UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number811-22969
PALMER SQUARE OPPORTUNISTIC INCOME FUND
(Exact name of registrant as specified in charter)
1900 Shawnee Mission Parkway, Suite 315
Mission Woods, KS 66205
(Address of principal executive offices) (Zip code)
Scott Betz
Chief Compliance Officer
1900 Shawnee Mission Parkway, Suite 315
Mission Woods, KS 66205
(Name and address of agent for service)
(816) 994-3200
Registrant's telephone number, including area code
Date of fiscal year end:July 31
Date of reporting period:January 31, 2020
Item 1. Report to Stockholders.
The registrant’s semi-annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940, as amended (the “Investment Company Act”), is as follows:
Palmer Square Opportunistic Income Fund
(PSOIX)
SEMI-ANNUAL REPORT
JANUARY 31, 2020
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the Fund if you hold your shares directly with the Fund, or from your financial intermediary, such as a broker-dealer or bank, if you hold your shares through a financial intermediary. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. If you hold your shares directly with the Fund, you may elect to receive shareholder reports and other communications from the Fund electronically by contacting the Fund at (866) 933-9033 or, if you hold your shares through a financial intermediary, contacting your financial intermediary.
You may elect to receive all future reports in paper free of charge. If you hold your shares directly with the Fund, you can inform the Fund that you wish to continue receiving paper copies of your shareholder reports at (866) 933-9033 or, if you hold your shares through a financial intermediary, contacting your financial intermediary. Your election to receive reports in paper will apply to all of the funds you hold directly or through your financial intermediary, as applicable. |
Palmer Square Opportunistic Income Fund
Table of Contents
| Schedule of Investments | 1 |
| Statement of Assets and Liabilities | 19 |
| Statement of Operations | 20 |
| Statements of Changes in Net Assets | 21 |
| Financial Highlights | 22 |
| Notes to Financial Statements | 23 |
| Expense Example | 36 |
This report and the financial statements contained herein are provided for the general information of the shareholders of the Palmer Square Opportunistic Income Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
www.palmersquarefunds.com
Palmer Square Opportunistic Income Fund
SCHEDULE OF INVESTMENTS
As of January 31, 2020 (Unaudited)
| Principal Amount | Value | |||||||
| BANK LOANS — 8.6% | ||||||||
| $ | 495,350 | Abe Investment Holdings, Inc. 6.188% (3-Month USD Libor+450 basis points), 2/19/20261,2,3 | $ | 492,566 | ||||
| Alphabet Holding Co., Inc. | ||||||||
| 664,799 | 5.145% (3-Month USD Libor+350 basis points), 9/28/20241,2,3 | 636,900 | ||||||
| 250,000 | 9.395% (3-Month USD Libor+775 basis points), 8/15/20251,2,3 | 221,797 | ||||||
| 511,284 | Avaya, Inc. 5.926% (3-Month USD Libor+425 basis points), 12/15/20241,2,3 | 501,593 | ||||||
| 692,893 | BCP Raptor LLC 5.895% (3-Month USD Libor+425 basis points), 6/30/20241,2,3 | 638,674 | ||||||
| 150,000 | BCPE Rover Merger Sub, Inc. 9.895% (3-Month USD Libor+825 basis points), 11/28/20261,2,3 | 125,875 | ||||||
| 400,000 | California Resources Corp. 11.375% (3-Month USD Libor+1,037.5 basis points), 12/31/20211,2,3,4,5 | 282,500 | ||||||
| CCS-CMGC Holdings, Inc. | ||||||||
| 272,250 | 7.544% (3-Month USD Libor+550 basis points), 10/1/20251,2,3 | 267,486 | ||||||
| 150,000 | 10.777% (3-Month USD Libor+900 basis points), 10/1/20261,2,3 | 148,500 | ||||||
| 397,815 | Covia Holdings Corp. 5.874% (3-Month USD Libor+375 basis points), 6/1/20251,2,3 | 321,236 | ||||||
| 548,604 | Deerfield Dakota Holding LLC 4.895% (3-Month USD Libor+325 basis points), 2/13/20251,2,3 | 550,593 | ||||||
| 196,087 | Diebold Nixdorf, Inc. 10.938% (3-Month USD Libor+925 basis points), 8/30/20222,3 | 208,097 | ||||||
| 117,779 | Ditech Holding Corp. 8.499% (3-Month USD Libor+600 basis points), 6/30/20221,3 | 48,878 | ||||||
| 916,994 | Envision Healthcare Corp. 5.395% (3-Month USD Libor+375 basis points), 10/10/20251,2,3 | 775,502 | ||||||
| 450,000 | Exact Holding North America, Inc. 9.945% (3-Month USD Libor+800 basis points), 9/29/20251,2,3 | 446,625 | ||||||
| 550,000 | Flex Acquisition Co., Inc. 5.159% (3-Month USD Libor+325 basis points), 6/29/20251,2,3 | 543,469 | ||||||
| 350,000 | Flexential Intermediate Corp. 9.156% (3-Month USD Libor+725 basis points), 8/1/20251,2,3 | 200,375 | ||||||
| 692,893 | Inmar, Inc. 5.945% (3-Month USD Libor+400 basis points), 5/1/20241,2,3 | 680,272 | ||||||
| 600,854 | Isagenix International LLC 7.697% (3-Month USD Libor+575 basis points), 6/14/20251,2,3 | 330,470 | ||||||
| 548,611 | Jane Street Group LLC 4.645% (3-Month USD Libor+300 basis points), 8/25/20221,2,3 | 549,728 | ||||||
| 598,481 | Janus International Group LLC 5.395% (1-Month USD Libor+375 basis points), 2/15/20251,2,3 | 597,981 | ||||||
| 272,922 | Kestrel Acquisition LLC 5.900% (3-Month USD Libor+425 basis points), 6/30/20251,2,3 | 242,559 | ||||||
| 604,500 | LifeScan Global Corp. 8.660% (3-Month USD Libor+600 basis points), 10/1/20241,2,3 | 579,848 | ||||||
1
Palmer Square Opportunistic Income Fund
SCHEDULE OF INVESTMENTS - Continued
As of January 31, 2020 (Unaudited)
| Principal Amount | Value | |||||||
| BANK LOANS (Continued) | ||||||||
| $ | 722,123 | Lower Cadence Holdings LLC 5.645% (3-Month USD Libor+400 basis points), 5/22/20261,2,3,4,5 | $ | 707,233 | ||||
| 645,125 | Minotaur Acquisition, Inc. 6.645% (3-Month USD Libor+500 basis points), 3/29/20261,2,3 | 643,783 | ||||||
| 550,000 | MMM Holdings LLC 9.500% (1-Month USD Libor+575 basis points), 11/6/20261,2,3,6 | 550,000 | ||||||
| 361,291 | MoneyGram International, Inc. 7.645% (3-Month USD Libor+600 basis points), 6/30/20231,2,3 | 345,033 | ||||||
| Murray Energy Corp. | ||||||||
| 307,554 | 13.000% (1-Month USD Libor+1,100 basis points), 7/29/20201,3 | 310,757 | ||||||
| 296,201 | 9.354% (1-Month USD Libor+725 basis points), 10/17/20221,3 | 55,644 | ||||||
| 399,917 | NeuStar, Inc. 9.645% (3-Month USD Libor+800 basis points), 8/8/20251,2,3 | 332,807 | ||||||
| 500,000 | Option Care Health, Inc. 6.145% (1-Month USD Libor+450 basis points), 8/6/20261,2,3 | 503,020 | ||||||
| 249,351 | Petco Animal Supplies, Inc. 4.250% (3-Month USD Libor+325 basis points), 1/26/20231,2,3,4,5 | 212,215 | ||||||
| 500,000 | Playtika Holding Corp. 7.645% (1-Month USD Libor+600 basis points), 12/10/20241,2,3 | 506,250 | ||||||
| 325,000 | Quest Software U.S. Holdings, Inc. 10.027% (3-Month USD Libor+825 basis points), 5/18/20261,2,3 | 319,394 | ||||||
| 400,000 | Renaissance Holdings Corp. 8.645% (3-Month USD Libor+700 basis points), 5/29/20261,2,3 | 390,500 | ||||||
| 349,100 | Serta Simmons Bedding LLC 3.500% (3-Month USD Libor+350 basis points), 11/8/20231,2,3 | 229,970 | ||||||
| 395,580 | U.S. Silica Co. 5.688% (3-Month USD Libor+400 basis points), 5/1/20251,3 | 351,572 | ||||||
| 347,375 | VVC Holding Corp. 6.401% (3-Month USD Libor+450 basis points), 2/11/20261,2,3 | 349,473 | ||||||
| 897,750 | WaterBridge Midstream Operating LLC 7.834% (3-Month USD Libor+575 basis points), 6/21/20261,2,3 | 886,528 | ||||||
| 729,942 | Windstream Services LLC 7.750% (3-Month USD Libor+200 basis points), 4/24/20201,3,4,5 | 694,361 | ||||||
| 275,000 | Zelis Payments Buyer, Inc. 6.395% (1-Month USD Libor+475 basis points), 9/30/20261,2,3 | 277,551 | ||||||
| Total Bank Loans | ||||||||
| (Cost $18,054,109) | 17,057,615 | |||||||
| BONDS — 88.1% | ||||||||
| ASSET-BACKED SECURITIES — 83.4% | ||||||||
| 1,000,000 | AIMCO CLO Ltd. Series 2019-10A, Class E, 8.352% (3-Month USD Libor+655 basis points), 7/22/20322,3,7 | 1,003,645 | ||||||
2
Palmer Square Opportunistic Income Fund
SCHEDULE OF INVESTMENTS - Continued
As of January 31, 2020 (Unaudited)
| Principal Amount | Value | |||||||
| BONDS (Continued) | ||||||||
| ASSET-BACKED SECURITIES (Continued) | ||||||||
| $ | 750,000 | AIMCO CLO Series Series 2015-AA, Class FR, 8.831% (3-Month USD Libor+700 basis points), 1/15/20282,3,7 | $ | 726,859 | ||||
| 5,000,000 | AIMCO CLO Series Series 2015-AA, Class SUB, 0.000%, 1/15/20282,7,8 | 3,774,244 | ||||||
| Annisa CLO Ltd. | ||||||||
| 1,000,000 | Series 2016-2A, Class DR, 4.819% (3-Month USD Libor+300 basis points), 7/20/20312,3,7 | 998,285 | ||||||
| 2,000,000 | Series 2016-2A, Class ER, 7.819% (3-Month USD Libor+600 basis points), 7/20/20312,3,7 | 1,965,784 | ||||||
| Apidos CLO | ||||||||
| 1,500,000 | Series 2015-21A, Class DR, 7.019% (3-Month USD Libor+520 basis points), 7/18/20272,3,7 | 1,496,254 | ||||||
| 1,750,000 | Series 2015-22X, Class E, 9.069% (3-Month USD Libor+725 basis points), 10/20/20272,3 | 1,662,758 | ||||||
| 1,000,000 | Series 2016-24A, Class ER, 9.674% (3-Month USD Libor+785.5 basis points), 10/20/20302,3,7 | 935,903 | ||||||
| 1,500,000 | Series 2018-18A, Class E, 7.502% (3-Month USD Libor+570 basis points), 10/22/20302,3,7 | 1,473,330 | ||||||
| 925,000 | Series 2017-28A, Class D, 7.319% (3-Month USD Libor+550 basis points), 1/20/20312,3,7 | 892,890 | ||||||
| 2,000,000 | Series 2013-12A, Class DR, 4.431% (3-Month USD Libor+260 basis points), 4/15/20312,3,7 | 1,962,382 | ||||||
| 1,750,000 | Series 2013-12A, Class ER, 7.231% (3-Month USD Libor+540 basis points), 4/15/20312,3,7 | 1,670,891 | ||||||
| 1,000,000 | Series 2019-31A, Class E, 8.581% (3-Month USD Libor+675 basis points), 4/15/20312,3,7 | 1,013,440 | ||||||
| 3,250,000 | Series 2013-15A, Class ERR, 7.519% (3-Month USD Libor+570 basis points), 4/20/20312,3,7 | 3,202,748 | ||||||
| 1,500,000 | Series 2015-20A, Class SUB, 0.000%, 7/16/20312,7,8 | 841,428 | ||||||
| 1,166,667 | Atrium Series 15A, Class D, 4.806% (3-Month USD Libor+300 basis points), 1/23/20312,3,7 | 1,164,104 | ||||||
| Bardot CLO Ltd. | ||||||||
| 750,000 | Series 2019-2A, Class D, 5.666% (3-Month USD Libor+380 basis points), 10/22/20322,3,7 | 764,842 | ||||||
| 2,000,000 | Series 2019-2A, Class E, 8.816% (3-Month USD Libor+695 basis points), 10/22/20322,3,7 | 2,003,351 | ||||||
| Barings CLO Ltd. | ||||||||
| 850,000 | Series 2013-IA, Class DR, 4.369% (3-Month USD Libor+255 basis points), 1/20/20282,3,7 | 850,123 | ||||||
| 1,875,000 | Series 2017-1A, Class E, 7.819% (3-Month USD Libor+600 basis points), 7/18/20292,3,7 | 1,865,553 | ||||||
3
Palmer Square Opportunistic Income Fund
SCHEDULE OF INVESTMENTS - Continued
As of January 31, 2020 (Unaudited)
| Principal Amount | Value | |||||||
| BONDS (Continued) | ||||||||
| ASSET-BACKED SECURITIES (Continued) | ||||||||
| $ | 750,000 | Series 2017-1A, Class F, 9.269% (3-Month USD Libor+745 basis points), 7/18/20292,3,7 | $ | 679,875 | ||||
| 1,000,000 | Series 2019-3A, Class E, 8.599% (3-Month USD Libor+678 basis points), 4/20/20312,3,7 | 1,016,196 | ||||||
| 1,000,000 | Series 2019-4A, Class E, 9.293% (3-Month USD Libor+739 basis points), 1/15/20332,3,7 | 1,023,733 | ||||||
| Battalion CLO Ltd. | ||||||||
| 500,000 | Series 2019-16A, Class D, 6.263% (3-Month USD Libor+436 basis points), 12/19/20322,3,7 | 503,946 | ||||||
| 1,000,000 | Series 2020-15A, Class A1, 0.000% (3-Month USD Libor+135 basis points), 1/17/20332,3,7 | 1,000,000 | ||||||
| Benefit Street Partners CLO Ltd. | ||||||||
| 1,250,000 | Series 2014-IVA, Class CRR, 5.619% (3-Month USD Libor+380 basis points), 1/20/20292,3,7 | 1,250,855 | ||||||
| 2,000,000 | Series 2017-11A, Class E, 9.031% (3-Month USD Libor+720 basis points), 4/15/20292,3,7 | 1,760,796 | ||||||
| 805,000 | Series 2013-IIA, Class CR, 5.531% (3-Month USD Libor+370 basis points), 7/15/20292,3,7 | 791,555 | ||||||
| 750,000 | Series 2018-5BA, Class C, 4.749% (3-Month USD Libor+293 basis points), 4/20/20312,3,7 | 732,712 | ||||||
| 1,000,000 | Series 2018-14A, Class E, 7.169% (3-Month USD Libor+535 basis points), 4/20/20312,3,7 | 942,799 | ||||||
| 1,000,000 | Series 2018-5BA, Class D, 7.769% (3-Month USD Libor+595 basis points), 4/20/20312,3,7 | 964,692 | ||||||
| 1,600,000 | Series 2016-9A, Class ER, 7.519% (3-Month USD Libor+570 basis points), 7/20/20312,3,7 | 1,557,482 | ||||||
| 1,000,000 | Series 2019-17A, Class E, 8.431% (3-Month USD Libor+660 basis points), 7/15/20322,3,7 | 993,650 | ||||||
| BlueMountain CLO Ltd. | ||||||||
| 1,000,000 | Series 2013-1A, Class DR, 9.319% (3-Month USD Libor+750 basis points), 1/20/20292,3,7 | 949,939 | ||||||
| 1,000,000 | Series 2019-25A, Class E, 8.531% (3-Month USD Libor+670 basis points), 7/15/20322,3,7 | 1,000,496 | ||||||
| 2,000,000 | California Street CLO LP Series 2012-9A, Class AR2, 3.163% (3-Month USD Libor+132 basis points), 7/16/20322,3,7 | 2,004,838 | ||||||
| 1,000,000 | Carbone CLO Ltd. Series 2017-1A, Class D, 7.727% (3-Month USD Libor+590 basis points), 1/20/20312,3,7 | 986,827 | ||||||
| Carlyle Global Market Strategies CLO Ltd. | ||||||||
| 1,000,000 | Series 2015-2A, Class CR, 4.044% (3-Month USD Libor+225 basis points), 4/27/20272,3,7 | 993,911 | ||||||
4
Palmer Square Opportunistic Income Fund
SCHEDULE OF INVESTMENTS - Continued
As of January 31, 2020 (Unaudited)
| Principal Amount | Value | |||||||
| BONDS (Continued) | ||||||||
| ASSET-BACKED SECURITIES (Continued) | ||||||||
| $ | 1,750,000 | Series 2015-4A, Class DR, 8.519% (3-Month USD Libor+670 basis points), 7/20/20322,3,7 | $ | 1,675,171 | ||||
| 1,303,000 | Carlyle U.S. CLO Ltd. Series 2019-3A, Class D, 9.115% (3-Month USD Libor+703 basis points), 10/20/20322,3,7 | 1,320,916 | ||||||
| 1,250,000 | Catamaran CLO Ltd. Series 2013-1A, Class DR, 4.594% (3-Month USD Libor+280 basis points), 1/27/20282,3,7 | 1,221,757 | ||||||
| 750,000 | Chenango Park CLO Ltd. Series 2018-1A, Class D, 7.631% (3-Month USD Libor+580 basis points), 4/15/20302,3,7 | 737,357 | ||||||
| CIFC Funding Ltd. | ||||||||
| 1,500,000 | Series 2012-2RA, Class A2, 3.069% (3-Month USD Libor+125 basis points), 1/20/20282,3,7 | 1,488,554 | ||||||
| 2,000,000 | Series 2013-2A, Class A1LR, 3.037% (3-Month USD Libor+121 basis points), 10/18/20302,3,7 | 2,001,019 | ||||||
| 1,500,000 | Cumberland Park CLO Ltd. Series 2015-2A, Class ER, 7.469% (3-Month USD Libor+565 basis points), 7/20/20282,3,7 | 1,498,692 | ||||||
| Dryden CLO Ltd. | ||||||||
| 1,265,000 | Series 2018-64A, Class F, 8.969% (3-Month USD Libor+715 basis points), 4/18/20312,3,7 | 1,090,549 | ||||||
| 995,000 | Series 2018-57A, Class D, 4.460% (3-Month USD Libor+255 basis points), 5/15/20312,3,7 | 969,974 | ||||||
| 330,000 | Series 2018-57A, Class E, 7.110% (3-Month USD Libor+520 basis points), 5/15/20312,3,7 | 310,224 | ||||||
| 1,000,000 | Series 2018-70A, Class E, 7.893% (3-Month USD Libor+605 basis points), 1/16/20322,3,7 | 991,045 | ||||||
| 750,000 | Series 2019-72A, Class E, 8.710% (3-Month USD Libor+680 basis points), 5/15/20322,3,7 | 761,552 | ||||||
| Dryden Senior Loan Fund | ||||||||
| 1,750,000 | Series 2012-25A, Class DRR, 4.831% (3-Month USD Libor+300 basis points), 10/15/20272,3,7 | 1,742,618 | ||||||
| 7,000,000 | Series 2014-33X, Class SUBR, 0.000%, 4/15/20292,8 | 4,033,748 | ||||||
| 750,000 | Series 2014-36A, Class DR2, 5.531% (3-Month USD Libor+370 basis points), 4/15/20292,3,7 | 753,098 | ||||||
| 1,500,000 | Series 2016-43A, Class ERR, 8.519% (3-Month USD Libor+670 basis points), 7/20/20292,3,7 | 1,504,711 | ||||||
| 1,000,000 | Series 2017-54A, Class E, 8.019% (3-Month USD Libor+620 basis points), 10/19/20292,3,7 | 1,000,894 | ||||||
| 1,500,000 | Series 2015-38A, Class ER, 7.431% (3-Month USD Libor+560 basis points), 7/15/20302,3,7 | 1,421,214 | ||||||
5
Palmer Square Opportunistic Income Fund
SCHEDULE OF INVESTMENTS - Continued
As of January 31, 2020 (Unaudited)
| Principal Amount | Value | |||||||
| BONDS (Continued) | ||||||||
| ASSET-BACKED SECURITIES (Continued) | ||||||||
| $ | 1,775,000 | Series 2017-50A, Class E, 8.091% (3-Month USD Libor+626 basis points), 7/15/20302,3,7 | $ | 1,773,706 | ||||
| 500,000 | Series 2016-45A, Class DR, 4.981% (3-Month USD Libor+315 basis points), 10/15/20302,3,7 | 501,183 | ||||||
| 975,000 | Series 2016-45A, Class ER, 7.681% (3-Month USD Libor+585 basis points), 10/15/20302,3,7 | 948,542 | ||||||
| 1,500,000 | Series 2015-41A, Class ER, 7.131% (3-Month USD Libor+530 basis points), 4/15/20312,3,7 | 1,401,506 | ||||||
| Eaton Vance CLO Ltd. | ||||||||
| 1,075,000 | Series 2015-1A, Class DR, 4.319% (3-Month USD Libor+250 basis points), 1/20/20302,3,7 | 1,041,684 | ||||||
| 1,000,000 | Series 2015-1A, Class ER, 7.419% (3-Month USD Libor+560 basis points), 1/20/20302,3,7 | 971,172 | ||||||
| 750,000 | Series 2014-1RA, Class D, 4.881% (3-Month USD Libor+305 basis points), 7/15/20302,3,7 | 756,190 | ||||||
| 500,000 | Series 2014-1RA, Class E, 7.531% (3-Month USD Libor+570 basis points), 7/15/20302,3,7 | 488,118 | ||||||
| 750,000 | Series 2018-1A, Class D, 5.031% (3-Month USD Libor+320 basis points), 10/15/20302,3,7 | 750,049 | ||||||
| 1,000,000 | Series 2019-1A, Class E, 8.581% (3-Month USD Libor+675 basis points), 4/15/20312,3,7 | 1,015,692 | ||||||
| Flatiron CLO Ltd. | ||||||||
| 500,000 | Series 2015-1A, Class E, 6.531% (3-Month USD Libor+470 basis points), 4/15/20272,3,7 | 486,416 | ||||||
| 1,500,000 | Series 2017-1A, Class SUB, 0.000%, 5/15/20302,7,8 | 1,008,845 | ||||||
| 1,000,000 | Goldentree Loan Management U.S. Clo 4 Ltd. Series 2019-4A, Class C, 4.501% (3-Month USD Libor+270 basis points), 4/24/20312,3,7 | 1,011,633 | ||||||
| Highbridge Loan Management Ltd. | ||||||||
| 1,250,000 | Series 7A-2015, Class DR, 4.310% (3-Month USD Libor+240 basis points), 3/15/20272,3,7 | 1,217,540 | ||||||
| 1,000,000 | Series 7A-2015, Class FR, 8.510% (3-Month USD Libor+660 basis points), 3/15/20272,3,7 | 879,516 | ||||||
| 850,000 | Series 3A-2014, Class CR, 5.419% (3-Month USD Libor+360 basis points), 7/18/20292,3,7 | 851,842 | ||||||
| 850,000 | Series 2013-2A, Class DR, 8.419% (3-Month USD Libor+660 basis points), 10/20/20292,3,7 | 849,788 | ||||||
| 1,000,000 | Series 4A-2014, Class A2R, 3.295% (3-Month USD Libor+150 basis points), 1/28/20302,3,7 | 994,751 | ||||||
| 500,000 | Series 5A-2015, Class DRR, 4.981% (3-Month USD Libor+315 basis points), 10/15/20302,3,7 | 482,748 | ||||||
| 1,250,000 | Series 5A-2015, Class ERR, 7.831% (3-Month USD Libor+600 basis points), 10/15/20302,3,7 | 1,161,681 | ||||||
6
Palmer Square Opportunistic Income Fund
SCHEDULE OF INVESTMENTS - Continued
As of January 31, 2020 (Unaudited)
| Principal Amount | Value | |||||||
| BONDS (Continued) | ||||||||
| ASSET-BACKED SECURITIES (Continued) | ||||||||
| $ | 750,000 | Series 6A-2015, Class BR, 3.641% (3-Month USD Libor+175 basis points), 2/5/20312,3,7 | $ | 734,942 | ||||
| HPS Loan Management Ltd. | ||||||||
| 2,000,000 | Series 10A-16, Class C, 5.469% (3-Month USD Libor+365 basis points), 1/20/20282,3,7 | 2,004,172 | ||||||
| 925,000 | Series 11A-17, Class D, 5.508% (3-Month USD Libor+360 basis points), 5/6/20302,3,7 | 927,455 | ||||||
| 500,000 | Series 8A-2016, Class ER, 7.327% (3-Month USD Libor+550 basis points), 7/20/20302,3,7 | 477,715 | ||||||
| 500,000 | Series 15A-19, Class E, 8.402% (3-Month USD Libor+660 basis points), 7/22/20322,3,7 | 503,750 | ||||||
| 3,000,000 | ICG U.S. CLO Ltd. Series 2015-2A, Class BR, 3.193% (3-Month USD Libor+135 basis points), 1/16/20282,3,7 | 3,002,008 | ||||||
| 500,000 | Jamestown CLO Ltd. Series 2016-9A, Class C1R, 5.919% (3-Month USD Libor+410 basis points), 10/20/20282,3,7 | 503,057 | ||||||
| 750,000 | Jay Park CLO Ltd. Series 2016-1A, Class DR, 7.019% (3-Month USD Libor+520 basis points), 10/20/20272,3,7 | 733,716 | ||||||
| 600,000 | LCM Ltd. Series 28A, Class E, 7.569% (3-Month USD Libor+575 basis points), 10/20/20302,3,7 | 570,219 | ||||||
| 345,000 | Limerock CLO LLC Series 2014-3A, Class C, 5.419% (3-Month USD Libor+360 basis points), 10/20/20262,3,7 | 345,892 | ||||||
| Madison Park Funding Ltd. | ||||||||
| 1,250,000 | Series 2015-19A, Class CR, 3.952% (3-Month USD Libor+215 basis points), 1/22/20282,3,7 | 1,227,632 | ||||||
| 1,460,000 | Series 2015-19A, Class DR, 6.152% (3-Month USD Libor+435 basis points), 1/22/20282,3,7 | 1,375,138 | ||||||
| 500,000 | Series 2016-22A, Class B, 3.594% (3-Month USD Libor+180 basis points), 10/25/20292,3,7 | 500,339 | ||||||
| 250,000 | Series 2018-27A, Class C, 4.419% (3-Month USD Libor+260 basis points), 4/20/20302,3,7 | 245,449 | ||||||
| 1,000,000 | Series 2016-21A, Class C2R, 7.551% (3-Month USD Libor+572 basis points), 10/15/20322,3,7 | 1,010,162 | ||||||
| Magnetite Ltd. | ||||||||
| 500,000 | Series 2015-16A, Class ER, 6.819% (3-Month USD Libor+500 basis points), 1/18/20282,3,7 | 493,140 | ||||||
| 500,000 | Series 2019-22A, Class D, 5.481% (3-Month USD Libor+365 basis points), 4/15/20312,3,7 | 504,758 | ||||||
7
Palmer Square Opportunistic Income Fund
SCHEDULE OF INVESTMENTS - Continued
As of January 31, 2020 (Unaudited)
| Principal Amount | Value | |||||||
| BONDS (Continued) | ||||||||
| ASSET-BACKED SECURITIES (Continued) | ||||||||
| $ | 500,000 | Series 2019-22A, Class E, 8.581% (3-Month USD Libor+675 basis points), 4/15/20312,3,7 | $ | 507,463 | ||||
| 250,000 | Series 2015-12A, Class DR, 4.831% (3-Month USD Libor+300 basis points), 10/15/20312,3,7 | 250,169 | ||||||
| 1,625,000 | Series 2015-12A, Class ER, 7.511% (3-Month USD Libor+568 basis points), 10/15/20312,3,7 | 1,594,059 | ||||||
| 1,500,000 | Series 2015-14RA, Class F, 9.749% (3-Month USD Libor+793 basis points), 10/18/20312,3,7 | 1,431,961 | ||||||
| 625,000 | Series 2019-24A, Class E, 8.857% (3-Month USD Libor+695 basis points), 1/15/20332,3,7 | 626,521 | ||||||
| 750,000 | Milos CLO Ltd. Series 2017-1A, Class E, 8.119% (3-Month USD Libor+630 basis points), 10/20/20302,3,7 | 751,569 | ||||||
| Mountain View CLO Ltd. | ||||||||
| 1,000,000 | Series 2015-10A, Class CR, 3.698% (3-Month USD Libor+185 basis points), 10/13/20272,3,7 | 1,002,485 | ||||||
| 1,000,000 | Series 2015-10A, Class E, 6.698% (3-Month USD Libor+485 basis points), 10/13/20272,3,7 | 981,250 | ||||||
| 500,000 | Series 2019-2A, Class D, 6.171% (3-Month USD Libor+437 basis points), 1/15/20332,3,7 | 499,942 | ||||||
| Neuberger Berman CLO Ltd. | ||||||||
| 1,625,000 | Series 2016-21A, Class DR, 4.219% (3-Month USD Libor+240 basis points), 4/20/20272,3,7 | 1,620,898 | ||||||
| 4,000,000 | Series 2015-20A, Class SUB, 0.000%, 1/15/20282,7,8 | 2,079,457 | ||||||
| 1,500,000 | Series 2017-16SA, Class D, 4.331% (3-Month USD Libor+250 basis points), 1/15/20282,3,7 | 1,487,679 | ||||||
| 550,000 | Series 2015-20A, Class FR, 9.281% (3-Month USD Libor+745 basis points), 1/15/20282,3,7 | 536,659 | ||||||
| 1,000,000 | Series 2013-14A, Class ER, 8.245% (3-Month USD Libor+645 basis points), 1/28/20302,3,7 | 1,003,430 | ||||||
| 325,000 | Series 2016-22A, Class DR, 4.936% (3-Month USD Libor+310 basis points), 10/17/20302,3,7 | 325,396 | ||||||
| 1,000,000 | Series 2016-22A, Class ER, 7.896% (3-Month USD Libor+606 basis points), 10/17/20302,3,7 | 999,130 | ||||||
| 350,000 | Series 2014-18A, Class CR2, 4.819% (3-Month USD Libor+300 basis points), 10/21/20302,3,7 | 347,543 | ||||||
| 2,750,000 | Series 2014-18A, Class DR2, 7.739% (3-Month USD Libor+592 basis points), 10/21/20302,3,7 | 2,715,368 | ||||||
| Neuberger Berman Loan Advisers CLO Ltd. | ||||||||
| 916,000 | Series 2018-27A, Class E, 7.031% (3-Month USD Libor+520 basis points), 1/15/20302,3,7 | 864,857 | ||||||
| 1,000,000 | Series 2017-24A, Class D, 5.219% (3-Month USD Libor+340 basis points), 4/19/20302,3,7 | 1,001,436 | ||||||
8
Palmer Square Opportunistic Income Fund
SCHEDULE OF INVESTMENTS - Continued
As of January 31, 2020 (Unaudited)
| Principal Amount | Value | |||||||
| BONDS (Continued) | ||||||||
| ASSET-BACKED SECURITIES (Continued) | ||||||||
| $ | 1,000,000 | Series 2017-26A, Class E, 7.719% (3-Month USD Libor+590 basis points), 10/18/20302,3,7 | $ | 989,783 | ||||
| 750,000 | Series 2018-30A, Class E, 8.569% (3-Month USD Libor+675 basis points), 1/20/20312,3,7 | 756,001 | ||||||
| 500,000 | Series 2019-31A, Class E, 8.569% (3-Month USD Libor+675 basis points), 4/20/20312,3,7 | 508,747 | ||||||
| 1,250,000 | Series 2018-29A, Class E, 7.419% (3-Month USD Libor+560 basis points), 10/19/20312,3,7 | 1,211,562 | ||||||
| 1,000,000 | Newark BSL CLO Ltd. Series 2017-1A, Class A1, 3.064% (3-Month USD Libor+127 basis points), 7/25/20302,3,7 | 1,000,980 | ||||||
| 500,000 | OCP CLO Ltd. Series 2019-17A, Class E, 8.479% (3-Month USD Libor+666 basis points), 7/20/20322,3,7 | 505,359 | ||||||
| Octagon Investment Partners Ltd. | ||||||||
| 500,000 | Series 2014-1A, Class E, 6.681% (3-Month USD Libor+485 basis points), 4/15/20262,3,7 | 499,087 | ||||||
| 500,000 | Series 2019-1A, Class A, 3.119% (3-Month USD Libor+130 basis points), 7/20/20322,3,7 | 502,376 | ||||||
| 500,000 | OZLM Ltd. Series 2015-14A, Class CR, 4.831% (3-Month USD Libor+300 basis points), 1/15/20292,3,7 | 497,926 | ||||||
| 1,250,000 | Race Point CLO Ltd. Series 2013-8A, Class CR, 4.399% (3-Month USD Libor+250 basis points), 2/20/20302,3,7 | 1,250,368 | ||||||
| 1,000,000 | Regatta Funding Ltd. Series 2017-1A, Class E, 7.936% (3-Month USD Libor+610 basis points), 10/17/20302,3,7 | 996,342 | ||||||
| Rockford Tower CLO Ltd. | ||||||||
| 1,000,000 | Series 2017-1A, Class E, 7.231% (3-Month USD Libor+540 basis points), 4/15/20292,3,7 | 979,428 | ||||||
| 500,000 | Series 2017-3A, Class D, 4.469% (3-Month USD Libor+265 basis points), 10/20/20302,3,7 | 487,939 | ||||||
| 1,000,000 | Series 2018-1A, Class A, 2.999% (3-Month USD Libor+110 basis points), 5/20/20312,3,7 | 999,238 | ||||||
| 500,000 | Series 2018-1A, Class D, 4.899% (3-Month USD Libor+300 basis points), 5/20/20312,3,7 | 499,269 | ||||||
| 2,000,000 | Series 2018-1A, Class E, 7.749% (3-Month USD Libor+585 basis points), 5/20/20312,3,7 | 1,948,576 | ||||||
| 950,000 | Series 2018-2A, Class D, 4.919% (3-Month USD Libor+310 basis points), 10/20/20312,3,7 | 952,455 | ||||||
| 1,300,000 | Series 2019-1A, Class E, 8.179% (3-Month USD Libor+636 basis points), 4/20/20322,3,7 | 1,311,237 | ||||||
9
Palmer Square Opportunistic Income Fund
SCHEDULE OF INVESTMENTS - Continued
As of January 31, 2020 (Unaudited)
| Principal Amount | Value | |||||||
| BONDS (Continued) | ||||||||
| ASSET-BACKED SECURITIES (Continued) | ||||||||
| $ | 2,000,000 | TCI-Flatiron CLO Ltd. Series 2018-1A, Class E, 8.375% (3-Month USD Libor+660 basis points), 1/29/20322,3,7 | $ | 2,003,426 | ||||
| 500,000 | Treman Park CLO Ltd. Series 2015-1A, Class DRR, 4.469% (3-Month USD Libor+265 basis points), 10/20/20282,3,7 | 498,767 | ||||||
| 1,000,000 | Upland CLO Ltd. Series 2016-1A, Class CR, 4.719% (3-Month USD Libor+290 basis points), 4/20/20312,3,7 | 980,601 | ||||||
| Voya CLO Ltd. | ||||||||
| 750,000 | Series 2015-1A, Class CR, 4.169% (3-Month USD Libor+235 basis points), 1/18/20292,3,7 | 713,330 | ||||||
| 500,000 | Series 2017-2A, Class D, 7.851% (3-Month USD Libor+602 basis points), 6/7/20302,3,7 | 496,248 | ||||||
| 500,000 | Series 2013-1A, Class CR, 4.781% (3-Month USD Libor+295 basis points), 10/15/20302,3,7 | 494,039 | ||||||
| 750,000 | Series 2013-1A, Class DR, 8.311% (3-Month USD Libor+648 basis points), 10/15/20302,3,7 | 739,113 | ||||||
| 1,000,000 | Series 2016-1A, Class DR, 7.069% (3-Month USD Libor+525 basis points), 1/20/20312,3,7 | 934,347 | ||||||
| 1,000,000 | Series 2018-1A, Class C, 4.419% (3-Month USD Libor+260 basis points), 4/19/20312,3,7 | 977,301 | ||||||
| 1,000,000 | Series 2018-1A, Class D, 7.019% (3-Month USD Libor+520 basis points), 4/19/20312,3,7 | 956,257 | ||||||
| 1,000,000 | Series 2013-2A, Class CR, 4.544% (3-Month USD Libor+275 basis points), 4/25/20312,3,7 | 973,489 | ||||||
| 500,000 | Series 2018-2A, Class E, 7.081% (3-Month USD Libor+525 basis points), 7/15/20312,3,7 | 479,825 | ||||||
| 795,000 | Series 2018-2A, Class F, 9.121% (3-Month USD Libor+729 basis points), 7/15/20312,3,7 | 719,495 | ||||||
| 650,000 | Series 2018-3A, Class D, 4.831% (3-Month USD Libor+300 basis points), 10/15/20312,3,7 | 652,490 | ||||||
| 2,500,000 | Series 2018-4A, Class E, 8.131% (3-Month USD Libor+630 basis points), 1/15/20322,3,7 | 2,517,842 | ||||||
| 250,000 | Webster Park CLO Ltd. Series 2015-1A, Class DR, 7.319% (3-Month USD Libor+550 basis points), 7/20/20302,3,7 | 240,861 | ||||||
| York CLO Ltd. | ||||||||
| 1,225,000 | Series 2016-1A, Class ER, 8.219% (3-Month USD Libor+640 basis points), 10/20/20292,3,7 | 1,230,982 | ||||||
| 750,000 | Series 2018-1A, Class D, 5.152% (3-Month USD Libor+335 basis points), 10/22/20312,3,7 | 751,255 | ||||||
10
Palmer Square Opportunistic Income Fund
SCHEDULE OF INVESTMENTS - Continued
As of January 31, 2020 (Unaudited)
| Principal Amount | Value | |||||||
| BONDS (Continued) | ||||||||
| ASSET-BACKED SECURITIES (Continued) | ||||||||
| $ | 1,750,000 | Series 2018-1A, Class E, 7.812% (3-Month USD Libor+601 basis points), 10/22/20312,3,7 | $ | 1,697,542 | ||||
| 1,000,000 | Series 2019-1A, Class D, 5.802% (3-Month USD Libor+400 basis points), 7/22/20322,3,7 | 1,016,137 | ||||||
| 500,000 | Series 2019-1A, Class E, 8.862% (3-Month USD Libor+706 basis points), 7/22/20322,3,7 | 496,272 | ||||||
| 750,000 | Series 2019-2A, Class D, 5.595% (3-Month USD Libor+380 basis points), 1/22/20332,3,7 | 750,000 | ||||||
| 500,000 | Series 2019-2A, Class E, 8.735% (3-Month USD Libor+694 basis points), 1/22/20332,3,7 | 488,715 | ||||||
| Total Asset-Backed Securities | ||||||||
| (Cost $163,682,963) | 165,030,634 | |||||||
| COMMERCIAL MORTGAGE-BACKED SECURITIES — 2.0% | ||||||||
| 1,750,000 | AIMCO CLO Series Series 2015-AA, Class ER, 7.031% (3-Month USD Libor+520 basis points), 1/15/20282,3,7 | 1,738,264 | ||||||
| 1,437,000 | Benefit Street Partners CLO Ltd. Series 2015-VIA, Class CR, 5.269% (3-Month USD Libor+345 basis points), 10/18/20292,3,7 | 1,440,141 | ||||||
| 800,000 | Neuberger Berman Loan Advisers CLO Ltd. Series 2017-25A, Class D, 5.069% (3-Month USD Libor+325 basis points), 10/18/20292,3,7 | 802,066 | ||||||
| Total Commercial Mortgage-Backed Securities | ||||||||
| (Cost $3,938,317) | 3,980,471 | |||||||
| CORPORATE — 2.7% | ||||||||
| COMMUNICATIONS — 0.1% | ||||||||
| 200,000 | GrubHub Holdings, Inc. 5.500%, 7/1/20272,7 | 195,620 | ||||||
| CONSUMER, CYCLICAL — 0.4% | ||||||||
| 550,000 | AMC Entertainment Holdings, Inc. 6.125%, 5/15/20272 | 468,889 | ||||||
| 250,000 | Downstream Development Authority of the Quapaw Tribe of Oklahoma 10.500%, 2/15/20232,7 | 260,596 | ||||||
| 729,485 | ||||||||
| CONSUMER, NON-CYCLICAL — 0.4% | ||||||||
| 370,000 | Endo Dac / Endo Finance LLC / Endo Finco, Inc. 6.000%, 7/15/20232,6,7 | 283,971 | ||||||
| 165,000 | Garda World Security Corp. 4.625%, 2/15/20272,6,7 | 163,763 | ||||||
11
Palmer Square Opportunistic Income Fund
SCHEDULE OF INVESTMENTS - Continued
As of January 31, 2020 (Unaudited)
| Principal Amount | Value | |||||||
| BONDS (Continued) | ||||||||
| CORPORATE (Continued) | ||||||||
| CONSUMER, NON-CYCLICAL (Continued) | ||||||||
| $ | 300,000 | Radiology Partners, Inc. 9.250%, 2/1/20282,7 | $ | 314,250 | ||||
| 761,984 | ||||||||
| ENERGY — 1.0% | ||||||||
| 500,000 | Buckeye Partners LP 6.375%, 1/22/20782,8 | 413,282 | ||||||
| CSI Compressco LP / CSI Compressco Finance, Inc. | ||||||||
| 326,000 | 7.250%, 8/15/20222 | 307,357 | ||||||
| 200,000 | 7.500%, 4/1/20252,7 | 199,167 | ||||||
| Denbury Resources, Inc. | ||||||||
| 162,000 | 9.000%, 5/15/20212,7 | 152,645 | ||||||
| 150,000 | 6.375%, 8/15/20212 | 120,750 | ||||||
| 250,000 | EnLink Midstream LLC 5.375%, 6/1/20292 | 226,831 | ||||||
| 200,000 | Montage Resources Corp. 8.875%, 7/15/20232 | 168,248 | ||||||
| 300,000 | Murray Energy Corp. 11.250%, 4/15/20212,7,9 | 378 | ||||||
| 450,000 | Peabody Energy Corp. 6.375%, 3/31/20252,7 | 374,625 | ||||||
| 1,963,283 | ||||||||
| INDUSTRIAL — 0.5% | ||||||||
| 250,000 | Mauser Packaging Solutions Holding Co. 7.250%, 4/15/20252,7 | 249,372 | ||||||
| 650,000 | Vertiv Intermediate Holding Corp. 12.000%, 2/15/20222,7 | 672,628 | ||||||
| 922,000 | ||||||||
| TECHNOLOGY — 0.2% | ||||||||
| 400,000 | Diebold Nixdorf, Inc. 8.500%, 4/15/20242 | 385,166 | ||||||
| 230,000 | Exela Intermediate LLC / Exela Finance, Inc. 10.000%, 7/15/20232,7 | 89,125 | ||||||
| 474,291 | ||||||||
| UTILITIES — 0.1% | ||||||||
| 350,000 | Talen Energy Supply LLC 6.500%, 6/1/20252 | 274,020 | ||||||
| Total Corporate | ||||||||
| (Cost $5,828,873) | 5,320,683 | |||||||
12
Palmer Square Opportunistic Income Fund
SCHEDULE OF INVESTMENTS - Continued
As of January 31, 2020 (Unaudited)
| Principal Amount | Value | |||||||
| BONDS (Continued) | ||||||||
| CORPORATE (Continued) | ||||||||
| UTILITIES (Continued) | ||||||||
| Total Bonds | ||||||||
| (Cost $173,450,153) | $ | 174,331,788 | ||||||
| COMMERCIAL PAPER — 1.6% | ||||||||
| $ | 1,000,000 | CSLB Holdings, Inc. 1.780%, 2/3/2020 | 999,857 | |||||
| 1,000,000 | Liberty Street Funding, LLC 1.890%, 2/13/2020 | 999,371 | ||||||
| 1,250,000 | Walgreens Boots Alliance, Inc. 1.990%, 4/28/2020 | 1,244,457 | ||||||
| Total Commercial Paper | ||||||||
| (Cost $3,243,260) | 3,243,685 | |||||||
| Number of Shares | ||||||||
| COMMON STOCKS — 0.0% | ||||||||
| ENERGY — 0.0% | ||||||||
| 12,991 | Pacific Drilling S.A.*,6 | 23,904 | ||||||
| TECHNOLOGY — 0.0% | ||||||||
| 17,360 | Exela Technologies, Inc.* | 6,520 | ||||||
| Total Common Stocks | ||||||||
| (Cost $304,593) | 30,424 | |||||||
| Number of Contracts | ||||||||
| PURCHASED OPTION CONTRACTS — 0.2% | ||||||||
| CALL OPTIONS — 0.0% | ||||||||
| EQUITY — 0.0% | ||||||||
| 635 | HCA Healthcare, Inc. Exercise Price: $160.00, Notional Amount: $10,160,000, Expiration Date: February 21, 2020* | — | ||||||
| 241 | Universal Health Services, Inc. Exercise Price: $160.00, Notional Amount: $3,856,000, Expiration Date: April 17, 2020* | 15,063 | ||||||
| Total Call Options | ||||||||
| (Cost $89,356) | 15,063 | |||||||
| PUT OPTIONS — 0.2% | ||||||||
| EQUITY — 0.2% | ||||||||
| 275 | Altria Group, Inc. Exercise Price: $30.00, Notional Amount: $825,000, Expiration Date: June 19, 2020* | 7,700 | ||||||
13
Palmer Square Opportunistic Income Fund
SCHEDULE OF INVESTMENTS - Continued
As of January 31, 2020 (Unaudited)
| Number of Contracts | Value | |||||||
| PURCHASED OPTION CONTRACTS (Continued) | ||||||||
| EQUITY (Continued) | ||||||||
| 410 | Altria Group, Inc. Exercise Price: $30.00, Notional Amount: $1,230,000, Expiration Date: March 20, 2020* | $ | — | |||||
| 236 | Boeing Co. Exercise Price: $250.00, Notional Amount: $5,900,000, Expiration Date: June 19, 2020* | 78,470 | ||||||
| 875 | iShares iBoxx High Yield Corporate Bond ETF Exercise Price: $87.00, Notional Amount: $7,612,500, Expiration Date: February 21, 2020* | 38,500 | ||||||
| 795 | Spirit AeroSystems, Inc. Exercise Price: $50.00, Notional Amount: $3,975,000, Expiration Date: June 19, 2020* | 121,237 | ||||||
| Washington Prime Group, Inc. | ||||||||
| 1,213 | Exercise Price: $2.50, Notional Amount: $303,250, Expiration Date: July 17, 2020* | 60,650 | ||||||
| 785 | Exercise Price: $2.50, Notional Amount: $196,250, Expiration Date: December 18, 2020* | 64,763 | ||||||
| Total Put Options | ||||||||
| (Cost $341,636) | 371,320 | |||||||
| Total Purchased Option Contracts | ||||||||
| (Cost $430,992) | 386,383 | |||||||
| Number of Shares | ||||||||
| SHORT-TERM INVESTMENTS — 2.7% | ||||||||
| 1,909,398 | Fidelity Investments Money Market Funds - Treasury Portfolio - Class I, 1.447%10,11 | 1,909,398 | ||||||
| 3,458,972 | Federated Treasury Obligations Fund - Institutional Class, 1.452%11 | 3,458,972 | ||||||
| Total Short-Term Investments | ||||||||
| (Cost $5,368,370) | 5,368,370 | |||||||
| TOTAL INVESTMENTS — 101.2% | ||||||||
| (Cost $200,851,477) | 200,418,265 | |||||||
| Liabilities in Excess of Other Assets — (1.2)% | (2,447,084 | ) | ||||||
| TOTAL NET ASSETS — 100.0% | $ | 197,971,181 | ||||||
14
Palmer Square Opportunistic Income Fund
SCHEDULE OF INVESTMENTS - Continued
As of January 31, 2020 (Unaudited)
| Principal Amount | Value | |||||||
| SECURITIES SOLD SHORT — (6.6)% | ||||||||
| BONDS — (6.6)% | ||||||||
| CORPORATE — (6.6)% | ||||||||
| BASIC MATERIALS — (0.2)% | ||||||||
| $ | (400,000 | ) | Venator Finance Sarl / Venator Materials LLC 5.750%, 7/15/20252,6,7 | $ | (367,000 | ) | ||
| COMMUNICATIONS — (0.4)% | ||||||||
| (650,000 | ) | CSC Holdings LLC 5.750%, 1/15/20302,7 | (699,576 | ) | ||||
| CONSUMER, CYCLICAL — (0.7)% | ||||||||
| (1,350,000 | ) | 1011778 BC ULC / New Red Finance, Inc. 5.000%, 10/15/20252,6,7 | (1,394,246 | ) | ||||
| CONSUMER, NON-CYCLICAL — (1.6)% | ||||||||
| (1,350,000 | ) | Bausch Health Cos., Inc. 5.500%, 11/1/20252,6,7 | (1,401,185 | ) | ||||
| (1,000,000 | ) | Chobani LLC / Chobani Finance Corp., Inc. 7.500%, 4/15/20252,7 | (997,110 | ) | ||||
| (725,000 | ) | DaVita, Inc. 5.125%, 7/15/20242 | (742,824 | ) | ||||
| (3,141,119 | ) | |||||||
| FINANCIAL — (0.4)% | ||||||||
| (1,000,000 | ) | Washington Prime Group LP 6.450%, 8/15/20242 | (894,585 | ) | ||||
| INDUSTRIAL — (1.6)% | ||||||||
| (1,700,000 | ) | Spirit AeroSystems, Inc. 4.600%, 6/15/20282 | (1,741,534 | ) | ||||
| (1,350,000 | ) | TransDigm, Inc. 6.250%, 3/15/20262,7 | (1,458,505 | ) | ||||
| (3,200,039 | ) | |||||||
| TECHNOLOGY — (1.7)% | ||||||||
| (900,000 | ) | Banff Merger Sub, Inc. 9.750%, 9/1/20262,7 | (925,717 | ) | ||||
| Pitney Bowes, Inc. | ||||||||
| (350,000 | ) | 5.200%, 4/1/20232 | (349,270 | ) | ||||
| (700,000 | ) | 4.625%, 3/15/20242 | (666,460 | ) | ||||
| (1,333,000 | ) | SS&C Technologies, Inc. 5.500%, 9/30/20272,7 | (1,412,547 | ) | ||||
| (3,353,994 | ) | |||||||
| Total Corporate | ||||||||
| (Proceeds $13,160,331) | (13,050,559 | ) | ||||||
| Total Bonds | ||||||||
| (Proceeds $13,160,331) | (13,050,559 | ) | ||||||
15
Palmer Square Opportunistic Income Fund
SCHEDULE OF INVESTMENTS - Continued
As of January 31, 2020 (Unaudited)
| Principal Amount | Value | |||||||
| Total Securities Sold Short | ||||||||
| (Proceeds $13,160,331) | $ | (13,050,559 | ) | |||||
| * | Non-income producing security. |
| 1 | Bank loans generally pay interest at rates which are periodically determined by reference to a base lending rate plus a premium. All loans carry a variable rate of interest. These base lending rates are generally (i) the Prime Rate offered by one or more major United States banks, (ii) the lending rate offered by one or more European banks such as the London Interbank Offered Rate ("LIBOR") or (iii) the Certificate of Deposit rate. Bank Loans, while exempt from registration, under the Securities Act of 1933, contain certain restrictions on resale and cannot be sold publicly. Floating rate bank loans often require prepayments from excess cash flow or permit the borrower to repay at its election. The degree to which borrowers repay, whether as a contractual requirement or at their election, cannot be predicted with accuracy. |
| 2 | Callable. |
| 3 | Floating rate security. |
| 4 | All or a portion of the loan is unfunded. |
| 5 | Denotes investments purchased on a when-issued or delayed delivery basis. |
| 6 | Foreign security denominated in U.S. Dollars. |
| 7 | Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities are restricted and may be resold in transactions exempt from registration normally to qualified institutional buyers. The absolute value of these securities is $174,926,624 which represents 88.40% of Net Assets. |
| 8 | Variable rate security. |
| 9 | Security is in default. |
| 10 | All or a portion of this security is segregated as collateral for securities sold short. |
| 11 | The rate is the annualized seven-day yield at period end. |
See accompanying Notes to Financial Statements.
16
Palmer Square Opportunistic Income Fund
SCHEDULE OF INVESTMENTS - Continued
As of January 31, 2020 (Unaudited)
SWAPTIONS CONTRACTS
CREDIT DEFAULT SWAPTIONS CONTRACTS ON CREDIT INDICES
| Premium | Unrealized | |||||||||||||||||||||||||||
| Counterparty/ | Buy/Sell | Exercise | Expiration | Notional | Paid | Appreciation/ | Market | |||||||||||||||||||||
| Reference Entity | Protection | Price | Date | Amount | (Received) | (Depreciation) | Value | |||||||||||||||||||||
| J.P. Morgan | ||||||||||||||||||||||||||||
| Markit CDX.NA.HY.33 V2 | ||||||||||||||||||||||||||||
| Put - 5 Year | Buy | $ | 108.00 | 2/19/20 | $ | 9,000,000 | $ | 24,057 | $ | 20,480 | $ | 44,537 | ||||||||||||||||
| TOTAL CREDIT DEFAULT SWAPTIONS CONTRACTS ON CREDIT INDICES | $ | 24,057 | $ | 20,480 | $ | 44,537 | ||||||||||||||||||||||
See accompanying Notes to Financial Statements.
17
Palmer Square Opportunistic Income Fund
SCHEDULE OF INVESTMENTS - Continued
As of January 31, 2020 (Unaudited)
| Security Type/Sector | Percent of Total Net Assets |
| Bonds | |
| Asset-Backed Securities | 83.4% |
| Corporate | 2.7% |
| Commercial Mortgage-Backed Securities | 2.0% |
| Total Bonds | 88.1% |
| Bank Loans | 8.6% |
| Commercial Paper | 1.6% |
| Purchased Option Contracts | |
| Put Options | 0.2% |
| Call Options | 0.0% |
| Total Purchased Option Contracts | 0.2% |
| Common Stocks | |
| Energy | 0.0% |
| Technology | 0.0% |
| Total Common Stocks | 0.0% |
| Short-Term Investments | 2.7% |
| Total Investments | 101.2% |
| Liabilities in Excess of Other Assets | (1.2)% |
| Total Net Assets | 100.0% |
See accompanying Notes to Financial Statements.
18
Palmer Square Opportunistic Income Fund
STATEMENT OF ASSETS AND LIABILITIES
As of January 31, 2020 (Unaudited)
| Assets: | |||||
| Investments, at value (cost $200,420,485) | $ | 200,031,882 | |||
| Purchased options contracts, at value (cost $430,992) | 386,383 | ||||
| Purchased swaptions contracts, at value (cost $24,057) | 44,537 | ||||
| Foreign currency, at value (cost $1,248) | 1,221 | ||||
| Cash | 19,616 | ||||
| Cash held at broker for securities sold short and swap contracts | 13,093,085 | ||||
| Segregated cash held by custodian for benefit of brokers | 200,000 | ||||
| Receivables: | |||||
| Investment securities sold | 4,940,120 | ||||
| Fund shares sold | 252,103 | ||||
| Interest | 756,888 | ||||
| Prepaid expenses | 37,443 | ||||
| Total assets | 219,763,278 | ||||
| Liabilities: | |||||
| Securities sold short, at value (proceeds $13,160,331) | 13,050,559 | ||||
| Payables: | |||||
| Investment securities purchased | 8,252,837 | ||||
| Advisory fees | 179,204 | ||||
| Shareholder servicing fees (Note 6) | 10,774 | ||||
| Fund accounting and administration fees | 38,134 | ||||
| Transfer agent fees and expenses | 15,373 | ||||
| Custody fees | 2,660 | ||||
| Interest on securities sold short | 216,309 | ||||
| Trustees' fees and expenses | 11,242 | ||||
| Auditing fees | 8,813 | ||||
| Legal fees | 211 | ||||
| Accrued other expenses | 5,981 | ||||
| Total liabilities | 21,792,097 | ||||
| Net Assets | $ | 197,971,181 | |||
| Components of Net Assets: | |||||
| Paid-in capital (par value of $0.01 per share with an unlimited number of shares authorized) | $ | 199,474,437 | |||
| Total accumulated deficit | (1,503,256 | ) | |||
| Net Assets | $ | 197,971,181 | |||
| Maximum Offering Price per Share: | |||||
| Net assets applicable to shares outstanding | $ | 197,971,181 | |||
| Shares of beneficial interest issued and outstanding | 10,476,604 | ||||
| Redemption price per share | $ | 18.90 | |||
See accompanying Notes to Financial Statements.
19
Palmer Square Opportunistic Income Fund
STATEMENT OF OPERATIONS
For the Six Months Ended January 31, 2020 (Unaudited)
| Investment Income: | ||||
| Interest | $ | 7,731,660 | ||
| Dividends | 719 | |||
| Total investment income | 7,732,379 | |||
| Expenses: | ||||
| Advisory fees | 924,212 | |||
| Shareholder servicing fees (Note 6) | 74,498 | |||
| Fund accounting and administration fees | 116,855 | |||
| Transfer agent fees and expenses | 39,044 | |||
| Custody fees | 9,885 | |||
| Interest on securities sold short | 226,804 | |||
| Legal fees | 42,636 | |||
| Trustees' fees and expenses | 30,378 | |||
| Shareholder reporting fees | 17,002 | |||
| Registration fees | 14,717 | |||
| Auditing fees | 9,188 | |||
| Insurance fees | 8,475 | |||
| Miscellaneous | 7,164 | |||
| Commitment fees (Note 11) | 3,198 | |||
| Total expenses | 1,524,056 | |||
| Advisory fees recovered | 93,696 | |||
| Fees paid indirectly (Note 3) | (1,432 | ) | ||
| Net expenses | 1,616,320 | |||
| Net investment income | 6,116,059 | |||
| Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | (477,349 | ) | ||
| Purchased options contracts | (136,898 | ) | ||
| Securities sold short | (70,965 | ) | ||
| Swap contracts | (7,535 | ) | ||
| Foreign currency transactions | (64 | ) | ||
| Net realized loss | (692,811 | ) | ||
| Net change in unrealized appreciation/depreciation on: | ||||
| Investments | 2,797,169 | |||
| Purchased options contracts | 99,775 | |||
| Securities sold short | 159,687 | |||
| Swaptions contracts | 20,480 | |||
| Swap contracts | 1,857 | |||
| Foreign currency translations | 2 | |||
| Net change in unrealized appreciation/depreciation | 3,078,970 | |||
| Net realized and unrealized gain on investments, securities sold short, purchased options contracts, swaptions contracts, swap contracts, and foreign currency | 2,386,159 | |||
| Net Increase in Net Assets from Operations | $ | 8,502,218 |
See accompanying Notes to Financial Statements.
20
Palmer Square Opportunistic Income Fund
STATEMENTS OF CHANGES IN NET ASSETS
| For the | ||||||||
| Six Months Ended | For the | |||||||
| January 31, 2020 | Year Ended | |||||||
| (Unaudited) | July 31, 2019 | |||||||
| Increase (Decrease) in Net Assets from: | ||||||||
| Operations: | ||||||||
| Net investment income | $ | 6,116,059 | $ | 8,452,692 | ||||
| Net realized loss on investments, securities sold short, purchased options contracts, written options contracts, swaptions contracts, swap contracts and foreign currency | (692,811 | ) | (1,857,089 | ) | ||||
| Net change in unrealized appreciation/depreciation on investments, securities sold short, purchased options contracts, written options contracts, swaptions contracts, swap contracts, and foreign currency | 3,078,970 | (3,227,576 | ) | |||||
| Net increase in net assets resulting from operations | 8,502,218 | 3,368,027 | ||||||
| Distributions to Shareholders: | ||||||||
| Total distributions to shareholders | (5,912,713 | ) | (9,285,989 | ) | ||||
| Capital Transactions: | ||||||||
| Net proceeds from shares sold | 28,827,528 | 77,035,325 | ||||||
| Reinvestment of distributions | 1,922,736 | 2,597,923 | ||||||
| Cost of shares redeemed | (18,963,882 | ) | (23,716,143 | ) | ||||
| Net increase in net assets from capital transactions | 11,786,382 | 55,917,105 | ||||||
| Total increase in net assets | 14,375,887 | 49,999,143 | ||||||
| Net Assets: | ||||||||
| Beginning of period | 183,595,294 | 133,596,151 | ||||||
| End of period | $ | 197,971,181 | $ | 183,595,294 | ||||
| Capital Share Transactions: | ||||||||
| Shares sold | 1,574,572 | 4,078,708 | ||||||
| Shares reinvested | 105,444 | 139,534 | ||||||
| Shares redeemed | (1,054,362 | ) | (1,247,996 | ) | ||||
| Net increase in capital share transactions | 625,654 | 2,970,246 | ||||||
See accompanying Notes to Financial Statements.
21
Palmer Square Opportunistic Income Fund
FINANCIAL HIGHLIGHTS
Per share operating performance.
For a capital share outstanding throughout each period.
| For the Six Months Ended | For the Year Ended July 31, | For the Period August 29, | ||||||||||||||||||||||
| January 31, 2020 | 2014* through | |||||||||||||||||||||||
| (Unaudited) | 2019 | 2018 | 2017 | 2016 | July 31, 2015 | |||||||||||||||||||
| Net asset value, beginning of period | $ | 18.64 | $ | 19.42 | $ | 19.28 | $ | 17.76 | $ | 20.06 | $ | 20.00 | ||||||||||||
| Income from Investment Operations: | ||||||||||||||||||||||||
| Net investment income1 | 0.61 | 1.09 | 1.04 | 1.16 | 1.12 | 0.97 | ||||||||||||||||||
| Net realized and unrealized gain (loss) | 0.24 | (0.66 | ) | (0.02 | ) | 1.52 | (2.29 | ) | (0.23 | ) | ||||||||||||||
| Total from investment operations | 0.85 | 0.43 | 1.02 | 2.68 | (1.17 | ) | 0.74 | |||||||||||||||||
| Less Distributions: | ||||||||||||||||||||||||
| From net investment income | (0.59 | ) | (1.01 | ) | (0.88 | ) | (1.17 | ) | (1.10 | ) | (0.68 | ) | ||||||||||||
| From net realized gains | - | (0.20 | ) | - | - | (0.03 | ) | - | ||||||||||||||||
| Total distributions | (0.59 | ) | (1.21 | ) | (0.88 | ) | (1.17 | ) | (1.13 | ) | (0.68 | ) | ||||||||||||
| Net increase from payments by affiliates1 | - | - | - | 0.01 | 7 | - | - | |||||||||||||||||
| Net asset value, end of period | $ | 18.90 | $ | 18.64 | $ | 19.42 | $ | 19.28 | $ | 17.76 | $ | 20.06 | ||||||||||||
| Total return2 | 4.70 | %3 | 2.36 | % | 5.40 | % | 15.56 | %6 | (5.50 | )% | 3.79 | %3 | ||||||||||||
| Ratios and Supplemental Data: | ||||||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 197,971 | $ | 183,595 | $ | 133,596 | $ | 95,872 | $ | 70,021 | $ | 52,174 | ||||||||||||
| Ratio of expenses to average net assets (including brokerage expense, interest expense and interest on securities sold short): | ||||||||||||||||||||||||
| Before fees waived/recovered5 | 1.65 | %4 | 1.81 | % | 1.72 | % | 1.80 | % | 1.93 | % | 2.40 | %4 | ||||||||||||
| After fees waived/recovered5 | 1.75 | %4 | 1.85 | % | 1.58 | % | 1.53 | % | 1.50 | % | 1.50 | %4 | ||||||||||||
| Ratio of net investment income to average net assets (including brokerage expense, interest expense and interest on securities sold short): | ||||||||||||||||||||||||
| Before fees waived/recovered | 6.71 | %4 | 5.78 | % | 5.19 | % | 5.89 | % | 5.97 | % | 4.33 | %4 | ||||||||||||
| After fees waived/recovered | 6.61 | %4 | 5.74 | % | 5.33 | % | 6.16 | % | 6.40 | % | 5.23 | %4 | ||||||||||||
| Portfolio turnover rate | 78 | %3 | 136 | % | 168 | % | 109 | % | 74 | % | 10 | %3 | ||||||||||||
| * | Commencement of operations. |
| 1 | Based on average shares outstanding for the period. |
| 2 | Total returns would have been lower/higher had expenses not been waived/recovered by the Advisor. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. |
| 3 | Not annualized. |
| 4 | Annualized. |
| 5 | If brokerage expense, interest expense and interest on securities sold short had been excluded, the expense ratios would have been lowered by 0.25% for the six months ended January 31, 2020, 0.35%, 0.08%, 0.03% and 0.00%, for the years ended July 31, 2019, 2018, 2017 and 2016, respectively, and 0.00% for the period ended July 31, 2015. |
| 6 | Payment from affiliates had a positive 0.04% impact to total return. |
| 7 | The Advisor reimbursed the Fund $32,147 for fee reimbursements for certain trades. |
See accompanying Notes to Financial Statements.
22
Palmer Square Opportunistic Income Fund
NOTES TO FINANCIAL STATEMENTS
January 31, 2020 (Unaudited)
Note 1 – Organization
The Palmer Square Opportunistic Income Fund (the “Fund”) was organized as a Delaware statutory trust (the “Trust”) on May 1, 2014, and is registered as a non-diversified, closed-end management investment company under the Investment Company Act of 1940, as amended. Shares of the Fund are being offered on a continuous basis (the “Shares”). The Fund commenced operations on August 29, 2014. The Fund had no operations prior to August 29, 2014 other than those relating to its organization and the sale of 5,000 shares of beneficial interest in the Fund at $20.00 per share to the Fund’s advisor, Palmer Square Capital Management LLC.
The Fund has an “interval fund” structure pursuant to which the Fund, subject to applicable law, has adopted a fundamental investment policy to make quarterly offers to repurchase between 5% and 25% of its outstanding Shares at net asset value (“NAV”). Subject to the approval of the Fund’s Board of Trustees, the Fund will seek to conduct such quarterly repurchase offers typically for 10% of the Fund’s outstanding Shares at NAV. In connection with any repurchase offer, the Fund may offer to repurchase only the minimum amount of 5% of its outstanding Shares. Repurchases may be oversubscribed, preventing shareholders from selling some or all of their tendered Shares back to the Fund. The Fund’s Shares are not listed on any securities exchange and there is no secondary trading market for its Shares.
The Fund’s investment objective is to seek a high level of current income. As a secondary objective, the Fund seeks long-term capital appreciation.
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standard Codification Topic 946 “Financial Services—Investment Companies”.
Note 2 – Accounting Policies
The following is a summary of the significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from these estimates.
(a) Valuation of Investments
The Fund values equity securities at the last reported sale price on the principal exchange or in the principal over the counter (“OTC”) market in which such securities are traded, as of the close of regular trading on the NYSE on the day the securities are being valued or, if the last-quoted sales price is not readily available, the securities will be valued at the last bid or the mean between the last available bid and ask price. Securities traded on the NASDAQ are valued at the NASDAQ Official Closing Price (“NOCP”). Pricing services generally value debt securities assuming orderly transactions of an institutional round lot size, but such securities may be held or transactions may be conducted in such securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. Investments in open-end investment companies are valued at the daily closing net asset value of the respective investment company. Debt securities are valued by utilizing a price supplied by independent pricing service providers. The independent pricing service providers may use various valuation methodologies including matrix pricing and other analytical pricing models as well as market transactions and dealer quotations. These models generally consider such factors as yields or prices of bonds of comparable quality, type of issue, coupon, maturity, ratings and general market conditions. If a price is not readily available for a portfolio security, the security will be valued at fair value (the amount which the Fund might reasonably expect to receive for the security upon its current sale) as determined in good faith by the Fund’s advisor, subject to review and approval by the Valuation Committee, pursuant to procedures adopted by the Board of Trustees. The actions of the Valuation Committee are subsequently reviewed by the Board at its next regularly scheduled board meeting. The Valuation Committee meets as needed. The Valuation Committee is comprised of all the Trustees, but action may be taken by any one of the Trustees.
23
Palmer Square Opportunistic Income Fund
NOTES TO FINANCIAL STATEMENTS - Continued
January 31, 2020 (Unaudited)
(b) Investment Transactions, Investment Income and Expenses
Investment transactions are accounted for on the trade date. Realized gains and losses on investments are determined on the identified cost basis. Dividend income is recorded net of applicable withholding taxes on the ex-dividend date and interest income is recorded on an accrual basis. Withholding taxes on foreign dividends, if applicable, are paid (a portion of which may be reclaimable) or provided for in accordance with the applicable country’s tax rules and rates and are disclosed in the Statement of Operations. Withholding tax reclaims are filed in certain countries to recover a portion of the amounts previously withheld. The Fund records a reclaim receivable based on a number of factors, including a jurisdiction’s legal obligation to pay reclaims as well as payment history and market convention. Discounts on debt securities are accreted or amortized to interest income over the lives of the respective securities using the effective interest method. Premiums for callable debt securities are amortized to the earliest call date, if the call price was less than the purchase price. If the call price was not at par and the security was not called, the security is amortized to the next call price and date. Expenses incurred by the Trust with respect to more than one fund are allocated in proportion to the net assets of each fund except where allocation of direct expenses to each Fund or an alternative allocation method can be more appropriately made.
Income from securitization vehicles and equity investments in the equity class securities of CLO vehicles (typically income notes or subordinated notes) is recorded using the effective interest method in accordance with the provisions of ASC 325-40, Beneficial Interests in Securitized Financial Assets, based upon a calculation of the effective yield to the expected redemption date based on an estimate of future cash flows, including those CLO equity investments that have not made their inaugural distribution for the relevant period end. The Fund monitors the expected residual payments, and the effective yield is determined and updated quarterly, or as required. Accordingly, investment income recognized on CLO equity securities in the GAAP statement of operations differs from both the tax-basis investment income and from the cash distributions actually received by the Fund during the period.
In conjunction with the use of futures contracts and swap contracts, the Fund may be required to maintain collateral in various forms. At January 31, 2020, such collateral is denoted in the Fund’s Statement of Assets and Liabilities. Also in conjunction with the use of futures contracts or swap contracts, the Fund, when appropriate, utilizes a segregated margin deposit account with the counterparty. At January 31, 2020, these segregated margin deposit accounts are denoted in the Fund’s Statement of Assets and Liabilities.
(c) Asset-Backed Securities
Asset-backed securities include pools of mortgages, loans, receivables or other assets. Payment of principal and interest may be largely dependent upon the cash flows generated by the assets backing the securities, and, in certain cases, supported by letters of credit, surety bonds, or other credit enhancements. The value of asset-backed securities may also be affected by the creditworthiness of the servicing agent for the pool, the originator of the loans or receivables, or the financial institution(s) providing the credit support. In addition, asset-backed securities are not backed by any governmental agency.
Collateralized Debt Obligations (“CDOs”) include Collateralized Bond Obligations (“CBOs”), Collateralized Loan Obligations (“CLOs”) and other similarly structured securities. CBOs and CLOs are types of asset backed securities. A CBO is a trust which is backed by a diversified pool of high risk, below investment grade fixed income securities. A CLO is a trust typically collateralized by a pool of loans, which may include, among others, domestic and foreign senior secured loans, senior unsecured loans, and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans. The risks of an investment in a CDO depend largely on the type of the collateral securities and the class of the CDO in which a Fund invests. CDOs carry additional risks including, but not limited to, (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments, (ii) the collateral may decline in value or default, (iii) a Fund may invest in CDOs that are subordinate to other classes, and (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment results.
24
Palmer Square Opportunistic Income Fund
NOTES TO FINANCIAL STATEMENTS - Continued
January 31, 2020 (Unaudited)
(d) Mortgage-Backed Securities
The Fund may invest in mortgage-backed securities ("MBS"), representing direct or indirect interests in pools of underlying residential or commercial mortgage loans that are secured by real property. These securities provide investors with payments consisting of both principal and interest as the mortgages in the underlying mortgage pools are paid.
The timely payment of principal and interest (but not the market value) on MBS issued or guaranteed by Ginnie Mae (formally known as the Government National Mortgage Association or GNMA) is backed by Ginnie Mae and the full faith and credit of the US government. Obligations issued by Fannie Mae (formally known as the Federal National Mortgage Association or FNMA) and Freddie Mac (formally known as the Federal Home Loan Mortgage Corporation or FHLMC) are historically supported only by the credit of the issuer, but currently are guaranteed by the US government in connection with such agencies being placed temporarily into conservatorship by the US government.
Some MBS are sponsored or issued by private entities. Payments of principal and interest (but not the market value) of such private MBS may be supported by pools of residential or commercial mortgage loans or other MBS that are guaranteed, directly or indirectly, by the US government or one of its agencies or instrumentalities, or they may be issued without any government guarantee of the underlying mortgage assets but may contain some form of non-government credit enhancement.
Collateralized mortgage obligations ("CMO") are a type of MBS. A CMO is a debt security that may be collateralized by whole mortgage loans or mortgage pass-through securities. The mortgage loans or mortgage pass-through securities are divided into classes or tranches with each class having its own characteristics. Investors typically receive payments out of the interest and principal on the underlying mortgages. The portions of these payments that investors receive, as well as the priority of their rights to receive payments, are determined by the specific terms of the CMO class.
The yield characteristics of MBS differ from those of traditional debt securities. Among the major differences are that interest and principal payments are made more frequently, usually monthly, and that principal may be prepaid at any time because the underlying mortgage loans or other obligations generally may be prepaid at any time. Prepayments on a pool of mortgage loans are influenced by a variety of economic, geographic, social and other factors. Generally, prepayments on fixed-rate mortgage loans will increase during a period of falling interest rates and decrease during a period of rising interest rates. Certain classes of CMOs and other MBS are structured in a manner that makes them extremely sensitive to changes in prepayment rates.
(e) Swap Agreements and Swaptions
The Fund may enter into credit default swap agreements for investment purposes. A credit default swap agreement may have as reference obligations one or more securities that are not currently held by the Fund. The Fund may be either the buyer or seller in the transaction. Credit default swaps may also be structured based on the debt of a basket of issuers, rather than a single issuer, and may be customized with respect to the default event that triggers purchase or other factors. As a seller, the Fund would generally receive an upfront payment or a fixed rate of income throughout the term of the swap, which typically is between six months and three years, provided that there is no credit event. If a credit event occurs, generally the seller must pay the buyer the full face amount of deliverable obligations of the reference obligations that may have little or no value. The notional value will be used to segregate liquid assets for selling protection on credit default swaps. If the Fund were a buyer and no credit event occurs, the Fund would recover nothing if the swap is held through its termination date. However, if a credit event occurs, the buyer may elect to receive the full notional value of the swap in exchange for an equal face amount of deliverable obligations of the reference obligation that may have little or no value. The use of swap agreements by the Fund entails certain risks, which may be different from, or possibly greater than, the risks associated with investing directly in the securities and other investments that are the referenced asset for the swap agreement. Swaps are highly specialized instruments that require investment techniques, risk analyses, and tax planning different from those associated with stocks, bonds, and other traditional investments. The use of a swap requires an understanding not only of the referenced asset, reference rate, or index, but also of the swap itself, without the benefit of observing the performance of the swap under all the possible market conditions. Because some swap agreements have a leverage component, adverse changes in the value or level of the underlying asset, reference rate, or index can result in a loss substantially greater than the amount invested in the swap itself. Certain swaps have the potential for unlimited loss, regardless of the size of the initial investment.
25
Palmer Square Opportunistic Income Fund
NOTES TO FINANCIAL STATEMENTS - Continued
January 31, 2020 (Unaudited)
The Fund may also purchase credit default swap contracts in order to hedge against the risk of default of the debt of a particular issuer or basket of issuers, in which case the Fund would function as the counterparty referenced in the preceding paragraph. This would involve the risk that the investment may expire worthless and would only generate income in the event of an actual default by the issuer(s) of the underlying obligation(s) (or, as applicable, a credit downgrade or other indication of financial instability). It would also involve the risk that the seller may fail to satisfy its payment obligations to the Fund in the event of a default. The purchase of credit default swaps involves costs, which will reduce the Fund's return.
The Fund may enter into total return swap contracts for investment purposes. Total return swaps are contracts in which one party agrees to make periodic payments based on the change in market value of the underlying assets, which may include a specified security, basket of securities or security indexes during the specified period, in return for periodic payments based on a fixed or variable interest rate of the total return from other underlying assets. Total return swap agreements may be used to obtain exposure to a security or market without owning or taking physical custody of such security or market, including in cases in which there may be disadvantages associated with direct ownership of a particular security. In a typical total return equity swap, payments made by the Fund or the counterparty are based on the total return of a particular reference asset or assets (such as an equity security, a combination of such securities, or an index). That is, one party agrees to pay another party the return on a stock, basket of stocks, or stock index in return for a specified interest rate. By entering into an equity index swap, for example, the index receiver can gain exposure to stocks making up the index of securities without actually purchasing those stocks. Total return swaps involve not only the risk associated with the investment in the underlying securities, but also the risk of the counterparty not fulfilling its obligations under the agreement.
An option on a swap agreement, or a “swaption,” is a contract that gives a counterparty the right (but not the obligation) to enter into a new swap agreement or to shorten, extend, cancel or otherwise modify an existing swap agreement, at some designated future time on specified terms. In return, the purchaser pays a “premium” to the seller of the contract. The seller of the contract receives the premium and bears the risk of unfavorable changes on the underlying swap. The Fund may write (sell) and purchase put and call swaptions. The Fund may also enter into swaptions on either an asset-based or liability-based basis, depending on whether the Fund is hedging its assets or its liabilities. The Fund may write (sell) and purchase put and call swaptions to the same extent it may make use of standard options on securities or other instruments. The Fund may enter into these transactions primarily to preserve a return or spread on a particular investment or portion of its holdings, as a duration management technique, to protect against an increase in the price of securities the Fund anticipates purchasing at a later date, or for any other purposes, such as for speculation to increase returns. Swaptions are generally subject to the same risks involved in the Fund’s use of options.
26
Palmer Square Opportunistic Income Fund
NOTES TO FINANCIAL STATEMENTS - Continued
January 31, 2020 (Unaudited)
Depending on the terms of the particular option agreement, the Fund will generally incur a greater degree of risk when it writes a swaption than it will incur when it purchases a swaption. When the Fund purchases a swaption, it risks losing only the amount of the premium it has paid should it decide to let the option expire unexercised. However, when the Fund writes a swaption, upon exercise of the option the Fund will become obligated according to the terms of the underlying agreement. The Fund did not enter into any transactions in written swaptions contracts for the six months ended January 31, 2020.
(f) Options Contracts
The Fund may write or purchase options contracts primarily to enhance the Fund’s returns or reduce volatility. In addition, the Fund may utilize options in an attempt to generate gains from options premiums or to reduce overall portfolio risk. When the Fund writes or purchases an option, an amount equal to the premium received or paid by the Fund is recorded as a liability or an asset and is subsequently adjusted to the current market value of the option written or purchased. Premiums received or paid from writing or purchasing options which expire unexercised are treated by the Fund on the expiration date as realized gains or losses. The difference between the premium and the amount paid or received on effecting a closing purchase or sale transaction, including brokerage commissions, is also treated as a realized gain or loss. If an option is exercised, the premium paid or received is added to the cost of the purchase or proceeds from the sale in determining whether the Fund has realized a gain or a loss on investment transactions. The Fund, as a writer of an option, may have no control over whether the underlying securities may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the security underlying the written option.
(g) Futures Contracts
The Fund may use interest rate, foreign currency, index and other futures contracts. A futures contract provides for the future sale by one party and purchase by another party of a specified quantity of the security or other financial instrument at a specified price and time. A futures contract on an index is an agreement pursuant to which two parties agree to take or make delivery of an amount of cash equal to the difference between the value of the index at the close of the last trading day of the contract and the price at which the index contract originally was written. Although the value of an index might be a function of the value of certain specified securities, physical delivery of these securities is not always made.
A futures contract held by the Fund is valued daily at the official settlement price of the exchange on which it is traded. Each day the Fund pays or receives cash, called "variation margin", equal to the daily change in value of the futures contract. This process is known as "marking to market". Variation margin does not represent a borrowing or loan by the Fund but is instead a settlement between the Fund and the broker of the amount one would owe the other if the futures contract expired. In computing daily net asset value, the Fund will mark to market its open futures positions. The Fund also is required to deposit and to maintain margin with respect to put and call options on futures contracts written by it. Such margin deposits will vary depending on the nature of the underlying futures contract (and the related initial margin requirements), the current market value of the option and other futures positions held by the Fund. Although some futures contracts call for making or taking delivery of the underlying securities, generally these obligations are closed out prior to delivery by offsetting purchases or sales of matching futures contracts (involving the same exchange, underlying security or index and delivery month). If an offsetting purchase price is less than the original sale price, the Fund realizes a capital gain, or if it is more, the Fund realizes a capital loss. Conversely, if an offsetting sale price is more than the original purchase price, the Fund realizes a capital gain, or if it is less, the Fund realizes a capital loss. The transaction costs also must be included in these calculations.
27
Palmer Square Opportunistic Income Fund
NOTES TO FINANCIAL STATEMENTS - Continued
January 31, 2020 (Unaudited)
(h) Short Sales
Short sales are transactions under which the Fund sells a security it does not own in anticipation of a decline in the value of that security. To complete such a transaction, the Fund must borrow the security to make delivery to the buyer. The Fund then is obligated to replace the security borrowed by purchasing the security at market price at the time of replacement. The price at such time may be more or less than the price at which the security was sold by the Fund. When a security is sold short a decrease in the value of the security will be recognized as a gain and an increase in the value of the security will be recognized as a loss, which is potentially limitless. Until the security is replaced, the Fund is required to pay the lender amounts equal to dividend or interest that accrue during the period of the loan which is recorded as an expense. To borrow the security, the Fund also may be required to pay a premium or an interest fee, which are recorded as interest expense. Cash or securities are segregated for the broker to meet the necessary margin requirements. The Fund is subject to the risk that it may not always be able to close out a short position at a particular time or at an acceptable price.
(i) Forward Foreign Currency Exchange Contracts
The Fund may utilize forward foreign currency exchange contracts (“forward contracts”) under which it is obligated to exchange currencies on specified future dates at specified rates, and are subject to the translations of foreign exchange rates fluctuations. All contracts are “marked-to-market” daily and any resulting unrealized gains or losses are recorded as unrealized appreciation or depreciation on foreign currency translations. The Fund records realized gains or losses at the time the forward contract is settled. Counterparties to these forward contracts are major U.S. financial institutions.
(j) Bank Loans
The Fund may purchase participations in commercial loans. Such investments may be secured or unsecured. Loan participations typically represent direct participation, together with other parties, in a loan to a corporate borrower, and generally are offered by banks or other financial institutions or lending syndicates. The Fund may participate in such syndications, or can buy part of a loan, becoming a part lender. When purchasing indebtedness and loan participations, the Fund assumes the credit risk associated with the corporate borrower and may assume the credit risk associated with an interposed bank or other financial intermediary. The indebtedness and loan participations in which the Fund intends to invest may not be rated by any nationally recognized rating service.
Bank loans may be structured to include both term loans, which are generally fully funded at the time of investment and unfunded loan commitments, which are contractual obligations for future funding. Unfunded loan commitments may include revolving credit facilities, which may obligate the Fund to supply additional cash to the borrower on demand, representing a potential financial obligation by the Fund in the future. The Fund may receive a commitment fee based on the undrawn portion of the underlying line of credit portion of a senior floating rate interest. Commitment fees are processed as a reduction in cost.
In addition, the Fund may enter into, or acquire participations in, delayed funding loans and revolving credit facilities. Delayed funding loans and revolving credit facilities are borrowing arrangements in which the lender agrees to make loans up to a maximum amount upon demand by the borrower during a specified term. A revolving credit facility differs from a delayed funding loan in that as the borrower repays the loan, an amount equal to the repayment may be borrowed again during the term of the revolving credit facility. Delayed funding loans and revolving credit facilities usually provide for floating or variable rates of interest. These commitments may have the effect of requiring the Fund to increase its investment in a company at a time when it might not otherwise decide to do so (including at a time when the company's financial condition makes it unlikely that such amounts will be repaid). To the extent that the Fund is committed to advance additional funds, it will at all-times segregate or "earmark" liquid assets, in an amount sufficient to meet such commitments.
28
Palmer Square Opportunistic Income Fund
NOTES TO FINANCIAL STATEMENTS - Continued
January 31, 2020 (Unaudited)
(k) Federal Income Taxes
The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its net investment income and any net realized gains to its shareholders. Therefore, no provision is made for federal income or excise taxes. Due to the timing of dividend distributions and the differences in accounting for income and realized gains and losses for financial statement and federal income tax purposes, the fiscal year in which amounts are distributed may differ from the year in which the income and realized gains and losses are recorded by the Fund.
Accounting for Uncertainty in Income Taxes (the “Income Tax Statement”) requires an evaluation of tax positions taken (or expected to be taken) in the course of preparing a Fund’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations.
The Income Tax Statement requires management of the Fund to analyze tax positions taken in the prior three open tax years, if any, and tax positions expected to be taken in the Fund’s current tax year, as defined by the IRS statute of limitations for all major jurisdictions, including federal tax authorities and certain state tax authorities. As of and during the years ended July 31, 2016-2019, and as of and during the six months ended January 31, 2020 the Fund did not have a liability for any unrecognized tax benefits. The Fund has no examination in progress and is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
(l) Distributions to Shareholders
The Fund will make quarterly distributions of net investment income and capital gains, if any, at least annually. Distributions to shareholders are recorded on the ex-dividend date. The amount and timing of distributions are determined in accordance with federal income tax regulations, which may differ from GAAP.
The character of distributions made during the year from net investment income or net realized gains may differ from the characterization for federal income tax purposes due to differences in the recognition of income, expense and gain (loss) items for financial statement and tax purposes.
(m) Counterparty Risks
The Fund may be exposed to counterparty risk on institution or other entity with which the Fund has unsettled or open transactions. Although the Fund expects to enter into transactions only with counterparties believed by the Advisor or relevant Sub-Advisor to be creditworthy, there can be no assurance that a counterparty will not default and that the Fund will not sustain a loss on a transaction as a result. The Fund is subject to the risk that issuers of the instruments in which it invests and trades may default on their obligations, and that certain events may occur that have an immediate and significant adverse effect on the value of those instruments.
The Fund is subject to various Master Agreements, which govern the terms of certain transactions with select counterparties. The Master Agreements reduce the counterparty risk associated with relevant transactions by specifying credit protection mechanisms and providing standardization that improves legal certainty. Master Agreements can also help limit counterparty risk by specifying collateral posting arrangements at pre-arranged exposure levels. Under the Master Agreement, collateral is routinely transferred if the total net exposure to certain transactions (net of existing collateral already in place) governed under the relevant master agreement with a counterparty in a given account exceeds a specified threshold.
29
Palmer Square Opportunistic Income Fund
NOTES TO FINANCIAL STATEMENTS - Continued
January 31, 2020 (Unaudited)
The Master Repurchase Agreement governs transactions between the Fund and the counterparty. The Master Repurchase Agreement maintains provisions for, among other things, initiation, income payments, events of default, and maintenance of collateral for Repurchase Agreements.
International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreements”) govern OTC financial derivative transactions entered into by the Fund and those counterparties. The ISDA Master Agreements maintain provisions for general obligations, representations, agreements, collateral and events of default or termination. Events of termination include conditions that may entitle counterparties to elect to terminate early and cause settlement of all outstanding transactions under the applicable ISDA Master Agreement.
Note 3 – Investment Advisory and Other Agreements
The Fund entered into an Investment Advisory Agreement (the “Agreement”) with Palmer Square Capital Management LLC (the “Advisor”). Under the terms of the Agreement, the Fund pays a monthly investment advisory fee to the Advisor at the annual rate of 1.00% of the Fund’s average daily net assets.
The Advisor has contractually agreed to waive or reduce its fee and/or to absorb other operating expenses to ensure that total annual Fund operating expenses (excluding taxes, leverage interest, brokerage commissions, dividend and interest expenses on short sales, acquired fund fees and expenses, expenses incurred in connection with any merger or reorganization, and extraordinary expenses such as litigation expenses) do not exceed 1.50% of the Fund’s average daily net assets. This agreement is in effect until December 1, 2020, and it may be terminated before that date only by the Fund’s Board of Trustees.
For the six months ended January 31, 2020, the Advisor recovered advisory fees previously waived totaling $93,696. The Fund’s advisor is permitted to seek reimbursement from the Fund, subject to certain limitations, of fees waived or payments made to the Fund for a period ending three full fiscal years after the date of the waiver or payment. This reimbursement may be requested from the Fund if the reimbursement will not cause the Fund’s annual expense ratio to exceed the lesser of (a) the expense limitation amount in effect at the time such fees were waived or payments made, or (b) the expense limitation amount in effect at the time of the reimbursement. At January 31, 2020, the amount of these potentially recoverable expenses was $263,980. The Advisor may recapture all or a portion of this amount no later than July 31, of the years stated below:
| 2020 | $ | 117,691 | ||
| 2021 | 146,289 | |||
| Total | $ | 263,980 |
UMB Fund Services, Inc. (“UMBFS”) serves as the Fund’s fund accountant, transfer agent and co-administrator; and Mutual Fund Administration, LLC (“MFAC”) serves as the Fund’s other co-administrator. UMB Bank, n.a., an affiliate of UMBFS, serves as the Fund’s custodian. The Fund’s fees incurred for fund accounting, fund administration, transfer agency and custody services for the six months ended January 31, 2020, are reported on the Statement of Operations.
Foreside Fund Services, LLC (“Distributor”) serves as the Fund’s distributor (the “Distributor”). The Distributor does not receive compensation from the Fund for its distribution services; the Advisor pays the Distributor a fee for its distribution-related services.
30
Palmer Square Opportunistic Income Fund
NOTES TO FINANCIAL STATEMENTS - Continued
January 31, 2020 (Unaudited)
The Fund has a fee arrangement with its custodian, UMB Bank, n.a., which provides for custody fees to be reduced by earning credits based on cash balances left on deposit with the custodian. For the six months ended January 31, 2020, the total fees reduced by earning credits were $1,432. Such amount is shown as a reduction of expenses, "Fees paid indirectly", on the Statement of Operations.
Certain trustees and officers of the Trust are employees of the Advisor and its affiliate. The Fund does not compensate trustees and officers affiliated with the Fund’s Advisor.
Note 4 – Federal Income Taxes
At January 31, 2020, the cost of securities on a tax basis and gross unrealized appreciation and depreciation on investments for federal income tax purposes were as follows:
| Cost of investments | $ | 187,713,161 | ||
| Gross unrealized appreciation | $ | 3,007,345 | ||
| Gross unrealized depreciation | (3,352,800 | ) | ||
| Net unrealized depreciation on investments | $ | (345,455 | ) |
The difference between cost amounts for financial statement and federal income tax purposes is due primarily to timing differences in recognizing certain gains and losses in security transactions.
As of July 31, 2019, the components of accumulated earnings (deficit) on a tax basis were as follows:
| Undistributed ordinary income | $ | 1,087,690 | ||
| Undistributed long-term capital gains | - | |||
| Accumulated earnings | 1,087,690 | |||
| Accumulated capital and other losses | (1,706,662 | ) | ||
| Unrealized depreciation on securities sold short | (49,915 | ) | ||
| Unrealized depreciation on investments | (3,423,845 | ) | ||
| Unrealized depreciation on foreign currency | (29 | ) | ||
| Total accumulated deficit | $ | (4,092,761 | ) |
The tax character of distributions paid during the fiscal years ended July 31, 2019 and July 31, 2018 were as follows:
| 2019 | 2018 | |||||||
| Distributions paid from: | ||||||||
| Ordinary income | $ | 9,011,994 | $ | 5,140,711 | ||||
| Net long-term capital gains | 273,995 | - | ||||||
| Total taxable distributions | 9,285,989 | 5,140,711 | ||||||
| Total distributions paid | $ | 9,285,989 | $ | 5,140,711 | ||||
31
Palmer Square Opportunistic Income Fund
NOTES TO FINANCIAL STATEMENTS - Continued
January 31, 2020 (Unaudited)
As of July 31, 2019, the Fund had a short-term capital loss carryover of $1,208,806 and a long-term capital loss carryforward of $497,856. To the extent that the fund may realize future net capital gains, those gains will be offset by any of its unused capital loss carryforward. Future capital loss carryover utilization in any given year may be subject to Internal Revenue Code limitations.
Note 5 – Investment Transactions
For the six months ended January 31, 2020, purchases and sales of investments, excluding short-term investments, futures contracts, options contracts, swaption contracts and swap contracts, were $131,302,846 and $123,934,671, respectively. Proceeds from securities sold short and cover short securities were $23,589,519 and $20,166,596, respectively, for the same period.
Note 6 – Shareholder Servicing Plan
The Fund has adopted a Shareholder Servicing Plan to pay a fee at an annual rate of up to 0.25% of average daily net assets of shares serviced by shareholder servicing agents who provide administrative and support services to their customers.
For the six months ended January 31, 2020, shareholder servicing fees incurred are disclosed on the Statement of Operations.
Note 7 – Indemnifications
In the normal course of business, the Fund enters into contracts that contain a variety of representations 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, the Fund expects the risk of loss to be remote.
Note 8 – Fair Value Measurements and Disclosure
Fair Value Measurements and Disclosures defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosure about fair value measurements. It also provides guidance on determining when there has been a significant decrease in the volume and level of activity for an asset or a liability, when a transaction is not orderly, and how that information must be incorporated into a fair value measurement.
UnderFair Value Measurements and Disclosures, various inputs are used in determining the value of the Fund’s investments. These inputs are summarized into three broad Levels as described below:
| • | Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access. |
| • | Level 2 – Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
| • | Level 3 – Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
32
Palmer Square Opportunistic Income Fund
NOTES TO FINANCIAL STATEMENTS - Continued
January 31, 2020 (Unaudited)
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.
The inputs used to measure fair value may fall into different Levels of the fair value hierarchy. In such cases, for disclosure purposes, the Level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest Level input that is significant to the fair value measurement in its entirety.
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities. The following is a summary of the inputs used, as of January 31, 2020, in valuing the Fund’s assets carried at fair value:
| Level 1 | Level 2 | Level 3** | Total | |||||||||||||
| Assets | ||||||||||||||||
| Bank Loans | $ | - | $ | 17,057,615 | $ | - | $ | 17,057,615 | ||||||||
| Bonds | ||||||||||||||||
| Asset-Backed Securities | - | 165,030,634 | - | 165,030,634 | ||||||||||||
| Commercial Mortgage-Backed Securities | - | 3,980,471 | - | 3,980,471 | ||||||||||||
| Corporate* | - | 5,320,683 | - | 5,320,683 | ||||||||||||
| Commercial Paper | - | 3,243,685 | - | 3,243,685 | ||||||||||||
| Common Stock* | 30,424 | - | - | 30,424 | ||||||||||||
| Purchased Options Contracts | 386,383 | - | - | 386,383 | ||||||||||||
| Short-Term Investments | 5,368,370 | - | - | 5,368,370 | ||||||||||||
| Other Financial Instruments*** | ||||||||||||||||
| Credit Default Swaptions Contracts on Credit Indices | - | 44,537 | - | 44,537 | ||||||||||||
| Total Assets | $ | 5,785,177 | $ | 194,677,625 | $ | - | $ | 200,462,802 | ||||||||
| Liabilities | ||||||||||||||||
| Securities Sold Short | ||||||||||||||||
| Bonds | ||||||||||||||||
| Corporate* | $ | - | $ | 13,050,559 | $ | - | $ | 13,050,559 | ||||||||
| Total Liabilities | $ | - | $ | 13,050,559 | $ | - | $ | 13,050,559 | ||||||||
| * | All corporate bonds held in the Fund are Level 2 securities and all common stocks held in the Fund are Level 1 securities. For a detailed break-out by major industry classification, please refer to the Schedule of Investments. |
| ** | The Fund did not hold any Level 3 securities at period end. |
| *** | Other financial instruments are derivative instruments, such as futures contracts, swaptions contracts, and swap contracts. Futures contracts and swap contracts are valued at the unrealized appreciation (depreciation) on the instrument. |
33
Palmer Square Opportunistic Income Fund
NOTES TO FINANCIAL STATEMENTS - Continued
January 31, 2020 (Unaudited)
Note 9 – Derivatives and Hedging Disclosures
Derivatives and Hedging requires enhanced disclosures about the Fund’s derivative and hedging activities, including how such activities are accounted for and their effects on the Fund’s financial position, performance and cash flows.
The effects of these derivative instruments on the Fund's financial position and financial performance as reflected in the Statement of Assets and Liabilities and Statement of Operations are presented in the tables below. The fair values of derivative instruments as of January 31, 2020 by risk category are as follows:
Derivatives not designated as hedging instruments
| Credit Contracts | Equity Contracts | Interest Rate Contracts | Total | |||||||||||||
| Assets | ||||||||||||||||
| Purchased options contracts, at fair value | $ | - | $ | 386,383 | $ | - | $ | 386,383 | ||||||||
| Purchased swaptions contracts, at fair value | 44,537 | - | - | 44,537 | ||||||||||||
| $ | 44,537 | $ | 386,383 | $ | - | $ | 430,920 | |||||||||
Derivatives not designated as hedging instruments
| Credit Contracts | Equity Contracts | Interest Rate Contracts | Total | |||||||||||||
| Realized Gain (Loss) on Derivatives | ||||||||||||||||
| Purchased options contracts | $ | - | $ | (136,898 | ) | $ | - | $ | (136,898 | ) | ||||||
| Swap contracts | (7,535 | ) | - | - | (7,535 | ) | ||||||||||
| $ | (7,535 | ) | $ | (136,898 | ) | $ | - | $ | (144,433 | ) | ||||||
| Credit Contracts | Equity Contracts | Interest Rate Contracts | Total | |||||||||||||
| Net Change in Unrealized Appreciation/Depreciation on Derivatives | ||||||||||||||||
| Purchased options contracts | $ | - | $ | 99,775 | $ | - | $ | 99,775 | ||||||||
| Swap contracts | 1,857 | - | - | 1,857 | ||||||||||||
| Swaptions contracts | 20,480 | - | - | 20,480 | ||||||||||||
| $ | 22,337 | $ | 99,775 | $ | - | $ | 122,112 | |||||||||
The notional amount is included on the Schedule of Investments. The quarterly average volumes of derivative instruments as of January 31, 2020 are as follows:
| Derivatives not designated as hedging instruments | ||||||||
| Credit contracts | Credit default swap contracts | Notional amount | $ | 193,333 | ||||
| Credit contracts | Swaptions Contracts | Notional amount | 3,000,000 | |||||
| Equity contracts | Purchased options contracts | Notional amount | 23,515,633 | |||||
34
Palmer Square Opportunistic Income Fund
NOTES TO FINANCIAL STATEMENTS - Continued
January 31, 2020 (Unaudited)
Note 10 - Disclosures about Offsetting Assets and Liabilities
Disclosures about Offsetting Assets and Liabilities requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The guidance requires retrospective application for all comparative periods presented.
A Fund mitigates credit risk with respect to OTC derivative counterparties through credit support annexes included with ISDA Master Agreements or other Master Netting Agreements which are the standard contracts governing most derivative transactions between the Fund and each of its counterparties. These agreements allow the Fund and each counterparty to offset certain derivative financial instruments’ payables and/or receivables against each other and/or with collateral, which is generally held by the Fund’s custodian. The amount of collateral moved to/from applicable counterparties is based upon minimum transfer amounts specified in the agreement. To the extent amounts due to the Fund from its counterparties are not fully collateralized contractually or otherwise, the Fund bears the risk of loss from counterparty non-performance.
The Fund did not hold any swap contracts as of January 31, 2020.
Note 11 – Line of Credit
The Fund together with other funds managed by the Advisor (together “Palmer Square Funds”) has entered into a Senior Secured Revolving Credit Facility (“Facility”) of $25,000,000 with UMB Bank, n.a. The Fund is permitted to borrow up to the lesser of the available credit line amount or an amount up to 10% of the adjusted net assets of the Fund. The purpose of the Facility is to finance temporarily the repurchase or redemption of shares of each fund. Borrowings under this agreement bear interest at the one-month London Interbank Offered Rate (LIBOR) plus 1.75%. As compensation for holding the lending commitment available, the Palmer Square Funds are charged a commitment fee on the average daily unused balance of the Facility at the rate of 0.20% per annum. The commitment fees for the six months ended January 31, 2020 are disclosed in the Statement of Operations. The Fund did not borrow under the line of credit agreement during the six months ended January 31, 2020.
Note 12 – Events Subsequent to the Fiscal Period End
The Fund has adopted financial reporting rules regarding subsequent events which require an entity to recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet.
In early 2020, an outbreak of a novel strain of coronavirus (COVID-19) emerged globally. This coronavirus has resulted in closing international borders, enhanced health screenings, healthcare service preparation and delivery, quarantines, cancellations, disruptions to supply chains and customer activity, as well as general public concern and uncertainty. The impact of this outbreak has negatively affected the worldwide economy, as well as the economies of individual countries, the financial health of individual companies and the market in general in significant and unforeseen ways. The future impact of COVID-19 is currently unknown, and it may exacerbate other risks that apply to the Fund, including political, social and economic risks. Any such impact could adversely affect the Fund’s performance, the performance of the securities in which the Fund invests and may lead to losses on your investment in the Fund. The ultimate impact of COVID-19 on the financial performance of the Fund’s investments is not reasonably estimable at this time.
There were no other events or transactions that occurred during this period that materially impacted the amounts or disclosures in the Fund’s financial statements.
35
Palmer Square Opportunistic Income Fund
EXPENSE EXAMPLE
For the Six Months Ended January 31, 2020 (Unaudited)
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees, distribution fees and other Fund expenses. The examples below 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.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from August 1, 2019 to January 31, 2020.
Actual Expenses
The information in the row titled “Actual Performance” of the table below provides actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the appropriate row under the column titled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The information in the row titled “Hypothetical (5% annual return before expenses)” of the table below provides hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (load) or contingent deferred sales charges. Therefore, the information in the row titled “Hypothetical (5% annual return before expenses)” is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value | Ending Account Value | Expenses Paid During Period* | |
| 8/1/19 | 1/31/20 | 8/1/19 – 1/31/20 | |
| Actual Performance | $ 1,000.00 | $ 1,047.00 | $ 8.99 |
| Hypothetical (5% annual return before expenses) | $ 1,000.00 | $ 1,016.35 | $ 8.86 |
| * | Expenses are equal to the Fund’s annualized expense ratio of 1.75% multiplied by the average account value over the period, multiplied by 184/366 (to reflect the six month period). The expense ratios reflect a recovery of previously waived fees. Assumes all dividends and distributions were reinvested. |
36
Palmer Square Opportunistic Income Fund
Investment Advisor
Palmer Square Capital Management LLC
1900 Shawnee Mission Parkway, Suite 315
Mission Woods, Kansas 66205
Custodian
UMB Bank, n.a.
928 Grand Boulevard, 5th Floor
Kansas City, Missouri 64106
Fund Co-Administrator
Mutual Fund Administration, LLC
2220 East Route 66, Suite 226
Glendora, California 91740
Fund Co-Administrator, Transfer Agent and Fund Accountant
UMB Fund Services, Inc.
235 West Galena Street
Milwaukee, Wisconsin 53212
Distributor
Foreside Fund Services, LLC
Three Canal Plaza, Suite 100
Portland, Maine 04101
www.foreside.com
FUND INFORMATION
| TICKER | CUSIP | |
| Palmer Square Opportunistic Income Fund | PSOIX | 611776 105 |
Privacy Principles of the Palmer Square Opportunistic Income Fund for Shareholders
The Fund is committed to maintaining the privacy of its shareholders and to safeguarding its non-public personal information. The following information is provided to help you understand what personal information the Fund collects, how we protect that information and why, in certain cases, we may share information with select other parties.
Generally, the Fund does not receive any non-public personal information relating to its shareholders, although certain non-public personal information of its shareholders may become available to the Fund. The Fund does not disclose any non-public personal information about its shareholders or former shareholders to anyone, except as permitted by law or as is necessary in order to service shareholder accounts (for example, to a transfer agent or third party administrator).
This report is sent to shareholders of the Palmer Square Opportunistic Income Fund for their information. It is not a Prospectus, circular or representation intended for use in the purchase or sale of shares of the Fund or of any securities mentioned in this report.
Proxy Voting Policies and Procedures
A description of the Fund’s proxy voting policies and procedures related to portfolio securities is available without charge, upon request, by calling the Fund at (866) 933-9033, or on the U.S. Securities and Exchange Commission’s (“SEC”) website atwww.sec.gov.
Proxy Voting Record
Information regarding how the Fund voted proxies for portfolio securities, if applicable, during the most recent 12-month period ended June 30, is also available, without charge and upon request by calling the Fund at (866) 933-9033, or by accessing the Fund’s Form N-PX on the SEC’s website atwww.sec.gov.
Form N-Q Disclosure
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Q is available on the SEC website at www.sec.gov or by calling the Fund at (866) 933-9033. The Fund’s Form N-Q may also be viewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.
Householding
The Fund will mail only one copy of shareholder documents, including prospectuses, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those other members of your household, please call the Fund at (866) 933-9033.
Palmer Square Opportunistic Income Fund
P.O. Box 2175
Milwaukee, WI 53201
Toll Free: (866) 933-9033
Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
(a) Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934).
(b) Not applicable.
Item 6. Schedule of Investments.
(a) Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable for semi-annual reports.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable semi-annual reports.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of trustees.
Item 11. Controls and Procedures.
| (a) | The Registrant’s President and Treasurer have reviewed the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant’s service provider. |
| (b) | There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. |
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
The registrant did not have any Securities Lending Activities during the period covered by the report.
Item 13. Exhibits.
| (a) | (1)Any code of ethics or amendment thereto, that is subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit.Not Applicable. |
(2)Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.Filed herewith.
(3)Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons.Not applicable.
(4) Change in the registrant's independent public accountant. There was no change in the registrant's independent public accountant for the period covered by this report.
| (b) | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| (Registrant) | Palmer Square Opportunistic Income Fund | |||
| By (Signature and Title) | /s/ Christopher D. Long | |||
| Christopher D. Long, President and Principal Executive Officer | ||||
| Date | 4/10/2020 | |||
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/ Christopher D. Long | |||
| Christopher D. Long, President and Principal Executive Officer | ||||
| Date | 4/10/2020 | |||
| By (Signature and Title) | /s/ Jeffrey D. Fox | |||
| Jeffrey Fox, Treasurer and Principal Financial Officer | ||||
| Date | 4/10/2020 | |||