | 593 | 48,679 | ||||||
Zoe's Kitchen, Inc. | 106 | 3,913 | ||||||
2,152,636 | ||||||||
Household Durables — 2.3% | ||||||||
CalAtlantic Group, Inc. | 1,800 | 66,582 | ||||||
Cavco Industries, Inc. | 269 | 26,717 |
31
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 90.5% (Continued) | Shares | Value | ||||||
Consumer Discretionary — 17.2% (Continued) | ||||||||
Household Durables — 2.3% (Continued) | ||||||||
Century Communities, Inc. | 412 | $ | 7,461 | |||||
D.R. Horton, Inc. | 1,498 | 45,779 | ||||||
Harman International Industries, Inc. | 179 | 14,005 | ||||||
Helen of Troy Ltd. | 451 | 46,376 | ||||||
Installed Building Products, Inc. | 1,981 | 66,225 | ||||||
Leggett & Platt, Inc. | 393 | 19,752 | ||||||
Lennar Corporation - Class A | 947 | 43,155 | ||||||
LGI Homes, Inc. | 324 | 8,755 | ||||||
Libbey, Inc. | 691 | 11,809 | ||||||
M/I Homes, Inc. | 924 | 17,445 | ||||||
MDC Holdings, Inc. | 1,960 | 45,550 | ||||||
Meritage Homes Corporation | 1,228 | 44,810 | ||||||
Mohawk Industries, Inc. | 244 | 47,992 | ||||||
Newell Brands, Inc. | 1,074 | 51,219 | ||||||
PulteGroup, Inc. | 929 | 17,428 | ||||||
Taylor Morrison Home Corporation - Class A | 3,485 | 51,927 | ||||||
Tempur Sealy International, Inc. | 390 | 22,706 | ||||||
Toll Brothers, Inc. | 1,775 | 51,741 | ||||||
TRI Pointe Group, Inc. | 3,964 | 46,220 | ||||||
Universal Electronics, Inc. | 776 | 50,386 | ||||||
WCI Communities, Inc. | 1,943 | 33,439 | ||||||
Whirlpool Corporation | 227 | 39,639 | ||||||
877,118 | ||||||||
Internet & Catalog Retail — 1.1% | ||||||||
1-800-FLOWERS.COM, Inc. - Class A | 3,988 | 32,143 | ||||||
Amazon.com, Inc. | 76 | 54,932 | ||||||
Etsy, Inc. | 887 | 8,205 | ||||||
Expedia, Inc. | 360 | 40,046 | ||||||
FTD Companies, Inc. | 1,664 | 45,327 | ||||||
Groupon, Inc. | 17,803 | 63,023 | ||||||
Liberty Interactive Corporation QVC Group - Series A | 131 | 3,534 | ||||||
Liberty TripAdvisor Holdings, Inc. - Series A | 1,304 | 29,953 | ||||||
Netflix, Inc. | 436 | 44,721 | ||||||
Overstock.com, Inc. | 857 | 14,612 | ||||||
Shutterfly, Inc. | 868 | 41,925 | ||||||
TripAdvisor, Inc. | 615 | 41,660 | ||||||
420,081 | ||||||||
Leisure Products — 0.5% | ||||||||
Brunswick Corporation | 112 | 5,362 | ||||||
Callaway Golf Company | 6,207 | 62,443 |
32
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 90.5% (Continued) | Shares | Value | ||||||
Consumer Discretionary — 17.2% (Continued) | ||||||||
Leisure Products — 0.5% (Continued) | ||||||||
Hasbro, Inc. | 108 | $ | 9,427 | |||||
Mattel, Inc. | 1,722 | 54,897 | ||||||
Sturm Ruger & Company, Inc. | 664 | 43,977 | ||||||
Vista Outdoor, Inc. | 723 | 36,280 | ||||||
212,386 | ||||||||
Media — 1.9% | ||||||||
AMC Entertainment Holdings, Inc. - Class A | 2,696 | 77,483 | ||||||
Cable One, Inc. | 21 | 10,290 | ||||||
Cinemark Holdings, Inc. | 366 | 13,242 | ||||||
DISH Network Corporation - Class A | 771 | 38,473 | ||||||
E.W. Scripps Company (The) - Class A | 3,115 | 52,519 | ||||||
Gannett Company, Inc. | 292 | 4,561 | ||||||
Global Eagle Entertainment, Inc. | 5,334 | 38,671 | ||||||
Liberty Braves Group - Series A | 52 | 809 | ||||||
Liberty Broadband Corporation - Series A | 66 | 3,815 | ||||||
Liberty Media Group - Series A | 131 | 2,552 | ||||||
Liberty SiriusXM Group - Series A | 526 | 16,774 | ||||||
Lions Gate Entertainment Corporation | 2,215 | 49,395 | ||||||
Live Nation Entertainment, Inc. | 2,562 | 61,872 | ||||||
Loral Space & Communications, Inc. | 981 | 37,641 | ||||||
MDC Partners, Inc. - Class A | 199 | 3,570 | ||||||
Morningstar, Inc. | 130 | 10,976 | ||||||
New Media Investment Group, Inc. | 2,359 | 41,117 | ||||||
New York Times Company (The) - Class A | 4,846 | 58,588 | ||||||
News Corporation - Class A | 3,643 | 43,570 | ||||||
Pandora Media, Inc. | 2,456 | 28,956 | ||||||
Scholastic Corporation | 1,412 | 55,139 | ||||||
Sirius XM Holdings, Inc. | 6,532 | 26,259 | ||||||
Tribune Media Company - Class A | 1,089 | 43,832 | ||||||
720,104 | ||||||||
Multiline Retail — 0.7% | ||||||||
Burlington Stores, Inc. | 1,333 | 80,460 | ||||||
Dollar Tree, Inc. | 631 | 57,131 | ||||||
Fred's, Inc. - Class A | 3,784 | 55,549 | ||||||
Kohl's Corporation | 317 | 11,425 | ||||||
Macy’s, Inc. | 158 | 5,247 | ||||||
Ollie's Bargain Outlet Holdings, Inc. | 270 | 6,769 | ||||||
Target Corporation | 476 | 32,739 | ||||||
Tuesday Morning Corporation | 742 | 5,045 | ||||||
254,365 |
33
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 90.5% (Continued) | Shares | Value | ||||||
Consumer Discretionary — 17.2% (Continued) | ||||||||
Specialty Retail — 2.7% | ||||||||
Aaron's, Inc. | 739 | $ | 18,549 | |||||
Abercrombie & Fitch Company - Class A | 2,522 | 50,163 | ||||||
Advance Auto Parts, Inc. | 180 | 27,691 | ||||||
American Eagle Outfitters, Inc. | 618 | 9,666 | ||||||
America's Car-Mart, Inc. | 90 | 2,140 | ||||||
Asbury Automotive Group, Inc. | 253 | 14,193 | ||||||
Ascena Retail Group, Inc. | 2,718 | 19,624 | ||||||
AutoNation, Inc. | 436 | 21,992 | ||||||
Barnes & Noble Education, Inc. | 215 | 2,042 | ||||||
Barnes & Noble, Inc. | 3,277 | 38,112 | ||||||
Boot Barn Holdings, Inc. | 483 | 3,676 | ||||||
Cabela's, Inc. | 727 | 35,303 | ||||||
CarMax, Inc. | 428 | 22,966 | ||||||
Chico's FAS, Inc. | 4,457 | 48,358 | ||||||
Children's Place, Inc. (The) | 210 | 14,801 | ||||||
CST Brands, Inc. | 1,905 | 72,257 | ||||||
Finish Line, Inc. (The) - Class A | 375 | 6,799 | ||||||
Five Below, Inc. | 1,329 | 55,632 | ||||||
Guess?, Inc. | 238 | 3,753 | ||||||
Haverty Furniture Companies, Inc. | 1,384 | 25,729 | ||||||
Home Depot, Inc. (The) | 55 | 7,267 | ||||||
Lithia Motors, Inc. - Class A | 677 | 55,744 | ||||||
Lowe's Companies, Inc. | 607 | 48,639 | ||||||
Lumber Liquidators Holdings, Inc. | 245 | 3,209 | ||||||
MarineMax, Inc. | 1,368 | 23,229 | ||||||
Monro Muffler Brake, Inc. | 1,075 | 67,671 | ||||||
Murphy USA, Inc. | 321 | 21,825 | ||||||
Office Depot, Inc. | 2,941 | 10,529 | ||||||
O'Reilly Automotive, Inc. | 37 | 9,784 | ||||||
Penske Automotive Group, Inc. | 530 | 20,946 | ||||||
Restoration Hardware Holdings, Inc. | 625 | 20,787 | ||||||
Shoe Carnival, Inc. | 151 | 3,518 | ||||||
Signet Jewelers Ltd. | 242 | 23,951 | ||||||
Sportman's Warehouse Holdings, Inc. | 1,172 | 10,126 | ||||||
Staples, Inc. | 3,841 | 33,801 | ||||||
Tailored Brands, Inc. | 543 | 7,488 | ||||||
Tiffany & Company | 144 | 8,922 | ||||||
Tile Shop Holdings, Inc. | 3,699 | 67,507 |
34
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 90.5% (Continued) | Shares | Value | ||||||
Consumer Discretionary — 17.2% (Continued) | ||||||||
Specialty Retail — 2.7% (Continued) | ||||||||
Tractor Supply Company | 494 | $ | 47,473 | |||||
Ulta Salon Cosmetics & Fragrance, Inc. | 243 | 56,621 | ||||||
1,042,483 | ||||||||
Textiles, Apparel & Luxury Goods — 1.2% | ||||||||
Coach, Inc. | 349 | 13,758 | ||||||
Columbia Sportswear Company | 771 | 40,994 | ||||||
Crocs, Inc. | 5,128 | 50,459 | ||||||
G-III Apparel Group Ltd. | 105 | 4,108 | ||||||
Hanesbrands, Inc. | 1,603 | 43,393 | ||||||
Kate Spade & Company | 3,609 | 78,893 | ||||||
NIKE, Inc. - Class B | 742 | 40,973 | ||||||
PVH Corporation | 429 | 40,240 | ||||||
Ralph Lauren Corporation | 35 | 3,302 | ||||||
Sequential Brands Group, Inc. | 9 | 73 | ||||||
Skechers U.S.A., Inc. - Class A | 430 | 13,403 | ||||||
Under Armour, Inc. - Class A | 636 | 23,996 | ||||||
Under Armour, Inc. - Class C | 473 | 16,541 | ||||||
Unifi, Inc. | 1,318 | 33,121 | ||||||
Vera Bradley, Inc. | 186 | 2,850 | ||||||
VF Corporation | 520 | 32,406 | ||||||
Wolverine World Wide, Inc. | 297 | 5,408 | ||||||
443,918 | ||||||||
Consumer Staples — 18.7% | ||||||||
Beverages — 2.1% | ||||||||
Brown-Forman Corporation - Class B | 203 | 19,908 | ||||||
Coca-Cola Bottling Company Consolidated | 1,659 | 204,886 | ||||||
Coca-Cola Company (The) | 2,915 | 130,009 | ||||||
Coca-Cola European Partners plc | 997 | 38,694 | ||||||
Constellation Brands, Inc. - Class A | 900 | 137,835 | ||||||
Molson Coors Brewing Company - Class B | 1,560 | 154,721 | ||||||
Monster Beverage Corporation | 163 | 24,450 | ||||||
PepsiCo, Inc. | 745 | 75,372 | ||||||
785,875 | ||||||||
Food & Staples Retailing — 5.6% | ||||||||
Anderson's, Inc. (The) | 8,852 | 316,725 | ||||||
Casey's General Stores, Inc. | 2,333 | 280,450 | ||||||
Chefs' Warehouse, Inc. (The) | 5,439 | 82,564 | ||||||
Costco Wholesale Corporation | 850 | 126,455 | ||||||
Diplomat Pharmacy, Inc. | 897 | 29,224 |
35
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 90.5% (Continued) | Shares | Value | ||||||
Consumer Staples — 18.7% (Continued) | ||||||||
Food & Staples Retailing — 5.6% (Continued) | ||||||||
Ingles Markets, Inc. - Class A | 2,611 | $ | 97,338 | |||||
Kroger Company (The) | 3,369 | 120,475 | ||||||
Natural Grocers by Vitamin Cottage, Inc. | 9,450 | 125,212 | ||||||
PriceSmart, Inc. | 902 | 79,908 | ||||||
Smart & Final Stores, Inc. | 7,108 | 112,804 | ||||||
SpartanNash Company | 8,884 | 263,944 | ||||||
Sysco Corporation | 3,209 | 154,385 | ||||||
United Natural Foods, Inc. | 1,054 | 39,272 | ||||||
Walgreens Boots Alliance, Inc. | 1,570 | 121,518 | ||||||
Weis Markets, Inc. | 3,317 | 166,414 | ||||||
2,116,688 | ||||||||
Food Products — 9.7% | ||||||||
Archer-Daniels-Midland Company | 2,393 | 102,349 | ||||||
Blue Buffalo Pet Products, Inc. | 1,190 | 30,750 | ||||||
Bunge Ltd. | 1,156 | 77,533 | ||||||
Calavo Growers, Inc. | 5,693 | 322,281 | ||||||
Campbell Soup Company | 1,006 | 60,933 | ||||||
ConAgra Foods, Inc. | 3,129 | 142,995 | ||||||
Darling Ingredients, Inc. | 10,187 | 156,370 | ||||||
Dean Foods Company | 15,243 | 278,642 | ||||||
Farmer Brothers Company | 5,486 | 154,980 | ||||||
Flowers Foods, Inc. | 7,970 | 149,437 | ||||||
Fresh Del Monte Produce, Inc. | 6,265 | 328,098 | ||||||
General Mills, Inc. | 547 | 34,341 | ||||||
Hain Celestial Group, Inc. (The) | 3,416 | 168,887 | ||||||
Hershey Company (The) | 1,168 | 108,449 | ||||||
Ingredion, Inc. | 517 | 60,701 | ||||||
JM Smucker Company (The) | 1,107 | 142,969 | ||||||
Kellogg Company | 1,961 | 145,840 | ||||||
Kraft Heinz Company (The) | 996 | 82,857 | ||||||
McCormick & Company, Inc. | 1,455 | 141,237 | ||||||
Omega Protein Corporation | 764 | 15,081 | ||||||
Post Holdings, Inc. | 1,623 | 123,364 | ||||||
Seaboard Corporation | 26 | 78,520 | ||||||
Snyder's-Lance, Inc. | 7,561 | 233,711 | ||||||
Tootsie Roll Industries, Inc. | 2,401 | 85,932 | ||||||
TreeHouse Foods, Inc. | 3,107 | 294,233 | ||||||
Tyson Foods, Inc. - Class A | 516 | 32,910 | ||||||
WhiteWave Foods Company (The) | 3,166 | 141,362 | ||||||
3,694,762 |
36
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 90.5% (Continued) | Shares | Value | ||||||
Consumer Staples — 18.7% (Continued) | ||||||||
Household Products — 0.8% | ||||||||
Colgate-Palmolive Company | 528 | $ | 37,176 | |||||
Energizer Holdings, Inc. | 83 | 3,928 | ||||||
Kimberly Clark Corporation | 1,093 | 138,855 | ||||||
Spectrum Brands Holdings, Inc. | 1,236 | 144,081 | ||||||
324,040 | ||||||||
Personal Products — 0.5% | ||||||||
Edgewell Personal Care Company | 2,229 | 177,049 | ||||||
Energy — 8.9% | ||||||||
Energy Equipment & Services — 1.1% | ||||||||
Baker Hughes, Inc. | 80 | 3,710 | ||||||
Bristow Group, Inc. | 1,017 | 13,638 | ||||||
Diamond Offshore Drilling, Inc. | 775 | 20,011 | ||||||
Halliburton Company | 936 | 39,480 | ||||||
Helix Energy Solutions Group, Inc. | 1,026 | 8,218 | ||||||
Matrix Service Company | 2,960 | 49,047 | ||||||
McDermott International, Inc. | 7,559 | 35,905 | ||||||
Patterson-UTI Energy, Inc. | 3,662 | 68,150 | ||||||
Pioneer Energy Services Corporation | 1,122 | 4,006 | ||||||
SEACOR Holdings, Inc. | 491 | 28,169 | ||||||
Superior Energy Services, Inc. | 3,810 | 65,684 | ||||||
TETRA Technologies, Inc. | 3,915 | 21,415 | ||||||
Unit Corporation | 569 | 7,949 | ||||||
U.S. Silica Holdings, Inc. | 886 | 25,278 | ||||||
USA Compression Partners, L.P. | 2,421 | 36,848 | ||||||
427,508 | ||||||||
Oil, Gas & Consumable Fuels — 7.8% | ||||||||
Alon USA Energy, Inc. | 492 | 3,715 | ||||||
Anadarko Petroleum Corporation | 1,107 | 57,409 | ||||||
Antero Resources Corporation | 280 | 8,128 | ||||||
Apache Corporation | 1,292 | 73,825 | ||||||
Atlas Energy Group, LLC | 2 | 1 | ||||||
Buckeye Partners, L.P. | 279 | 20,066 | ||||||
Cabot Oil & Gas Corporation | 2,517 | 60,332 | ||||||
California Resources Corporation | 58 | 88 | ||||||
Callon Petroleum Company | 10,513 | 119,743 | ||||||
Calumet Specialty Products Partners, L.P. | 212 | 929 | ||||||
Carrizo Oil & Gas, Inc. | 995 | 38,308 | ||||||
Cheniere Energy Partners LP Holdings, LLC | 2,228 | 44,449 | ||||||
Cheniere Energy, Inc. | 263 | 8,450 |
37
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 90.5% (Continued) | Shares | Value | ||||||
Energy — 8.9% (Continued) | ||||||||
Oil, Gas & Consumable Fuels — 7.8% (Continued) | ||||||||
Chevron Corporation | 509 | $ | 51,409 | |||||
Cimarex Energy Company | 596 | 69,303 | ||||||
Cobalt International Energy, Inc. | 5,534 | 12,396 | ||||||
Columbia Pipeline Partners, L.P. | 497 | 7,321 | ||||||
Concho Resources, Inc. | 534 | 64,796 | ||||||
ConocoPhillips | 1,238 | 54,212 | ||||||
CONSOL Energy, Inc. | 329 | 5,053 | ||||||
Continental Resources, Inc. | 1,675 | 70,451 | ||||||
CrossAmerica Partners, L.P. | 1,939 | 44,597 | ||||||
Devon Energy Corporation | 1,783 | 64,348 | ||||||
Diamondback Energy, Inc. | 953 | 86,675 | ||||||
Dominion Midstream Partners, L.P. | 337 | 9,746 | ||||||
Dorian LPG Ltd. | 527 | 4,711 | ||||||
Eclipse Resources Corporation | 2,720 | 7,262 | ||||||
Enbridge Energy Management, LLC | 369 | 8,066 | ||||||
Enbridge Energy Partners, L.P. | 1,114 | 24,218 | ||||||
Energen Corporation | 1,636 | 77,906 | ||||||
Energy Transfer Equity, L.P. | 1,387 | 17,532 | ||||||
Energy Transfer Partners, L.P. | 417 | 15,120 | ||||||
EnLink Midstream, LLC | 4,121 | 64,576 | ||||||
EnLink Midstream Partners, L.P. | 3,425 | 53,910 | ||||||
Enterprise Products Partners, L.P. | 384 | 10,660 | ||||||
EOG Resources, Inc. | 649 | 52,803 | ||||||
EQT Corporation | 725 | 53,106 | ||||||
Genesis Energy, L.P. | 943 | 35,523 | ||||||
Gulfport Energy Corporation | 2,132 | 65,538 | ||||||
Hess Corporation | 996 | 59,690 | ||||||
Kinder Morgan, Inc. | 338 | 6,111 | ||||||
Kosmos Energy Ltd. | 11,074 | 63,565 | ||||||
Laredo Petroleum, Inc. | 517 | 6,261 | ||||||
Marathon Oil Corporation | 3,435 | 44,895 | ||||||
Matador Resources Company | 3,334 | 75,748 | ||||||
Memorial Resource Development Corporation | 1,726 | 27,271 | ||||||
MPLX, L.P. | 487 | 15,535 | ||||||
Murphy Oil Corporation | 1,138 | 35,176 | ||||||
Newfield Exploration Company | 1,884 | 76,811 | ||||||
NGL Energy Partners, L.P. | 756 | 11,355 | ||||||
Noble Energy, Inc. | 1,565 | 55,949 | ||||||
NuStar GP Holdings, LLC | 2,665 | 66,705 | ||||||
Occidental Petroleum Corporation | 837 | 63,143 |
38
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 90.5% (Continued) | Shares | Value | ||||||
Energy — 8.9% (Continued) | ||||||||
Oil, Gas & Consumable Fuels — 7.8% (Continued) | ||||||||
Par Pacific Holdings, Inc. | 2,304 | $ | 35,251 | |||||
Parsley Energy, Inc. - Class A | 3,600 | 93,852 | ||||||
PBF Energy, Inc. - Class A | 880 | 23,206 | ||||||
PDC Energy, Inc. | 1,277 | 74,130 | ||||||
Phillips 66 | 57 | 4,581 | ||||||
Pioneer Natural Resources Company | 364 | 58,356 | ||||||
QEP Resources, Inc. | 3,562 | 66,360 | ||||||
Range Resources Corporation | 187 | 7,964 | ||||||
Rice Energy, Inc. | 4,681 | 94,790 | ||||||
Rice Midstream Partners, L.P. | 1,990 | 36,397 | ||||||
RSP Permian, Inc. | 1,636 | 53,873 | ||||||
SemGroup Corporation - Class A | 1,338 | 42,535 | ||||||
Southwestern Energy Company | 891 | 12,180 | ||||||
Spectra Energy Corporation | 292 | 9,303 | ||||||
Summit Midstream Partners, L.P. | 3,481 | 72,892 | ||||||
Sunoco Logistics Partners, L.P. | 202 | 5,545 | ||||||
Synergy Resources Corporation | 7,769 | 46,925 | ||||||
Tallgrass Energy Partners, L.P. | 570 | 25,798 | ||||||
Targa Resources Corporation | 1,266 | 54,223 | ||||||
Tesoro Logistics, L.P. | 288 | 14,155 | ||||||
Western Gas Equity Partners, L.P. | 696 | 29,267 | ||||||
Western Gas Partners, L.P. | 114 | 5,681 | ||||||
Whiting Petroleum Corporation | 261 | 3,223 | ||||||
Williams Partners, L.P. | 293 | 9,353 | ||||||
WPX Energy, Inc. | 847 | 8,716 | ||||||
2,963,452 | ||||||||
Financials — 0.0% (a) | ||||||||
Real Estate Investment Trusts (REITs) — 0.0% (a) | ||||||||
Equinix, Inc. | 8 | 2,896 | ||||||
Health Care — 18.1% | ||||||||
Health Care Equipment & Supplies — 11.7% | ||||||||
ABIOMED, Inc. | 423 | 42,008 | ||||||
Accuray, Inc. | 11,270 | 61,422 | ||||||
Alere, Inc. | 2,683 | 115,235 | ||||||
Align Technology, Inc. | 68 | 5,361 | ||||||
Analogic Corporation | 904 | 74,128 | ||||||
AngioDynamics, Inc. | 3,864 | 46,407 | ||||||
AtriCure, Inc. | 5,443 | 78,869 | ||||||
Baxter International, Inc. | 1,468 | 63,359 |
39
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 90.5% (Continued) | Shares | Value | ||||||
Health Care — 18.1% (Continued) | ||||||||
Health Care Equipment & Supplies — 11.7% (Continued) | ||||||||
Becton, Dickinson and Company | 813 | $ | 135,324 | |||||
Boston Scientific Corporation | 6,654 | 151,112 | ||||||
Cantel Medical Corporation | 1,416 | 94,065 | ||||||
Cardiovascular Systems, Inc. | 5,424 | 91,611 | ||||||
Cerus Corporation | 3,888 | 21,617 | ||||||
CONMED Corporation | 1,533 | 61,044 | ||||||
Cooper Companies, Inc. (The) | 802 | 130,574 | ||||||
Cynosure, Inc. - Class A | 404 | 19,299 | ||||||
DENTSPLY SIRONA, Inc. | 1,748 | 108,656 | ||||||
DexCom, Inc. | 1,913 | 123,369 | ||||||
Edwards Lifesciences Corporation | 38 | 3,743 | ||||||
Endologix, Inc. | 10,006 | 126,776 | ||||||
Entellus Medical, Inc. | 351 | 6,297 | ||||||
Glaukos Corporation | 4,241 | 103,268 | ||||||
Greatbatch, Inc. | 816 | 25,753 | ||||||
Haemonetics Corporation | 3,781 | 105,868 | ||||||
Halyard Health, Inc. | 1,686 | 52,418 | ||||||
HeartWare International, Inc. | 2,399 | 70,531 | ||||||
Hill-Rom Holdings, Inc. | 3,751 | 184,287 | ||||||
Hologic, Inc. | 2,960 | 101,854 | ||||||
ICU Medical, Inc. | 263 | 27,349 | ||||||
IDEXX Laboratories, Inc. | 1,525 | 133,544 | ||||||
Inogen, Inc. | 1,582 | 75,525 | ||||||
Insulet Corporation | 3,843 | 115,367 | ||||||
Integra LifeSciences Holdings Corporation | 3,090 | 230,854 | ||||||
Invacare Corporation | 4,796 | 51,317 | ||||||
K2M Group Holdings, Inc. | 5,566 | 69,575 | ||||||
LDR Holding Corporation | 3,953 | 83,132 | ||||||
Merit Medical Systems, Inc. | 4,964 | 93,174 | ||||||
Neogen Corporation | 2,200 | 108,614 | ||||||
Nevro Corporation | 1,764 | 122,986 | ||||||
NuVasive, Inc. | 1,190 | 64,700 | ||||||
Nuvectra Corporation | 272 | 2,448 | ||||||
NxStage Medical, Inc. | 5,976 | 112,946 | ||||||
Orthofix International N.V. | 710 | 31,403 | ||||||
Quidel Corporation | 5,151 | 85,558 | ||||||
SeaSpine Holdings Corporation | 51 | 509 | ||||||
Spectranetics Corporation (The) | 6,948 | 127,287 | ||||||
STERIS plc | 252 | 17,496 | ||||||
Stryker Corporation | 389 | 43,241 |
40
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 90.5% (Continued) | Shares | Value | ||||||
Health Care — 18.1% (Continued) | ||||||||
Health Care Equipment & Supplies — 11.7% (Continued) | ||||||||
Teleflex, Inc. | 811 | $ | 130,652 | |||||
Vascular Solutions, Inc. | 671 | 25,558 | ||||||
West Pharmaceutical Services, Inc. | 3,170 | 238,004 | ||||||
ZELTIQ Aesthetics, Inc. | 3,598 | 102,399 | ||||||
Zimmer Biomet Holdings, Inc. | 1,156 | 141,159 | ||||||
4,439,052 | ||||||||
Health Care Providers & Services — 3.0% | ||||||||
Acadia Healthcare Company, Inc. | 2,624 | 154,475 | ||||||
Amedisys, Inc. | 2,303 | 117,154 | ||||||
AmerisourceBergen Corporation | 4 | 300 | ||||||
Brookdale Senior Living, Inc. | 267 | 4,790 | ||||||
Capital Senior Living Corporation | 732 | 13,388 | ||||||
Civitas Solutions, Inc. | 430 | 9,352 | ||||||
Cross Country Healthcare, Inc. | 3,357 | 45,722 | ||||||
DaVita HealthCare Partners, Inc. | 359 | 27,758 | ||||||
Envision Healthcare Holdings, Inc. | 4,005 | 99,364 | ||||||
Healthways, Inc. | 2,643 | 31,716 | ||||||
Henry Schein, Inc. | 350 | 60,806 | ||||||
HMS Holdings Corporation | 6,329 | 104,587 | ||||||
Laboratory Corporation of America Holdings | 580 | 74,211 | ||||||
LifePoint Health, Inc. | 2,450 | 162,410 | ||||||
Owens & Minor, Inc. | 2,012 | 75,027 | ||||||
PharMerica Corporation | 1,594 | 42,353 | ||||||
Providence Service Corporation (The) | 301 | 14,316 | ||||||
Team Health Holdings, Inc. | 2,025 | 97,139 | ||||||
Universal Health Services, Inc. - Class B | 65 | 8,766 | ||||||
1,143,634 | ||||||||
Health Care Technology — 2.1% | ||||||||
Allscripts Healthcare Solutions, Inc. | 14,349 | 193,568 | ||||||
athenahealth, Inc. | 1,128 | 143,109 | ||||||
Cerner Corporation | 1,851 | 102,934 | ||||||
Imprivata, Inc. | 988 | 13,427 | ||||||
Medidata Solutions, Inc. | 4,456 | 204,709 | ||||||
Omnicell, Inc. | 237 | 7,667 | ||||||
Press Ganey Holdings, Inc. | 2,566 | 87,321 | ||||||
Veeva Systems, Inc. - Class A | 1,549 | 51,039 | ||||||
803,774 | ||||||||
Pharmaceuticals — 1.3% | ||||||||
Abbott Laboratories | 2,838 | 112,470 | ||||||
Akorn, Inc. | 189 | 5,649 |
41
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 90.5% (Continued) | Shares | Value | ||||||
Health Care — 18.1% (Continued) | ||||||||
Pharmaceuticals — 1.3% (Continued) | ||||||||
Allergan plc | 351 | $ | 82,748 | |||||
Bristol-Myers Squibb Company | 353 | 25,310 | ||||||
Eli Lilly & Company | 1,194 | 89,586 | ||||||
Mallinckrodt plc | 1,048 | 66,401 | ||||||
Merck & Company, Inc. | 782 | 43,996 | ||||||
Zoetis, Inc. | 1,759 | 83,412 | ||||||
509,572 | ||||||||
Industrials — 8.4% | ||||||||
Aerospace & Defense — 1.4% | ||||||||
AAR Corporation | 1,156 | 28,218 | ||||||
Aerojet Rocketdyne Holdings, Inc. | 1,697 | 29,256 | ||||||
AeroVironment, Inc. | 1,209 | 34,831 | ||||||
B/E Aerospace, Inc. | 407 | 19,390 | ||||||
Boeing Company (The) | 233 | 29,393 | ||||||
BWX Technologies, Inc. | 1,582 | 55,639 | ||||||
Cubic Corporation | 392 | 15,994 | ||||||
Curtiss-Wright Corporation | 195 | 16,228 | ||||||
DigitalGlobe, Inc. | 1,057 | 22,123 | ||||||
Engility Holdings, Inc. | 88 | 2,071 | ||||||
Esterline Technologies Corporation | 449 | 30,267 | ||||||
Hexcel Corporation | 851 | 37,163 | ||||||
KLX, Inc. | 212 | 6,973 | ||||||
L-3 Communications Holdings, Inc. | 302 | 41,437 | ||||||
Lockheed Martin Corporation | 42 | 9,922 | ||||||
Moog, Inc. - Class A | 372 | 20,062 | ||||||
Orbital ATK, Inc. | 266 | 23,150 | ||||||
Rockwell Collins, Inc. | 166 | 14,674 | ||||||
Spirit AeroSystems Holdings, Inc. - Class A | 468 | 21,893 | ||||||
TASER International, Inc. | 109 | 2,438 | ||||||
Textron, Inc. | 803 | 30,562 | ||||||
Triumph Group, Inc. | 618 | 23,317 | ||||||
515,001 | ||||||||
Air Freight & Logistics — 0.3% | ||||||||
Air Transport Services Group, Inc. | 2,823 | 35,711 | ||||||
Echo Global Logistics, Inc. | 1,060 | 24,020 | ||||||
FedEx Corporation | 216 | 35,634 | ||||||
Hub Group, Inc. - Class A | 323 | 12,926 | ||||||
United Parcel Service, Inc. - Class B | 235 | 24,226 | ||||||
132,517 |
42
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 90.5% (Continued) | Shares | Value | ||||||
Industrials — 8.4% (Continued) | ||||||||
Building Products — 1.3% | ||||||||
A.O. Smith Corporation | 279 | $ | 22,962 | |||||
Advanced Drainage Systems, Inc. | 1,080 | 26,255 | ||||||
Apogee Enterprises, Inc. | 179 | 8,094 | ||||||
Armstrong Flooring, Inc. | 510 | 8,461 | ||||||
Armstrong World Industries, Inc. | 1,187 | 49,082 | ||||||
Builders FirstSource, Inc. | 1,043 | 12,266 | ||||||
Continental Building Products, Inc. | 1,564 | 35,831 | ||||||
Fortune Brands Home & Security, Inc. | 677 | 39,720 | ||||||
Gibraltar Industries, Inc. | 1,324 | 39,561 | ||||||
Griffon Corporation | 473 | 7,970 | ||||||
Lennox International, Inc. | 249 | 34,200 | ||||||
Masonite International Corporation | 670 | 46,786 | ||||||
NCI Building Systems, Inc. | 2,469 | 39,751 | ||||||
Owens Corning | 866 | 44,227 | ||||||
Quanex Building Products Corporation | 1,606 | 31,992 | ||||||
Simpson Manufacturing Company, Inc. | 255 | 10,090 | ||||||
USG Corporation | 1,997 | 57,633 | ||||||
514,881 | ||||||||
Commercial Services & Supplies — 1.7% | ||||||||
ABM Industries, Inc. | 1,175 | 40,150 | ||||||
Brady Corporation - Class A | 1,309 | 41,613 | ||||||
Brink's Company (The) | 1,018 | 29,675 | ||||||
Clean Harbors, Inc. | 1,185 | 61,015 | ||||||
Covanta Holding Corporation | 819 | 13,653 | ||||||
Ennis, Inc. | 637 | 11,631 | ||||||
Essendant, Inc. | 210 | 6,466 | ||||||
Healthcare Services Group, Inc. | 1,546 | 60,294 | ||||||
HNI Corporation | 524 | 24,141 | ||||||
InnerWorkings, Inc. | 267 | 2,301 | ||||||
Interface, Inc. | 552 | 9,362 | ||||||
KAR Auction Services, Inc. | 1,200 | 49,248 | ||||||
McGrath RentCorp | 674 | 19,229 | ||||||
Mobile Mini, Inc. | 893 | 30,764 | ||||||
MSA Safety, Inc. | 140 | 7,052 | ||||||
Republic Services, Inc. | 806 | 38,914 | ||||||
Rollins, Inc. | 1,193 | 33,905 | ||||||
Steelcase, Inc. - Class A | 657 | 10,486 | ||||||
Stericycle, Inc. | 258 | 25,281 | ||||||
Team, Inc. | 319 | 9,672 | ||||||
Tetra Tech, Inc. | 308 | 9,425 |
43
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 90.5% (Continued) | Shares | Value | ||||||
Industrials — 8.4% (Continued) | ||||||||
Commercial Services & Supplies — 1.7% (Continued) | ||||||||
Tyco International plc | 908 | $ | 38,699 | |||||
US Ecology, Inc. | 213 | 9,651 | ||||||
Viad Corporation | 279 | 8,875 | ||||||
Waste Management, Inc. | 637 | 38,825 | ||||||
630,327 | ||||||||
Electrical Equipment — 0.7% | ||||||||
Acuity Brands, Inc. | 149 | 38,597 | ||||||
Babcock & Wilcox Enterprises, Inc. | 310 | 6,743 | ||||||
Belden, Inc. | 829 | 53,611 | ||||||
Eaton Corporation plc | 296 | 18,242 | ||||||
Encore Wire Corporation | 180 | 7,018 | ||||||
Franklin Electric Company, Inc. | 792 | 26,437 | ||||||
II-VI, Inc. | 1,242 | 25,312 | ||||||
Powell Industries, Inc. | 70 | 2,492 | ||||||
Regal-Beloit Corporation | 901 | 51,474 | ||||||
Sensata Technologies Holding N.V. | 542 | 20,043 | ||||||
Sunrun, Inc. | 352 | 2,232 | ||||||
Vicor Corporation | 200 | 2,032 | ||||||
254,233 | ||||||||
Industrial Conglomerates — 0.3% | ||||||||
Carlisle Companies, Inc. | 60 | 6,229 | ||||||
Danaher Corporation | 197 | 19,377 | ||||||
General Electric Company | 1,240 | 37,485 | ||||||
Raven Industries, Inc. | 1,753 | 35,341 | ||||||
98,432 | ||||||||
Machinery — 0.9% | ||||||||
Actuant Corporation - Class A | 1,171 | 31,957 | ||||||
Albany International Corporation - Class A | 813 | 31,975 | ||||||
Astec Industries, Inc. | 738 | 39,365 | ||||||
Briggs & Stratton Corporation | 1,502 | 33,525 | ||||||
Chart Industries, Inc. | 297 | 7,710 | ||||||
CIRCOR International, Inc. | 563 | 31,551 | ||||||
Energy Recovery, Inc. | 613 | 6,590 | ||||||
EnPro Industries, Inc. | 593 | 29,988 | ||||||
Gorman-Rupp Company (The) | 612 | 18,941 | ||||||
Harsco Corporation | 560 | 3,685 | ||||||
John Bean Technologies Corporation | 243 | 14,745 | ||||||
Joy Global, Inc. | 714 | 12,160 | ||||||
Kennametal, Inc. | 469 | 11,481 | ||||||
Milacron Holdings Corporation | 276 | 4,526 |
44
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 90.5% (Continued) | Shares | Value | ||||||
Industrials — 8.4% (Continued) | ||||||||
Machinery — 0.9% (Continued) | ||||||||
RBC Bearings, Inc. | 340 | $ | 25,466 | |||||
SPX Corporation | 437 | 7,241 | ||||||
Tennant Company | 83 | 4,457 | ||||||
Titan International, Inc. | 826 | 5,237 | ||||||
TriMas Corporation | 649 | 11,091 | ||||||
Watts Water Technologies, Inc. - Class A | 184 | 10,589 | ||||||
342,280 | ||||||||
Professional Services — 0.7% | ||||||||
Advisory Board Company (The) | 959 | 31,484 | ||||||
CEB, Inc. | 270 | 17,215 | ||||||
Equifax, Inc. | 19 | 2,389 | ||||||
Insperity, Inc. | 26 | 1,871 | ||||||
Kelly Services, Inc. - Class A | 1,553 | 30,780 | ||||||
Mistras Group, Inc. | 701 | 17,392 | ||||||
Navigant Consulting, Inc. | 366 | 5,830 | ||||||
Nielsen Holdings plc | 288 | 15,376 | ||||||
On Assignment, Inc. | 644 | 24,260 | ||||||
Paylocity Holding Corporation | 804 | 29,515 | ||||||
TransUnion | 1,916 | 63,420 | ||||||
Verisk Analytics, Inc. | 139 | 11,035 | ||||||
WageWorks, Inc. | 512 | 28,698 | ||||||
279,265 | ||||||||
Road & Rail — 0.6% | ||||||||
AMERCO | 12 | 4,520 | ||||||
Celadon Group, Inc. | 375 | 3,705 | ||||||
CSX Corporation | 1,236 | 32,667 | ||||||
Genesee & Wyoming, Inc. - Class A | 879 | 52,802 | ||||||
J.B. Hunt Transport Services, Inc. | 427 | 35,321 | ||||||
Kansas City Southern | 419 | 39,009 | ||||||
Knight Transportation, Inc. | 584 | 15,254 | ||||||
Norfolk Southern Corporation | 76 | 6,389 | ||||||
Old Dominion Freight Line, Inc. | 108 | 6,950 | ||||||
P.A.M. Transportation Services, Inc. | 38 | 782 | ||||||
Ryder System, Inc. | 68 | 4,734 | ||||||
Union Pacific Corporation | 248 | 20,879 | ||||||
Werner Enterprises, Inc. | 422 | 10,504 | ||||||
233,516 | ||||||||
Trading Companies & Distributors — 0.4% | ||||||||
Applied Industrial Technologies, Inc. | 50 | 2,260 | ||||||
Beacon Roofing Supply, Inc. | 1,213 | 52,341 |
45
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 90.5% (Continued) | Shares | Value | ||||||
Industrials — 8.4% (Continued) | ||||||||
Trading Companies & Distributors — 0.4% (Continued) | ||||||||
BMC Stock Holdings, Inc. | 1,605 | $ | 31,490 | |||||
DXP Enterprises, Inc. | 230 | 3,193 | ||||||
Fastenal Company | 207 | 9,528 | ||||||
HD Supply Holdings, Inc. | 254 | 8,966 | ||||||
MRC Global, Inc. | 462 | 6,556 | ||||||
NOW, Inc. | 1,788 | 31,004 | ||||||
Univar, Inc. | 400 | 7,464 | ||||||
152,802 | ||||||||
Transportation Infrastructure — 0.1% | ||||||||
Macquarie Infrastructure Corporation | 590 | 42,250 | ||||||
Wesco Aircraft Holdings, Inc. | 1,070 | 15,076 | ||||||
57,326 | ||||||||
Information Technology — 10.7% | ||||||||
Communications Equipment — 2.0% | ||||||||
ADTRAN, Inc. | 2,583 | 50,239 | ||||||
Arista Networks, Inc. | 531 | 38,917 | ||||||
ARRIS International plc | 1,038 | 25,016 | ||||||
Ciena Corporation | 2,674 | 46,688 | ||||||
CommScope Holding Company, Inc. | 1,105 | 34,421 | ||||||
EchoStar Corporation - Class A | 1,124 | 45,005 | ||||||
Finisar Corporation | 2,911 | 48,963 | ||||||
Harmonic, Inc. | 2,948 | 8,431 | ||||||
Harris Corporation | 747 | 58,841 | ||||||
Infinera Corporation | 2,734 | 35,843 | ||||||
Ixia | 3,696 | 37,551 | ||||||
Juniper Networks, Inc. | 1,769 | 41,412 | ||||||
Lumentum Holdings, Inc. | 141 | 3,573 | ||||||
Motorola Solutions, Inc. | 824 | 57,078 | ||||||
NETGEAR, Inc. | 858 | 38,610 | ||||||
Oclaro, Inc. | 2,074 | 10,391 | ||||||
Palo Alto Networks, Inc. | 436 | 56,881 | ||||||
ShoreTel, Inc. | 4,705 | 31,053 | ||||||
ViaSat, Inc. | 817 | 56,398 | ||||||
Viavi Solutions, Inc. | 4,429 | 30,250 | ||||||
755,561 | ||||||||
Electronic Equipment, Instruments & Components — 2.5% | ||||||||
Amphenol Corporation - Class A | 931 | 54,668 | ||||||
Anixter International, Inc. | 59 | 3,552 | ||||||
Arrow Electronics, Inc. | 1,000 | 64,620 |
46
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 90.5% (Continued) | Shares | Value | ||||||
Information Technology — 10.7% (Continued) | ||||||||
Electronic Equipment, Instruments & Components — 2.5% (Continued) | ||||||||
Avnet, Inc. | 1,500 | $ | 61,545 | |||||
Badger Meter, Inc. | 600 | 45,000 | ||||||
Corning, Inc. | 3,764 | 78,630 | ||||||
CTS Corporation | 1,043 | 18,649 | ||||||
DTS, Inc. | 378 | 9,771 | ||||||
FARO Technologies, Inc. | 809 | 28,630 | ||||||
FEI Company | 375 | 40,294 | ||||||
Flextronics International Ltd. | 6,268 | 78,037 | ||||||
InvenSense, Inc. | 4,274 | 26,413 | ||||||
Itron, Inc. | 1,152 | 50,746 | ||||||
Jabil Circuit, Inc. | 179 | 3,415 | ||||||
Knowles Corporation | 2,461 | 35,980 | ||||||
Littelfuse, Inc. | 282 | 32,297 | ||||||
Mercury Systems, Inc. | 2,122 | 45,092 | ||||||
National Instruments Corporation | 1,838 | 52,512 | ||||||
Novanta, Inc. | 1,923 | 29,441 | ||||||
OSI Systems, Inc. | 432 | 23,017 | ||||||
Trimble Navigation Ltd. | 2,900 | 74,182 | ||||||
TTM Technologies, Inc. | 720 | 5,638 | ||||||
Universal Display Corporation | 861 | 57,816 | ||||||
Vishay Intertechnology, Inc. | 791 | 10,251 | ||||||
Zebra Technologies Corporation - Class A | 615 | 32,663 | ||||||
962,859 | ||||||||
Internet Software & Services — 1.6% | ||||||||
Actua Corporation | 1,217 | 11,817 | ||||||
Akamai Technologies, Inc. | 213 | 11,626 | ||||||
Alphabet, Inc. - Class A | 23 | 17,224 | ||||||
Bankrate, Inc. | 204 | 1,854 | ||||||
Bazaarvoice, Inc. | 762 | 2,835 | ||||||
Benefitfocus, Inc. | 473 | 17,364 | ||||||
Blucora, Inc. | 783 | 7,031 | ||||||
comScore, Inc. | 637 | 20,626 | ||||||
Cornerstone OnDemand, Inc. | 899 | 35,969 | ||||||
CoStar Group, Inc. | 123 | 25,411 | ||||||
Demandware, Inc. | 637 | 30,570 | ||||||
EarthLink Holdings Corporation | 2,249 | 14,753 | ||||||
Envestnet, Inc. | 57 | 1,926 | ||||||
Facebook, Inc. - Class A | 246 | 29,227 | ||||||
Five9, Inc. | 792 | 8,070 |
47
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 90.5% (Continued) | Shares | Value | ||||||
Information Technology — 10.7% (Continued) | ||||||||
Internet Software & Services — 1.6% (Continued) | ||||||||
GoDaddy, Inc. - Class A | 1,034 | $ | 33,636 | |||||
Gogo, Inc. | 679 | 7,632 | ||||||
GTT Communications, Inc. | 1,131 | 21,195 | ||||||
Hortonworks, Inc. | 1,288 | 15,044 | ||||||
IAC/InterActiveCorp | 52 | 2,906 | ||||||
inContact, Inc. | 713 | 9,896 | ||||||
Instructure, Inc. | 667 | 11,572 | ||||||
Internap Corporation | 986 | 2,140 | ||||||
Intralinks Holdings, Inc. | 2,179 | 17,083 | ||||||
LinkedIn Corporation - Class A | 133 | 18,155 | ||||||
LivePerson, Inc. | 1,262 | 8,809 | ||||||
Marketo, Inc. | 1,091 | 38,436 | ||||||
Monster Worldwide, Inc. | 2,773 | 7,348 | ||||||
New Relic, Inc. | 823 | 24,822 | ||||||
PayPal Holdings, Inc. | 419 | 15,834 | ||||||
Q2 Holdings, Inc. | 1,106 | 27,628 | ||||||
Rackspace Hosting, Inc. | 804 | 20,100 | ||||||
Stamps.com, Inc. | 217 | 19,745 | ||||||
Twitter, Inc. | 1,052 | 16,011 | ||||||
Yahoo!, Inc. | 697 | 26,444 | ||||||
Yelp, Inc. | 1,038 | 27,185 | ||||||
607,924 | ||||||||
IT Services — 0.7% | ||||||||
Acxiom Corporation | 712 | 15,080 | ||||||
Black Knight Financial Services, Inc. - Class A | 116 | 4,060 | ||||||
Blackhawk Network Holdings, Inc. | 365 | 12,563 | ||||||
Computer Sciences Corporation | 681 | 33,505 | ||||||
CSRA, Inc. | 186 | 4,607 | ||||||
EPAM Systems, Inc. | 60 | 4,591 | ||||||
Fidelity National Information Services, Inc. | 112 | 8,318 | ||||||
FleetCor Technologies, Inc. | 30 | 4,467 | ||||||
Gartner, Inc. | 272 | 27,641 | ||||||
Genpact Ltd. | 141 | 3,975 | ||||||
Leidos Holdings, Inc. | 133 | 6,570 | ||||||
Sabre Corporation | 788 | 22,198 | ||||||
ServiceSource International, Inc. | 808 | 3,006 | ||||||
Teradata Corporation | 924 | 26,186 | ||||||
Unisys Corporation | 317 | 2,676 | ||||||
Vantiv, Inc. - Class A | 509 | 27,369 | ||||||
VeriFone Systems, Inc. | 1,451 | 38,306 |
48
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 90.5% (Continued) | Shares | Value | ||||||
Information Technology — 10.7% (Continued) | ||||||||
IT Services — 0.7% (Continued) | ||||||||
WEX, Inc. | 148 | $ | 13,655 | |||||
Xerox Corporation | 1,919 | 19,132 | ||||||
277,905 | ||||||||
Software — 3.1% | ||||||||
Adobe Systems, Inc. | 271 | 26,956 | ||||||
Autodesk, Inc. | 437 | 25,464 | ||||||
Barracuda Networks, Inc. | 1,178 | 20,273 | ||||||
Blackbaud, Inc. | 503 | 31,523 | ||||||
Bottomline Technologies (de), Inc. | 603 | 15,111 | ||||||
BroadSoft, Inc. | 266 | 11,598 | ||||||
Callidus Software, Inc. | 1,654 | 30,698 | ||||||
CDK Global, Inc. | 90 | 4,977 | ||||||
Citrix Systems, Inc. | 321 | 27,259 | ||||||
CommVault Systems, Inc. | 481 | 21,780 | ||||||
Ellie Mae, Inc. | 422 | 35,748 | ||||||
EPIQ Systems, Inc. | 148 | 2,254 | ||||||
FireEye, Inc. | 1,399 | 22,272 | ||||||
Fortinet, Inc. | 730 | 24,973 | ||||||
Gigamon, Inc. | 420 | 13,083 | ||||||
Guidewire Software, Inc. | 559 | 32,813 | ||||||
HubSpot, Inc. | 631 | 30,137 | ||||||
Imperva, Inc. | 634 | 24,206 | ||||||
Infoblox, Inc. | 1,498 | 28,177 | ||||||
Interactive Intelligence Group, Inc. | 781 | 32,201 | ||||||
Intuit, Inc. | 241 | 25,705 | ||||||
Manhattan Associates, Inc. | 57 | 3,758 | ||||||
Microsoft Corporation | 136 | 7,208 | ||||||
MobileIron, Inc. | 357 | 1,178 | ||||||
NetScout Systems, Inc. | 1,333 | 32,339 | ||||||
NetSuite, Inc. | 299 | 23,714 | ||||||
Nuance Communications, Inc. | 1,356 | 22,672 | ||||||
Paycom Software, Inc. | 282 | 11,404 | ||||||
Pegasystems, Inc. | 668 | 17,615 | ||||||
Proofpoint, Inc. | 550 | 32,241 | ||||||
PROS Holdings, Inc. | 814 | 11,388 | ||||||
PTC, Inc. | 659 | 23,553 | ||||||
Qlik Technologies, Inc. | 973 | 27,925 | ||||||
RealPage, Inc. | 1,204 | 26,187 | ||||||
Red Hat, Inc. | 314 | 24,323 | ||||||
Rubicon Project, Inc. (The) | 1,546 | 22,649 |
49
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 90.5% (Continued) | Shares | Value | ||||||
Information Technology — 10.7% (Continued) | ||||||||
Software — 3.1% (Continued) | ||||||||
salesforce.com, inc. | 331 | $ | 27,708 | |||||
ServiceNow, Inc. | 328 | 23,495 | ||||||
Splunk, Inc. | 453 | 26,025 | ||||||
SS&C Technologies Holdings, Inc. | 278 | 17,122 | ||||||
Synchronoss Technologies, Inc. | 167 | 5,890 | ||||||
Synopsys, Inc. | 500 | 25,835 | ||||||
Tableau Software, Inc. - Class A | 373 | 19,187 | ||||||
Take-Two Interactive Software, Inc. | 1,016 | 39,533 | ||||||
Tyler Technologies, Inc. | 129 | 19,774 | ||||||
Ultimate Software Group, Inc. (The) | 145 | 29,650 | ||||||
Varonis Systems, Inc. | 820 | 19,942 | ||||||
Verint Systems, Inc. | 693 | 22,862 | ||||||
VMware, Inc. - Class A | 100 | 6,056 | ||||||
Workday, Inc. - Class A | 323 | 24,496 | ||||||
Workiva, Inc. | 1,849 | 25,516 | ||||||
Zendesk, Inc. | 1,445 | 35,388 | ||||||
Zynga, Inc. - Class A | 12,815 | 32,935 | ||||||
1,176,776 | ||||||||
Technology Hardware, Storage & Peripherals — 0.8% | ||||||||
3D Systems Corporation | 247 | 3,307 | ||||||
Avid Technology, Inc. | 517 | 3,076 | ||||||
Cray, Inc. | 1,348 | 44,915 | ||||||
Diebold, Inc. | 1,636 | 42,291 | ||||||
Eastman Kodak Company | 212 | 2,779 | ||||||
Electronics For Imaging, Inc. | 1,225 | 53,692 | ||||||
NCR Corporation | 1,863 | 57,529 | ||||||
Nimble Storage, Inc. | 3,506 | 31,309 | ||||||
Quantum Corporation | 1,886 | 720 | ||||||
Seagate Technology plc | 787 | 17,755 | ||||||
Stratasys Ltd. | 983 | 22,432 | ||||||
279,805 | ||||||||
Materials — 8.4% | ||||||||
Chemicals — 3.3% | ||||||||
A. Schulman, Inc. | 651 | 16,477 | ||||||
Air Products and Chemicals, Inc. | 422 | 60,194 | ||||||
Albemarle Corporation | 1,127 | 88,469 | ||||||
American Vanguard Corporation | 578 | 7,572 | ||||||
Ashland, Inc. | 535 | 60,648 | ||||||
Axalta Coating Systems Ltd. | 1,545 | 43,492 | ||||||
Balchem Corporation | 115 | 6,894 |
50
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 90.5% (Continued) | Shares | Value | ||||||
Materials — 8.4% (Continued) | ||||||||
Chemicals — 3.3% (Continued) | ||||||||
Cabot Corporation | 1,256 | $ | 57,412 | |||||
Celanese Corporation - Series A | 850 | 59,908 | ||||||
CF Industries Holdings, Inc. | 235 | 6,500 | ||||||
Chemours Company (The) | 15 | 131 | ||||||
Eastman Chemical Company | 414 | 30,371 | ||||||
Ecolab, Inc. | 347 | 40,682 | ||||||
Ferro Corporation | 5,697 | 78,789 | ||||||
Flotek Industries, Inc. | 3,110 | 36,574 | ||||||
FMC Corporation | 1,691 | 80,306 | ||||||
H.B. Fuller Company | 1,868 | 85,293 | ||||||
Huntsman Corporation | 177 | 2,643 | ||||||
Innophos Holdings, Inc. | 431 | 16,524 | ||||||
Intrepid Potash, Inc. | 3,213 | 4,080 | ||||||
Koppers Holdings, Inc. | 196 | 4,961 | ||||||
Kraton Performance Polymers, Inc. | 2,753 | 74,854 | ||||||
Kronos Worldwide, Inc. | 6,938 | 40,587 | ||||||
LSB Industries, Inc. | 638 | 8,390 | ||||||
Minerals Technologies, Inc. | 985 | 56,736 | ||||||
OCI Partners, L.P. | 398 | 2,826 | ||||||
Olin Corporation | 1,448 | 33,318 | ||||||
Platform Specialty Products Corporation | 1,144 | 10,857 | ||||||
PPG Industries, Inc. | 170 | 18,306 | ||||||
Praxair, Inc. | 440 | 48,338 | ||||||
Scotts Miracle-Gro Company (The) - Class A | 291 | 20,224 | ||||||
Sensient Technologies Corporation | 1,432 | 97,691 | ||||||
Stepan Company | 110 | 6,346 | ||||||
Tredegar Corporation | 2,199 | 35,734 | ||||||
1,242,127 | ||||||||
Construction Materials — 0.9% | ||||||||
Eagle Materials, Inc. | 1,330 | 104,166 | ||||||
GCP Applied Technologies, Inc. | 118 | 2,800 | ||||||
Headwaters, Inc. | 730 | 13,863 | ||||||
Martin Marietta Materials, Inc. | 387 | 73,158 | ||||||
Summit Materials, Inc. - Class A | 1,426 | 31,015 | ||||||
U.S. Concrete, Inc. | 784 | 50,286 | ||||||
Vulcan Materials Company | 602 | 70,284 | ||||||
345,572 | ||||||||
Containers & Packaging — 0.7% | ||||||||
Ball Corporation | 440 | 31,812 | ||||||
Berry Plastics Group, Inc. | 1,919 | 75,167 |
51
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 90.5% (Continued) | Shares | Value | ||||||
Materials — 8.4% (Continued) | ||||||||
Containers & Packaging — 0.7% (Continued) | ||||||||
Graphic Packaging Holding Company | 1,020 | $ | 13,668 | |||||
Greif, Inc. - Class A | 1,565 | 56,121 | ||||||
Ingevity Corporation | 125 | 3,643 | ||||||
Myers Industries, Inc. | 870 | 12,432 | ||||||
Silgan Holdings, Inc. | 583 | 29,815 | ||||||
WestRock Company | 753 | 29,826 | ||||||
252,484 | ||||||||
Metals & Mining — 2.6% | ||||||||
Alcoa, Inc. | 5,081 | 47,101 | ||||||
Allegheny Technologies, Inc. | 3,267 | 40,446 | ||||||
Carpenter Technology Corporation | 2,080 | 66,643 | ||||||
Century Aluminum Company | 1,963 | 12,681 | ||||||
Coeur Mining, Inc. | 6,057 | 45,609 | ||||||
Ferroglobe plc | 2,207 | 20,128 | ||||||
Freeport-McMoRan, Inc. | 440 | 4,875 | ||||||
Haynes International, Inc. | 200 | 5,764 | ||||||
Hecla Mining Company | 27,834 | 113,006 | ||||||
Kaiser Aluminum Corporation | 730 | 62,568 | ||||||
Materion Corporation | 1,108 | 26,803 | ||||||
Newmont Mining Corporation | 1,835 | 59,472 | ||||||
NN, Inc. | 574 | 9,563 | ||||||
Nucor Corporation | 814 | 39,487 | ||||||
Reliance Steel & Aluminum Company | 7 | 520 | ||||||
Royal Gold, Inc. | 1,987 | 111,530 | ||||||
Schnitzer Steel Industries, Inc. - Class A | 1,450 | 23,331 | ||||||
Steel Dynamics, Inc. | 4,262 | 105,229 | ||||||
Stillwater Mining Company | 6,156 | 62,299 | ||||||
SunCoke Energy, Inc. | 1,558 | 9,426 | ||||||
TimkenSteel Corporation | 2,439 | 21,853 | ||||||
Worthington Industries, Inc. | 2,800 | 104,608 | ||||||
992,942 | ||||||||
Paper & Forest Products — 0.9% | ||||||||
Clearwater Paper Corporation | 870 | 54,471 | ||||||
Deltic Timber Corporation | 1,067 | 68,693 | ||||||
Domtar Corporation | 749 | 28,941 | ||||||
International Paper Company | 951 | 40,094 | ||||||
KapStone Paper and Packaging Corporation | 2,188 | 33,367 | ||||||
Louisiana-Pacific Corporation | 5,452 | 99,663 | ||||||
P.H. Glatfelter Company | 1,312 | 26,896 |
52
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
COMMON STOCKS — 90.5% (Continued) | Shares | Value | ||||||
Materials — 8.4% (Continued) | ||||||||
Paper & Forest Products — 0.9% (Continued) | ||||||||
Schweitzer-Mauduit International, Inc. | 113 | $ | 3,887 | |||||
356,012 | ||||||||
Telecommunication Services — 0.1% | ||||||||
Wireless Telecommunication Services — 0.1% | ||||||||
RingCentral, Inc. - Class A | 1,085 | 21,418 | ||||||
Total Common Stocks (Proceeds $32,686,881) | $ | 34,410,914 |
RIGHTS — 0.0% (a) | Shares | Value | ||||||
Liberty Braves Group (Proceeds $106) | 24 | $ | 52 |
WARRANTS — 0.0% (a) | Shares | Value | ||||||
BioTime, Inc. (Proceeds $1) | 1 | $ | 1 | |||||
Total Securities Sold Short — 90.5% (Proceeds $32,686,988) | $ | 34,410,967 |
(a) | Percentage rounds to less than 0.1%. |
See accompanying notes to financial statements. |
53
BARROW FUNDS | ||||||||
| Barrow Value Opportunity Fund | Barrow Long/Short Opportunity Fund | ||||||
ASSETS | ||||||||
Investments in securities: | ||||||||
At acquisition cost | $ | 31,899,143 | $ | 50,310,569 | ||||
At value (Note 2) | $ | 34,501,933 | $ | 52,188,937 | ||||
Deposits with brokers for securities sold short (Note 2) | — | 20,318,813 | ||||||
Dividends receivable | 45,726 | 66,835 | ||||||
Receivable for capital shares sold | — | 100 | ||||||
Other assets | 9,169 | 10,253 | ||||||
TOTAL ASSETS | 34,556,828 | 72,584,938 | ||||||
LIABILITIES | ||||||||
Securities sold short, at value (Note 2) (proceeds $— and $32,686,988, respectively) | — | 34,410,967 | ||||||
Dividends payable on securities sold short (Note 2) | — | 28,383 | ||||||
Payable for capital shares redeemed | 211 | — | ||||||
Payable to Adviser (Note 4) | 16,831 | 41,182 | ||||||
Payable to administrator (Note 4) | 7,930 | 8,280 | ||||||
Accrued brokerage expense on securities sold short (Note 2) | — | 14,006 | ||||||
Accrued borrowing expense (Note 5) | — | 14,146 | ||||||
Other accrued expenses and liabilities | 9,385 | 15,756 | ||||||
TOTAL LIABILITIES | 34,357 | 34,532,720 | ||||||
NET ASSETS | $ | 34,522,471 | $ | 38,052,218 | ||||
Net assets consist of: | ||||||||
Paid-in capital | $ | 32,046,381 | $ | 38,830,686 | ||||
Accumulated net investment income (loss) | 195,001 | (88,626 | ) | |||||
Accumulated net realized losses from security transactions | (321,701 | ) | (844,231 | ) | ||||
Net unrealized appreciation (depreciation) on: | ||||||||
Investments | 2,602,790 | 1,878,368 | ||||||
Short positions | — | (1,723,979 | ) | |||||
Net assets | $ | 34,522,471 | $ | 38,052,218 | ||||
Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) | 1,393,005 | 3,668,099 | ||||||
Net asset value, offering price and redemption price per share (Note 2) | $ | 24.78 | $ | 10.37 |
See accompanying notes to financial statements. |
54
BARROW FUNDS | ||||||||
Barrow Value Opportunity Fund | Barrow Long/Short Opportunity Fund | |||||||
INVESTMENT INCOME | ||||||||
Dividends | $ | 748,139 | $ | 645,382 | ||||
Interest | — | 23,173 | ||||||
TOTAL INVESTMENT INCOME | 748,139 | 668,555 | ||||||
EXPENSES | ||||||||
Investment advisory fees (Note 4) | 332,182 | 325,511 | ||||||
Dividend expense on securities sold short (Note 2) | — | 256,505 | ||||||
Brokerage expense on securities sold short (Note 2) | — | 129,400 | ||||||
Professional fees | 34,303 | 35,303 | ||||||
Accounting services fees (Note 4) | 33,111 | 31,934 | ||||||
Administration fees (Note 4) | 33,587 | 31,041 | ||||||
Custodian and bank service fees | 20,608 | 42,308 | ||||||
Registration and filing fees | 23,474 | 24,769 | ||||||
Borrowing costs (Note 5) | 2,029 | 46,266 | ||||||
Transfer agent fees (Note 4) | 15,750 | 14,500 | ||||||
Pricing fees | 4,140 | 21,035 | ||||||
Compliance service fees (Note 4) | 12,141 | 12,141 | ||||||
Trustees’ fees and expenses (Note 4) | 9,984 | 9,984 | ||||||
Printing of shareholder reports | 7,488 | 7,186 | ||||||
Postage and supplies | 4,489 | 4,331 | ||||||
Insurance expense | 3,897 | 3,897 | ||||||
Distribution fees, Investor Class (Note 4) | 57 | 39 | ||||||
Other expenses | 7,824 | 7,224 | ||||||
TOTAL EXPENSES | 545,064 | 1,003,374 | ||||||
Investment advisory fee reductions and expense reimbursements by Adviser (Note 4) | (157,109 | ) | (193,578 | ) | ||||
NET EXPENSES | 387,955 | 809,796 | ||||||
NET INVESTMENT INCOME (LOSS) | 360,184 | (141,241 | ) | |||||
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS AND SECURITIES SOLD SHORT | ||||||||
Net realized losses from: | ||||||||
Investments | (286,001 | ) | (74,973 | ) | ||||
Securities sold short | — | (358,159 | ) | |||||
Net change in unrealized appreciation (depreciation) on: | ||||||||
Investments | (2,041,141 | ) | 369,069 | |||||
Securities sold short | — | (1,169,227 | ) | |||||
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS | (2,327,142 | ) | (1,233,290 | ) | ||||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (1,966,958 | ) | $ | (1,374,531 | ) |
See accompanying notes to financial statements. |
55
BARROW VALUE OPPORTUNITY FUND | ||||||||
| Year Ended 2016 | Year Ended 2015 | ||||||
FROM OPERATIONS | ||||||||
Net investment income | $ | 360,184 | $ | 308,510 | ||||
Net realized gains (losses) from security transactions | (286,001 | ) | 163,178 | |||||
Net change in unrealized appreciation (depreciation) on investments | (2,041,141 | ) | 1,815,680 | |||||
Net increase (decrease) in net assets resulting from operations | (1,966,958 | ) | 2,287,368 | |||||
DISTRIBUTIONS TO SHAREHOLDERS (Note 2) | ||||||||
Investment income, Institutional Class | (266,621 | ) | (166,316 | ) | ||||
Investment income, Investor Class | — | (1,730 | ) | |||||
Realized gains, Institutional Class | (281,697 | ) | (1,701,605 | ) | ||||
Realized gains, Investor Class | — | (24,232 | ) | |||||
Decrease in net assets from distributions to shareholders | (548,318 | ) | (1,893,883 | ) | ||||
CAPITAL SHARE TRANSACTIONS (Note 1) | ||||||||
Institutional Class | ||||||||
Proceeds from shares sold | 8,014,825 | 9,208,231 | ||||||
Net asset value of shares issued in reinvestment of distributions | 543,321 | 1,843,520 | ||||||
Payments for shares redeemed | (3,465,224 | ) | (881,565 | ) | ||||
Net increase in Institutional Class net assets from capital share transactions | 5,092,922 | 10,170,186 | ||||||
Investor Class | ||||||||
Proceeds from shares sold | — | 293,091 | ||||||
Net asset value of shares issued in reinvestment of distributions | — | 25,962 | ||||||
Payments for shares redeemed | (275,749 | ) | (401,316 | ) | ||||
Net decrease in Investor Class net assets from capital share transactions | (275,749 | ) | (82,263 | ) | ||||
TOTAL INCREASE IN NET ASSETS | 2,301,897 | 10,481,408 | ||||||
NET ASSETS | ||||||||
Beginning of year | 32,220,574 | 21,739,166 | ||||||
End of year | $ | 34,522,471 | $ | 32,220,574 | ||||
ACCUMULATED NET INVESTMENT INCOME | $ | 195,001 | $ | 198,721 |
See accompanying notes to financial statements. |
56
BARROW VALUE OPPORTUNITY FUND | ||||||||
| Year Ended 2016 | Year Ended 2015 | ||||||
CAPITAL SHARE ACTIVITY (Note 1) | ||||||||
Institutional Class | ||||||||
Shares sold | 313,016 | 352,569 | ||||||
Shares reinvested | 21,979 | 73,284 | ||||||
Shares redeemed | (143,732 | ) | (33,824 | ) | ||||
Net increase in shares outstanding | 191,263 | 392,029 | ||||||
Shares outstanding, beginning of year | 1,201,742 | 809,713 | ||||||
Shares outstanding, end of year | 1,393,005 | 1,201,742 | ||||||
Investor Class | ||||||||
Shares sold | — | 11,054 | ||||||
Shares reinvested | — | 1,035 | ||||||
Shares redeemed | (10,392 | ) | (15,299 | ) | ||||
Net decrease in shares outstanding | (10,392 | ) | (3,210 | ) | ||||
Shares outstanding, beginning of year | 10,392 | 13,602 | ||||||
Shares outstanding, end of year | — | 10,392 |
See accompanying notes to financial statements. |
57
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
Year Ended 2016 | Year Ended 2015 | |||||||
FROM OPERATIONS | ||||||||
Net investment loss | $ | (141,241 | ) | $ | (4,122 | ) | ||
Net realized gains (losses) from: | ||||||||
Investments | (74,973 | ) | 133,151 | |||||
Securities sold short | (358,159 | ) | (474,610 | ) | ||||
Net change in unrealized appreciation (depreciation) on: | ||||||||
Investments | 369,069 | 1,169,975 | ||||||
Securities sold short | (1,169,227 | ) | (313,893 | ) | ||||
Net increase (decrease) in net assets resulting from operations | (1,374,531 | ) | 510,501 | |||||
DISTRIBUTIONS TO SHAREHOLDERS (Note 2) | ||||||||
Realized gains, Institutional Class | — | (169,448 | ) | |||||
Realized gains, Investor Class | — | (3,197 | ) | |||||
Decrease in net assets from distributions to shareholders | — | (172,645 | ) | |||||
CAPITAL SHARE TRANSACTIONS (Note 1) | ||||||||
Institutional Class | ||||||||
Proceeds from shares sold | 31,363,694 | 5,065,056 | ||||||
Net asset value of shares issued in reinvestment of distributions | — | 165,696 | ||||||
Payments for shares redeemed | (1,607,462 | ) | (106,526 | ) | ||||
Net increase in Institutional Class net assets from capital share transactions | 29,756,232 | 5,124,226 | ||||||
Investor Class | ||||||||
Proceeds from shares sold | — | 10,500 | ||||||
Net asset value of shares issued in reinvestment of distributions | — | 3,197 | ||||||
Payments for shares redeemed | (191,532 | ) | — | |||||
Net increase (decrease) in Investor Class net assets from capital share transactions | (191,532 | ) | 13,697 | |||||
TOTAL INCREASE IN NET ASSETS | 28,190,169 | 5,475,779 | ||||||
NET ASSETS | ||||||||
Beginning of year | 9,862,049 | 4,386,270 | ||||||
End of year | $ | 38,052,218 | $ | 9,862,049 | ||||
ACCUMULATED NET INVESTMENT INCOME (LOSS) | $ | (88,626 | ) | $ | 12,858 |
See accompanying notes to financial statements. |
58
BARROW LONG/SHORT OPPORTUNITY FUND | ||||||||
Year Ended 2016 | Year Ended 2015 | |||||||
CAPITAL SHARE ACTIVITY (Note 1) | ||||||||
Institutional Class | ||||||||
Shares sold | 2,909,103 | 499,343 | ||||||
Shares reinvested | — | 16,134 | ||||||
Shares redeemed | (150,836 | ) | (10,410 | ) | ||||
Net increase in shares outstanding | 2,758,267 | 505,067 | ||||||
Shares outstanding, beginning of year | 909,832 | 404,765 | ||||||
Shares outstanding, end of year | 3,668,099 | 909,832 | ||||||
Investor Class | ||||||||
Shares sold | — | 1,004 | ||||||
Shares reinvested | — | 312 | ||||||
Shares redeemed | (18,074 | ) | — | |||||
Net increase (decrease) in shares outstanding | (18,074 | ) | 1,316 | |||||
Shares outstanding, beginning of year | 18,074 | 16,758 | ||||||
Shares outstanding, end of year | — | 18,074 |
See accompanying notes to financial statements. |
59
BARROW VALUE OPPORTUNITY FUND* | ||||||||||||
Per share data for a share outstanding throughout each period: | ||||||||||||
Year Ended 2016 | Year Ended 2015 | Period Ended 2014(a) | ||||||||||
Net asset value at beginning of period | $ | 26.58 | $ | 26.40 | $ | 23.30 | ||||||
Income (loss) from investment operations: | ||||||||||||
Net investment income | 0.27 | (b) | 0.27 | 0.18 | ||||||||
Net realized and unrealized gains (losses) on investments | (1.68 | ) | 2.25 | 3.47 | ||||||||
Total from investment operations | (1.41 | ) | 2.52 | 3.65 | ||||||||
Less distributions: | ||||||||||||
From net investment income | (0.19 | ) | (0.20 | ) | (0.06 | ) | ||||||
From net realized gains from investments | (0.20 | ) | (2.14 | ) | (0.49 | ) | ||||||
Total distributions | (0.39 | ) | (2.34 | ) | (0.55 | ) | ||||||
Net asset value at end of period | $ | 24.78 | $ | 26.58 | $ | 26.40 | ||||||
Total return (c) | (5.29 | %) | 10.10 | % | 15.73 | %(d) | ||||||
Ratios and supplemental data: | ||||||||||||
Net assets at end of period (000’s) | $ | 34,522 | $ | 31,945 | $ | 21,380 | ||||||
Ratio of total expenses to average net assets | 1.60 | % | 1.79 | % | 1.86 | %(e) | ||||||
Ratio of net expenses to average net assets (f) | 1.16 | %(g) | 1.15 | % | 1.15 | %(e) | ||||||
Ratio of net investment income to average net assets (f) | 1.08 | % | 1.29 | % | 1.01 | %(e) | ||||||
Portfolio turnover rate | 84 | % | 112 | % | 45 | %(d) |
* | Prior to July 1, 2015, formally known as Barrow Value Opportunity Fund - Institutional Class (Note 1). |
(a) | Represents the period from the commencement of operations (close of business August 30, 2013) through May 31, 2014 (Note 1). |
(b) | Calculated using average shares outstanding. |
(c) | Total return is a measure of the change in value of an investment in the Fund over the periods covered, which assumes any dividends or capital gains distributions are reinvested in shares of the Fund. The returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. The total returns would have been lower if the Adviser had not reduced advisory fees and reimbursed expenses. |
(d) | Not annualized. |
(e) | Annualized. |
(f) | Ratio was determined after fee reductions and expense reimbursements by the Adviser (Note 4). |
(g) | Ratio includes borrowing costs of 0.01% for the year ended May, 31, 2016 (Note 5). |
See accompanying notes to financial statements. |
60
BARROW LONG/SHORT OPPORTUNITY FUND* | ||||||||||||
Per share data for a share outstanding throughout each period: | ||||||||||||
| Year Ended 2016 | Year Ended 2015 | Period Ended 2014(a) | |||||||||
Net asset value at beginning of period | $ | 10.63 | $ | 10.41 | $ | 10.00 | ||||||
Income (loss) from investment operations: | ||||||||||||
Net investment loss | (0.07 | )(b) | (0.02 | ) | (0.03 | ) | ||||||
Net realized and unrealized gains (losses) on investments | (0.19 | ) | 0.43 | 0.44 | ||||||||
Total from investment operations | (0.26 | ) | 0.41 | 0.41 | ||||||||
Less distributions: | ||||||||||||
From net realized gains from investments | — | (0.19 | ) | — | ||||||||
Net asset value at end of period | $ | 10.37 | $ | 10.63 | $ | 10.41 | ||||||
Total return (c) | (2.45 | %) | 4.01 | % | 4.10 | %(d) | ||||||
Ratios and supplemental data: | ||||||||||||
Net assets at end of period (000’s) | $ | 38,052 | $ | 9,671 | $ | 4,212 | ||||||
Ratio of total expenses to average net assets | 4.58 | % | 6.16 | % | 8.69 | %(f) | ||||||
Ratio of net expenses to average net assets (e) | 3.72 | % | 3.70 | % | 3.51 | %(f) | ||||||
Ratio of net expenses to average net assets excluding dividend expense (e) | 2.54 | % | 2.54 | % | 2.51 | %(f) | ||||||
Ratio of net expenses to average net assets excluding dividend expense, brokerage expense on securities sold short and borrowing costs (e) | 1.74 | % | 1.74 | % | 1.74 | %(f) | ||||||
Ratio of net investment loss to average net assets (e)(g) | (0.65 | %) | (0.05 | %) | (0.37 | %)(f) | ||||||
Portfolio turnover rate | 64 | % | 111 | % | 76 | %(d) |
* | Formerly (prior to July 1, 2015) known as Barrow All-Cap Long/Short Fund - Institutional Class (Note 1). |
(a) | Represents the period from the commencement of operations (close of business August 30, 2013) through May 31, 2014 (Note 1). |
(b) | Calculated using average shares outstanding. |
(c) | Total return is a measure of the change in value of an investment in the Fund over the periods covered, which assumes any dividends or capital gains distributions are reinvested in shares of the Fund. The returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. The total returns would have been lower if the Adviser had not reduced advisory fees and reimbursed expenses. |
(d) | Not annualized. |
(e) | Ratio was determined after fee reductions and expense reimbursements by the Adviser (Note 4). |
(f) | Annualized. |
(g) | The Fund earns interest income on the margin account balance that is associated with securities sold short. The ratio of interest income to average net assets for the periods ended May 31, 2016, May 31, 2015 and May 31, 2014 is 0.11%, 0.30% and 0.28%(f), respectively. |
See accompanying notes to financial statements. |
61
BARROW FUNDS
NOTES TO FINANCIAL STATEMENTS
May 31, 2016
1. Organization
Barrow Value Opportunity Fund (formerly Barrow All-Cap Core Fund) and Barrow Long/Short Opportunity Fund (formerly Barrow All-Cap Long/Short Fund) (individually, a “Fund” and collectively, the “Funds”) are each a diversified series of Ultimus Managers Trust (the “Trust”), an open-end investment company established as an Ohio business trust under a Declaration of Trust dated February 28, 2012. Other series of the Trust are not incorporated in this report. The Funds commenced operations at the close of business on August 30, 2013.
The investment objective of Barrow Value Opportunity Fund is to seek to generate long-term capital appreciation. The investment objective of Barrow Long/Short Opportunity Fund is to seek to generate above-average returns through capital appreciation, while also attempting to reduce volatility and preserve capital during market downturns.
The Funds each currently offer one class of shares which are sold without any sales loads or distribution fees. Prior to July 1, 2015, each Fund offered two classes of shares: Institutional Class shares (sold without any sales loads or distribution fees and required a $250,000 initial investment) and Investor Class shares (sold without any sales loads, but subject to a distribution fee of up to 0.25% of the average daily net assets attributable to Investor Class shares, and required a $2,500 initial investment). Each class of shares represented an ownership interest in the same investment portfolio. On June 30, 2015, all existing Investor Class shares of each Fund were converted into Institutional Class shares and the initial minimum investment was reduced to $2,500 (the “Conversion”). After the Conversion, the Institutional Class designation no longer applied to shares of the Fund.
2. Significant Accounting Policies
The following is a summary of the Funds’ significant accounting policies. The policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”). As an investment company, as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Update 2013-08, the Funds follow accounting and reporting guidance under FASB Accounting Standards Codification Topic 946, “Financial Services – Investment Companies.”
Securities valuation – Each Fund values its portfolio securities at market value as of the close of regular trading on the New York Stock Exchange (the “NYSE”) (normally 4:00 p.m. Eastern time) on each business day the NYSE is open for business. The Funds value their listed securities on the basis of the security’s last sale price on the security’s primary exchange, if available, otherwise at the exchange’s most recently quoted mean price. NASDAQ-listed securities are valued at the NASDAQ Official Closing Price. In the event that market quotations are not readily available or are considered unreliable due to market or other events, the Funds value their securities and other
62
BARROW FUNDS |
assets at fair value in accordance with procedures established by and under the general supervision of the Trust’s Board of Trustees (the “Board”). Under these procedures, the securities will be classified as Level 2 or 3 within the fair value hierarchy (see below), depending on the inputs used. Unavailable or unreliable market quotes may be due to the following factors: a substantial bid-ask spread; infrequent sales resulting in stale prices; insufficient trading volume; small trade sizes; a temporary lapse in any reliable pricing source; and actions of the securities or futures markets, such as the suspension or limitation of trading. As a result, the prices of securities used to calculate each Fund’s net asset value (“NAV”) may differ from quoted or published prices for the same securities.
GAAP establishes a single authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair value measurements.
Various inputs are used in determining the value of each Fund’s investments and other financial instruments. 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 |
● | Level 3 – significant unobservable inputs |
The inputs or methods used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. 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.
The following is a summary of the inputs used to value the Funds’ investments and other financial instruments as of May 31, 2016:
Barrow Value Opportunity Fund | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments in Securities: | ||||||||||||||||
Common Stocks | $ | 34,356,378 | $ | — | $ | — | $ | 34,356,378 | ||||||||
Money Market Funds | 145,555 | — | — | 145,555 | ||||||||||||
Total | $ | 34,501,933 | $ | — | $ | — | $ | 34,501,933 |
63
BARROW FUNDS |
Barrow Long/Short Opportunity Fund | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments in Securities: | ||||||||||||||||
Common Stocks | $ | 49,408,823 | $ | 0 | (a) | $ | — | $ | 49,408,823 | |||||||
Money Market Funds | 2,780,114 | — | — | 2,780,114 | ||||||||||||
Total | $ | 52,188,937 | $ | 0 | $ | — | $ | 52,188,937 | ||||||||
Other Financial Instruments: | ||||||||||||||||
Common Stocks – Sold Short | $ | (34,410,914 | ) | $ | — | $ | — | $ | (34,410,914 | ) | ||||||
Rights – Sold Short | (52 | ) | — | — | (52 | ) | ||||||||||
Warrants – Sold Short | (1 | ) | — | — | (1 | ) | ||||||||||
Total | $ | (34,410,967 | ) | $ | — | $ | — | $ | (34,410,967 | ) |
(a) | Barrow Long/Short Opportunity Fund holds a Level 2 security which is valued at $0. |
Refer to each Fund’s Schedule of Investments and Schedule of Securities Sold Short, as applicable, for a listing of securities by industry type. As of May 31, 2016, the Funds did not have any transfers between Levels. There were no Level 3 securities or derivative instruments held by the Funds as of May 31, 2016. It is the Funds’ policy to recognize transfers between Levels at the end of the reporting period.
Share valuation – The NAV per share of each Fund is calculated daily by dividing the total value of its assets, less liabilities, by the number of shares outstanding. The offering price and redemption price per share of each Fund is equal to the NAV per share.
Investment income/expense – Dividend income and expense are recorded on the ex-dividend date. Interest income is accrued as earned.
Security transactions – Security transactions are accounted for on the trade date. Realized gains and losses on securities sold are determined on a specific identification basis.
Common expenses – Common expenses of the Trust are allocated among the Funds and the other series of the Trust based on the relative net assets of each series or the nature of the services performed and the relative applicability to each series.
64
BARROW FUNDS |
Distributions to shareholders – The Funds distribute to shareholders any net investment income dividends and net realized capital gains distributions at least once each year. The amount of such dividends and distributions are determined in accordance with federal income tax regulations, which may differ from GAAP. Dividends and distributions to shareholders are recorded on the ex-dividend date. The tax character of distributions paid to shareholders during the years ended May 31, 2016 and May 31, 2015 was as follows:
Barrow Value Opportunity Fund | ||||||||||||
Year Ended | Ordinary Income | Long-Term Capital Gains | Total Distributions | |||||||||
Institutional Class | ||||||||||||
May 31, 2016 | $ | 266,621 | $ | 281,697 | $ | 548,318 | ||||||
May 31, 2015 | $ | 272,298 | $ | 1,595,623 | $ | 1,867,921 | ||||||
Investor Class | ||||||||||||
May 31, 2016 | $ | — | $ | — | $ | — | ||||||
May 31, 2015 | $ | 3,239 | $ | 22,723 | $ | 25,962 |
Barrow Long/Short Opportunity Fund | ||||||||||||
Year Ended | Ordinary Income | Long-Term Capital Gains | Total Distributions | |||||||||
Institutional Class | ||||||||||||
May 31, 2016 | $ | — | $ | — | $ | — | ||||||
May 31, 2015 | $ | 169,448 | $ | — | $ | 169,448 | ||||||
Investor Class | ||||||||||||
May 31, 2016 | $ | — | $ | — | $ | — | ||||||
May 31, 2015 | $ | 3,197 | $ | — | $ | 3,197 |
Short Sales – Barrow Long/Short Opportunity Fund may sell securities short. For financial statement purposes, an amount equal to the settlement amount is included in the Statements of Assets and Liabilities as an asset and an equivalent liability is then subsequently marked-to-market daily to reflect the current value of the short position. Subsequent fluctuations in the market prices of securities sold, but not yet purchased, may require purchasing the securities at prices which may differ from the market value reflected on the Statements of Assets and Liabilities. The Fund is liable for any dividends payable on securities while those securities are in a short position and will also bear other costs, such as charges for the prime brokerage accounts, in connection with the short positions. These costs are reported as dividend expense and brokerage expense on securities sold short, respectively, in the Statements of Operations. As collateral for its short positions, the Fund is required under the Investment Company Act of 1940
65
BARROW FUNDS |
(the “1940 Act”) to maintain assets consisting of cash, cash equivalents or other liquid securities equal to the market value of the securities sold short. The cash deposits with brokers for securities sold short are reported on the Statements of Assets and Liabilities. The amount of collateral is required to be adjusted daily to reflect changes in the value of the securities sold short. To the extent Barrow Long/Short Opportunity Fund invests the proceeds received from selling securities short, the Fund is engaging in a form of leverage. The use of leverage by the Fund may make any change in the Fund’s NAV greater than it would be without the use of leverage. Short sales are speculative transactions and involve special risks, including greater reliance on the ability of Barrow Street Advisers LLC (the “Adviser”) to accurately anticipate the future value of a security.
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 as of the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Federal income tax – Each Fund has qualified and intends to continue to qualify each year as a regulated investment company under the Internal Revenue Code of 1986, as amended (the “Code”). Qualification generally will relieve each Fund of liability for federal income taxes to the extent 100% of its net investment income and net realized capital gains are distributed in accordance with the Code.
In order to avoid imposition of the excise tax applicable to regulated investment companies, it is also each Fund’s intention to declare as dividends in each calendar year at least 98% of its net investment income (earned during the calendar year) and 98.2% of its net realized capital gains (earned during the twelve months ended October 31) plus undistributed amounts from prior years.
The following information is computed on a tax basis for each item as of May 31, 2016:
| Barrow Value Opportunity Fund | Barrow Long/Short Opportunity Fund | ||||||
Cost of portfolio investments | $ | 32,228,524 | $ | 50,548,991 | ||||
Gross unrealized appreciation | $ | 4,804,730 | $ | 4,648,484 | ||||
Gross unrealized depreciation | (2,531,321 | ) | (3,008,538 | ) | ||||
Net unrealized appreciation | 2,273,409 | 1,639,946 | ||||||
Net unrealized depreciation on securities sold short | — | (2,062,549 | ) | |||||
Undistributed ordinary income | 145,793 | — | ||||||
Undistributed long-term gains | 56,888 | — | ||||||
Accumulated capital and other losses | — | (355,865 | ) | |||||
Accumulated earnings (deficit) | $ | 2,476,090 | $ | (778,468 | ) |
66
BARROW FUNDS |
As of May 31, 2016, the proceeds of securities sold short on a tax basis is $32,348,418 for Barrow Long/Short Opportunity Fund.
The value of the federal income tax cost of portfolio investments and securities sold short and tax components of accumulated earnings may temporarily differ from the financial statement cost of portfolio investments and securities sold short and components of net assets (“book/tax differences”). These book/tax differences are due to the recognition of capital gains or losses under income tax regulations and GAAP, primarily the tax deferral of losses on wash sales and the tax treatment of income and capital gains on publicly-traded partnerships held by the Funds.
As of May 31, 2016, Barrow Long/Short Opportunity Fund had a short-term capital loss carryforward of $146,311 for federal income tax purposes. This capital loss carryforward, which does not expire, may be utilized in future years to offset net realized capital gains, if any, prior to distributing such gains to shareholders.
Net qualified late year losses include late year ordinary losses (incurred after December 31, 2015 and within the taxable year) and late year capital losses (incurred after October 31, 2015 and within the taxable year), and are deemed to arise on the first day of the Funds’ next taxable year. For the year ended May 31, 2016, Barrow Long/Short Opportunity Funds intends to defer to June 1, 2016 for federal tax purposes late year ordinary losses of $149,989 and late year capital losses of $59,565.
For the year ended May 31, 2016, the following reclassifications were made as a result of permanent differences between financial statement and income tax reporting requirements:
Barrow Value Opportunity Fund | Barrow Long/Short Opportunity Fund | |||||||
Paid-in capital | $ | (309 | ) | $ | (88,994 | ) | ||
Undistributed net investment income | (97,283 | ) | 39,757 | |||||
Accumulated net realized gain from securities transactions | 97,592 | 49,237 |
The Funds recognize tax benefits or expenses of uncertain tax positions only when the position is “more likely than not” of being sustained assuming examination by tax authorities. Management has reviewed the tax positions taken on Federal income tax returns for all open tax years (tax years ended May 31, 2014 through May 31, 2016) and has concluded that no provision for unrecognized tax benefits or expenses is required in these financial statements. The Funds identify their major tax jurisdiction as U.S. Federal.
67
BARROW FUNDS |
3. Investment Transactions
During the year ended May 31, 2016, cost of purchases and proceeds from sales of investment securities, other than short-term investments and short positions, amounted to $33,039,290 and $27,939,635, respectively, for Barrow Value Opportunity Fund and $54,310,975 and $17,840,321, respectively, for Barrow Long/Short Opportunity Fund.
4. Transactions with Related Parties
INVESTMENT ADVISORY AGREEMENT
Each Fund’s investments are managed by the Adviser pursuant to the terms of an Investment Advisory Agreement. Barrow Value Opportunity Fund pays the Adviser an investment advisory fee, computed and accrued daily and paid monthly, at the annual rate of 0.99% of its average daily net assets. Barrow Long/Short Opportunity Fund pays the Adviser an investment advisory fee, computed and accrued daily and paid monthly, at the annual rate of 1.50% of its average daily net assets.
Pursuant to an Expense Limitation Agreement (“ELA”) between the Funds and the Adviser, the Adviser has contractually agreed, until October 1, 2017, to reduce investment advisory fees and reimburse other operating expenses to limit total annual operating expenses of the Funds (exclusive of brokerage costs, taxes, borrowing costs such as interest and dividend expenses on securities sold short, interest, acquired fund fees and expenses, extraordinary expenses such as litigation and merger or reorganization costs, and other expenses not incurred in the ordinary course of the Funds’ business) to an amount not exceeding the following percentages of each Fund’s average daily net assets:
Barrow Value Opportunity Fund | 1.15% |
Barrow Long/Short Opportunity Fund | 1.74% |
Accordingly, during the year ended May 31, 2016, the Adviser reduced its investment advisory fees and reimbursed other operating expenses as follows:
| Investment Advisory Fee Reductions | Expense Reimbursements | Total | |||||||||
Barrow Value Opportunity Fund | $ | 130,203 | $ | 26,906 | $ | 157,109 | ||||||
Barrow Long/Short Opportunity Fund | $ | 169,397 | $ | 24,181 | $ | 193,578 |
68
BARROW FUNDS |
Under the terms of the ELA, investment advisory fee reductions and expense reimbursements by the Adviser are subject to recoupment by the Adviser for a period of three years after such fees and expenses were incurred, provided that the recoupments do not cause total annual operating expenses of the Funds to exceed the foregoing expense limitations. As of May 31, 2016, the Adviser may seek recoupment of investment advisory fee reductions and expense reimbursements no later than the dates as stated below:
| May 31, | May 31, | May 31, | Total | ||||||||||||
Barrow Value Opportunity Fund | $ | 118,161 | $ | 180,140 | $ | 157,109 | $ | 455,410 | ||||||||
Barrow Long/Short Opportunity Fund | $ | 156,927 | $ | 212,647 | $ | 193,578 | $ | 563,152 |
The Principle Executive Officer of the Funds is also an officer of the Adviser.
OTHER SERVICE PROVIDERS
Ultimus Fund Solutions, LLC (“Ultimus”) provides fund administration, fund accounting, compliance, and transfer agency services to the Funds. Each Fund pays Ultimus fees in accordance with the agreements for such services. In addition, each Fund pays out-of-pocket expenses including, but not limited to, postage, supplies, and costs of pricing its portfolio securities.
Under the terms of a Distribution Agreement with the Trust, Ultimus Fund Distributors, LLC (the “Distributor”) serves as principal underwriter to each Fund. The Distributor is a wholly-owned subsidiary of Ultimus.
Certain Trustees and officers of the Trust are also officers of Ultimus and the Distributor.
DISTRIBUTION PLAN
Prior to July 1, 2015, the Trust had in place a distribution plan under Rule 12b-1 under the 1940 Act (the “Plan”) pursuant to which each Fund could pay intermediaries and other persons for rendering distribution and shareholder services and for bearing any related expenses with respect to the Investor Class of each Fund. These distribution and shareholder service fees could not exceed the annual rate of 0.25% of each Fund’s average daily net assets allocable to Investor Class Shares. During the year ended May 31, 2016, the Investor Class of Barrow Value Opportunity Fund and Barrow Long/Short Opportunity Fund incurred $57 and $39, respectively, of distribution fees under the Plan.
69
BARROW FUNDS |
TRUSTEE COMPENSATION
Each Trustee who is not an “interested person” of the Trust (“Independent Trustee”) receives from each Fund a fee of $500 for each Board meeting attended plus reimbursement of travel and other meeting-related expenses. Each Independent Trustee also receives a $500 annual retainer from each Fund. Trustees affiliated with the Adviser or Ultimus are not compensated by the Funds for their services.
PRINCIPAL HOLDERS OF FUND SHARES
As of May 31, 2016, the following shareholders owned of record 5% or more of the outstanding shares of each Fund:
Name of Record Owner | % Ownership |
Barrow Value Opportunity Fund: | |
Socatean Partners | 44% |
Charles Schwab & Company, Inc. (for the benefit of its customers) | 32% |
Robert F. Greenhill, Jr. (a principal of the Adviser) | 13% |
Barrow Long/Short Opportunity Fund: | |
Charles Schwab & Company, Inc. (for the benefit of its customers) | 64% |
Socatean Partners | 14% |
A beneficial owner of 25% or more of either Fund’s outstanding shares may be considered a controlling person. That shareholder’s vote could have a more significant effect on matters presented at a shareholder’s meeting.
5. Borrowing Costs
Prior to December 30, 2015, Barrow Value Opportunity Fund had a secured bank line of credit with BNP Paribas that provided a maximum borrowing of up to one-third of its net assets. The line of credit was used to maintain necessary liquidity to make payments for redemptions of Fund shares or for temporary emergency purposes. Borrowings under this arrangement bore interest at an annual rate equal to the one-month LIBOR at the time of borrowing plus 0.85%. During the year ended May 31, 2016, Barrow Value Opportunity Fund incurred $382 of borrowing costs. The secured bank line of credit that Barrow Value Opportunity Fund had with BNP Paribas was closed on December 30, 2015. The average outstanding borrowings and average interest rate on such borrowings by Barrow Value Opportunity Fund during the year ended May 31, 2016 were $35,650 and 1.08%, respectively. Barrow Long/Short Opportunity Fund does not have a bank line of credit.
From time to time, a Fund may have an overdrawn cash balance at the custodian due to redemptions or market movements. When this occurs, the Fund will incur borrowing costs charged by the custodian. Accordingly, during the year ended May 31, 2016, Barrow Value Opportunity Fund and Barrow Long/Short Opportunity Fund incurred $1,647 and $46,266, respectively, of borrowing costs charged by the custodian.
70
BARROW FUNDS |
6. Contingencies and Commitments
The Funds indemnify the Trust’s officers and Trustees for certain liabilities that might arise from their performance of their duties to the Funds. Additionally, in the normal course of business the Funds enter into contracts that contain a variety of representations and warranties and which provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote.
7. Sector Risk
If a Fund has significant investments in the securities of issuers within a particular sector, any development affecting that sector will have a greater impact on the value of the net assets of the Fund than would be the case if the Fund did not have significant investments in that sector. In addition, this may increase the risk of loss in the Fund and increase the volatility of the Fund’s NAV per share. Occasionally, market conditions, regulatory changes, or other developments may negatively impact a particular sector, and therefore the value of the Fund’s portfolio will be adversely affected. As of May 31, 2016, Barrow Long/Short Opportunity Fund had the following percentages of the value of its net assets invested or sold short in stocks within the following sectors:
Sector | Long | Short | Net |
Consumer Staples | 29.1% | (18.7%) | 10.4% |
Health Care | 27.2% | (18.1%) | 9.1% |
As shown above, although the Fund has greater than 25% of the Fund’s net assets invested in long positions in the sector noted, the sector exposure is mitigated by short positions. As part of the Fund’s principal investment strategies, the Adviser monitors the Fund’s sector exposure to ensure the Fund’s portfolio is significantly diversified.
8. Subsequent Events
The Funds are required to recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed as of the date of the Statements of Assets and Liabilities. For non-recognized subsequent events that must be disclosed to keep the financial statements from being misleading, the Funds are required to disclose the nature of the event as well as an estimate of its financial effect, or a statement that such an estimate cannot be made. Management has evaluated subsequent events through the issuance of these financial statements and has noted no such events.
71
BARROW FUNDS |
To the Board of Trustees of Ultimus Managers Trust
and the Shareholders of Barrow Value Opportunity Fund and
Barrow Long/Short Opportunity Fund
We have audited the accompanying statements of assets and liabilities of Barrow Value Opportunity Fund and Barrow Long/Short Opportunity Fund (the “Funds”), each a series of shares of beneficial interest in Ultimus Managers Trust, including the schedules of investments, as of May 31, 2016, and the related statements 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 two-year period then ended and for the period August 30, 2013 (commencement of operations) through May 31, 2014. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2016 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Barrow Value Opportunity Fund and Barrow Long/Short Opportunity Fund as of May 31, 2016, and the results of their operations for the year then ended, the changes in their net assets for each of the years in the two-year period then ended and their financial highlights for each of the years in the two-year period then ended and for the period August 30, 2013 to May 31, 2014, in conformity with accounting principles generally accepted in the United States of America.
BBD, LLP |
Philadelphia, Pennsylvania
July 29, 2016
72
BARROW FUNDS |
We believe it is important for you to understand the impact of costs on your investment. As a shareholder of the Funds, you incur ongoing costs, including management fees and other operating expenses. The following examples are intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
A mutual fund’s ongoing costs are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The expenses in the table below are based on an investment of $1,000 made at the beginning of the most recent period (December 1, 2015) and held until the end of the period (May 31, 2016).
The table below illustrates each Fund’s ongoing costs in two ways:
Actual fund return – This section helps you to estimate the actual expenses that you paid over the period. The “Ending Account Value” shown is derived from each Fund’s actual return, and the fourth column shows the dollar amount of operating expenses that would have been paid by an investor who started with $1,000 in the Funds. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for the Funds under the heading “Expenses Paid During Period.”
Hypothetical 5% return – This section is intended to help you compare the Funds’ ongoing costs with those of other mutual funds. It assumes that each Fund had an annual return of 5% before expenses during the period shown, but that the expense ratio is unchanged. In this case, because the return used is not the Funds’ actual return, the results do not apply to your investment. The example is useful in making comparisons because the U.S. Securities and Exchange Commission (the “SEC”) requires all mutual funds to calculate expenses based on a 5% return. You can assess each Fund’s ongoing costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
Note that expenses shown in the table are meant to highlight and help you compare ongoing costs only. The Funds do not charge transaction fees, such as purchase or redemption fees, nor do they carry a “sales load.”
The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.
73
BARROW FUNDS |
More information about the Funds’ expenses can be found in this report. For additional information on operating expenses and other shareholder costs, please refer to the Funds’ prospectus.
| Beginning | Ending | Net | Expenses Period(b) |
Barrow Value Opportunity Fund | ||||
Actual | $1,000.00 | $961.20 | 1.16% | $5.69 |
Hypothetical 5% Return (before expenses) | $1,000.00 | $1,019.20 | 1.16% | $5.86 |
Barrow Long/Short Opportunity Fund | ||||
Actual | $1,000.00 | $943.60 | 3.75% | $18.22 |
Hypothetical 5% Return (before expenses) | $1,000.00 | $1,006.25 | 3.75% | $18.81 |
(a) | Annualized, based on the Fund’s most recent one-half year expenses. |
(b) | Expenses are equal to the Funds’ annualized net expense ratio multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). |
74
BARROW FUNDS |
A description of the policies and procedures that the Funds use to vote proxies relating to portfolio securities is available without charge upon request by calling toll-free 1-877-767-6633, or on the SEC’s website at http://www.sec.gov. Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12 month period ended June 30 is also available without charge upon request by calling toll-free 1-877-767-6633, or on the SEC’s website at http://www.sec.gov.
The Trust files a complete listing of portfolio holdings for each Fund with the SEC as of the end of the first and third quarters of each fiscal year on Form N-Q. These filings are available upon request by calling 1-877-767-6633. Furthermore, you may obtain a copy of the filings on the SEC’s website at http://www.sec.gov. The Trust’s Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
FEDERAL TAX INFORMATION (Unaudited)
In accordance with federal tax requirements, the following provides shareholders with information concerning distributions from ordinary income and net realized capital gains made by each Fund during the fiscal year ended May 31, 2016. Certain dividends paid by the Funds may be subject to a maximum tax rate of 23.8%. Barrow Value Opportunity Fund intends to designate up to a maximum amount of $266,621 as taxed at a maximum rate of 23.8%. Additionally, Barrow Value Opportunity Fund intends to designate up to a maximum amount of $281,697 as a long-term capital gain distribution. As required by federal regulations, complete information was computed and reported in conjunction with your 2015 Form 1099-DIV.
75
BARROW FUNDS |
The Board of Trustees has overall responsibility for management of the Trust’s affairs. The Trustees serve during the lifetime of the Trust and until its termination, or until death, resignation, retirement, or removal. The Trustees, in turn, elect the officers of the Fund to actively supervise its day-to-day operations. The officers have been elected for an annual term. Unless otherwise noted, each Trustee’s and officer’s address is 225 Pictoria Drive, Suite 450, Cincinnati, OH 45246. The following are the Trustees and executive officers of the Fund:
Name and | Length of Time Served | Position(s) Held with Trust | Principal Occupation(s) During Past 5 Years | Number of Funds in Trust Overseen by Trustee | Directorships of Public Companies Held by Trustee During Past 5 Years |
Interested Trustees: | |||||
Robert G. Dorsey* Year of Birth: 1957 | Since February 2012 | Trustee (February 2012 to present)
President (July 2012 to October 2013) | Managing Director of Ultimus Fund Solutions, LLC and Ultimus Fund Distributors, LLC (1999 to present) | 21 | None |
Independent Trustees: | |||||
John J. Discepoli Year of Birth: 1963 | Since June 2012 | Chairman (June 2016
Trustee (June 2012 | Owner of Discepoli Financial Planning, LLC (personal financial planning company) since 2004 | 21 | None |
Janine L. Cohen Year of Birth: 1952 | Since | Trustee | Retired since 2013; Chief Financial Officer from 2004 to 2013 and Chief Compliance Officer from 2008 to 2013 at AER Advisors, Inc. | 21 | None |
76
BARROW FUNDS |
Name and | Length of Time Served | Position(s) Held with Trust | Principal Occupation(s) During Past 5 Years | Number of Funds in Trust Overseen by Trustee | Directorships of Public Companies Held by Trustee During Past 5 Years |
Independent Trustees (Continued): | |||||
David M. Deptula Year of Birth: 1958 | Since June 2012 | Trustee | Vice President of Legal and Special Projects at Dayton Freight Lines, Inc. since 2016; Vice President of Tax Treasury at Standard Register Inc. (formerly The Standard Register Company) from 2011 to 2016 | 21 | None |
* | Mr. Dorsey is considered an “interested person” of the Trust within the meaning of Section 2(a)(19) of the 1940 Act because of his relationship with the Trust’s administrator, transfer agent and distributor. |
Name and | Length of Time Served | Position(s) Held with Trust | Principal Occupation(s) During Past 5 Years |
Executive Officers: | |||
Nicholas Chermayeff 300 First Stamford Place 3rd Floor East Stamford, CT 06902 Year of Birth: 1969 | Since April 2013 | Principal Executive Officer of Barrow All-Cap Core Fund and Barrow All-Cap Long/Short Fund | Co-Chief Executive Officer and Principal of Barrow Street Capital LLC (since 1997) |
David R. Carson Year of Birth: 1958 | Since April 2013 | President (October 2013
Vice (April 2013 to October 2013) | Vice President and Director of Client Strategies of Ultimus Fund Solutions, LLC (2013 to present); Chief Compliance Officer, FSI Low Beta Absolute Return Fund (2013 to present), The Huntington Funds (2005 to 2013), The Flex-Funds (2006 to 2011), Meeder Financial (2007 to 2011), Huntington Strategy Shares (2012 to 2013), and Huntington Asset Advisors (2013); Vice President, Huntington National Bank (2001 to 2013) |
77
BARROW FUNDS |
Name and | Length of Time Served | Position(s) Held with Trust | Principal Occupation(s) During Past 5 Years |
Jennifer L. Leamer Year of Birth: 1976 | Since April 2014 | Treasurer (October 2014 to present)
Assistant Treasurer (April 2014 to October 2014) | V.P., Mutual Fund Controller of Ultimus Fund Solutions, LLC (2014 to present); Business Analyst of Ultimus Fund Solutions (2007 to 2014) |
Bo J. Howell Year of Birth: 1981 | Since October 2014 | Secretary (April 2015 to present)
Assistant Secretary (October 2014 to April 2015) | V.P., Director of Fund Administration for Ultimus Fund Solutions, LLC (2014 to present); Counsel – Securities and Mutual Funds for Western & Southern Financial Group (2012 to 2014); U.S. Securities and Exchange Commission, Senior Counsel (2009 to 2012) |
Charles C. Black | Since April 2015 | Chief Compliance Officer (January 2016 to present) | Senior Compliance Officer of Ultimus Fund Solutions, LLC (2015 to present); Senior Compliance Manager for Touchstone Mutual Funds (2013 to 2015); Senior Compliance Manager for Fund Evaluation Group (2011 to 2013); Regulatory Administration Specialist for JPMorgan Chase Bank (2006 to 2011) |
Additional information about members of the Board and executive officers is available in the Funds’ Statement of Additional Information (“SAI”). To obtain a free copy of the SAI, please call 1-877-767-6633.
78
BARROW FUNDS |
The Board of Trustees (the “Board”), including the Independent Trustees voting separately, has reviewed and approved the Funds’ Investment Advisory Agreement with Barrow Street Advisors LLC (the “Adviser”) for an additional annual term. Approval took place at an in-person meeting held on January 25-26, 2016, at which all of the Trustees were present.
In the course of their deliberations, the Board was advised by legal counsel. The Board received and reviewed a substantial amount of information provided by the Adviser in response to requests of the Board and counsel.
In considering the Investment Advisory Agreement and reaching their conclusions with respect thereto, the Board reviewed and analyzed various factors that they determined were relevant, including the factors described below.
The nature, extent, and quality of the services provided by the Adviser. In this regard, the Board reviewed the services being provided by the Adviser to each Fund including, without limitation, its investment advisory services since the Funds’ inception, the Adviser’s compliance procedures and practices, and its efforts to promote the Funds and assist in their distribution. The Board also noted that an Adviser principal serves as the Funds’ Principal Executive Officer without additional compensation. After reviewing the foregoing information and further information (e.g., descriptions of its business and Form ADV), the Board concluded that the quality, extent, and nature of the services provided by the Adviser were satisfactory and adequate for the Funds.
The investment performance of the Funds. In this regard, the Board compared the performance of each Fund with the performance of its benchmark index and related Morningstar categories. The Board also considered the consistency of the Adviser’s management with each Fund’s investment objective and policies. Following a review of the investment performance of each Fund and its performance relative to its respective Morningstar categories, the Adviser’s experience in managing mutual funds, its historical investment performance, and other factors, the Board concluded that the investment performance of each Fund has been satisfactory.
The costs of the services provided and profits realized by the Adviser and its affiliates from its relationship with the Funds. In this regard, the Board considered the Adviser’s staffing, personnel, and methods of operations; the education and experience of its personnel; compliance program, policies, and procedures; financial condition and the level of commitment to each Fund, and, generally, the Adviser’s advisory business; the asset level of each Fund; the overall expenses of each Fund, including the advisory fee; and the differences in fees and services to the Adviser’s other similar clients that may be similar to the Funds. The Board considered the Adviser’s Expense Limitation Agreement (the “ELA”) with the Funds, and considered the Adviser’s current and past
79
BARROW FUNDS |
fee reductions and expense reimbursements for each Fund. The Board further took into account the Adviser’s commitment to continue the ELA for each Fund until at least October 1, 2017.
The Board also considered potential benefits to the Adviser in managing the Funds, including promotion of the Adviser’s name and the potential for it to receive research, statistical, or other services from the Funds’ trades. The Board compared each Fund’s advisory fee and overall expense ratio to the average advisory fees and average expense ratios for its Morningstar category. In addition, the Board compared each Fund to the other mutual funds in its Morningstar category and peer group in terms of the style of investment management, the size of the fund, and the nature of the investment strategies. The Board noted that the advisory fee for Barrow Value Opportunity Fund was slightly above the 25th percentile for its Morningstar category and the overall expense ratio for Barrow Value Opportunity Fund was also slightly above the 25th percentile for its Morningstar category. The Board noted that the advisory fee for Barrow Long/Short Opportunity Fund was at the 25th percentile for its Morningstar category and the overall expense ratio for Barrow Long/Short Opportunity Fund was slightly below the 50th percentile for its Morningstar category. The Board also noted that both Funds had significantly less assets than most funds in their respective peer groups. The Board also compared the fees paid by each Fund to the fees paid by other clients of the Adviser, and considered the similarities and differences of services received by such other clients as compared to the service provided to each Barrow Fund. Following these comparisons and upon further consideration and discussion of the foregoing, the Board concluded that the advisory fee paid to the Adviser by each Fund is fair and reasonable.
The extent to which economies of scale would be realized as each Fund grows and whether advisory fee levels reflect these economies of scale for the benefit of each Fund’s investors. In this regard, the Board considered that each Barrow Fund’s fee arrangements with the Adviser involve both the advisory fee and the ELA. The Board determined that while the advisory fee remained the same as asset levels increased, the shareholders of each Fund have experienced benefits from the ELA and shareholders of the Funds will continue to experience benefits from the ELA until the Funds’ assets grow to level where their expenses otherwise fall below the expense limit. Following further consideration of each Fund’s asset levels, expectations for growth, and level of fees, the Board determined that each Fund’s fee arrangement with the Adviser would continue to provide benefits. The Board also determined that the fee arrangements were fair and reasonable given each Fund’s projected asset levels for the next year.
Brokerage and portfolio transactions. In this regard, the Board considered the Adviser’s trading policies, procedures, and performance in seeking best execution for the Funds. The Board also considered the historical portfolio turnover rate for each Fund; the
80
BARROW FUNDS |
process by which evaluations are made of the overall reasonableness of commissions paid; the method and basis for selecting and evaluating the broker-dealers used; and any anticipated allocation of portfolio business to persons affiliated with the Adviser. After further review and discussion, the Board determined that the Adviser’s practices regarding brokerage and portfolio transactions were satisfactory.
Possible conflicts of interest. In evaluating the possibility for conflicts of interest, the Board considered such matters as the experience and abilities of the advisory personnel assigned to each Fund, the Adviser’s process for allocating trades among its different clients, and the substance and administration of the Adviser’s code of ethics. Following further consideration and discussion, the Board found that the Adviser’s standards and practices relating to the identification and mitigation of potential conflicts of interests were satisfactory.
Conclusion
After full consideration of the above factors as well as other factors, the Board unanimously concluded that continuance of the Investment Advisory Agreement was in the best interests of each of the Funds and their respective shareholders.
81
CINCINNATI ASSET MANAGEMENT FUNDS:
BROAD MARKET STRATEGIC INCOME FUND
Annual Report
May 31, 2016
CINCINNATI ASSET MANAGEMENT FUNDS: | July 15, 2016 |
Dear Shareholders,
Our Annual Report for the Cincinnati Asset Management Funds: Broad Market Strategic Income Fund (the “Fund”) presents data and performance for the year ended May 31, 2016. All of us at Cincinnati Asset Management, Inc. want to thank you for your investment with us, and we appreciate your confidence in our investment management.
The Fund invests primarily in a broad market of investment-grade and high-yield corporate bonds that we consider undervalued. We believe that our proprietary analysis enhances our ability to identify such opportunities and enables us to sell securities when opportunities that are more attractive present themselves. These investment decisions are made with the important discipline of maintaining portfolio diversification and with the dual objectives of achieving a high level of income while preserving capital. Our goal is to improve quality, increase yield, and shorten maturity in the Fund’s portfolio.
Our disciplined investing strategy resulted in the Fund holding 77 positions in the bonds of 70 different corporations on May 31, 2016. The Fund continues to be fully invested. The Fund’s performance underperformed the Barclays U.S. Corporate BAA Index (the “Benchmark”) for the year ended May 31, 2016 with a total return of -0.06% for the Fund and 1.99% for the Benchmark. A contributing factor for the underperformance was the heavy weighting of long dated paper included in the BAA Index relative to the Fund’s intermediate term maturity structure. An additional factor was the relative underperformance of high yield, as the Fund uses a credit quality barbell to achieve an investment grade rating target.
During the past year, interest rates decreased. On May 29, 2015, the yield on the 10-year Treasury Bond was 2.12%, and on May 31, 2016 it was 1.85%. Moreover, the premium yield on A-rated corporate bonds versus Treasuries increased from 1.09% to 1.17%, and on BBB-rated corporate bonds the premium moved from 1.78% to 2.00%. The Federal Reserve Board (the “Fed”) increased the Federal Funds Target Rate by 0.25% during December 2015, a move that had been generally anticipated for several months. At this time, it is unlikely that the Fed will raise an additional time during 2016. As of May 31, 2016, bonds that the Fund owns were yielding 3.77% to average maturity, around 2.3% more than U.S. Treasury yields. We believe that the Fund’s positions will continue to provide excellent value relative to other investment-grade, fixed-income alternatives.
Since the last Annual Report, gross domestic product (“GDP”) has slowed with each quarterly report. The second calendar quarter of 2015 had a reported GDP number of 3.9% followed by 2.0% for the third calendar quarter of 2015. The fourth calendar quarter of 2015 had a reported GDP number of 1.4% followed by 1.1% for the first calendar quarter of 2016. Unemployment settled at 4.7% on May 31, 2016 while continuing jobless claims and initial jobless claims showed improvement. The Fed’s measure of inflation was approximately +1.6%, well below its target of 2.0%. Although interest rates will be impacted by “headline” news and the so-called “risk-off/risk-on” trades that cause short-term volatility, we intend to focus on the relative value of corporate and high-yield bonds and on the intermediate-term maturity of the portfolio; it is the underlying credit quality of the companies whose bonds we purchase that influences our investment decisions, not short-term interest rate fluctuations.
1
Additionally, a predominant theme in the market recently has been the referendum vote for the United Kingdom to leave the European Union. This theme will be persistently in the news headlines going forward. Furthermore, the theme will remain a consideration for investors globally due to the ability to impact risk securities across many asset classes.
We continue to expect increased volatility in fixed-income markets as some participants continually readjust positioning. As of this report, $13 trillion of global debt has a negative yield. In our opinion, this backdrop will be a contributor to increasing volatility going forward. In the meantime, as investor search for positive yielding assets, the corporate and high yield market in which the Fund participates offers an attractive opportunity. As always, we will continue to search for value and adjust positions as we uncover compelling situations.
Thank you again for your confidence in our Fund. Our investors are very important to us and if you have any questions regarding market conditions or the Fund, please don’t hesitate to call us (513.554.8500).
Sincerely,
Cincinnati Asset Management Funds:
Broad Market Strategic Income Fund
Managed by Cincinnati Asset Management, Inc.
Past performance is not predictive of future performance. Investment results and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data quoted. Performance data current to the most recent month end are available by calling 1-866-738-1128.
An investor should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. The Fund’s prospectus contains this and other important information. To obtain a copy of the Fund’s prospectus please call 1-866-738-1128 and a copy will be sent to you free of charge. Please read the prospectus carefully before you invest. Cincinnati Asset Management Funds: Broad Market Strategic Income Fund is distributed by Ultimus Fund Distributors, LLC.
The Letter to Shareholders seeks to describe some of the adviser’s current opinions and views of the financial markets. Although the adviser believes it has a reasonable basis for any opinions or views expressed, actual results may differ, sometimes significantly so, from those expected or expressed. The securities held by the Fund that are discussed in the Letter to Shareholders were held during the period covered by this Report. They do not comprise the entire investment portfolio of the Fund, may be sold at any time and may no longer be held by the Fund. For a complete list of securities held by the Fund as of May 31, 2016, please see the Schedule of Investments section of the Annual Report. The opinions of the Fund’s adviser with respect to those securities may change at any time.
Statements in the Letter to Shareholders that reflect projections or expectations for future financial or economic performance of the Fund and the market in general and statements of the Fund’s plans and objectives for future operations are forward-looking statements. No assurance can be given that actual results or events will not differ materially from those projected, estimated, assumed, or anticipated in any such forward-looking statements. Important factors that could result in such differences, in addition to factors noted with such forward-looking statements include, without limitation, general economic conditions, such as inflation, recession, and interest rates. Past performance is not a guarantee of future results.
2
CINCINNATI ASSET MANAGEMENT FUNDS:
BROAD MARKET STRATEGIC INCOME FUND
PERFORMANCE INFORMATION
May 31, 2016 (Unaudited)
Comparison of the Change in Value of a $10,000 Investment
in Cincinnati Asset Management Funds: Broad Market Strategic
Income Fund versus the Barclays U.S. Corporate BAA Index
Average Annual Total Returns For Periods Ended May 31, 2016 | |||
1 Year | 3 Years | Since | |
Cincinnati Asset Management Funds: Broad Market Strategic Income Fund (a) | (0.06%) | 2.52% | 2.23% |
Barclays U.S. Corporate BAA Index | 1.99% | 3.28% | 2.55% |
(a) | The Fund’s total return does not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. |
(b) | The Fund commenced operations on October 26, 2012. |
3
CINCINNATI ASSET MANAGEMENT FUNDS:
BROAD MARKET STRATEGIC INCOME FUND
PORTFOLIO INFORMATION
May 31, 2016 (Unaudited)
Sector Diversification (% of Net Assets)
Top 10 Investments
Security Description | % of Net Assets |
United Airlines, Inc., Class A Pass-Through Certificates, Series 2014-2, 3.750%, 03/03/28 | 2.6% |
L-3 Communications Corp., 3.950%, due 05/28/24 | 2.6% |
Toll Brothers Finance Corp., 5.875%, due 02/15/22 | 2.5% |
Wells Fargo & Co., 4.125%, due 08/15/23 | 2.5% |
Morgan Stanley, 3.700%, due 10/23/24 | 2.4% |
U.S. Bancorp, 2.950%, due 07/15/22 | 2.4% |
Halliburton Co., 3.500%, due 08/01/23 | 2.3% |
PerkinElmer, Inc., 5.000%, due 11/15/21 | 2.2% |
International Lease Finance Corp., 5.875%, due 08/15/22 | 2.2% |
Qwest Corp., 6.750%, due 12/01/21 | 2.1% |
Credit Rating Allocation | ||
S&P Credit Quality | % of Portfolio | |
AA | 11.9% | |
A | 37.2% | |
BBB | 23.0% | |
BB | 18.6% | |
B | 9.3% |
4
CINCINNATI ASSET MANAGEMENT FUNDS: | ||||||||||||
CORPORATE BONDS — 93.8% | Coupon | Maturity | Par Value | Value | ||||||||
Consumer Discretionary — 13.1% | ||||||||||||
Avis Budget Car Rental, LLC | 5.500% |
| 04/01/23 | $ | 57,000 | $ | 53,081 | |||||
Cinemark USA, Inc. | 4.875% |
| 06/01/23 | 65,000 | 64,675 | |||||||
Constellation Brands, Inc. | 4.750% |
| 12/01/25 | 54,000 | 56,767 | |||||||
Ford Motor Credit Co., LLC | 4.250% |
| 09/20/22 | 150,000 | 159,231 | |||||||
Penske Auto Group, Inc. | 5.375% |
| 12/01/24 | 60,000 | 60,300 | |||||||
Regal Entertainment Group | 5.750% |
| 02/01/25 | 61,000 | 62,068 | |||||||
Royal Caribbean Cruises Ltd. | 5.250% |
| 11/15/22 | 65,000 | 68,575 | |||||||
Service Corp. International | 7.500% |
| 04/01/27 | 50,000 | 58,750 | |||||||
Tenneco, Inc. | 5.375% |
| 12/15/24 | 55,000 | 57,266 | |||||||
Toll Brothers Finance Corp. | 5.875% |
| 02/15/22 | 175,000 | 189,875 | |||||||
Toll Brothers Finance Corp. | 4.875% |
| 11/15/25 | 60,000 | 60,900 | |||||||
Walt Disney Co. (The) | 2.350% |
| 12/01/22 | 100,000 | 102,026 | |||||||
993,514 | ||||||||||||
Consumer Staples — 4.5% | ||||||||||||
Anheuser-Busch InBev SA/NV | 2.625% |
| 01/17/23 | 100,000 | 99,938 | |||||||
B&G Foods, Inc. | 4.625% |
| 06/01/21 | 58,000 | 58,870 | |||||||
Ingles Markets, Inc. | 5.750% |
| 06/15/23 | 60,000 | 61,200 | |||||||
Spectrum Brands, Inc. | 6.625% |
| 11/15/22 | 50,000 | 53,532 | |||||||
Wal-Mart Stores, Inc. | 2.550% |
| 04/11/23 | 65,000 | 66,590 | |||||||
340,130 | ||||||||||||
Energy — 8.5% | ||||||||||||
Apache Corp. | 3.250% |
| 04/15/22 | 109,000 | 108,783 | |||||||
Chevron Corp. | 2.355% |
| 12/05/22 | 150,000 | 148,897 | |||||||
Cloud Peak Energy Resources, LLC | 8.500% |
| 12/15/19 | 12,000 | 5,430 | |||||||
Cloud Peak Energy Resources, LLC | 6.375% |
| 03/15/24 | 29,000 | 10,150 | |||||||
Halliburton Co. | 3.500% |
| 08/01/23 | 175,000 | 177,555 | |||||||
Sabine Pass Liquefaction, LLC | 5.625% |
| 04/15/23 | 59,000 | 59,885 | |||||||
Schlumberger Ltd. | 3.650% |
| 12/01/23 | 125,000 | 131,855 | |||||||
642,555 | ||||||||||||
Financials — 21.4% | ||||||||||||
Aircastle Ltd. | 5.500% |
| 02/15/22 | 58,000 | 61,480 | |||||||
Bank of New York Mellon Corp. (The) | 3.000% |
| 02/24/25 | 100,000 | 103,323 | |||||||
Berkshire Hathaway, Inc. | 3.125% |
| 03/15/26 | 125,000 | 129,484 | |||||||
Branch Banking & Trust Co. | 3.625% |
| 09/16/25 | 150,000 | 157,780 | |||||||
Corrections Corp. of America | 5.000% |
| 10/15/22 | 55,000 | 58,025 | |||||||
General Electric Capital Corp. | 3.150% |
| 09/07/22 | 80,000 | 84,426 | |||||||
International Lease Finance Corp. | 5.875% |
| 08/15/22 | 150,000 | 164,250 | |||||||
Morgan Stanley | 3.700% |
| 10/23/24 | 175,000 | 180,922 | |||||||
PNC Financial Services Group, Inc. (The) (a) | 2.854% |
| 11/09/22 | 150,000 | 152,709 |
5
CINCINNATI ASSET MANAGEMENT FUNDS: | ||||||||||||
CORPORATE BONDS — 93.8% (Continued) | Coupon | Maturity | Par Value | Value | ||||||||
Financials — 21.4% (Continued) | ||||||||||||
Simon Property Group, L.P. | 3.750% |
| 02/01/24 | $ | 150,000 | $ | 161,014 | |||||
U.S. Bancorp | 2.950% |
| 07/15/22 | 175,000 | 179,780 | |||||||
Wells Fargo & Co. | 4.125% |
| 08/15/23 | 175,000 | 186,426 | |||||||
1,619,619 | ||||||||||||
Health Care — 4.6% | ||||||||||||
DaVita HealthCare Partners, Inc. | 5.000% |
| 05/01/25 | 60,000 | 59,625 | |||||||
HCA Holdings, Inc. | 5.375% |
| 02/01/25 | 60,000 | 60,975 | |||||||
HealthSouth Corp. | 5.750% |
| 11/01/24 | 60,000 | 61,125 | |||||||
PerkinElmer, Inc. | 5.000% |
| 11/15/21 | 150,000 | 165,617 | |||||||
347,342 | ||||||||||||
Industrials — 16.8% | ||||||||||||
General Dynamics Corp. | 2.250% |
| 11/15/22 | 150,000 | 151,134 | |||||||
Hawaiian Airlines, Inc., Series 2013-1A | 3.900% |
| 01/15/26 | 67,621 | 66,397 | |||||||
Iron Mountain, Inc. | 5.750% |
| 08/15/24 | 57,000 | 57,285 | |||||||
L-3 Communications Corp. | 3.950% |
| 05/28/24 | 195,000 | 197,797 | |||||||
Raytheon Co. | 2.500% |
| 12/15/22 | 150,000 | 153,605 | |||||||
Stanley Black & Decker, Inc. | 2.900% |
| 11/01/22 | 150,000 | 156,186 | |||||||
United Airlines, Inc., Class B Pass-Through Certificates, Series 2013-1 | 5.375% |
| 02/15/23 | 37,133 | 38,675 | |||||||
United Airlines, Inc., Class A Pass-Through Certificates, Series 2014-2 | 3.750% |
| 03/03/28 | 194,181 | 200,249 | |||||||
United Rentals North America, Inc. | 5.500% |
| 07/15/25 | 60,000 | 59,100 | |||||||
US Airways, Inc., Class A Pass-Through Certificates, Series 2012-2B | 6.750% |
| 12/03/22 | 34,906 | 37,132 | |||||||
US Airways, Inc., Class A Pass-Through Certificates, Series 2012-2 | 4.625% |
| 06/03/25 | 145,101 | 155,422 | |||||||
1,272,982 | ||||||||||||
Information Technology — 4.9% | ||||||||||||
Equinix, Inc. | 5.375% |
| 04/01/23 | 55,000 | 56,856 | |||||||
Hewlett-Packard Co. | 4.375% |
| 09/15/21 | 150,000 | 157,062 | |||||||
Intel Corp. | 2.700% |
| 12/15/22 | 150,000 | 155,146 | |||||||
369,064 | ||||||||||||
Materials — 4.2% | ||||||||||||
Graphic Packaging International, Inc. | 4.750% |
| 04/15/21 | 55,000 | 57,750 | |||||||
Huntsman International, LLC | 4.875% |
| 11/15/20 | 55,000 | 56,238 | |||||||
Praxair, Inc. | 2.200% |
| 08/15/22 | 150,000 | 149,774 | |||||||
Vulcan Materials Co. | 7.150% |
| 11/30/37 | 50,000 | 57,250 | |||||||
321,012 |
6
CINCINNATI ASSET MANAGEMENT FUNDS: | ||||||||||||
CORPORATE BONDS — 93.8% (Continued) | Coupon | Maturity | Par Value | Value | ||||||||
Telecommunication Services — 12.4% | ||||||||||||
AT&T, Inc. | 2.625% |
| 12/01/22 | $ | 140,000 | $ | 137,406 | |||||
CCO Holdings, LLC/CCO Holdings Capital Corp. | 5.750% |
| 01/15/24 | 58,000 | 60,465 | |||||||
CenturyLink, Inc. | 5.800% |
| 03/15/22 | 5,000 | 4,843 | |||||||
Comcast Corp. | 3.600% |
| 03/01/24 | 80,000 | 85,989 | |||||||
Comcast Corp. | 3.150% |
| 03/01/26 | 115,000 | 119,249 | |||||||
Frontier Communications Corp. | 9.000% |
| 08/15/31 | 55,000 | 47,300 | |||||||
Lamar Media Corp. | 5.000% |
| 05/01/23 | 52,000 | 54,210 | |||||||
Level 3 Financing, Inc. | 5.375% |
| 05/01/25 | 60,000 | 61,287 | |||||||
Mediacom, LLC/Mediacom Capital Corp. | 5.500% |
| 04/15/21 | 17,000 | 17,574 | |||||||
Mediacom, LLC/Mediacom Capital Corp. | 7.250% |
| 02/15/22 | 43,000 | 45,634 | |||||||
Netflix, Inc. | 5.875% |
| 02/15/25 | 54,000 | 56,835 | |||||||
Qwest Corp. | 6.750% |
| 12/01/21 | 150,000 | 161,250 | |||||||
Verizon Communications, Inc. | 5.150% |
| 09/15/23 | 25,000 | 28,718 | |||||||
Zayo Group, LLC | 6.375% |
| 05/15/25 | 56,000 | 58,450 | |||||||
939,210 | ||||||||||||
Utilities — 3.4% | ||||||||||||
AES Corp. (The) | 5.500% |
| 03/15/24 | 43,000 | 43,632 | |||||||
AES Corp. (The) | 5.500% |
| 04/15/25 | 30,000 | 29,925 | |||||||
Amerigas Finance, LLC | 7.000% |
| 05/20/22 | 55,000 | 58,231 | |||||||
Calpine Corp. | 5.750% |
| 01/15/25 | 65,000 | 63,131 | |||||||
Suburban Propane Partners, L.P. | 5.500% |
| 06/01/24 | 60,000 | 59,400 | |||||||
254,319 | ||||||||||||
Total Investments at Value — 93.8% (Cost $7,006,143) | $ | 7,099,747 | ||||||||||
Other Assets in Excess of Liabilities — 6.2% | 465,970 | |||||||||||
Net Assets — 100.0% | $ | 7,565,717 |
(a) | Step coupon security. The rate shown is the effective interest rate as of May 31, 2016. |
See accompanying notes to financial statements. |
7
CINCINNATI ASSET MANAGEMENT FUNDS: | ||||
ASSETS | ||||
Investments in securities: | ||||
At acquisition cost | $ | 7,006,143 | ||
At value (Note 2) | $ | 7,099,747 | ||
Cash | 244,973 | |||
Receivable for investment securities sold | 188,569 | |||
Interest receivable | 79,215 | |||
Receivable from Adviser (Note 4) | 12,859 | |||
Other assets | 13,823 | |||
Total assets | 7,639,186 | |||
LIABILITIES | ||||
Payable to administrator (Note 4) | 7,060 | |||
Payable for investment securities purchased | 58,819 | |||
Other accrued expenses | 7,590 | |||
Total liabilities | 73,469 | |||
NET ASSETS | $ | 7,565,717 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 7,768,060 | ||
Undistributed net investment income | 37,840 | |||
Accumulated net realized losses from security transactions | (333,787 | ) | ||
Net unrealized appreciation on investments | 93,604 | |||
NET ASSETS | $ | 7,565,717 | ||
Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) | 781,623 | |||
Net asset value, offering price and redemption price per share (Note 2) | $ | 9.68 |
See accompanying notes to financial statements. |
8
CINCINNATI ASSET MANAGEMENT FUNDS: | ||||
INVESTMENT INCOME | ||||
Interest | $ | 280,546 | ||
EXPENSES | ||||
Investment advisory fees (Note 4) | 53,352 | |||
Professional fees | 36,752 | |||
Fund accounting fees (Note 4) | 30,770 | |||
Administration fees (Note 4) | 30,000 | |||
Registration and filing fees | 22,050 | |||
Pricing fees | 20,048 | |||
Distribution fees (Note 4) | 17,784 | |||
Compliance fees (Note 4) | 12,000 | |||
Transfer agent fees (Note 4) | 12,000 | |||
Trustees’ fees and expenses (Note 4) | 9,984 | |||
Custody and bank service fees | 7,686 | |||
Insurance expense | 4,003 | |||
Postage and supplies | 2,491 | |||
Other expenses | 8,941 | |||
Total expenses | 267,861 | |||
Less fee waivers and expense reimbursements by the Adviser (Note 4) | (221,622 | ) | ||
Net expenses | 46,239 | |||
NET INVESTMENT INCOME | 234,307 | |||
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS | ||||
Net realized losses from security transactions | (331,563 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | 99,081 | |||
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS | (232,482 | ) | ||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 1,825 |
See accompanying notes to financial statements. |
9
CINCINNATI ASSET MANAGEMENT FUNDS: | ||||||||
| Year | Year | ||||||
FROM OPERATIONS | ||||||||
Net investment income | $ | 234,307 | $ | 231,416 | ||||
Net realized gains (losses) from security transactions | (331,563 | ) | 2,330 | |||||
Net change in unrealized appreciation (depreciation) on investments | 99,081 | (28,468 | ) | |||||
Net increase in net assets resulting from operations | 1,825 | 205,278 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS | ||||||||
From net investment income | (238,438 | ) | (221,564 | ) | ||||
FROM CAPITAL SHARE TRANSACTIONS | ||||||||
Proceeds from shares sold | 506,515 | 1,022,639 | ||||||
Net asset value of shares issued in reinvestment of distributions to shareholders | 238,438 | 221,564 | ||||||
Payments for shares redeemed | (174,874 | ) | (403,078 | ) | ||||
Net increase in net assets from capital share transactions | 570,079 | 841,125 | ||||||
TOTAL INCREASE IN NET ASSETS | 333,466 | 824,839 | ||||||
NET ASSETS | ||||||||
Beginning of year | 7,232,251 | 6,407,412 | ||||||
End of year | $ | 7,565,717 | $ | 7,232,251 | ||||
UNDISTRIBUTED NET INVESTMENT INCOME | $ | 37,840 | $ | 41,585 | ||||
CAPITAL SHARE ACTIVITY | ||||||||
Shares sold | 53,320 | 102,166 | ||||||
Shares reinvested | 24,991 | 22,290 | ||||||
Shares redeemed | (18,186 | ) | (40,361 | ) | ||||
Net increase in shares outstanding | 60,125 | 84,095 | ||||||
Shares outstanding at beginning of year | 721,498 | 637,403 | ||||||
Shares outstanding at end of year | 781,623 | 721,498 |
See accompanying notes to financial statements. |
10
CINCINNATI ASSET MANAGEMENT FUNDS: | ||||||||||||||||
Per Share Data for a Share Outstanding Throughout Each Period | ||||||||||||||||
| Year | Year | Year | Period | ||||||||||||
Net asset value at beginning of period | $ | 10.02 | $ | 10.05 | $ | 9.94 | $ | 10.00 | ||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income | 0.32 | 0.33 | 0.33 | 0.16 | ||||||||||||
Net realized and unrealized gains (losses) on investments | (0.33 | ) | (0.04 | ) | 0.11 | (0.11 | ) | |||||||||
Total from investment operations | (0.01 | ) | 0.29 | 0.44 | 0.05 | |||||||||||
Less distributions: | ||||||||||||||||
From net investment income | (0.33 | ) | (0.32 | ) | (0.33 | ) | (0.11 | ) | ||||||||
Net asset value at end of period | $ | 9.68 | $ | 10.02 | $ | 10.05 | $ | 9.94 | ||||||||
Total return (b) | (0.06 | %) | 2.99 | % | 4.68 | % | 0.48 | %(c) | ||||||||
Net assets at end of period (000’s) | $ | 7,566 | $ | 7,232 | $ | 6,407 | $ | 5,220 | ||||||||
Ratios/supplementary data: | ||||||||||||||||
Ratio of total expenses to average net assets | 3.77 | % | 3.71 | % | 4.53 | % | 3.69 | %(d) | ||||||||
Ratio of net expenses to average net assets (e) | 0.65 | % | 0.65 | % | 0.65 | % | 0.65 | %(d) | ||||||||
Ratio of net investment income to average net assets (e) | 3.30 | % | 3.35 | % | 3.41 | % | 2.81 | %(d) | ||||||||
Portfolio turnover rate | 18 | % | 23 | % | 11 | % | 13 | %(c) |
(a) | Represents the period from the commencement of operations (October 26, 2012) through May 31, 2013. |
(b) | Total return is a measure of the change in value of an investment in the Fund over the periods covered. The returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions, if any, or the redemption of Fund shares. The total returns would be lower if the Adviser had not waived advisory fees and reimbursed expenses. |
(c) | Not annualized. |
(d) | Annualized. |
(e) | Ratio was determined after advisory fee waivers and expense reimbursements (Note 4). |
See accompanying notes to financial statements. |
11
CINCINNATI ASSET MANAGEMENT FUNDS:
BROAD MARKET STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS
May 31, 2016
1. Organization
Cincinnati Asset Management Funds: Broad Market Strategic Income Fund (the “Fund”) is a diversified series of Ultimus Managers Trust (the “Trust”), an open-end investment company established as an Ohio business trust under a Declaration of Trust dated February 28, 2012. Other series of the Trust are not incorporated in this report. The Fund commenced operations on October 26, 2012.
The investment objective of the Fund is to achieve a high level of income consistent with a secondary goal of capital preservation.
2. Significant Accounting Policies
The following is a summary of the Fund’s significant accounting policies. These policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”). As an investment company, as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Update 2013-08, the Fund follows accounting and reporting guidance under FASB Accounting Standards Codification Topic 946, “Financial Services – Investment Companies.”
Securities valuation – The Fund’s fixed income securities are generally valued using prices provided by an independent pricing service approved by the Trust’s Board of Trustees (the “Board”). The independent pricing service uses information with respect to transactions in bonds, quotations from bond dealers, market transactions in comparable securities, and various relationships between securities in determining these prices. The methods used by the independent pricing service and the quality of valuations so established are reviewed by Cincinnati Asset Management, Inc. (the “Adviser”), under the general supervision of the Board. Securities for which market quotations are not readily available are valued at fair value as determined in good faith under procedures adopted by the Board.
GAAP establishes a single authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair value measurements.
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 |
● | Level 3 – significant unobservable inputs |
Corporate bonds are classified as Level 2 since values are based on prices provided by an independent pricing service that utilizes various “other significant observable inputs” including bid and ask quotations, prices of similar securities, and interest rates, among other factors. The inputs or methods used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. The inputs used to measure fair
12
CINCINNATI ASSET MANAGEMENT FUNDS: |
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.
The following is a summary of the inputs used to value the Fund’s investments as of May 31, 2016:
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Corporate Bonds | $ | — | $ | 7,099,747 | $ | — | $ | 7,099,747 |
Refer to the Fund’s Schedule of Investments for a listing of the securities by sector type. As of May 31, 2016, the Fund did not have any transfers between Levels. In addition, the Fund did not have derivative instruments or any assets or liabilities that were measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of May 31, 2016. It is the Fund’s policy to recognize transfers between Levels at the end of the reporting period.
Share valuation – The net asset value (“NAV”) per share of the Fund is calculated daily by dividing the total value of the Fund’s assets, less liabilities, by the number of shares outstanding. The offering price and redemption price per share of the Fund is equal to the NAV per share.
Investment income – Interest income is accrued as earned. Discounts and premiums on fixed income securities purchased are accreted or amortized using the effective interest method. Dividend income is recorded on the ex-dividend date.
Security transactions – Security transactions are accounted for on the trade date. Realized gains and losses on securities sold are determined on a specific identification basis.
Common expenses – Common expenses of the Trust are allocated among the Fund and other series of the Trust based on the relative net assets of each series or the nature of the services performed and the relative applicability to each series.
Distributions to shareholders – Dividends from net investment income are declared and paid quarterly to shareholders. Net realized capital gains, if any, are distributed at least once each year. The amount of distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations, which may differ from GAAP. Dividends and distributions to shareholders are recorded on the ex-dividend date. The tax character of the Fund’s distributions during the years ended May 31, 2016 and May 31, 2015 was ordinary income. On June 30, 2016, the Fund paid an ordinary income dividend of $0.0716 per share to shareholders of record on June 29, 2016.
13
CINCINNATI ASSET MANAGEMENT FUNDS: |
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 as of the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Federal income tax – The Fund has qualified and intends to continue to qualify as a regulated investment company under the Internal Revenue Code of 1986 (the “Code”). Qualification generally will relieve the Fund of liability for federal income taxes to the extent 100% of its net investment income and net realized capital gains are distributed in accordance with the Code.
In order to avoid imposition of the excise tax applicable to regulated investment companies, it is also the Fund’s intention to declare as dividends in each calendar year at least 98% of its net investment income (earned during the calendar year) and 98.2% of its net realized capital gains (earned during the twelve months ended October 31) plus undistributed amounts from prior years.
The following information is computed on a tax basis for each item as of May 31, 2016:
Tax cost of portfolio investments | $ | 7,006,143 | ||
Gross unrealized appreciation | $ | 163,045 | ||
Gross unrealized depreciation | (69,441 | ) | ||
Net unrealized appreciation on investments | 93,604 | |||
Undistributed ordinary income | 37,840 | |||
Capital loss carryforwards | (333,787 | ) | ||
Accumulated deficit | $ | (202,343 | ) |
As of May 31, 2016, the Fund had a short-term capital loss carryforward of $94,191 and a long-term capital loss carryfoward of $239,596. These capital loss carryforwards, which do not expire, may be utilized in future years to offset net realized capital gains, if any, prior to distributing such gains to shareholders.
For the year ended May 31, 2016, the Fund reclassified $386 of accumulated net investment income against accumulated net realized losses from security transactions on the Statement of Assets and Liabilities due to permanent differences in the recognition of capital gains or losses under income tax regulations and GAAP. This difference is due to the tax treatment of paydown adjustments. Such reclassification had no effect on the Fund’s net assets or NAV per share.
The Fund recognizes the tax benefits or expenses of uncertain tax positions only when the position is “more likely than not” to be sustained assuming examination by tax authorities. Management has reviewed the Fund’s tax positions for all open tax periods (periods ended May 31, 2013 through May 31, 2016) and has concluded that no provision for unrecognized tax benefits or expenses is required in these financial statements. The Fund identifies its major tax jurisdiction as U.S. Federal.
14
CINCINNATI ASSET MANAGEMENT FUNDS: |
3. Investment Transactions
During the year ended May 31, 2016, cost of purchases and proceeds from sales of investment securities, other than short-term investments, were $1,620,624 and $1,213,727, respectively.
4. Transactions with Related Parties
INVESTMENT ADVISORY AGREEMENT
The Fund’s investments are managed by the Adviser pursuant to the terms of an Investment Advisory Agreement. Under the Investment Advisory Agreement, the Fund pays the Adviser an advisory fee, computed and accrued daily and paid monthly, at the annual rate of 0.75% of its average daily net assets.
Pursuant to an expense limitation agreement between the Fund and the Adviser, the Adviser has contractually agreed until October 1, 2017 to waive investment advisory fees and reimburse certain other operating expenses in order to limit total annual operating expenses of the Fund (exclusive of brokerage costs; taxes; interest; costs to organize the Fund; acquired fund fees and expenses; extraordinary expenses such as litigation and merger or reorganization costs; and other expenses not incurred in the ordinary course of the Fund’s business, and amounts, if any, payable to a plan adopted in accordance with Rule 12b-1 under the Investment Company Act of 1940 (the “1940 Act”), as amended) to an amount not exceeding 0.65% of the Fund’s average daily net assets. Accordingly, the Adviser did not collect any of its advisory fees and, in addition, reimbursed other operating expenses totaling $168,270 during the year ended May 31, 2016.
An officer of the Fund is also an officer of the Adviser.
DISTRIBUTION PLAN
The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act (the “Rule 12b-1 Plan”), pursuant to which the Fund may incur certain costs for distribution and/or shareholder servicing expenses not to exceed 0.25% per annum of the Fund’s average daily net assets. During the year ended May 31, 2016, the Fund incurred $17,784 in distribution and service fees under the Rule 12b-1 Plan.
OTHER SERVICE PROVIDERS
Ultimus Fund Solutions, LLC (“Ultimus”) provides fund administration, fund accounting, compliance and transfer agency services to the Fund. The Fund pays Ultimus fees in accordance with the agreements for such services. In addition, the Fund pays out-of-pocket expenses including, but not limited to, postage, supplies and costs of pricing the Fund’s portfolio securities.
Under the terms of a Distribution Agreement with the Trust, Ultimus Fund Distributors, LLC (the “Distributor”) serves as principal underwriter to the Fund. The Distributor is a wholly-owned subsidiary of Ultimus.
Certain officers and a Trustee of the Trust are also officers of Ultimus and the Distributor.
15
CINCINNATI ASSET MANAGEMENT FUNDS: |
TRUSTEE COMPENSATION
Each Trustee who is not an “interested person” of the Trust (“Independent Trustee”) receives from the Fund a fee of $500 for each Board meeting attended plus reimbursement of travel and other meeting-related expenses. In addition, each Independent Trustee receives a $500 annual retainer from the Fund. Trustees affiliated with the Adviser or Ultimus are not compensated by the Fund for their services.
PRINCIPAL HOLDERS OF FUND SHARES
As of May 31, 2016, the following shareholders owned of record 5% or more of the outstanding shares of the Fund:
Name of Record Owner | % Ownership |
Mary S. Sloneker | 40% |
Cincinnati Asset Management, Inc. | 25% |
William S. Sloneker | 18% |
UBS (for the benefit of its customers) | 8% |
Charles Schwab & Co., Inc. (for the benefit of its customers) | 8% |
A beneficial owner of 25% or more of the Fund’s outstanding shares may be considered a controlling person. That shareholder’s vote could have a more significant effect on matters presented at a shareholder’s meeting.
5. Contingencies and Commitments
The Fund indemnifies the Trust’s officers and Trustees for certain liabilities that might arise from their performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of representations and warranties and which provide 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 that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote.
6. Subsequent Events
The Fund is required to recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed as of the date of the Statement of Assets and Liabilities. For non-recognized subsequent events that must be disclosed to keep the financial statements from being misleading, the Fund is required to disclose the nature of the event as well as an estimate of its financial effect, or a statement that such an estimate cannot be made. Management has evaluated subsequent events through the issuance of these financial statements and has noted no such events.
16
CINCINNATI ASSET MANAGEMENT FUNDS:
BROAD MARKET STRATEGIC INCOME FUND
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Ultimus Managers Trust
and the Shareholders of Cincinnati Asset Management Funds:
Broad Market Strategic Income Fund
We have audited the accompanying statement of assets and liabilities of Cincinnati Asset Management Funds: Broad Market Strategic Income Fund (the “Fund”), a series of shares of beneficial interest in Ultimus Managers Trust, including the schedule of investments, as of May 31, 2016, 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 three-year period then ended and for the period October 26, 2012 (commencement of operations) through May 31, 2013. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2016 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Cincinnati Asset Management Funds: Broad Market Strategic Income Fund as of May 31, 2016, 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 three-year period then ended and for the period October 26, 2012 to May 31, 2013, in conformity with accounting principles generally accepted in the United States of America.
BBD, LLP |
Philadelphia, Pennsylvania
July 28, 2016
17
CINCINNATI ASSET MANAGEMENT FUNDS: |
We believe it is important for you to understand the impact of costs on your investment. As a shareholder of the Fund, you incur ongoing costs, including management fees, distribution (12b-1) fees and other operating expenses. The following examples are 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.
A mutual fund’s ongoing costs are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The expenses in the table below are based on an investment of $1,000 made at the beginning of the most recent period (December 1, 2015) and held until the end of the period (May 31, 2016).
The table below illustrates the Fund’s ongoing costs in two ways:
Actual fund return – This section helps you to estimate the actual expenses that you paid over the period. The “Ending Account Value” shown is derived from the Fund’s actual return, and the third column shows the dollar amount of operating expenses that would have been paid by an investor who started with $1,000 in the Fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for the Fund under the heading “Expenses Paid During Period.”
Hypothetical 5% return – This section is intended to help you compare the Fund’s ongoing costs with those of other mutual funds. It assumes that the Fund had an annual return of 5% before expenses during the period shown, but that the expense ratio is unchanged. In this case, because the return used is not the Fund’s actual return, the results do not apply to your investment. The example is useful in making comparisons because the U.S. Securities and Exchange Commission (“SEC”) requires all mutual funds to calculate expenses based on a 5% return. You can assess the Fund’s ongoing costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
Note that expenses shown in the table are meant to highlight and help you compare ongoing costs only. The Fund does not charge transaction fees, such as purchase or redemption fees, nor does it carry a “sales load.” The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.
18
CINCINNATI ASSET MANAGEMENT FUNDS: |
More information about the Fund’s expenses can be found in this report. For additional information on operating expenses and other shareholder costs, please refer to the Fund’s prospectus.
| Beginning | Ending | Expenses Period* |
Based on Actual Fund Return | $1,000.00 | $1,024.80 | $3.29 |
Based on Hypothetical 5% Return (before expenses) | $1,000.00 | $1,021.75 | $3.29 |
* | Expenses are equal to the Fund’s annualized net expense ratio of 0.65% for the period, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). |
OTHER INFORMATION (Unaudited)
A description of the policies and procedures that the Fund uses to vote proxies relating to portfolio securities is available without charge upon request by calling toll-free 1-866-738-1128, or on the SEC’s website at http://www.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 without charge upon request by calling toll-free 1-866-738-1128, or on the SEC’s website at http://www.sec.gov.
The Trust files a complete listing of portfolio holdings for the Fund with the SEC as of the end of the first and third quarters of each fiscal year on Form N-Q. These filings are available upon request by calling 1-866-738-1128. Furthermore, you may obtain a copy of the filings on the SEC’s website at http://www.sec.gov. The Trust’s Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
19
CINCINNATI ASSET MANAGEMENT FUNDS:
BROAD MARKET STRATEGIC INCOME FUND
BOARD OF TRUSTEES AND EXECUTIVE OFFICERS
(Unaudited)
The Board of Trustees has overall responsibility for management of the Trust’s affairs. The Trustees serve during the lifetime of the Trust and until its termination, or until death, resignation, retirement, or removal. The Trustees, in turn, elect the officers of the Fund to actively supervise its day-to-day operations. The officers have been elected for an annual term. Unless otherwise noted, each Trustee’s and officer’s address is 225 Pictoria Drive, Suite 450, Cincinnati, OH 45246. The following are the Trustees and executive officers of the Fund:
Name and | Length of Time Served | Position(s) Held with Trust | Principal Occupation(s) During Past 5 Years | Number of Funds in Trust Overseen by Trustee | Directorships of Public Companies Held by Trustee During Past 5 Years |
Interested Trustees: | |||||
Robert G. Dorsey* Year of Birth: 1957 | Since February 2012 | Trustee (February 2012 to present)
President (June 2012 to October 2013) | Managing Director of Ultimus Fund Solutions, LLC and Ultimus Fund Distributors, LLC (1999 to present) | 21 | n/a |
Independent Trustees: | |||||
Janine L. Cohen Year of Birth: 1952 | Since | Trustee | Retired since 2013; Chief Financial Officer from 2004 to 2013 and Chief Compliance Officer from 2008 to 2013 at AER Advisors, Inc. | 21 | n/a |
David M. Deptula Year of Birth: 1958 | Since | Trustee | Vice President of Legal and Special Projects at Dayton Freight Lines, Inc. since 2016; Vice President of Tax Treasury at Standard Register, Inc. (formerly The Standard Register Company) from 2011 to 2016 | 21 | n/a |
20
CINCINNATI ASSET MANAGEMENT FUNDS:
BROAD MARKET STRATEGIC INCOME FUND
BOARD OF TRUSTEES AND EXECUTIVE OFFICERS
(Unaudited) (Continued)
Name and | Length of Time Served | Position(s) Held with Trust | Principal Occupation(s) During Past 5 Years | Number of Funds in Trust Overseen by Trustee | Directorships of Public Companies Held by Trustee During Past 5 Years |
Independent Trustees: (Continued) | |||||
John J. Discepoli Year of Birth: 1963 | Since | Chairman
Trustee | Owner of Decepoli Financial Planning, LLC (personal financial planning company) since 2004 | 21 | n/a |
* | Mr. Dorsey is considered an “interested person” of the Trust within the meaning of Section 2(a)(19) of the 1940 Act because of his relationship with the Trust’s administrator, transfer agent and distributor. |
Name and | Length of Time Served | Position(s) Held with | Principal Occupation(s) |
Executive Officers: | |||
William S. Sloneker 8845 Govenor’s Hill Drive Cincinnati, OH 45249 Year of Birth: 1953 | Since | Principal Executive Officer of Cincinnati Asset Management Funds: Broad Market Strategic Income Fund | Chairman, Chief Executive Officer and Portfolio Manager of Cincinnati Asset Management, Inc. (1989 to present) |
David R. Carson Year of Birth: 1958 | Since | President
Vice President (April 2013 to October 2013) | Vice President and Director of Client Strategies of Ultimus Fund Solutions, LLC (2013 to present); Chief Compliance Officer, FSI LBAR Fund (2013 to present), The Huntington Funds (2005 to 2013), The Flex-Funds (2006 to 2011), Meeder Financial (2007 to 2011), Huntington Strategy Shares (2012 to 2013), and Huntington Asset Advisors (2013); Vice President, Huntington National Bank (2001 to 2013). |
21
CINCINNATI ASSET MANAGEMENT FUNDS:
BROAD MARKET STRATEGIC INCOME FUND
BOARD OF TRUSTEES AND EXECUTIVE OFFICERS
(Unaudited) (Continued)
Name and | Length of Time Served | Position(s) | Principal Occupation(s) |
Executive Officers: (Continued) | |||
Jennifer L. Leamer Year of Birth: 1976 | Since | Treasurer
Assistant Treasurer (April 2014 to October 2014) | V.P., Mutual Fund Controller of Ultimus Fund Solutions, LLC (2014 to present); Business Analyst of Ultimus Fund Solutions, LLC (2007 to 2014) |
Bo J. Howell Year of Birth: 1981 | Since | Secretary
Assistant Secretary (October 2014 to April 2015) | V.P., Director of Fund Administration for Ultimus Fund Solutions, LLC (2014 to present); Counsel – Securities and Mutual Funds for Western & Southern Financial Group (2012 to 2014); U.S. Securities and Exchange Commission, Senior Counsel (2009 to 2012) |
Charles C. Black Year of Birth: 1979 | Since | Chief Compliance Officer
Assistant Chief Compliance Officer (April 2015 to January 2016) | Senior Compliance Officer of Ultimus Fund Solutions, LLC (2015 to present); Senior Compliance Manager for Touchstone Mutual Funds (2013 to 2015); Senior Compliance Manager for Fund Evaluation Group (2011 to 2013); Regulatory Administration Specialist for JPMorgan Chase Bank (2006 to 2011) |
Additional information about members of the Board and executive officers is available in the Fund’s Statement of Additional Information (“SAI”). To obtain a free copy of the SAI, please call 1-866-738-1128.
22
CINCINNATI ASSET MANAGEMENT FUNDS:
BROAD MARKET STRATEGIC INCOME FUND
DISCLOSURE REGARDING APPROVAL OF INVESTMENT ADVISORY AGREEMENT (Unaudited)
The Board of Trustees (the “Board”), including the Independent Trustees voting separately, has reviewed and approved the Fund’s Investment Advisory Agreement with the Advisor for an additional term. Approval took place at an in-person meeting held on April 25-26, 2016, at which all of the Trustees were present.
In the course of their deliberations, the Board was advised by legal counsel. The Board received and reviewed a substantial amount of information provided by the Advisor in response to requests of the Board and counsel.
In considering the Investment Advisory Agreement and reaching their conclusions with respect thereto, the Board reviewed and analyzed various factors that they determined were relevant, including the factors described below.
The nature, extent, and quality of the services provided by the Adviser. In this regard, the Board reviewed the services being provided by the Adviser to the Fund including, without limitation, its investment advisory services since the Fund’s inception, the Adviser’s compliance procedures and practices, and its efforts to promote the Fund and assist in its distribution. The Board also noted that a principal of the Adviser serves as the Fund’s Principal Executive Officer without additional compensation. After reviewing the foregoing information and further information regarding the Adviser’s business, the Board concluded that the quality, extent, and nature of the services provided by the Adviser were satisfactory and adequate for the Fund.
The investment performance of the Fund. In this regard, the Board compared the performance of the Fund with the performance of its benchmark index and related Morningstar category. The Board noted that for the one and three-year periods reported (through March 31, 2016), the Fund had: (i) outperformed its benchmark for the three-year period but unperformed for the one-year period; (ii) outperformed the average and median of the Fund’s Peer Group for both periods; and (iii) outperformed the average, but underperformed the median, of funds of comparable size and structure in the Morningstar category (no load, under $25 million) for both periods. The Board also considered the consistency of the Adviser’s management with the Fund’s investment objective and policies. Following discussion of the investment performance of the Fund and its performance relative to its peer group and Morningstar category, the Adviser’s experience in managing mutual funds, its historical investment performance, and other factors, the Board concluded that the investment performance of the Fund is satisfactory.
The costs of the services provided and profits realized by the Adviser from its relationship with the Fund. In this regard, the Board considered the Adviser’s staffing, personnel, and methods of operations; the education and experience of its personnel; compliance program, policies, and procedures; financial condition and the level of commitment to the Fund, and, generally, the Adviser’s advisory business; the asset level of the Fund; the overall expenses of the Fund, including the advisory fee; and the differences in fees and services to the Adviser’s other accounts with similar strategies to the Fund. The Board considered the
23
CINCINNATI ASSET MANAGEMENT FUNDS:
BROAD MARKET STRATEGIC INCOME FUND
DISCLOSURE REGARDING APPROVAL OF INVESTMENT ADVISORY AGREEMENT (Unaudited) (Continued)
Adviser’s Expense Limitation Agreement (the “ELA”) with the Fund, and considered the Adviser’s current and past fee reductions and expense reimbursements for the Fund. The Board further took into account the Adviser’s commitment to continue the ELA for the Fund until at least October 1, 2017.
The Board also considered potential benefits for the Adviser in managing the Fund, including promotion of the adviser’s name and the potential for it to receive research, statistical, or other services from the Fund’s trades. The Board compared the Fund’s advisory fee and overall expense ratio to the average advisory fees and average expense ratios for its Morningstar category. In addition, the Board compared the Fund to the comparable mutual funds in its Morningstar category and peer group in terms of the style of investment management, the size of the fund, and the nature of the investment strategies. The Board noted that the advisory fee for the Fund was at the 20th percentile for its peer group and slightly more competitive than the 20th percentile for comparable funds in the Morningstar category. The Board also noted that the overall expense ratio for the Fund was in the top quartile of its peer group and comparable funds in the Morningstar Multi-Sector Bond category. The Board also compared the fees paid by the Fund to the fees paid by other accounts of the Adviser with similar strategies, and considered the similarities and differences of services received by such other accounts as compared to the service provided to the Fund. Following these comparisons and upon further consideration and discussion of the foregoing, the Board concluded that the advisory fee paid to the Adviser by the Fund is fair and reasonable.
The extent to which economies of scale would be realized as the Fund grows and whether advisory fee levels reflect these economies of scale for the benefit of the Fund’s investors. In this regard, the Board considered that the Fund’s fee arrangement with the Adviser involves both the advisory fee and the ELA. The Board determined that while the advisory fee remained the same as asset levels increased, the shareholders of the Fund have experienced benefits from the ELA and will continue to experience benefits from the ELA until the Fund’s assets grow to a level where its expenses otherwise fall below the expense limit. Following further discussion of the Fund’s asset levels, expectations for growth, and level of fees, the Board determined that the Fund’s fee arrangement with the Adviser would continue to provide benefits. The Board also determined that the fee arrangement is fair and reasonable given the Fund’s projected asset levels for the next year.
Brokerage and portfolio transactions. In this regard, the Board considered the Adviser’s trading policies, procedures, and performance in seeking best execution for the Fund. The Board also considered the historical portfolio turnover rate for the Fund; the process by which evaluations are made of the overall reasonableness of commissions paid; the method and basis for selecting and evaluating the broker-dealers used; and any anticipated allocation of portfolio business to persons affiliated with the Adviser. After further review and discussion, the Board determined that the Adviser’s practices regarding brokerage and portfolio transactions were satisfactory.
24
CINCINNATI ASSET MANAGEMENT FUNDS:
BROAD MARKET STRATEGIC INCOME FUND
DISCLOSURE REGARDING APPROVAL OF INVESTMENT ADVISORY AGREEMENT (Unaudited) (Continued)
Possible conflicts of interest. In evaluating the possibility for conflicts of interest, the Board considered such matters as the experience and abilities of the advisory personnel assigned to the Fund, the Adviser’s process for allocating trades among its different clients, and the substance and administration of the Adviser’s code of ethics. Following further consideration and discussion, the Board found that the Adviser’s standards and practices relating to the identification and mitigation of potential conflicts of interests were satisfactory.
Conclusion
After full consideration of the above factors as well as other factors, the Board unanimously concluded that continuance of the Investment Advisory Agreement was in the best interests of the Fund and its shareholders.
25
WAVELENGTH INTEREST RATE NEUTRAL FUND | |
LETTER TO SHAREHOLDERS | July 11, 2016 |
Dear Fellow Shareholders:
Since our last annual letter, markets exhibited less consistent relationships with fundamental drivers due to concerns over Federal Reserve policy. Short-term fears led frequently to heightened volatility, leaving many investors on the sidelines in cash waiting for clarity.
Over the long-term, people invest in pursuit of a positive real rate of return. With rates on cash near historic lows and economic conditions still important to asset classes’ ability to make money, we believe a balanced exposure to areas where cash is deployed remains the most prudent approach. This is consistent with our investment mandate as we seek total returns with a balance across economic environments.
What follows is designed to provide context around returns that builds a deeper understanding of the investment process that supports them. Through this we hope to build on the partnership your investment creates.
PERFORMANCE SUMMARY
For the twelve months ended May 31, 2016, the Wavelength Interest Rate Neutral Fund (the “Fund”) delivered a return of -3.37% versus a benchmark return of +0.11% for the S&P / BGCantor 0-3 Month US Treasury Bill Index (which seeks to represent the return from not taking risk in financial markets). Performance over the period remained within targeted risk parameters, and the Fund has maintained its portfolio balance in line with investment objectives.
WAVELENGTH PHILOSOPHY
We believe that macroeconomic conditions drive asset prices and central banks use interest rates to manage macroeconomic conditions. Based on this fundamental logic, we seek to build a portfolio that is hedged to changes in interest rates by balancing investment exposure between instruments we expect to outperform in rising and falling macroeconomic conditions.
INVESTMENT ENVIRONMENT
As an extension of our investment philosophy, we believe that changing expectations for these conditions drive investment decisions, which in turn drive market prices. While markets responded to expectations regarding growth and inflation, these conditions were sometimes offset by uncertainty over the period.
Economic output recovered modestly over the second half of 2015, yet continued to lag consensus expectations. Inflation was similarly subdued and consistently below what had been forecast by economists. Expectations for rising rates conflicted with downside surprises, resulting in mixed signals for many financial markets.
1
Energy prices remained under pressure heading into year-end, and this impacted corporate credit markets meaningfully. This produced a disconnect between high yield bonds and other corporate assets, such as equities and convertible bonds, as they failed to respond to expectations for growth. Similarly, inflation-linked assets underperformed, while those linked to falling inflation were modestly positive.
After the Federal Reserve raised interest rates in December, uncertainty in January rose to new heights for the cycle. This also represented a turning point for markets which emerged from short-term deleveraging and returned to more fundamental long-term relationships.
February was characterized by the redeployment of cash into markets after months of heightened volatility and uncertainty. Over the months that followed, despite economic data falling below expectations, its influence on asset prices returned. Federal Reserve guidance was constructive for investor confidence and policy expectations adjusted to the “new normal” for interest rates.
In this context, corporate credit rebounded meaningfully from its previous dislocation as 2016’s first quarter came to an end. Sovereign debt in emerging markets also benefited from the change in sentiment, as sources of yield were limited. A rally at the short end of the US yield curve to begin the year was followed by a flattening where long-term government bonds started to reflect lower inflation expectations.
PERFORMANCE DISCUSSION
As discussed above, short-term fears led frequently to heightened volatility over the period, leaving many investors in cash seeking clarity. The Fund managed downside risk through this uncertainty by design, with a disciplined balance to growth and inflation.
In June came the first notable headwinds for markets, as financial assets became correlated with uncertainty. Losses were driven by corporate assets, including convertible bonds, credit, and emerging market positions, and these were among the most profitable when the Fund recovered in July. Selling pressure returned in August and to a lesser extent in September, as the portfolio’s balance proved to be more effective. Profits from government bonds and precious metals positions helped offset losses through quarter-end.
Strong returns in October came from performance across the portfolio, as markets that had suffered dislocations benefited the portfolio most. Assets again became correlated in November due to widespread deleveraging which persisted through the end of the year.
Positive performance in February represented a turning point for the Fund, as short-term fear gave way to long-term fundamentals. March was the Fund’s strongest month of performance, as positive contributions came from across the portfolio. Among the top positions were inflation assets, such as TIPS and emerging market debt, which responded positively to higher-than-expected inflation. Growth-related positions also made meaningful contributions, led by corporate assets such as credit and bank loans.
The portfolio continued to harvest returns in April due to strong performance from corporate and emerging market bonds. Profits from investment grade bonds were limited by modest losses in US Treasuries which limited upside for the portfolio. Amidst mixed market signals and a number of reversals, the Fund held year-to-date profits through May. Positive contributions were made from credit, bank loans and REITs during the month, and were offset by investment grade bonds and short-term US Treasuries.
2
OUTLOOK
As markets adjust to a new normal for interest rates, spells of uncertainty are likely to continue. We expect that asset prices will be driven by macroeconomic conditions and short-term dislocations will create opportunities for disciplined investors.
In this context, we maintain our balance to growth and inflation and our discipline in managing new risks. We believe our investment process will continue to deliver value with consistency in harvesting absolute returns over the long-term.
Thank you for your trust and commitment through investment.
Sincerely,
Andrew Dassori
Founding Partner & Chief Investment Officer
Wavelength Capital Management
Past performance is not predictive of future performance. Investment results and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data quoted.Performance data current to the most recent month end are available by calling 1-866-896-9292.
An investor should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. The Fund’s prospectus contains this and other important information. To obtain a copy of the Fund’s prospectus please call 1-866-896-9292 and a copy will be sent to you free of charge. Please read the prospectus carefully before you invest. The Wavelength Interest Rate Neutral Fund is distributed by Ultimus Fund Distributors, LLC.
The Letter to Shareholders seeks to describe some of the Adviser’s current opinions and views of the financial markets. Although the Adviser believes it has a reasonable basis for any opinions or views expressed, actual results may differ, sometimes significantly so, from those expected or expressed. The securities held by the Fund that are discussed in the Letter to Shareholders were held during the period covered by this Report. They do not comprise the entire investment portfolio of the Fund, may be sold at any time and may no longer be held by the Fund.For a complete list of securities held by the Fund as of May 31, 2016, please see the Schedule of Investments section of the Annual Report.The opinions of the Adviser with respect to those securities may change at any time.
Statements in the Letter to Shareholders that reflect projections or expectations for future financial or economic performance of the Fund and the market in general and statements of the Fund’s plans and objectives for future operations are forward-looking statements.No assurance can be given that actual results or events will not differ materially from those projected, estimated, assumed, or anticipated in any such forward-looking statements.Important factors that could result in such differences, in addition to factors noted with such forward-looking statements include, without limitation, general economic conditions, such as inflation, recession, and interest rates.Past performance is not a guarantee of future results.
3
WAVELENGTH INTEREST RATE NEUTRAL FUND
PERFORMANCE INFORMATION
May 31, 2016 (Unaudited)
Comparison of the Change in Value of a $100,000 Investment in
Wavelength Interest Rate Neutral Fund versus the
S&P/BGCantor 0-3 Month U.S. Treasury Bill Index
Average Annual Total Returns | ||
1 Year | Since | |
Wavelength Interest Rate Neutral Fund(a) | (3.37%) | 0.34% |
S&P/BGCantor 0-3 Month U.S. Treasury Bill Index | 0.11% | 0.06% |
(a) | The Fund’s total returns do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. |
(b) | The Fund commenced operations on September 30, 2013. |
4
WAVELENGTH INTEREST RATE NEUTRAL FUND
PORTFOLIO INFORMATION
May 31, 2016 (Unaudited)
Portfolio Allocation (% of Net Assets)
Top 10 Holdings
Security Description | % of |
iShares® TIPS Bond ETF | 17.5% |
Vanguard Short-Term Corporate Bond ETF | 16.9% |
PowerShares Senior Loan Portfolio | 16.0% |
SPDR® Barclays Short Term High Yield Bond ETF | 8.9% |
iShares® iBoxx $ Investment Grade Corporate Bond ETF | 6.5% |
PowerShares Emerging Markets Sovereign Debt Portfolio | 4.6% |
SPDR® Barclays High Yield Bond ETF | 4.6% |
VanEck Vectors Emerging Markets High Yield Bond ETF | 4.4% |
iShares® J.P. Morgan USD Emerging Markets Bond ETF | 3.0% |
Vanguard REIT ETF | 2.5% |
5
WAVELENGTH INTEREST RATE NEUTRAL FUND | ||||||||
EXCHANGE-TRADED FUNDS — 87.4% | Shares | Value | ||||||
Emerging Markets Debt — 12.0% | ||||||||
iShares® J.P. Morgan USD Emerging Markets Bond ETF | 4,496 | $ | 498,966 | |||||
PowerShares Emerging Markets Sovereign Debt Portfolio | 27,577 | 782,911 | ||||||
VanEck Vectors Emerging Markets High Yield Bond ETF | 31,553 | 736,763 | ||||||
2,018,640 | ||||||||
Real Estate Investment Trusts (REITs) — 2.7% | ||||||||
SPDR® Dow Jones REIT ETF | 200 | 18,832 | ||||||
Vanguard REIT ETF | 5,100 | 426,819 | ||||||
445,651 | ||||||||
U.S. Fixed Income — 72.7% | ||||||||
iShares® iBoxx $ High Yield Corporate Bond ETF | 2,610 | 218,222 | ||||||
iShares® iBoxx $ Investment Grade Corporate Bond ETF | 9,140 | 1,091,225 | ||||||
iShares® TIPS Bond ETF | 25,626 | 2,924,952 | ||||||
PowerShares Senior Loan Portfolio | 116,331 | 2,683,756 | ||||||
SPDR® Barclays High Yield Bond ETF | 21,823 | 768,824 | ||||||
SPDR® Barclays Short Term High Yield Bond ETF | 55,634 | 1,486,540 | ||||||
Vanguard Short-Term Corporate Bond ETF | 35,407 | 2,832,560 | ||||||
Vanguard Short-Term Inflation-Protected Securities ETF * | 3,734 | 183,003 | ||||||
12,189,082 | ||||||||
Total Exchange-Traded Funds (Cost $14,666,308) | $ | 14,653,373 |
MONEY MARKET FUNDS — 9.4% | Shares | Value | ||||||
Fidelity Institutional Money Market Government Portfolio - Class I, 0.24% (a) | 1,540,359 | $ | 1,540,359 | |||||
Invesco Short-Term Investments Trust - Treasury Portfolio - Institutional Shares, 0.24% (a) | 36,812 | 36,812 | ||||||
Total Money Market Funds (Cost $1,577,171) | $ | 1,577,171 | ||||||
Total Investments at Value — 96.8%(Cost $16,243,479) | $ | 16,230,544 | ||||||
Other Assets in Excess of Liabilities — 3.2% | 530,635 | |||||||
Net Assets — 100.0% | $ | 16,761,179 |
* | Non-income producing security. |
(a) | The rate shown is the 7-day effective yield as of May 31, 2016. |
See accompanying notes to financial statements. |
6
WAVELENGTH INTEREST RATE NEUTRAL FUND | |||||||||||||
FUTURES CONTRACTS | Expiration Date | Contracts | Aggregate Market Value of Contracts | Unrealized Appreciation | |||||||||
Commodity Futures | |||||||||||||
COMEX miNY Gold Future | 7/27/2016 | 4 | $ | 243,650 | $ | 343 | |||||||
E-Mini Crude Oil Future | 6/20/2016 | 7 | 171,325 | 661 | |||||||||
Total Commodity Futures | 414,975 | 1,004 | |||||||||||
Index Futures | |||||||||||||
E-Mini Dow CBOT DJIA Future | 6/17/2016 | 8 | 710,920 | 6,701 | |||||||||
E-Mini Nasdaq 100 Future | 6/17/2016 | 2 | 180,960 | 4,851 | |||||||||
E-Mini S&P 500® Future | 6/17/2016 | 6 | 628,050 | 8,350 | |||||||||
Total Index Futures | 1,519,930 | 19,902 | |||||||||||
Treasury Futures | |||||||||||||
5-Year U.S. Treasury Note Future | 9/30/2016 | 10 | 1,200,547 | (554 | ) | ||||||||
U.S. Treasury Long Bond Future | 9/21/2016 | 3 | 489,187 | 308 | |||||||||
Total Treasury Futures | 1,689,734 | (246 | ) | ||||||||||
Total Futures Contracts | $ | 3,624,639 | $ | 20,660 |
| |||||||||||||
FUTURES CONTRACTS SOLD SHORT | Expiration Date | Contracts | Aggregate Market Value of Contracts | Unrealized Depreciation | |||||||||
Treasury Futures | |||||||||||||
10-Year U.S. Treasury Note Future | 6/21/2016 | 10 | $ | 1,296,875 | $ | (1,968 | ) |
See accompanying notes to financial statements. |
7
WAVELENGTH INTEREST RATE NEUTRAL FUND | ||||
ASSETS | ||||
Investments in securities: | ||||
At acquisition cost | $ | 16,243,479 | ||
At value (Note 2) | $ | 16,230,544 | ||
Cash | 3,397 | |||
Margin deposits for futures contracts (Notes 2 and 5) | 541,202 | |||
Dividends receivable | 328 | |||
Receivable for investment securities sold | 5,349 | |||
Other assets | 2,588 | |||
Total assets | 16,783,408 | |||
LIABILITIES | ||||
Payable for investment securities purchased | 7,014 | |||
Payable to Adviser (Note 4) | 290 | |||
Payable to administrator (Note 4) | 7,390 | |||
Variation margin payable (Notes 2 and 5) | 4,291 | |||
Other accrued expenses | 3,244 | |||
Total liabilities | 22,229 | |||
NET ASSETS | $ | 16,761,179 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 17,909,445 | ||
Undistributed net investment income | 49,485 | |||
Accumulated net realized losses from security transactions and other financial instruments | (1,203,508 | ) | ||
Net unrealized appreciation (depreciation) on: | ||||
Investments | (12,935 | ) | ||
Futures contracts | 18,692 | |||
NET ASSETS | $ | 16,761,179 | ||
Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) | 1,756,840 | |||
Net asset value, offering price and redemption price per share (Note 2) | $ | 9.54 |
See accompanying notes to financial statements. |
8
WAVELENGTH INTEREST RATE NEUTRAL FUND | ||||
INVESTMENT INCOME | ||||
Dividends | $ | 521,014 | ||
EXPENSES | ||||
Investment advisory fees (Note 4) | 157,467 | |||
Professional fees | 36,077 | |||
Fund accounting fees (Note 4) | 30,654 | |||
Administration fees (Note 4) | 29,000 | |||
Transfer agent fees (Note 4) | 15,000 | |||
Compliance fees (Note 4) | 12,615 | |||
Custody and bank service fees | 11,344 | |||
Trustees' fees and expenses (Note 4) | 10,007 | |||
Registration and filing fees | 6,226 | |||
Insurance expense | 3,998 | |||
Postage and supplies | 2,728 | |||
Other expenses | 15,216 | |||
Total expenses | 330,332 | |||
Less fee reductions and expense reimbursements by the Adviser (Note 4) | (166,221 | ) | ||
Net expenses | 164,111 | |||
NET INVESTMENT INCOME | 356,903 | |||
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS AND FUTURES CONTRACTS | ||||
Net realized losses from: | ||||
Investments | (791,771 | ) | ||
Futures contracts (Note 5) | (242,528 | ) | ||
Capital gain distributions from regulated investment companies | 1,602 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 33,201 | |||
Futures contracts (Note 5) | 26,867 | |||
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS AND FUTURES CONTRACTS | (972,629 | ) | ||
NET DECREASE IN NET ASSETSRESULTING FROM OPERATIONS | $ | (615,726 | ) |
See accompanying notes to financial statements. |
9
WAVELENGTH INTEREST RATE NEUTRAL FUND | ||||||||
| Year | Year | ||||||
FROM OPERATIONS | ||||||||
Net investment income | $ | 356,903 | $ | 329,154 | ||||
Net realized losses from: | ||||||||
Investments | (791,771 | ) | (168,620 | ) | ||||
Option contracts | — | (8,464 | ) | |||||
Futures contracts (Note 5) | (242,528 | ) | (14,863 | ) | ||||
Capital gain distributions from regulated investment companies | 1,602 | 37,148 | ||||||
Net change in unrealized appreciation (depreciation) on: | ||||||||
Investments | 33,201 | (153,547 | ) | |||||
Futures contracts (Note 5) | 26,867 | (18,308 | ) | |||||
Net increase (decrease) in net assets from operations | (615,726 | ) | 2,500 | |||||
DISTRIBUTIONS TO SHAREHOLDERS | ||||||||
From net investment income | (355,504 | ) | (293,521 | ) | ||||
From net realized gains | — | (48,557 | ) | |||||
Decrease in net assets from distributions to shareholders | (355,504 | ) | (342,078 | ) | ||||
CAPITAL SHARE TRANSACTIONS | ||||||||
Proceeds from shares sold | 544,904 | 13,413,165 | ||||||
Net asset value of shares issued in reinvestment of distributions to shareholders | 350,339 | 339,021 | ||||||
Payments for shares redeemed | (978,011 | ) | (314,392 | ) | ||||
Net increase (decrease) in net assets from capital share transactions | (82,768 | ) | 13,437,794 | |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | (1,053,998 | ) | 13,098,216 | |||||
NET ASSETS | ||||||||
Beginning of year | 17,815,177 | 4,716,961 | ||||||
End of year | $ | 16,761,179 | $ | 17,815,177 | ||||
UNDISTRIBUTED NET INVESTMENT INCOME | $ | 49,485 | $ | 48,086 |
See accompanying notes to financial statements. |
10
WAVELENGTH INTEREST RATE NEUTRAL FUND | ||||||||
Year | Year | |||||||
CAPITAL SHARE ACTIVITY | ||||||||
Shares sold | 57,617 | 1,308,050 | ||||||
Shares issued in reinvestment of distributions to shareholders | 37,420 | 34,071 | ||||||
Shares redeemed | (103,873 | ) | (31,083 | ) | ||||
Net increase (decrease) in shares outstanding | (8,836 | ) | 1,311,038 | |||||
Shares outstanding at beginning of year | 1,765,676 | 454,638 | ||||||
Shares outstanding at end of year | 1,756,840 | 1,765,676 |
See accompanying notes to financial statements. |
11
WAVELENGTH INTEREST RATE NEUTRAL FUND | ||||||||||||
Per Share Data for a Share Outstanding Throughout Each Period | ||||||||||||
| Year | Year | Period | |||||||||
Net asset value at beginning of period | $ | 10.09 | $ | 10.38 | $ | 10.00 | ||||||
Income (loss) from investment operations: | ||||||||||||
Net investment income | 0.21 | 0.23 | 0.10 | |||||||||
Net realized and unrealized gains (losses) on investments and futures contracts | (0.56 | ) | (0.25 | ) | 0.36 | |||||||
Total from investment operations | (0.35 | ) | (0.02 | ) | 0.46 | |||||||
Less distributions: | ||||||||||||
Distributions from net investment income | (0.20 | ) | (0.23 | ) | (0.07 | ) | ||||||
Distributions from net realized gains | — | (0.04 | ) | (0.01 | ) | |||||||
Total distributions | (0.20 | ) | (0.27 | ) | (0.08 | ) | ||||||
Net asset value at end of period | $ | 9.54 | $ | 10.09 | $ | 10.38 | ||||||
Total return (b) | (3.37 | %) | (0.17 | %) | 4.62 | %(c) | ||||||
Net assets at end of period (000's) | $ | 16,761 | $ | 17,815 | $ | 4,717 | ||||||
Ratios/supplementary data: | ||||||||||||
Ratio of total expenses to average net assets (d) | 2.00 | % | 2.19 | % | 4.42 | %(e) | ||||||
Ratio of net expenses to average net assets (d)(f) | 0.99 | % | 0.99 | % | 0.99 | %(e) | ||||||
Ratio of net investment income to average net assets (f)(g) | 2.16 | % | 2.52 | % | 1.55 | %(e) | ||||||
Portfolio turnover rate | 103 | % | 107 | % | 114 | %(c) |
(a) | Represents the period from the commencement of operations (September 30, 2013) through May 31, 2014. |
(b) | Total return is a measure of the change in value of an investment in the Fund over the periods covered. The returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions, if any, or the redemption of Fund shares. The total returns would be lower if the Adviser had not reduced advisory fees and reimbursed expenses. |
(c) | Not annualized. |
(d) | The ratios of expenses to average net assets do not reflect the Fund's proportionate share of expenses of the underlying investment companies in which the Fund invests. |
(e) | Annualized. |
(f) | Ratio was determined after advisory fee reductions and expense reimbursements (Note 4). |
(g) | Recognition of net investment income by the Fund is affected by the timing of the declarations of dividends by the underlying investment companies in which the Fund invests. |
See accompanying notes to financial statements. |
12
WAVELENGTH INTEREST RATE NEUTRAL FUND
NOTES TO FINANCIAL STATEMENTS
May 31, 2016
1. Organization
Wavelength Interest Rate Neutral Fund (the “Fund”) is a non-diversified series of Ultimus Managers Trust (the “Trust”), an open-end investment company established as an Ohio business trust under a Declaration of Trust dated February 28, 2012. Other series of the Trust are not incorporated in this report. The Fund commenced operations on September 30, 2013.
The investment objective of the Fund is total return.
2. Significant Accounting Policies
The following is a summary of the Fund’s significant accounting policies. The policies are in conformity with Generally Accepted Accounting Principles in the United States of America (“GAAP”). As an investment company, as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Update 2013-08, the Fund follows accounting and reporting guidance under FASB Accounting Standards Codification Topic 946, “Financial Services – Investment Companies.”
Securities and futures valuation – The Fund values its portfolio securities at market value as of the close of regular trading on the New York Stock Exchange (the “NYSE”) (normally 4:00 p.m. Eastern time) on each business day the NYSE is open. The Fund values its listed securities on the basis of the security’s last sale price on the security’s primary exchange, if available, otherwise at the exchange’s most recently quoted mean price. NASDAQ-listed securities are valued at the NASDAQ Official Closing Price. The Fund values its exchange-traded futures contracts at their last sale price as of the close of regular trading on the NYSE. Prices for these futures contracts are monitored daily by the Adviser until the close of regular trading to determine if fair valuation is required.
In the event that market quotations are not readily available or are considered unreliable due to market or other events, the Fund values its securities and other assets at fair value pursuant to the procedures adopted by and under the general supervision of the Trust’s Board of Trustees (the “Board”). Under these procedures, the securities will be classified as Level 2 or 3 within the fair value hierarchy (see below), depending on the inputs used. Unavailable or unreliable market quotes may be due to the following factors: a substantial bid-ask spread; infrequent sales resulting in stale prices; insufficient trading volume; small trade sizes; a temporary lapse in any reliable pricing source; and actions of the securities or futures markets, such as the suspension or limitation of trading.
GAAP establishes a single authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair value measurements.
13
WAVELENGTH INTEREST RATE NEUTRAL FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
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 |
● | Level 3 – significant unobservable inputs |
The inputs or methods used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. 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.
The following is a summary of the inputs used to value the Fund’s investments and other financial instruments as of May 31, 2016:
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments in Securities | ||||||||||||||||
Exchange-Traded Funds | $ | 14,653,373 | $ | — | $ | — | $ | 14,653,373 | ||||||||
Money Market Funds | 1,577,171 | — | — | 1,577,171 | ||||||||||||
Total | $ | 16,230,544 | $ | — | $ | — | $ | 16,230,544 | ||||||||
Other Financial Instruments | ||||||||||||||||
Futures Contracts | $ | 20,660 | $ | — | $ | — | $ | 20,660 | ||||||||
Futures Contracts Sold Short | (1,968 | ) | — | — | (1,968 | ) | ||||||||||
Total | $ | 18,692 | $ | — | $ | — | $ | 18,692 |
As of May 31, 2016, the Fund did not have any transfers between Levels. In addition, the Fund did not have any assets or liabilities that were measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of May 31, 2016. It is the Fund’s policy to recognize transfers between Levels at the end of the reporting period.
Share valuation – The net asset value (“NAV”) per share of the Fund is calculated daily by dividing the total value of the Fund’s assets, less liabilities, by the number of shares outstanding. The offering price and redemption price per share of the Fund is equal to the NAV per share.
Investment income – Dividend income is recorded on the ex-dividend date. Interest income is accrued as earned.
Security transactions – Security transactions are accounted for on the trade date. Realized gains and losses on securities sold are determined on a specific identification basis.
Common expenses – Common expenses of the Trust are allocated among the Fund and the other series of the Trust based on the relative net assets of each series or the nature of the services performed and the relative applicability to each series.
14
WAVELENGTH INTEREST RATE NEUTRAL FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
Distributions to shareholders – The Fund will distribute to shareholders any net investment income on a quarterly basis and any net realized capital gains at least annually. The amount of such dividends and distributions are determined in accordance with federal income tax regulations, which may differ from GAAP. Dividends and distributions to shareholders are recorded on the ex-dividend date. The tax character of distributions paid during the years ended May 31, 2016 and May 31, 2015 was as follows:
Years Ended | Ordinary Income | Long-Term Capital Gains | Total Distributions | |||||||||
May 31, 2016 | $ | 355,504 | $ | — | $ | 355,504 | ||||||
May 31, 2015 | $ | 328,122 | $ | 13,956 | $ | 342,078 |
Option contracts – The Fund may use option contracts in any manner consistent with its investment objective and as long as the use is consistent with relevant provisions of the Investment Company Act of 1940 (the “1940 Act”). The Fund may use options for speculative investment purposes as well as for the purpose of seeking to reduce the overall investment risk that would otherwise be associated with the securities in which the Fund invests. When the Fund purchases an option, an amount equal to the total premium (the premium plus the commission) paid by the Fund is recorded as an asset in the Fund’s Statement of Assets and Liabilities and is subsequently marked-to-market daily. Premiums paid in the purchase of options which expire are treated as realized losses. Premiums paid in the purchase of call options which are exercised increase the cost of the security purchased. If a closing sale transaction is used to terminate the Fund’s obligation on an option, a gain or loss will be realized depending upon whether the price of the closing sale transaction is more or less than the premium previously paid on the option purchased.
Futures contracts – The Fund may use futures contracts to gain exposure to or to hedge against changes in the value of equities, real estate, interest rates or commodities. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date. When the Fund purchases or sells a futures contract, no price is paid to or received by the Fund. Instead, the Fund is required to deposit in a segregated asset account an amount of cash or qualifying securities currently ranging from 2% to 10% of the contract amount. This is called the “initial margin deposit.” Subsequent payments, known as “variation margin,” are made or received by the Fund each day, depending on the daily fluctuations in the fair value of the underlying asset. The Fund recognizes an unrealized gain or loss equal to the daily variation margin. If market conditions move unexpectedly, the Fund may not achieve the anticipated benefits of the futures contracts and may realize a loss. The margin deposits for futures contracts and the variation margin payable are reported on the Statement of Assets and Liabilities.
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 as of the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
15
WAVELENGTH INTEREST RATE NEUTRAL FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
Federal income tax – The Fund has qualified and intends to continue to qualify as a regulated investment company under the Internal Revenue Code of 1986 (the “Code”). Qualification generally will relieve the Fund of liability for federal income taxes to the extent 100% of its net investment income and net realized captial gains are distributed in accordance with the Code.
In order to avoid imposition of the excise tax applicable to regulated investment companies, it is also the Fund’s intention to declare as dividends in each calendar year at least 98% of its net investment income (earned during the calendar year) and 98.2% of its net realized capital gains (earned during the twelve months ended October 31) plus undistributed amounts from prior years.
The following information is computed on a tax basis for each item as of May 31, 2016:
Tax cost of portfolio investments | $ | 16,552,919 | ||
Gross unrealized appreciation | $ | 94,770 | ||
Gross unrealized depreciation | (417,145 | ) | ||
Net unrealized depreciation | (322,375 | ) | ||
Undistributed ordinary income | 49,485 | |||
Accumulated capital and other losses | (875,376 | ) | ||
Total accumulated deficit | $ | (1,148,266 | ) |
The value of the federal income tax cost of portfolio investments and the tax components of the accumulated deficit may temporarily differ from the financial statement cost and components of net assets (“book/tax difference”). These book/tax differences are due to the recognition of capital gains or losses under income tax regulations and GAAP, primarily the tax deferral of losses on wash sales and the tax treatment of realized and unrealized gains and losses on futures contracts.
As of May 31, 2016, the Fund had a short-term capital loss carryforward of $343,823 and a long-term capital loss carryforward of $298,968 for federal income tax purposes. These capital loss carryforwards, which do not expire, may be utilized in future years to offset net realized capital gains, if any, prior to distributing such gains to shareholders.
Certain capital losses incurred after October 31, 2015 and within the current taxable year are deemed to arise on the first business day of the Fund’s following taxable year. For the year ended May 31, 2016, the Fund deferred until June 1, 2016, post-October capital losses in the amount of $232,585.
The Fund recognizes the tax benefits or expenses of uncertain tax positions only when the position is “more likely than not” to be sustained assuming examination by tax authorities. Management has reviewed the Fund’s tax positions for all open tax periods (periods ended May 31, 2014 through May 31, 2016) and has concluded that no provision for unrecognized tax benefits or expenses is required in these financial statements. The Fund identifies its major tax jurisdiction as U.S. Federal.
16
WAVELENGTH INTEREST RATE NEUTRAL FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
3. Investment Transactions
During the year ended May 31, 2016, cost of purchases and proceeds from sales of investment securities, other than short-term investments, were $15,321,897 and $15,176,233, respectively.
4. Transactions with Related Parties
INVESTMENT ADVISORY AGREEMENT
The Fund’s investments are managed by Wavelength Capital Management, LLC (the “Adviser”) pursuant to the terms of an Investment Advisory Agreement. Under the Investment Advisory Agreement, the Fund pays the Adviser an advisory fee, computed and accrued daily and paid monthly, at the annual rate of 0.95% of its average daily net assets.
Pursuant to an Expense Limitation Agreement (“ELA”) between the Fund and the Adviser, the Adviser has contractually agreed, until October 1, 2017, to reduce investment advisory fees and reimburse other operating expenses in order to limit total annual operating expenses of the Fund (exclusive of brokerage costs; taxes; interest; acquired fund fees and expenses; extraordinary expenses such as litigation and merger or reorganization costs; other 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 1940 Act) to an amount not exceeding 0.99% of the Fund’s average daily net assets. During the year ended May 31, 2016, the Adviser did not collect any of its investment advisory fees and, in addition, reimbursed the Fund for other operating expenses totaling $8,754.
Under the terms of the ELA, investment advisory fee reductions and expense reimbursements by the Adviser are subject to recoupment by the Adviser for a period of three years after such fees and expenses were incurred, provided that the recoupments do not cause total annual operating expenses of the Fund to exceed 0.99% of the Fund’s average daily net assets. As of May 31, 2016, the Adviser may seek recoupment of investment advisory fee reductions and expense reimbursements in the amount of $415,560 no later than the dates as stated below:
May 31, 2017 | May 31, 2018 | May 31, 2018 | Total |
$91,664 | $157,675 | $166,221 | $415,560 |
The principal executive officer of the Fund is also an officer of the Adviser.
OTHER SERVICE PROVIDERS
Ultimus Fund Solutions, LLC (“Ultimus”) provides fund administration, fund accounting, compliance and transfer agency services to the Fund. The Fund pays Ultimus fees in accordance with the agreements for such services. In addition, the Fund pays out-of-pocket expenses including, but not limited to, postage, supplies and costs of pricing the Fund’s portfolio securities.
17
WAVELENGTH INTEREST RATE NEUTRAL FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
Under the terms of a Distribution Agreement with the Trust, Ultimus Fund Distributors, LLC (the “Distributor”) serves as the principal underwriter to the Fund. The Distributor is a wholly-owned subsidiary of Ultimus. The Distributor is compensated by the Adviser (not the Fund) for acting as principal underwriter.
Certain officers and a Trustee of the Trust are also officers of Ultimus and the Distributor.
TRUSTEE COMPENSATION
Each Trustee who is not an “interested person” of the Trust (“Independent Trustee”) receives from the Fund a fee of $500 for each Board meeting attended plus reimbursement of travel and other meeting-related expenses. In addition, each Independent Trustee receives a $500 annual retainer from the Fund. Trustees affiliated with the Adviser or Ultimus are not compensated by the Fund for their services.
PRINCIPAL HOLDERS OF FUND SHARES
As of May 31, 2016, the following shareholders owned of record 5% or more of the outstanding shares of the Fund:
Name of Record Owner | % Ownership |
Interactive Brokers, LLC (for the benefit of its customers) | 71% |
R&T Partners, LLC (for the benefit of its customers) | 12% |
Charles Schwab & Co., Inc. (for the benefit of its customers) | 5% |
A shareholder owning of record or beneficially 25% or more of the Fund’s outstanding shares may be considered a controlling person. That shareholder’s vote could have a more significant effect on matters presented at a shareholders’ meeting.
5. Derivatives Transactions
The Fund’s positions in derivative instruments as of May 31, 2016 are recorded in the following location in the Statement of Assets and Liabilities:
Derivative Investment Type | Location |
Futures contracts | Variation margin payable |
18
WAVELENGTH INTEREST RATE NEUTRAL FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
The following table sets forth the values of variation margin of the Fund as of May 31, 2016:
Variation Margin | ||||||||||||
| Receivable | (Payable) | Total | |||||||||
Asset Derivatives | ||||||||||||
Futures contracts | ||||||||||||
Commodity | $ | 344 | $ | (1,330 | ) | $ | (986 | ) | ||||
Index | 1,322 | (5,212 | ) | (3,890 | ) | |||||||
Treasury | 373 | (550 | ) | (177 | ) | |||||||
Total Asset Derivatives | 2,039 | (7,092 | ) | (5,053 | ) | |||||||
Liability Derivatives | ||||||||||||
Futures contracts | ||||||||||||
Treasury | 762 | — | 762 | |||||||||
Total Liability Derivatives | 762 | — | 762 | |||||||||
Total | $ | 2,801 | $ | (7,092 | ) | $ | (4,291 | ) |
The Fund’s transactions in derivative instruments during the year ended May 31, 2016 are recorded in the following locations in the Statement of Operations:
Derivative Investment Type | Location |
Futures contracts | Net realized losses from futures contracts |
Net change in unrealized appreciation (depreciation) on futures contracts |
The following is a summary of the Fund’s net realized gains (losses) and net change in unrealized appreciation (depreciation) on derivative instruments recognized in the Statement of Operations during the year ended May 31, 2016:
Type of Derivative | Net Realized Gains (Losses) | Net Change in Unrealized Appreciation (Depreciation) | ||||||
Futures contracts | ||||||||
Commodity | $ | 12,533 | $ | 10,242 | ||||
Index | (280,379 | ) | 29,067 | |||||
Treasury | 25,318 | (12,442 | ) | |||||
Total | $ | (242,528 | ) | $ | 26,867 |
The average monthly notional amount of futures contracts purchased during the year ended May 31, 2016 was $5,651,987, and the gross notional amount of futures contracts and future contracts sold short outstanding at May 31, 2016 was $3,624,639 and $(1,296,875), respectively.
19
WAVELENGTH INTEREST RATE NEUTRAL FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
In the ordinary course of business, the Fund may enter into transactions subject to enforceable netting agreements or other similar arrangements (“netting agreements”). Generally, the right to offset in netting agreements allows the Fund to offset any exposure to a specific counterparty with any collateral received or delivered to that counterparty based on the terms of the agreements. Generally, the Fund manages its cash collateral securities and securities collateral on a counterparty basis.
As of May 31, 2016, the offsetting of financial assets and derivative assets is as follows:
Description | Gross Amount of Recognized Assets | Gross Amount Offset on Statement of Assets and Liabilities | Net Amount of Assets Presented on Statement of Assets and Liabilities | Collateral Pledged | Net Amount | |||||||||||||||
Variation margin receivable - | $ | 2,039 | $ | (7,092 | ) | $ | (5,053 | ) | $ | 398,589 | $ | 393,536 | ||||||||
Total subject to a master netting or similar arrangement | $ | 2,039 | $ | (7,092 | ) | $ | (5,053 | ) | $ | 398,589 | $ | 393,536 |
As of May 31, 2016, the offsetting of financial liabilities and derivative liabilities is as follows:
Description | Gross Amount of Recognized Liabilities | Gross Amount Offset on Statement of Assets and Liabilities | Net Amount of Liabilities Presented on Statement of Assets and Liabilities | Collateral Pledged | Net Amount | |||||||||||||||
Variation margin receivable - | $ | 762 | $ | — | $ | 762 | $ | 142,613 | $ | 143,375 | ||||||||||
Total subject to a master netting or similar arrangement | $ | 762 | $ | — | $ | 762 | $ | 142,613 | $ | 143,375 |
6. Certain Investments and Risks
The securities in which the Fund invests, as well as the risks associated with these securities, are described in the Fund’s prospectus. Among these risks are those associated with investments in exchange-traded funds (“ETFs”). ETFs issue their shares to authorized participants in return for a specific basket of securities. The authorized participants then sell the ETF’s shares on the secondary market. In other words, ETF shares are traded on a securities exchange based on their market value. Investments in ETFs are subject to the
20
WAVELENGTH INTEREST RATE NEUTRAL FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
risk that the ETF’s shares may trade at a premium (creating the risk that the Fund pays more than NAV for an ETF when making a purchase) or discount (creating the risk that the Fund receives less than NAV when selling an ETF) to the ETF’s NAV. Investments in ETFs are also subject to index-tracking risk because the total return generated by the securities will be reduced by transaction costs and expenses not incurred by the indices. Certain securities comprising the index tracked by an ETF may, from time to time, temporarily be unavailable, which may further impede the ETF’s ability to track its applicable index or match the index’s performance. To the extent that the Fund invests in an ETF, the Fund incurs additional expenses because the Fund bears its pro-rata portion of such ETF’s advisory fees and operational expenses. Finally, ETF shares are also subject to the risks applicable to the underlying basket of securities. As of May 31, 2016, the Fund had 87.4% of the value of its net assets invested in ETFs.
7. Contingencies and Commitments
The Fund indemnifies the Trust’s officers and Trustees for certain liabilities that might arise from their performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of representations and warranties and which provide 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 that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote.
8. Subsequent Events
The Fund is required to recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed as of the date of the Statement of Assets and Liabilities. For non-recognized subsequent events that must be disclosed to keep the financial statements from being misleading, the Fund is required to disclose the nature of the event as well as an estimate of its financial effect, or a statement that such an estimate cannot be made. Management has evaluated subsequent events through the issuance of these financial statements and has noted no such events.
21
WAVELENGTH INTEREST RATE NEUTRAL FUND
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Ultimus Managers Trust
and the Shareholders of Wavelength Interest Rate Neutral Fund
We have audited the accompanying statement of assets and liabilities of Wavelength Interest Rate Neutral Fund (the “Fund”), a series of shares of beneficial interest in the Ultimus Managers Trust, including the schedule of investments, as of May 31, 2016, 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 two-year period then ended and for the period September 30, 2013 (commencement of operations) through May 31, 2014. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2016 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Wavelength Interest Rate Neutral Fund as of May 31, 2016, 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 two-year period then ended and for the period September 30, 2013 to May 31, 2014, in conformity with accounting principles generally accepted in the United States of America.
BBD, LLP |
Philadelphia, Pennsylvania
July 28, 2016
22
WAVELENGTH INTEREST RATE NEUTRAL FUND
ABOUT YOUR FUND’S EXPENSES (Unaudited)
We believe it is important for you to understand the impact of costs on your investment. As a shareholder of the Fund, you incur ongoing costs, including management fees and other operating expenses. The following examples are 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.
A mutual fund’s ongoing costs are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The expenses in the table below are based on an investment of $1,000 made at the beginning of the most recent period (December 1, 2015) and held until the end of the period (May 31, 2016).
The table below illustrates the Fund’s ongoing costs in two ways:
Actual fund return – This section helps you to estimate the actual expenses that you paid over the period. The “Ending Account Value” shown is derived from the Fund’s actual return, and the third column shows the dollar amount of operating expenses that would have been paid by an investor who started with $1,000 in the Fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for the Fund under the heading “Expenses Paid During Period.”
Hypothetical 5% return – This section is intended to help you compare the Fund’s ongoing costs with those of other mutual funds. It assumes that the Fund had an annual return of 5% before expenses during the period shown, but that the expense ratio is unchanged. In this case, because the return used is not the Fund’s actual return, the results do not apply to your investment. The example is useful in making comparisons because the SEC requires all mutual funds to calculate expenses based on a 5% return. You can assess the Fund’s ongoing costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
Note that expenses shown in the table are meant to highlight and help you compare ongoing costs only. The Fund does not charge transaction fees, such as purchase or redemption fees, nor does it carry a “sales load.”
The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.
23
WAVELENGTH INTEREST RATE NEUTRAL FUND
ABOUT YOUR FUND’S EXPENSES (Unaudited)
More information about the Fund’s expenses can be found in this report. For additional information on operating expenses and other shareholder costs, please refer to the Fund’s prospectus.
Beginning Account Value December 1, 2015 | Ending Account Value May 31, 2016 | Expenses | |
Based on Actual Fund Return | $ 1,000.00 | $ 1,023.20 | $ 5.01 |
Based on Hypothetical 5% Return (before expenses) | $ 1,000.00 | $ 1,020.05 | $ 5.00 |
* | Expenses are equal to the Fund’s annualized net expense ratio of 0.99% for the period, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). |
OTHER INFORMATION (Unaudited)
A description of the policies and procedures that the Fund uses to vote proxies relating to portfolio securities is available without charge upon request by calling toll-free 1-866-896-9292, or on the SEC’s website at http://www.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 without charge upon request by calling toll-free 1-866-896-9292, or on the SEC’s website at http://www.sec.gov.
The Trust files a complete listing of portfolio holdings for the Fund with the SEC as of the end of the first and third quarters of each fiscal year on Form N-Q. These filings are available upon request by calling 1-866-896-9292. Furthermore, you may obtain a copy of the filings on the SEC’s website at http://www.sec.gov. The Trust’s Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
24
WAVELENGTH INTEREST RATE NEUTRAL FUND
FEDERAL TAX INFORMATION (Unaudited)
In accordance with federal tax requirements, the following provides shareholders with information concerning distributions from ordinary income and net realized gains made by the Fund during the fiscal year ended May 31, 2016. Certain dividends paid by the Fund may be subject to a maximum tax rate of 23.8%. The Fund intends to designate up to a maximum amount of $16,472 as taxed at a maximum rate of 23.8%. As required by federal regulations, complete information was computed and reported in conjunction with your 2015 Form 1099-DIV.
25
WAVELENGTH INTEREST RATE NEUTRAL FUND
BOARD OF TRUSTEES AND EXECUTIVE OFFICERS (Unaudited)
The Board of Trustees has overall responsibility for management of the Trust’s affairs. The Trustees serve during the lifetime of the Trust and until its termination, or until death, resignation, retirement, or removal. The Trustees, in turn, elect the officers of the Fund to actively supervise its day-to-day operations. The officers have been elected for an annual term. Unless otherwise noted, each Trustee’s and officer’s address is 225 Pictoria Drive, Suite 450, Cincinnati, OH 45246. The following are the Trustees and executive officers of the Fund:
Name and | Length of Time Served | Position(s) Held with Trust | Principal Occupation(s) During Past 5 Years | Number of Funds in Trust Overseen by Trustee | Directorships of Public Companies Held by Trustee During Past 5 Years |
Interested Trustees: | |||||
Robert G. Dorsey* | Since February 2012 | Trustee (February 2012 to present) | Managing Director of Ultimus Fund Solutions, LLC and Ultimus Fund Distributors, LLC (1999 to present) | 21 | None |
Independent Trustees: | |||||
Janine L. Cohen | Since January 2016 | Trustee | Retired since 2013; Chief Financial Officer from 2004 to 2013 and Chief Compliance Officer from 2008 to 2013 at AER Advisors, Inc. | 21 | None |
David M. Deptula | Since | Trustee | Vice President of Legal and Special Projects at Dayton Freight Lines, Inc. since 2016; Vice President of Tax Treasury at Standard Register, Inc. (formerly The Standard Register Company) from 2011 to 2016 | 21 | None |
26
WAVELENGTH INTEREST RATE NEUTRAL FUND
BOARD OF TRUSTEES AND EXECUTIVE OFFICERS (Unaudited) (Continued)
Name and | Length of Time Served | Position(s) Held with Trust | Principal Occupation(s) During Past 5 Years | Number of Funds in Trust Overseen by Trustee | Directorships of Public Companies Held by Trustee During Past 5 Years |
Independent Trustees (continued): | |||||
John J. Discepoli | Since | Chairman (June 2016 to present)
Trustee | Owner of Discepoli Financial Planning, LLC (personal financing planning company) since 2004 | 21 | None |
* | Mr. Dorsey is considered an “interested person” of the Trust within the meaning of Section 2(a)(19) of the 1940 Act because of his relationship with the Trust’s administrator, transfer agent and distributor. |
Name and | Length of Time Served | Position(s) Held with | Principal Occupation(s) |
Executive Officers: | |||
Andrew Dassori | Since | Principal Executive Officer of Wavelength Interest Rate Neutral Fund | Managing Member of Wavelength Capital Management, LLC (2013 to present); Chief Compliance Officer of Wavelength Capital Management (2013 to 2016); Formerly, Portfolio Manager, Credit Suisse Asset Management LLC (2007 to 2013) |
David R. Carson | Since | President | Vice President and Director of Client Strategies of Ultimus Fund Solutions, LLC (2013 to present); Chief Compliance Officer, FSI LBAR Fund (2013 to Present), The Huntington Funds (2005 to 2013), The Flex-Funds (2006 to 2011), Meeder Financial (2007 to 2011), Huntington Strategy Shares (2012 to 2013), and Huntington Asset Advisors (2013); Vice President, Huntington National Bank (2001 to 2013). |
27
WAVELENGTH INTEREST RATE NEUTRAL FUND
BOARD OF TRUSTEES AND EXECUTIVE OFFICERS (Unaudited) (Continued)
Name and | Length of Time Served | Position(s) | Principal Occupation(s) |
Executive Officers (Continued): | |||
Jennifer L. Leamer | Since | Treasurer | V.P., Mutual Fund Controller of Ultimus Fund Solutions, LLC (2014 to present); Business Analyst of Ultimus Fund Solutions, LLC (2007 to 2014) |
Bo J. Howell | Since October 2014 | Secretary | V.P., Director of Fund Administration for Ultimus Fund Solutions, LLC (2014 to present); Counsel – Securities and Mutual Funds for Western & Southern Financial Group (2012 to 2014); U.S. Securities and Exchange Commission, Senior Counsel (2009 to 2012) |
Charles C. Black | Since | Chief Compliance Officer | Senior Compliance Officer of Ultimus Fund Solutions, LLC (2015 to present); Senior Compliance Manager for Touchstone Mutual Funds (2013 to 2015); Senior Compliance Manager for Fund Evaluation Group (2011 to 2013); Regulatory Administration Specialist for JPMorgan Chase Bank (2006 to 2011) |
Additional information about members of the Board and executive officers is available in the Fund’s Statement of Additional Information (“SAI”). To obtain a free copy of the SAI, please call 1-866-738-1128.
28
WAVELENGTH INTEREST RATE NEUTRAL FUND
DISCLOSURE REGARDING APPROVAL OF INVESTMENT ADVISORY AGREEMENT (Unaudited)
The Board of Trustees (the “Board”), including the Independent Trustees voting separately, has reviewed and approved the Fund’s Investment Advisory Agreement with the Advisor for an additional term. Approval took place at an in-person meeting held on April 25-26, 2016, at which all of the Trustees were present.
In the course of their deliberations, the Board was advised by legal counsel. The Board received and reviewed a substantial amount of information provided by the Advisor in response to requests of the Board and counsel.
In considering the Investment Advisory Agreement and reaching their conclusions with respect thereto, the Board reviewed and analyzed various factors that they determined were relevant, including the factors described below.
The nature, extent, and quality of the services provided by the Adviser. In this regard, the Board reviewed the services being provided by the Adviser to the Fund including, without limitation, its investment advisory services since the Fund’s inception, the Adviser’s compliance procedures and practices, and its efforts to promote the Fund and assist in its distribution. The Board also noted that a principal of the Adviser serves as the Fund’s Principal Executive Order without additional compensation. After reviewing the foregoing information and further information regarding the Adviser’s business, the Board concluded that the quality, extent, and nature of the services provided by the Adviser were satisfactory and adequate for the Fund.
The investment performance of the Fund. In this regard, the Board compared the performance of the Fund with the performance of its benchmark index and related Morningstar category. The Board also considered the consistency of the Adviser’s management with the Fund’s investment objective and policies. The Board noted that while relative to its peer group and funds of similar size and structure in the Fund’s Morningstar category (Nontraditional Bond under $50 million, No Load), the Fund had underperformed the peer group’s and Morningstar category’s average and median for the one year period, the Fund was comparable with or better than many of the funds in the peer group and Morningstar category. Following discussion of the investment performance of the Fund, the Adviser’s experience in managing a mutual fund, its historical investment performance, and other factors, the Board concluded that the investment performance of the Fund has been satisfactory.
The costs of the services provided and profits realized by the Adviser and its affiliates from its relationship with the Fund. In this regard, the Board considered the Adviser’s staffing, personnel, and methods of operations; the education and experience of its personnel; compliance program, policies, and procedures; financial condition and the level of commitment to the Fund, and, generally, the Adviser’s advisory business; the asset level of the Fund; and the overall expenses of the Fund, including the advisory fee. The Board considered the Adviser’s Expense Limitation Agreement (the “ELA”) with the Fund, and considered the Adviser’s current and past fee reductions and expense reimbursements for the Fund. The Board further took into account the Adviser’s commitment to continue the ELA for the Fund until at least October 1, 2017.
29
WAVELENGTH INTEREST RATE NEUTRAL FUND
DISCLOSURE REGARDING APPROVAL OF INVESTMENT ADVISORY AGREEMENT (Unaudited) (Continued)
The Board also considered potential benefits for the Adviser in managing the Fund, including promotion of the Adviser’s name and the potential for it to receive research, statistical, or other services from the Fund’s trades. The Board compared the Fund’s advisory fee and overall expense ratio to the average advisory fees and average expense ratios for its peer group and Morningstar category. The Board noted that the 0.95% advisory fee for the Fund was above the average and the median for the Fund’s peer group and Morningstar category, but less than the advisory fee for many of the funds in the peer group and Morningstar category. The Board further noted that the overall annual expense ratio of 0.99% for the Fund is above the average and median for the Fund’s peer group, lower than the Morningstar category’s average expense ratio, and equal to the category’s median expense ratio. Following these comparisons and upon further consideration and discussion of the foregoing, the Board concluded that the advisory fee paid to the Adviser by the Fund is fair and reasonable.
The extent to which economies of scale would be realized as the Fund grows and whether advisory fee levels reflect these economies of scale for the benefit of the Fund’s investors. In this regard, the Board considered that the Fund’s fee arrangements with the Adviser involve both the advisory fee and the ELA. The Board determined that while the advisory fee remained the same as asset levels increased, the shareholders of the Fund have experienced benefits from the ELA and will continue to experience benefits from the ELA until the Fund assets grow to a level where its expenses otherwise fall below the expense limit. Following further discussion of the Fund’s asset level, expectations for growth, and level of fees, the Board determined that the Fund’s fee arrangements with the Adviser would continue to provide benefits. The Board also determined that the fee arrangements were fair and reasonable given the Fund’s projected asset levels for the next year.
Brokerage and portfolio transactions. In this regard, the Board considered the Adviser’s trading policies, procedures, and performance in seeking best execution for the Fund. The Board also considered the historical portfolio turnover rate for the Fund; the process by which evaluations are made of the overall reasonableness of commissions paid; the method and basis for selecting and evaluating the broker-dealers used; and any anticipated allocation of portfolio business to persons affiliated with the Adviser. After further review and discussion, the Board determined that the Adviser’s practices regarding brokerage and portfolio transactions were satisfactory.
Possible conflicts of interest. In evaluating the possibility for conflicts of interest, the Board considered such matters as the experience and abilities of the advisory personnel assigned to the Fund, the Adviser’s process for allocating trades among its different clients, and the substance and administration of the Adviser’s code of ethics. Following further consideration and discussion, the Board found that the Adviser’s standards and practices relating to the identification and mitigation of potential conflicts of interests were satisfactory.
Conclusion
After full consideration of the above factors as well as other factors, the Board unanimously concluded that continuance of the Investment Advisory Agreement was in the best interests of the Fund and its shareholders.
30
This page intentionally left blank.
This page intentionally left blank.
This page intentionally left blank.
Item 2. | Code of Ethics. |
Item 3. | Audit Committee Financial Expert. |
Item 4. | Principal Accountant Fees and Services. |
(a) | Audit Fees. The aggregate fees billed for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements were $69,000 and $67,500 with respect to the registrant’s fiscal years ended May 31, 2016 and 2015, respectively. |
(b) | Audit-Related Fees. No fees were billed in either of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item. |
(c) | Tax Fees. The aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were $10,000 and $10,000 with respect to the registrant’s fiscal years ended May 31, 2016 and 2015, respectively. The services comprising these fees are the preparation of the registrant’s federal income and excise tax returns. |
(d) | All Other Fees. No fees were billed in either of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item. |
(e)(1) | The audit committee has not adopted pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. |
(e)(2) | None of the services described in paragraph (b) through (d) of this Item were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. |
(f) | Less than 50% of hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees. |
(g) | During the fiscal years ended May 31, 2016 and 2015, aggregate non-audit fees of $10,000 and $10,000, respectively, were billed by the registrant’s accountant for services rendered to the registrant. No non-audit fees were billed in either of the last two fiscal years by the registrant’s accountant for services rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant. |
(h) | The principal accountant has not provided any non-audit services to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant. |
Item 5. | Audit Committee of Listed Registrants. |
Item 6. | Schedule of Investments. |
(a) | Not applicable [schedule filed with Item 1] |
(b) | Not applicable |
Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Item 11. | Controls and Procedures. |
Item 12. | Exhibits. |
Exhibit 99.CODE ETH | Code of Ethics |
Exhibit 99.CERT | Certifications required by Rule 30a-2(a) under the Act |
Exhibit 99.906CERT | Certifications required by Rule 30a-2(b) under the Act |
(Registrant) | Ultimus Managers Trust | ||
By (Signature and Title)* | /s/ Frank L. Newbauer | ||
Frank L. Newbauer, Assistant Secretary | |||
Date | August 9, 2016 | ||
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. | |||
By (Signature and Title)* | /s/ Nitin N. Kumbhani | ||
Nitin N. Kumbhani, Principal Executive Officer of APEXcm Small/Mid Cap Growth Fund | |||
Date | August 9, 2016 | ||
By (Signature and Title)* | /s/ William S. Sloneker | ||
William S. Sloneker, Principal Executive Officer of Cincinnati Asset Management Funds: Broadmarket Strategic Income Fund | |||
Date | August 9, 2016 | ||
By (Signature and Title)* | /s/ Nicholas Chermayeff | ||
Nicholas Chermayeff, Principal Executive Officer of Barrow Value Opportunity Fund and Barrow Long/Short Opportunity Fund | |||
Date | August 9, 2016 | ||
By (Signature and Title)* | /s/ Andrew G. Dassori | ||
Andrew G. Dassori, Principal Executive Officer of Wavelength Interest Rate Neutral Fund | |||
Date | August 9, 2016 | ||
By (Signature and Title)* | /s/ Jennifer L. Leamer | ||
Jennifer L. Leamer, Treasurer | |||
Date | August 9, 2016 |
* | Print the name and title of each signing officer under his or her signature. |