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 number811-23179
The Relative Value Fund
(Exact name of registrant as specified in charter)
c/o UMB Fund Services, Inc.
235 West Galena Street
Milwaukee, WI 53212
(Address of principal executive offices) (Zip code)
Terrance P. Gallagher
235 West Galena Street
Milwaukee, WI 53212
(Name and address of agent for service)
registrant's telephone number, including area code:(414) 299-2270
Date of fiscal year end:March 31
Date of reporting period:March 31, 2019
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
![[MISSING IMAGE: lg_vivaldi-lr.jpg]](https://capedge.com/proxy/N-CSR/0001144204-19-030273/lg_vivaldi-lr.jpg)
| | | | | 1 | | | |
| Schedule of Investments | | | | | 2 | | |
| | | | | 11 | | | |
| | | | | 12 | | | |
| | | | | 14 | | | |
| | | | | 15 | | | |
| | | | | 16 | | | |
| | | | | 17 | | | |
| | | | | 18 | | | |
| | | | | 29 | | | |
| | | | | 32 | | |
![[MISSING IMAGE: lg_grant-thornton.jpg]](https://capedge.com/proxy/N-CSR/0001144204-19-030273/lg_grant-thornton.jpg)
Grant Thornton Tower
171 N. Clark Street, Suite 200
Chicago, IL 60601-3370
F +1 312 565 4719
gt.com
The Relative Value Fund
May 30, 2019
SCHEDULE OF INVESTMENTS
As of March 31, 2019
| Principal Amount | | | | | | Value | | | | ||||||||||
| | | | Asset-Backed Securities – 5.5% | | | | | | | | |||||||||
| | $ | 100,000 | | | | Deephaven Residential Mortgage Trust Series 2018-1A, Class B1, 4.340%, 12/25/20571,2,3 | | | | $ | 98,562 | | | | | ||||
| | | 196,035 | | | | DSLA Mortgage Loan Trust Series 2006-AR2, Class 1A1A, 2.672% (LIBOR 1 Month+19 basis points), 10/19/20361,3,4 | | | | | 171,529 | | | | | ||||
| | | | | | | Fannie Mae Connecticut Avenue Securities | | | | | | | | | | ||||
| | | 49,000 | | | | Series 2017-C06, Class 1M2, 5.136% (LIBOR 1 Month+265 basis points), 2/25/20301,3,4 | | | | | 50,565 | | | | | ||||
| | | 100,000 | | | | Series 2018-C01, Class 1M2, 4.736% (LIBOR 1 Month+225 basis points), 7/25/20301,3,4 | | | | | 100,568 | | | | | ||||
| | | 250,000 | | | | Magnetite XVI Ltd. Series 2015-16A, Class F, 9.280% (LIBOR 3 Month+650 basis points), 1/18/20281,2,3,4 | | | | | 228,471 | | | | | ||||
| | | 223,725 | | | | RBSSP Resecuritization Trust Series 2009-10, Class 2A2, 2.000%, 1/26/20371,2,3 | | | | | 152,409 | | | | | ||||
| | | 51,469 | | | | WaMu Mortgage Pass-Through Certificates Series Trust Series 2006-AR18, Class 3A1, 3.333%, 1/25/20371,3 | | | | | 46,667 | | | | | ||||
| | | 100,000 | | | | WFRBS Commercial Mortgage Trust Series 2014-C24, Class C, 4.290%, 11/15/20471,3 | | | | | 96,859 | | | | | ||||
| | | | | | | Total Asset-Backed Securities (Cost $956,561) | | | | | 945,630 | | | | | ||||
| | | | | | | Bank Loans – 2.9% | | | | | |||||||||
| | | 500,000 | | | | BJ SERVICES TERM LOAN 12.980%, 1/3/20239 | | | | | 495,000 | | | | | ||||
| | | | | | | Total Bank Loans (Cost $495,131) | | | | | 495,000 | | | | | ||||
| Number of Shares | | | | | | | | | | | | | |||||||
| | | | Closed-End Funds – 29.3% | | | | | ||||||||||||
| | | 5,189 | | | | Aberdeen Emerging Markets Equity Income Fund, Inc. | | | | | 37,724 | | | | | ||||
| | | 10,841 | | | | Aberdeen Total Dynamic Dividend Fund5 | | | | | 89,438 | | | | | ||||
| | | 1,161 | | | | Advent Claymore Convertible Securities and Income Fund5 | | | | | 17,136 | | | | | ||||
| | | 1,549 | | | | Alliance California Municipal Income Fund, Inc. | | | | | 22,894 | | | | | ||||
| | | 5,006 | | | | AllianzGI Convertible & Income 2024 Target5 | | | | | 45,054 | | | | | ||||
| | | 5,300 | | | | AllianzGI NFJ Dividend Interest & Premium Strategy Fund5 | | | | | 63,918 | | | | | ||||
| | | 9,097 | | | | Barings BDC, Inc.5 | | | | | 89,242 | | | | | ||||
| | | 594 | | | | BlackRock California Municipal Income Trust | | | | | 7,621 | | | | | ||||
| | | 2,465 | | | | BlackRock Debt Strategies Fund, Inc. | | | | | 26,425 | | | | | ||||
| | | 570 | | | | BlackRock Floating Rate Income Trust | | | | | 6,960 | | | | | ||||
| | | 970 | | | | BlackRock Municipal 2030 Target Term Trust5 | | | | | 21,573 | | | | | ||||
| | | 1,650 | | | | BlackRock Resources & Commodities Strategy Trust5 | | | | | 13,481 | | | | | ||||
| | | 5,193 | | | | BrandywineGLOBAL Global Income Opportunities Fund, Inc.5 | | | | | 57,798 | | | | |
SCHEDULE OF INVESTMENTS — Continued
As of March 31, 2019
| Number of Shares | | | | | | Value | | ||||||
| | | | Closed-End Funds (Continued) | | | ||||||||
| | | 7,124 | | | | Clough Global Opportunities Fund5 | | | | $ | 68,818 | | |
| | | 5,882 | | | | Cornerstone Strategic Value Fund, Inc.5 | | | | | 71,643 | | |
| | | 1,931 | | | | Cornerstone Total Return Fund, Inc.5 | | | | | 23,153 | | |
| | | 7,720 | | | | Delaware Enhanced Global Dividend & Income Fund5 | | | | | 74,652 | | |
| | | 1,968 | | | | Eagle Growth & Income Opportunities Fund5 | | | | | 30,248 | | |
| | | 7,785 | | | | Eaton Vance Limited Duration Income Fund5 | | | | | 98,480 | | |
| | | 798 | | | | Eaton Vance Tax-Managed Buy-Write Strategy Fund | | | | | 7,389 | | |
| | | 1,755 | | | | Franklin Ltd. Duration Income Trust5 | | | | | 16,901 | | |
| | | 4,794 | | | | Garrison Capital, Inc.5 | | | | | 34,421 | | |
| | | 24,331 | | | | Griffin Institutional Access Credit Fund – Class I | | | | | 602,676 | | |
| | | 7,996 | | | | Highland Floating Rate Opportunities Fund5 | | | | | 111,064 | | |
| | | 6,312 | | | | Invesco Dynamic Credit Opportunities Fund | | | | | 68,485 | | |
| | | 4,559 | | | | Invesco High Income Trust II5 | | | | | 65,376 | | |
| | | 1,892 | | | | Invesco Municipal Opportunity Trust5 | | | | | 22,572 | | |
| | | 29,108 | | | | Invesco Senior Income Trust5 | | | | | 122,254 | | |
| | | 2,889 | | | | Kayne Anderson MLP/Midstream Investment Co.5 | | | | | 46,311 | | |
| | | 3,830 | | | | Lazard World Dividend & Income Fund, Inc.5 | | | | | 37,955 | | |
| | | 5,056 | | | | Liberty All Star Growth Fund, Inc.5 | | | | | 28,111 | | |
| | | 3,575 | | | | Morgan Stanley Emerging Markets Debt Fund, Inc.5 | | | | | 32,139 | | |
| | | 966 | | | | Neuberger Berman California Municipal Fund, Inc. | | | | | 12,587 | | |
| | | 5,698 | | | | Neuberger Berman High Yield Strategies Fund, Inc. | | | | | 64,330 | | |
| | | 466 | | | | NexPoint Strategic Opportunities Fund5 | | | | | 10,145 | | |
| | | 2,097 | | | | Nuveen California Quality Municipal Income Fund | | | | | 28,897 | | |
| | | 13,588 | | | | Nuveen Credit Strategies Income Fund5 | | | | | 105,035 | | |
| | | 2,594 | | | | Nuveen Emerging Markets Debt 2022 Target Term Fund5 | | | | | 22,594 | | |
| | | 1,320 | | | | Nuveen Intermediate Duration Quality Municipal Term Fund5 | | | | | 17,266 | | |
| | | 2,312 | | | | Nuveen Mortgage Opportunity Term Fund5 | | | | | 53,708 | | |
| | | 1,831 | | | | Nuveen Mortgage Opportunity Term Fund 25 | | | | | 41,197 | | |
| | | 28,453 | | | | Palmer Square Opportunistic Income Fund | | | | | 527,807 | | |
| | | 11,038 | | | | PGIM Global High Yield Fund, Inc.5 | | | | | 153,870 | | |
| | | 3,712 | | | | PGIM High Yield Bond Fund, Inc.5 | | | | | 52,636 | | |
| | | 71,839 | | | | PIMCO Flexible Credit Income Fund | | | | | 714,080 | | |
| | | 78,433 | | | | Pomona Investment LP8 | | | | | 786,475 | | |
| | | 1,300 | | | | Special Opportunities Fund, Inc.5 | | | | | 17,459 | | |
| | | 4,457 | | | | Sprott Focus Trust, Inc.5 | | | | | 30,352 | | |
| | | 2,149 | | | | Templeton Emerging Markets Income Fund5 | | | | | 22,006 | | |
| | | 8,876 | | | | Templeton Global Income Fund5 | | | | | 55,919 | | |
| | | 1,060 | | | | The India Fund, Inc.5 | | | | | 22,663 | | |
| | | 3,823 | | | | Tortoise Midstream Energy Fund, Inc.5 | | | | | 53,598 | | |
| | | 3,135 | | | | Virtus Total Return Fund, Inc.5 | | | | | 31,507 | | |
| | | 25,035 | | | | Voya Prime Rate Trust5 | | | | | 119,667 | | |
| | | 247 | | | | Western Asset Corporate Loan Fund, Inc. | | | | | 2,339 | | |
| | | 3,597 | | | | Western Asset Global High Income Fund, Inc.5 | | | | | 33,776 | | |
| | | | | | | Total Closed-End Funds (Cost $5,225,391) | | | | | 5,041,825 | | |
|
SCHEDULE OF INVESTMENTS — Continued
As of March 31, 2019
| Principal Amount | | | | | | Value | | ||||||
| | | | Collateralized Mortgage Obligations – 5.8% | | | ||||||||
| | $ | 1,391,171 | | | | CHL Mortgage Pass-Through Trust Series 2004-29, Class 1X, 0.913%, 2/25/20351,3 | | | | $ | 24,366 | | |
| | | 131,000 | | | | COMM Mortgage Trust Series 2017-PANW, Class E, 3.809%, 10/10/20292,3 | | | | | 123,946 | | |
| | | 200,000 | | | | GS Mortgage Securities Trust Series 2014-GC22, Class C, 4.690%, 6/10/20471,3 | | | | | 205,423 | | |
| | | 100,000 | | | | Home Partners of America Trust Series 2018-1, Class F, 4.832% (LIBOR 1 Month+235 basis points), 7/17/20372,4 | | | | | 99,174 | | |
| | | 247,350 | | | | Morgan Stanley Mortgage Loan Trust Series 2006-13AX, Class A2, 2.826% (LIBOR 1 Month+34 basis points), 10/25/20361,4 | | | | | 127,161 | | |
| | | 370,366 | | | | Series 2007-7AX, Class 2A1, 2.606% (LIBOR 1 Month+12 basis points), 4/25/20371,4 | | | | | 183,508 | | |
| | | 115,000 | | | | UBS Commercial Mortgage Trust Series 2018-C8, Class C, 4.704%, 2/15/20511,3 | | | | | 117,223 | | |
| | | 139,097 | | | | Wells Fargo Alternative Loan Trust Series 2007-PA1, Class A1, 2.806% (LIBOR 1 Month+32 basis points), 3/25/20371,4 | | | | | 115,401 | | |
| | | | | | | Total Collateralized Mortgage Obligations (Cost $991,897) | | | | | 996,202 | | |
|
| Number of Shares | | | | | | | | | | | |||
| | | | Common Stocks – 6.9% | | | ||||||||
| | | | | | | Communications – 0.1% | | | |||||
| | | 266 | | | | Fox Corp. – Class A* | | | | | 9,765 | | |
| | | 39 | | | | Tribune Media Co. | | | | | 1,799 | | |
| | | | | | | | | | | | 11,564 | | |
| | | | | | | Financials – 2.3% | | | |||||
| | | 574 | | | | 8i Enterprises Acquisition Corp.*,6 | | | | | 5,763 | | |
| | | 713 | | | | Andina Acquisition Corp. III*,6 | | | | | 7,201 | | |
| | | 1,246 | | | | Big Rock Partners Acquisition Corp.*,5 | | | | | 12,859 | | |
| | | 849 | | | | Black Ridge Acquisition Corp.*,5 | | | | | 8,668 | | |
| | | 1,532 | | | | BSB Bancorp, Inc.* | | | | | 50,311 | | |
| | | 415 | | | | CF Finance Acquisition Corp.* | | | | | 4,233 | | |
| | | 553 | | | | Chardan Healthcare Acquisition Corp.* | | | | | 5,547 | | |
| | | 1,386 | | | | CM Seven Star Acquisition Corp.*,5,6 | | | | | 10,132 | | |
| | | 476 | | | | Crescent Acquisition Corp.* | | | | | 4,760 | | |
| | | 1,094 | | | | Ellie Mae, Inc.* | | | | | 107,967 | | |
| | | 1,359 | | | | Far Point Acquisition Corp. – Class A*,5 | | | | | 13,522 | | |
| | | 411 | | | | FinTech Acquisition Corp. III* | | | | | 4,188 | | |
| | | 37 | | | | First Data Corp.* | | | | | 972 | | |
SCHEDULE OF INVESTMENTS — Continued
As of March 31, 2019
| Number of Shares | | | | | | Value | | ||||||
| | | | Common Stocks (Continued) | | | ||||||||
| | | | | | | Financials (Continued) | | | |||||
| | | 526 | | | | Hennessy Capital Acquisition Corp. IV* | | | | $ | 5,302 | | |
| | | 153 | | | | Insurance Acquisition Corp.* | | | | | 1,545 | | |
| | | 1,038 | | | | Legacy Acquisition Corp.*,5 | | | | | 10,421 | | |
| | | 2,374 | | | | Leisure Acquisition Corp.*,5 | | | | | 23,740 | | |
| | | 177 | | | | Monocle Acquisition Corp.* | | | | | 1,772 | | |
| | | 587 | | | | Oaktree Capital Group LLC | | | | | 29,144 | | |
| | | 2,579 | | | | One Madison Corp.*,5,6 | | | | | 26,435 | | |
| | | 1,142 | | | | Pensare Acquisition Corp.*,5 | | | | | 11,728 | | |
| | | 238 | | | | Pivotal Acquisition Corp.* | | | | | 2,416 | | |
| | | 754 | | | | Pure Acquisition Corp.*,5 | | | | | 7,555 | | |
| | | 732 | | | | Schultze Special Purpose Acquisition Corp.* | | | | | 7,342 | | |
| | | 327 | | | | TCF Financial Corp. | | | | | 6,766 | | |
| | | 728 | | | | Trine Acquisition Corp.* | | | | | 7,295 | | |
| | | 521 | | | | Tuscan Holdings Corp.* | | | | | 5,413 | | |
| | | 533 | | | | Wealthbridge Acquisition Ltd.*,6 | | | | | 5,330 | | |
| | | | | | | | | | | | 388,327 | | |
| | | | | | | Health Care – 0.6% | | | |||||
| | | 683 | | | | Celgene Corp.* | | | | | 64,434 | | |
| | | 405 | | | | Spark Therapeutics, Inc.* | | | | | 46,122 | | |
| | | | | | | | | | | | 110,556 | | |
| | | | | | | Materials – 0.8% | | | |||||
| | | 175 | | | | DowDuPont, Inc. | | | | | 9,329 | | |
| | | 10,046 | | | | Goldcorp, Inc.6 | | | | | 114,926 | | |
| | | 1,422 | | | | SunCoke Energy Partners LP | | | | | 17,704 | | |
| | | | | | | | | | | | 141,959 | | |
| | | | | | | Technology – 3.1% | | | |||||
| | | 512 | | | | ARRIS International PLC*,6 | | | | | 16,184 | | |
| | | 978 | | | | Attunity Ltd.*,6 | | | | | 22,934 | | |
| | | 595 | | | | Luxoft Holding, Inc.*,6 | | | | | 34,933 | | |
| | | 1,120 | | | | Mellanox Technologies Ltd.*,6 | | | | | 132,563 | | |
| | | 1,319 | | | | Quantenna Communications, Inc.* | | | | | 32,091 | | |
| | | 554 | | | | Red Hat, Inc.*,5 | | | | | 101,216 | | |
| | | 588 | | | | Ultimate Software Group, Inc.* | | | | | 194,117 | | |
| | | | | | | | | | | | 534,038 | | |
| | | | | | | Total Common Stocks (Cost $1,180,191) | | | | | 1,186,444 | | |
|
SCHEDULE OF INVESTMENTS — Continued
As of March 31, 2019
| Number of Shares | | | | | | Value | | ||||||
| | | | | | | Exchange-Traded Debt Securities – 0.8% | | | |||||
| | | | | | | Financials – 0.8% | | | |||||
| | | 1,144 | | | | Capital Southwest Corp. 5.950%, 12/15/20221 | | | | $ | 29,092 | | |
| | | 251 | | | | Monroe Capital Corp. 5.750%, 10/31/20231 | | | | | 6,242 | | |
| | | 1,554 | | | | Oxford Square Capital Corp. 6.500%, 3/30/20241 | | | | | 39,596 | | |
| | | 433 | | | | Stellus Capital Investment Corp. 5.750%, 9/15/20221 | | | | | 10,912 | | |
| | | 1,068 | | | | THL Credit, Inc. 6.750%, 12/30/20221 | | | | | 26,924 | | |
| | | 580 | | | | THL Credit, Inc. 6.125%, 10/30/20231 | | | | | 14,744 | | |
| | | 396 | | | | TriplePoint Venture Growth BDC Corp. 5.750%, 7/15/20221 | | | | | 9,979 | | |
| | | | | | | | | | | | 137,489 | | |
| | | | | | | Total Exchange-Traded Debt Securities (Cost $136,832) | | | | | 137,489 | | |
| | | | | | | Investment Funds – 10.2% | | | |||||
| | | N/A | | | | Bailard Real Estate LP8,10,12 | | | | | 600,000 | | |
| | | N/A | | | | DSC Meridian LP8,10,13,16 | | | | | 278,682 | | |
| | | N/A | | | | Linden Investors LP8,10,13,17 | | | | | 280,702 | | |
| | | N/A | | | | Walleye Opportunities LP8,11,14,17 | | | | | 313,138 | | |
| | | N/A | | | | Whitebox Asymmetric LP8,10,15,17 | | | | | 271,777 | | |
| | | | | | | Total Investment Funds (Cost $1,725,000) | | | | | 1,744,299 | | |
| | | | | | | Mutual Funds – 3.6% | | | |||||
| | | 46,025 | | | | Jones Lang LaSalle Income Property Trust, Inc. – Class M-I – REIT5 | | | | | 558,744 | | |
| | | 2,750 | | | | Morgan Stanley Institutional Fund, Inc. – Emerging Markets Portfolio – Class I | | | | | 66,507 | | |
| | | | | | | Total Mutual Funds (Cost $605,788) | | | | | 625,251 | | |
|
SCHEDULE OF INVESTMENTS — Continued
As of March 31, 2019
| Number of Contracts | | | | | | Value | | ||||||
| | | | Purchased Options Contracts – 0.0% | | | ||||||||
| | | | | | | Call Options – 0.0% | | | |||||
| | | | | | | Mellanox Technologies, Ltd. | | | | | | | |
| | | 1 | | | | Exercise Price: $115.00, Notional Amount: $11,500, Expiration Date: June 21, 2019 | | | | $ | 430 | | |
| | | | | | | Total Call Options (Cost $481) | | | | | 430 | | |
| | | | | | | Put Options – 0.0% | | | |||||
| | | | | | | Goldcorp, Inc. | | | | | | | |
| | | 1 | | | | Exercise Price: $10.00, Notional Amount: $1,000, Expiration Date: April 18, 2019 | | | | | 6 | | |
| | | | | | | Total Put Options (Cost $8) | | | | | 6 | | |
| | | | | | | Total Purchased Options Contracts (Cost $489) | | | | | 436 | | |
| Number of Shares | | | | | | | | | | | |||
| | | | Rights – 0.0% | | | ||||||||
| | | 1,246 | | | | Big Rock Partners Acquisition Corp., Expiration Date: July 3, 2019*,5 | | | | | 361 | | |
| | | 425 | | | | Black Ridge Acquisition Corp., Expiration Date: July 3, 2019*,5 | | | | | 149 | | |
| | | 1,386 | | | | CM Seven Star Acquisition Corp., Expiration Date: April 25, 2019*,5,6 | | | | | 458 | | |
| | | 265 | | | | Constellation Alpha Capital Corp., Expiration Date: March 18, 2020*,5,6 | | | | | 33 | | |
| | | 1,803 | | | | Corium International, Expiration Date: March 31, 2020*,5,9 | | | | | — | | |
| | | 4,716 | | | | Pan American Silver Corp. Expiration Date: February 22, 2029*,6,9 | | | | | 1,080 | | |
| | | 1,142 | | | | Pensare Acquisition Corp., Expiration Date: January 26, 2020*,5 | | | | | 297 | | |
| | | | | | | Total Rights (Cost $0) | | | | | 2,378 | | |
| | | | Units – 0.0% | | | ||||||||
| | | 1 | | | | Far Point Acquisition Corp.*,5 | | | | | 10 | | |
| | | 1 | | | | Leisure Acquisition Corp.*,5 | | | | | 10 | | |
| | | | | | | Total Units (Cost $20) | | | | | 20 | | |
| | | | Warrants – 0.0% | | | ||||||||
| | | 623 | | | | Big Rock Partners Acquisition Corp., Expiration Date: December 1, 2022*,5 | | | | | 112 | | |
| | | 1,386 | | | | Black Ridge Acquisition Corp., Expiration Date: October 25, 2022*,5 | | | | | 416 | | |
| | | 693 | | | | CM Seven Star Acquisition Corp., Expiration Date: November 6, 2022*,5,6 | | | | | 118 | | |
| | | 265 | | | | Constellation Alpha Capital Corp., Expiration Date: March 23, 2024*,5,6 | | | | | 32 | | |
SCHEDULE OF INVESTMENTS — Continued
As of March 31, 2019
| Number of Shares | | | | | | Value | | ||||||
| | | | Warrants (Continued) | | | ||||||||
| | | 286 | | | | Falcon Minerals Corp., Expiration Date: August 23, 2023*,5 | | | | $ | 235 | | |
| | | 453 | | | | Far Point Acquisition Corp., Expiration Date: June 1, 2025*,5 | | | | | 566 | | |
| | | 1,038 | | | | Legacy Acquisition Corp., Expiration Date: November 30, 2022*,5 | | | | | 311 | | |
| | | 1,187 | | | | Leisure Acquisition Corp., Expiration Date: December 28, 2022*,5 | | | | | 513 | | |
| | | 290 | | | | NRC Group Holdings Corp., Expiration Date: October 18, 2023*,5 | | | | | 261 | | |
| | | 1,502 | | | | One Madison Corp., Expiration Date: February 22, 2023*,5,6 | | | | | 1,697 | | |
| | | 127 | | | | OneSpaWorld Holding, Ltd., Expiration Date: March 19, 2024* | | | | | 306 | | |
| | | 571 | | | | Pensare Acquisition Corp., Expiration Date: August 8, 2022*,5 | | | | | 114 | | |
| | | 377 | | | | Pure Acquisition Corp., Expiration Date: April 17, 2023*,5 | | | | | 4 | | |
| | | | | | | Total Warrants (Cost $305) | | | | | 4,685 | | |
| | | | Short-Term Investments – 24.3% | | | ||||||||
| | | 4,175,670 | | | | Morgan Stanley Institutional Liquidity Fund – Government Portfolio – Institutional Class, 2.28%5,7 | | | | | 4,175,670 | | |
| | | | | | | Total Short-Term Investments (Cost $4,175,670) | | | | | 4,175,670 | | |
| | | | | | | Total Investments – 89.3% (Cost $15,493,275) | | | | | 15,355,329 | | |
| | | | | | | Other Assets in Excess of Liabilities – 14.2% | | | | | 1,840,890 | | |
| | | | | | | Total Net Assets – 100.0% | | | | $ | 17,196,219 | | |
| | | | Securities Sold Short – (2.4)% | | | ||||||||
| | | | | | | Common Stocks – (1.5)% | | | |||||
| | | | | | | Financials – (0.4)% | | | |||||
| | | (316) | | | | Brookfield Asset Management, Inc. – Class A6 | | | | | (14,741) | | |
| | | (166) | | | | Chemical Financial Corp. | | | | | (6,833) | | |
| | | (11) | | | | Fiserv, Inc.* | | | | | (971) | | |
| | | (3,064) | | | | People’s United Financial, Inc. | | | | | (50,372) | | |
| | | | | | | | | | | | (72,917) | | |
| | | | | | | Health Care – (0.2)% | | | |||||
| | | (684) | | | | Bristol-Myers Squibb Co. | | | | | (32,634) | | |
| | | | | | | Materials – (0.9)% | | | |||||
| | | (58) | | | | Dow, Inc.* | | | | | (2,994) | | |
| | | (175) | | | | DowDuPont, Inc.* | | | | | (6,312) | | |
| | | (3,293) | | | | Newmont Mining Corp. | | | | | (117,791) | | |
| | | (117) | | | | Pan American Silver Corp.6 | | | | | (1,550) | | |
| | | (1,891) | | | | SunCoke Energy, Inc.* | | | | | (16,055) | | |
| | | | | | | | | | | | (144,702) | | |
| | | | | | | Total Common Stocks (Proceeds $248,937) | | | | | (250,253) | | |
|
SCHEDULE OF INVESTMENTS — Continued
As of March 31, 2019
| Number of Shares | | | | | | Value | | ||||||
| | | | Securities Sold Short (Continued) | | | ||||||||
| | | | Exchange-Traded Funds – (0.9)% | | | ||||||||
| | | (750) | | | | iShares iBoxx High Yield Corporate Bond ETF | | | | $ | (64,853) | | |
| | | (1,400) | | | | SPDR Bloomberg Barclays High Yield Bond ETF | | | | | (50,358) | | |
| | | (1,612) | | | | SPDR Bloomberg Barclays Short Term High Yield Bond ETF | | | | | (43,927) | | |
| | | | | | | Total Exchange-Traded Funds (Proceeds $159,316) | | | | | (159,138) | | |
| | | | | | | Total Securities Sold Short (Proceeds $408,253) | | | | $ | (409,391) | | |
|
| Number of Contracts | | | | ||||||||||
| | | | WRITTEN Options Contracts – 0.0% | | | ||||||||
| | | | Call Options – 0.0% | | | ||||||||
| | | | | | | Mellanox Technologies, Ltd. | | | |||||
| | | (2) | | | | Exercise Price: $120.00, Notional Amount: $(24,000), Expiration Date: April 18, 2019 | | | | | (10) | | |
| | | (1) | | | | Exercise Price: $120.00, Notional Amount: $(12,000), Expiration Date: June 21, 2019 | | | | | (95) | | |
| | | | | | | SunCoke Energy, Inc. | | | |||||
| | | (1) | | | | Exercise Price: $7.50, Notional Amount: $(750), Expiration Date: June 21, 2019 | | | | | (140) | | |
| | | | | | | Total Call Options (Proceeds $520) | | | | | (245) | | |
| | | | | | | Put Options – 0.0% | | | |||||
| | | | | | | Celgene Corp. | | | |||||
| | | (1) | | | | Exercise Price: $80.00, Notional Amount: $(8,000), Expiration Date: April 18, 2019 | | | | | (27) | | |
| | | | | | | Total PUT Options (Proceeds $31) | | | | | (27) | | |
| | | | | | | Total WRITTEN Options Contracts (Proceeds $551) | | | | $ | (272) | | |
SCHEDULE OF INVESTMENTS — Continued
As of March 31, 2019
SUMMARY OF INVESTMENTS
As of March 31, 2019
Security Type/Sector* | | | Percent of Total Net Assets | | |||
Closed-End Funds | | | | | 29.3% | | |
Common Stocks | | | | | | | |
Technology | | | | | 3.1% | | |
Financials | | | | | 2.3% | | |
Materials | | | | | 0.8% | | |
Health Care | | | | | 0.6% | | |
Communications | | | | | 0.1% | | |
Total Common Stocks | | | | | 6.9% | | |
Investment Funds | | | | | 10.2% | | |
Collateralized Mortgage Obligations | | | | | 5.8% | | |
Asset-Backed Securities | | | | | 5.5% | | |
Mutual Funds | | | | | 3.6% | | |
Bank Loans | | | | | 2.9% | | |
Exchange-Traded Debt Securities | | | | | 0.8% | | |
Purchased Options Contracts | | | | | | | |
Call Options | | | | | 0.0% | | |
Put Options | | | | | 0.0% | | |
Total Purchased Options Contracts | | | | | 0.0% | | |
Rights | | | | | 0.0% | | |
Units | | | | | 0.0% | | |
Warrants | | | | | 0.0% | | |
Short-Term Investments | | | | | 24.3% | | |
Total Investments | | | | | 89.3% | | |
Other Assets in Excess of Liabilities | | | | | 10.7% | | |
Total Net Assets | | | | | 100.0% | | |
STATEMENT OF ASSETS AND LIABILITIES
As of March 31, 2019
| Assets: | | | | | | | |
| Investments, at value (cost $15,492,786) | | | | $ | 15,354,893 | | |
| Purchased options contracts, at value (cost $489) | | | | | 436 | | |
| Cash | | | | | 228,141 | | |
| Cash deposited with brokers for securities sold short | | | | | 445,814 | | |
| Receivables: | | | | | | | |
| Investment securities sold | | | | | 96,829 | | |
| Fund shares sold | | | | | 719,964 | | |
| Dividends and interest | | | | | 64,564 | | |
| Investments purchased in advance | | | | | 1,125,000 | | |
| Due from Advisor | | | | | 51,736 | | |
| Prepaid expenses | | | | | 30,333 | | |
| Prepaid organization and offering costs | | | | | 210 | | |
| Total assets | | | | | 18,117,920 | | |
| Liabilities: | | | | | | | |
| Securities sold short, at value (proceeds $408,253) | | | | | 409,391 | | |
| Written options contracts, at value (proceeds $551) | | | | | 272 | | |
| Payables: | | | | | | | |
| Investment securities purchased | | | | | 173,260 | | |
| Fund shares redeemed | | | | | 258,637 | | |
| Auditing fees | | | | | 39,753 | | |
| Custody fees | | | | | 8,697 | | |
| Transfer agent fees and expenses | | | | | 4,494 | | |
| Chief Compliance Officer fees | | | | | 575 | | |
| Fund administration fees | | | | | 410 | | |
| Fund accounting fees | | | | | 332 | | |
| Accrued other expenses | | | | | 25,880 | | |
| Total liabilities | | | | | 921,701 | | |
| Net Assets | | | | $ | 17,196,219 | | |
STATEMENT OF ASSETS AND LIABILITIES — Continued
As of March 31, 2019
| Components of Net Assets: | | | | | | | |
| Paid-in capital (par value of $0.01 per share with an unlimited number of shares authorized) | | | | $ | 17,194,155 | | |
| Total distributable earnings | | | | | 2,064 | | |
| Net Assets | | | | $ | 17,196,219 | | |
| Maximum Offering Price per Share: | | | | | | | |
| CIA Class Shares: | | | | | | | |
| Net assets applicable to shares outstanding | | | | $ | 17,196,219 | | |
| Shares of common stock issued and outstanding | | | | | 684,139 | | |
| Net asset value per share | | | | $ | 25.14 | | |
STATEMENT OF OPERATIONS
For the Year Ended March 31, 2019
| Investment Income: | | | | | | | |
| Dividends (net of withholding tax of $289) | | | | $ | 557,659 | | |
| Interest | | | | | 135,747 | | |
| Total investment income | | | | | 693,406 | | |
| Expenses: | | | | | | | |
| Advisory fees | | | | | 170,533 | | |
| Legal fees | | | | | 96,980 | | |
| Custody fees | | | | | 43,267 | | |
| Miscellaneous | | | | | 41,221 | | |
| Auditing fees | | | | | 37,763 | | |
| Registration fees | | | | | 33,251 | | |
| Dividends on securities sold short | | | | | 32,488 | | |
| Offering costs | | | | | 29,446 | | |
| Trustees’ fees and expenses | | | | | 29,000 | | |
| Transfer agent fees and expenses | | | | | 26,996 | | |
| Shareholder reporting fees | | | | | 26,937 | | |
| Interest on securities sold short | | | | | 19,229 | | |
| Chief Compliance Officer fees | | | | | 18,638 | | |
| Insurance fees | | | | | 12,206 | | |
| Fund administration fees | | | | | 6,168 | | |
| Broker expenses | | | | | 5,587 | | |
| Fund accounting fees | | | | | 5,397 | | |
| Total expenses | | | | | 635,107 | | |
| Advisory fees waived and other expenses absorbed | | | | | (352,938) | | |
| Net expenses | | | | | 282,169 | | |
| Net investment income | | | | | 411,237 | | |
| Realized and Unrealized Gain (Loss) on Investments, Purchased Options Contracts, Securities Sold Short, Warrants, Written Options Contracts and Foreign Currency | | | | | | | |
| Net realized gain (loss) on: | | | | | | | |
| Investments | | | | | 326,932 | | |
| Purchased options contracts | | | | | (44,206) | | |
| Securities sold short | | | | | (365,899) | | |
| Written options contracts | | | | | (20,936) | | |
| Foreign currency transactions | | | | | 16,943 | | |
| Net realized loss | | | | | (87,166) | | |
| Net change in unrealized appreciation/depreciation on: | | | | | | | |
| Investments | | | | | 30,149 | | |
| Purchased options contracts | | | | | 7,627 | | |
| Securities sold short | | | | | 55,880 | | |
| Written options contracts | | | | | 9,673 | | |
| Foreign currency translations | | | | | (919) | | |
| Net change in unrealized appreciation/depreciation | | | | | 102,410 | | |
| Net realized and unrealized gain on investments, purchased option contracts, securities sold short, written options contracts, and foreign currency | | | | | 15,244 | | |
| Net Increase in Net Assets from Operations | | | | $ | 426,481 | | |
|
STATEMENT OF CHANGES IN NET ASSETS
| | | For the Year Ended March 31, 2019 | | | For the Period June 12, 2017 Through March 31, 2018* | | ||||||
Increase (Decrease) in Net Assets from: | | | | | | | | | | | | | |
Operations: | | | | | | | | | | | | | |
Net investment income | | | | $ | 411,237 | | | | | $ | 33,255 | | |
Net realized gain (loss) on investments, purchased options contracts, securities sold short, written options contracts, and foreign currency | | | | | (87,166) | | | | | | 46,050 | | |
Net change in unrealized appreciation/depreciation on investments, purchased option contracts, securities sold short, written options contracts, and foreign currency | | | | | 102,410 | | | | | | (241,215) | | |
Net increase (decrease) in net assets resulting from operations | | | | | 426,481 | | | | | | (161,910) | | |
Distributions to Shareholders: | | | | | | | | | | | | | |
Distributions:1 | | | | | | | | | | | | | |
CIA Class | | | | | (207,210) | | | | | | | | |
Total | | | | | (207,210) | | | | | | | | |
From net investment income: | | | | | | | | | | | | | |
CIA Class | | | | | | | | | | | (28,307) | | |
Total | | | | | | | | | | | (28,307) | | |
From net realized gains: | | | | | | | | | | | | | |
CIA Class | | | | | | | | | | | (29,528) | | |
Total | | | | | | | | | | | (29,528) | | |
Capital Transactions: | | | | | | | | | | | | | |
Net proceeds from shares sold: | | | | | | | | | | | | | |
CIA Class | | | | | 7,804,749 | | | | | | 15,073,953 | | |
Reinvestment of distributions: | | | | | | | | | | | | | |
CIA Class | | | | | 138,092 | | | | | | 41,642 | | |
Cost of shares redeemed: | | | | | | | | | | | | | |
CIA Class | | | | | (3,560,451) | | | | | | (2,301,292) | | |
Net increase in net assets from capital transactions | | | | | 4,382,390 | | | | | | 12,814,303 | | |
Total increase in net assets | | | | | 4,601,661 | | | | | | 12,594,558 | | |
Net Assets: | | | | | | | | | | | | | |
Beginning of period | | | | | 12,594,558 | | | | | | — | | |
End of period2 | | | | $ | 17,196,219 | | | | | $ | 12,594,558 | | |
Capital Share Transactions: | | | | | | | | | | | | | |
Shares sold: | | | | | | | | | | | | | |
CIA Class | | | | | 312,367 | | | | | | 597,986 | | |
Shares reinvested: | | | | | | | | | | | | | |
CIA Class | | | | | 5,699 | | | | | | 1,627 | | |
Shares redeemed: | | | | | | | | | | | | | |
CIA Class | | | | | (142,477) | | | | | | (91,063) | | |
Net increase in capital share transactions | | | | | 175,589 | | | | | | 508,550 | | |
STATEMENT OF CASH FLOWS
For the Year Ended March 31, 2019
| Increase (Decrease) in Cash: | | | | | | | |
| Cash flows provided by (used for) operating activities: | | | | | | | |
| Net increase in net assets resulting from operations | | | | $ | 426,481 | | |
| Adjustments to reconcile net increase in net assets from operations to net cash used for operating activities: | | | | | | | |
| Purchases of long-term portfolio investments | | | | | (37,368,931) | | |
| Sales of long-term portfolio investments | | | | | 36,206,697 | | |
| Proceeds from securities sold short | | | | | 8,815,147 | | |
| Cover short securities | | | | | (10,956,330) | | |
| Proceeds from written options | | | | | 71,943 | | |
| Closed written options | | | | | (116,724) | | |
| Purchases of short-term investments, net | | | | | (2,129,013) | | |
| Return of capital dividends received | | | | | 678,883 | | |
| Decrease in foreign currency | | | | | 24,985 | | |
| Decrease in cash deposited with broker for securities sold short | | | | | 1,948,674 | | |
| Increase in dividends and interest receivable | | | | | (47,260) | | |
| Increase in due from Advisor | | | | | (1,522) | | |
| Increase in prepaid expenses | | | | | (16,225) | | |
| Decrease in prepaid organization and offering costs | | | | | 29,446 | | |
| Decrease in foreign currency due to custodian | | | | | (223,473) | | |
| Decrease in dividends and interest on securities sold short | | | | | (3,037) | | |
| Increase in accrued expenses | | | | | 18,857 | | |
| Net amortization on investments | | | | | (8,619) | | |
| Net realized loss | | | | | 92,882 | | |
| Net change in unrealized appreciation/depreciation | | | | | (103,329) | | |
| Net cash used for operating activities | | | | | (2,660,468) | | |
| Cash flows provided by (used for) financing activities: | | | | | | | |
| Proceeds from shares sold | | | | | 7,084,785 | | |
| Cost of shares redeemed | | | | | (4,130,163) | | |
| Dividends paid to shareholders, net of reinvestments | | | | | (69,118) | | |
| Net cash provided by financing activities | | | | | 2,885,504 | | |
| Net increase in cash | | | | | 225,036 | | |
| Cash: | | | | | | | |
| Beginning of period | | | | | 3,105 | | |
| End of period | | | | $ | 228,141 | | |
FINANCIAL HIGHLIGHTS
CIA Class
For a capital share outstanding throughout each period.
| | | For the Year Ended March 31, 2019 | | | For the Period June 12, 2017* Through March 31, 2018 | | ||||||
Net asset value, beginning of period | | | | $ | 24.77 | | | | | $ | 25.00 | | |
Income from Investment Operations: | | | | | | | | | | | | | |
Net investment income1 | | | | | 0.86 | | | | | | 0.08 | | |
Net realized and unrealized loss on investments | | | | | (0.06) | | | | | | (0.20) | | |
Total from investment operations | | | | | 0.80 | | | | | | (0.12) | | |
Less Distributions: | | | | | | | | | | | | | |
From net investment income | | | | | (0.28) | | | | | | (0.05) | | |
From net realized gains | | | | | (0.15) | | | | | | (0.06) | | |
Total distributions | | | | | (0.43) | | | | | | (0.11) | | |
Redemption fee proceeds1 | | | | | — | | | | | | — | | |
Net asset value, end of period | | | | $ | 25.14 | | | | | $ | 24.77 | | |
Total return | | | | | 3.28% | | | | | | (0.50)%2 | | |
Ratios and Supplemental Data: | | | | | | | | | | | | | |
Net assets, end of period (in thousands) | | | | $ | 17,196 | | | | | $ | 12,595 | | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | |
(including interest expense and interest on securities sold short) | | | | | | | | | | | | | |
Before fees waived4 | | | | | 5.28% | | | | | | 6.89%3 | | |
After fees waived4 | | | | | 2.35% | | | | | | 2.45%3 | | |
Ratio of net investment income to average net assets: | | | | | | | | | | | | | |
(including interest expense and interest on securities sold short) | | | | | | | | | | | | | |
Before fees waived | | | | | 0.49% | | | | | | (4.05)%3 | | |
After fees waived | | | | | 3.42% | | | | | | 0.39%3 | | |
Portfolio turnover rate | | | | | 374% | | | | | | 264%2 | | |
Notes to Financial Statements
March 31, 2019
Notes to Financial Statements — Continued
March 31, 2019
Notes to Financial Statements — Continued
March 31, 2019
Notes to Financial Statements — Continued
March 31, 2019
Notes to Financial Statements — Continued
March 31, 2019
Notes to Financial Statements — Continued
March 31, 2019
| 2021 | | | | $ | 375,201 | | |
| 2022 | | | | $ | 352,938 | | |
| Total | | | | $ | 728,139 | | |
| Cost of investments | | | | $ | 14,521,296 | | |
| Gross unrealized appreciation | | | | $ | 275,892 | | |
| Gross unrealized depreciation | | | | | (451,522) | | |
| Net unrealized depreciation on investments | | | | $ | (175,630) | | |
Notes to Financial Statements — Continued
March 31, 2019
| Increase (Decrease) | | |||
| Paid-in Capital | | | Total Distributable Earnings | |
| $ (176) | | | $ 176 | |
| Undistributed ordinary income | | | | $ | 32,810 | | |
| Undistributed long-term capital gains | | | | | — | | |
| Accumulated earnings | | | | | 32,810 | | |
| Accumulated capital and other losses | | | | | (13,302) | | |
| Unrealized depreciation on investments | | | | | (175,630) | | |
| Unrealized depreciation on foreign currency | | | | | — | | |
| Total accumulated deficit | | | | $ | (156,122) | | |
Distribution paid from: | | | 2018 | | | 2017 | | ||||||
Ordinary income | | | | $ | 196,387 | | | | | $ | 53,633 | | |
Net long-term capital gains | | | | | 10,823 | | | | | | 4,201 | | |
Total taxable distributions | | | | $ | 207,210 | | | | | $ | 57,834 | | |
Notes to Financial Statements — Continued
March 31, 2019
Notes to Financial Statements — Continued
March 31, 2019
| | | Level 1 | | | Level 2 | | | Level 3 | | | Total | | ||||||||||||
Assets | | | | | | | | | | | | | | | | | | | | | | | | | |
Investments | | | | | | | | | | | | | | | | | | | | | | | | | |
Asset-Backed Securities | | | | $ | — | | | | | $ | 945,630 | | | | | $ | — | | | | | $ | 945,630 | | |
Bank Loans | | | | | — | | | | | | — | | | | | | 495,000 | | | | | | 495,000 | | |
Closed-End Funds | | | | | 4,255,350 | | | | | | — | | | | | | — | | | | | | 4,255,350 | | |
Collateralized Mortgage Obligations | | | | | — | | | | | | 996,202 | | | | | | — | | | | | | 996,202 | | |
Common Stocks | | | | | | | | | | | | | | | | | | | | | | | | | |
Communications | | | | | 11,564 | | | | | | — | | | | | | — | | | | | | 11,564 | | |
Financials | | | | | 338,843 | | | | | | 49,484 | | | | | | — | | | | | | 388,327 | | |
Health Care | | | | | 110,556 | | | | | | — | | | | | | — | | | | | | 110,556 | | |
Materials | | | | | 141,959 | | | | | | — | | | | | | — | | | | | | 141,959 | | |
Technology | | | | | 534,038 | | | | | | — | | | | | | — | | | | | | 534,038 | | |
Exchange-Traded Debt Securities* | | | | | 137,489 | | | | | | — | | | | | | — | | | | | | 137,489 | | |
Mutual Funds | | | | | 625,251 | | | | | | — | | | | | | — | | | | | | 625,251 | | |
Purchased Options Contracts | | | | | 436 | | | | | | — | | | | | | — | | | | | | 436 | | |
Rights | | | | | 937 | | | | | | 361 | | | | | | 1,080 | | | | | | 2,378 | | |
Units | | | | | 10 | | | | | | 10 | | | | | | — | | | | | | 20 | | |
Warrants | | | | | 4,168 | | | | | | 517 | | | | | | — | | | | | | 4,685 | | |
Short-Term Investments | | | | | 4,175,670 | | | | | | — | | | | | | — | | | | | | 4,175,670 | | |
Subtotal | | | | $ | 10,336,271 | | | | | $ | 1,992,204 | | | | | $ | 496,080 | | | | | $ | 12,824,555 | | |
Closed End Funds | | | | | | | | | | | | | | | | | | | | | | $ | 786,475 | | |
Investment Funds | | | | | | | | | | | | | | | | | | | | | | $ | 1,744,299 | | |
Total Investments | | | | | | | | | | | | | | | | | | | | | | $ | 15,355,329 | | |
Liabilities | | | | | | | | | | | | | | | | | | | | | | | | | |
Securities Sold Short | | | | | | | | | | | | | | | | | | | | | | | | | |
Common Stocks* | | | | $ | 250,253 | | | | | $ | — | | | | | $ | — | | | | | $ | 250,253 | | |
Exchange-Traded Funds* | | | | | 159,138 | | | | | | — | | | | | | — | | | | | | 159,138 | | |
Written Options Contracts | | | | | 272 | | | | | | — | | | | | | — | | | | | | 272 | | |
Total Securities Sold Short | | | | $ | 409,663 | | | | | $ | — | | | | | $ | — | | | | | $ | 409,663 | | |
| Beginning balance March 31, 2018 | | | | $ | — | | |
| Transfers into Level 3 during the period | | | | | — | | |
| Transfers out of Level 3 during the period | | | | | — | | |
| Total realized gain/(loss) | | | | | — | | |
| Total unrealized appreciation/(depreciation) | | | | | 1,080 | | |
| Net purchases | | | | | 495,000 | | |
| Net sales | | | | | — | | |
| Balance as of March 31, 2019 | | | | $ | 496,080 | | |
Notes to Financial Statements — Continued
March 31, 2019
Fair Value March 31, 2019 | | | Valuation Methodologies | | | Unobservable Input(1) | | | Input Range/Value | | | Impact to Valuation from an increase in Input(2) | | |||
$496,080 | | | Recent Transaction Price | | | Recent Transaction Price | | | — | | | | | Increase | | |
| | | Asset Derivatives | | | Liability Derivatives | | ||||||||||||
Derivatives not designated as hedging instruments | | | Statement of Asset and Liabilities Location | | | Value | | | Statement of Asset and Liabilities Location | | | Value | | ||||||
Equity Price Risk | | | Purchased options contracts, at value | | | | $ | 436 | | | | Written options contracts, at value | | | | $ | 272 | | |
Total | | | | | | | $ | 436 | | | | | | | | $ | 272 | | |
Notes to Financial Statements — Continued
March 31, 2019
Amount of Realized Gain or (Loss) on Derivatives Recognized in Income | | ||||||||||||
Derivatives not designated as hedging instruments | | | Purchased Options Contracts | | | Written Options Contracts | | ||||||
Equity Price Risk | | | | $ | (44,206) | | | | | $ | (20,936) | | |
Total | | | | $ | (44,206) | | | | | $ | (20,936) | | |
|
Change in Unrealized Appreciation/Depreciation on Derivatives Recognized in Income | | ||||||||||||||||||
Derivatives not designated as hedging instruments | | | Purchased Options Contracts | | | Written Options Contracts | | | Total | | |||||||||
Equity Price Risk | | | | $ | 7,627 | | | | | $ | 9,673 | | | | | $ | 17,300 | | |
Total | | | | $ | 7,627 | | | | | $ | 9,673 | | | | | $ | 17,300 | | |
Derivative | | | Quarterly Average | | | Amount | | |||
Options Contracts — Purchased | | | Average Notional Value | | | | | 420,440 | | |
Options Contracts — Written | | | Average Notional Value | | | | | (457,520) | | |
Fund Management(Unaudited)
March 31, 2019
Name, Address and Year of Birth | | | Position(s) Held With the Fund | | | Length of Time Served | | | Principal Occupation(s) During Past 5 Years | | | Number of Portfolios in Fund Complex* Overseen by Trustee | | | Other Directorships Held by Trustees | |
David G. Lee Year of Birth: 1952 c/o UMB Fund Services, Inc. 235 W. Galena St. Milwaukee, WI 53212 | | | Trustee | | | Since Inception | | | President and Director, Client Opinions, Inc. (2003 – 2012); Chief Operating Officer, Brandywine Global Investment Management (1998 – 2002) | | | 6 | | | None | |
Robert Seyferth Year of Birth: 1952 c/o UMB Fund Services, Inc. 235 W. Galena St. Milwaukee, WI 53212 | | | Trustee | | | Since Inception | | | Chief Procurement Officer/Senior Managing Director, Bear Stearns/JP Morgan Chase (1993 – 2009) | | | 6 | | | None | |
Gary E. Shugrue Year of Birth: 1954 c/o UMB Fund Services, Inc. 235 W. Galena St. Milwaukee, WI 53212 | | | Advisory Board Member | | | Since December 2018 | | | Managing Director, Veritable LP (2016 – Present); Founder/President, Ascendant Capital Partners, LP (2001 – 2015) | | | 6 | | | Trustee, Quaker Investment Trust (5 portfolios)(registered investment company); Scotia Institutional Funds (2006 – 2014) (3 portfolios)(registered investment company | |
Fund Management(Unaudited) — Continued
March 31, 2019
Name, Address and Year of Birth | | | Position(s) Held with the Fund | | | Length of Time Served | | | Principal Occupation(s) During Past 5 Years | | | Number of Portfolios in Fund Complex* Overseen by Trustee | | | Other Directorships Held by Trustees | |
Anthony Fischer** Year of Birth: 1959 c/o UMB Fund Services, Inc. 235 W. Galena St. Milwaukee, WI 53212 | | | Chairman and Trustee | | | Since March 2016 | | | Executive Director– National Sales of UMB Bank for Institutional Banking and Asset Servicing (Until 2018); President of UMB Fund Services (2014 – 2018); Executive Vice President in charge of Business Development, UMB Fund Services (2013 – 2014); Senior Vice President in Business Development, UMB Fund Services (2008 – 2013). | | | 6 | | | None | |
Michael Peck Year of Birth: 1980 c/o UMB Fund Services, Inc. 235 W. Galena St. Milwaukee, WI 53212 | | | President | | | Since Inception | | | President and Co-CIO, Vivaldi Capital Management, LLC (2012 – Present); Portfolio Manager, Coe Capital Management (2010 – 2012); Senior Financial Analyst and Risk Manager, the Bond Companies (2006 – 2008). | | | N/A | | | N/A | |
Chad Eisenberg Year of Birth: 1982 c/o UMB Fund Services, Inc. 235 W. Galena St. Milwaukee, WI 53212 | | | Treasurer | | | Since Inception | | | Chief Operating Officer, Vivaldi Capital Management LLC (2012 – Present); Director, Coe Capital Management LLC (2010 – 2011). | | | N/A | | | N/A | |
Fund Management(Unaudited) — Continued
March 31, 2019
Name, Address and Year of Birth | | | Position(s) Held with the Fund | | | Length of Time Served | | | Principal Occupation(s) During Past 5 Years | | | Number of Portfolios in Fund Complex* Overseen by Trustee | | | Other Directorships Held by Trustees | |
Perpetua Seidenberg Year of Birth: 1990 c/o UMB Fund Services, Inc. 235 W. Galena St. Milwaukee, WI 53212 | | | Chief Compliance Officer | | | Since June 5, 2018 | | | Compliance Director, Vigilant Compliance, LLC (an investment management services company) (2014 – Present); Auditor, PricewaterhouseCoopers (2012 – 2014). | | | N/A | | | N/A | |
Ann Maurer Year of Birth: 1972 c/o UMB Fund Services, Inc. 235 W. Galena St. Milwaukee, WI 53212 | | | Secretary | | | Since September 5, 2018 | | | Senior Vice President, Client Services (2017 – Present); Vice President, Senior Client Service Manager (2013 – 2017), Assistant Vice President, Client Relations Manager (2002 – 2013); UMB Fund Services, Inc. | | | N/A | | | N/A | |
Fund INFORMATION(Unaudited)
March 31, 2019
Fund INFORMATION(Unaudited) — Continued
March 31, 2019
FUND INFORMATION (Unaudited) — Continued
March 31, 2019
| | | | Ticker | | | CUSIP | | ||||||
| The Relative Value Fund – CIA Class Shares | | | | | VFLEX | | | | | | 75943J100 | | |
235 West Galena Street
Milwaukee, WI 53212
Toll Free: (877) 779-1999
PRIVACY POLICY
(Unaudited)
| | FACTS | | | | WHAT DOES THE FUND DO WITH YOUR PERSONAL INFORMATION? | | |
| | Why? | | | | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. | | |
| | What? | | | | The types of personal information we collect and share depend on the product or service you have with us. This information can include: • Social Security number • account balances • account transactions • transaction history • wire transfer instructions • checking account information Even when you areno longer our customer, we continue to share your information as described in this notice. | | |
| | How? | | | | All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons funds choose to share; and whether you can limit this sharing. | | |
| | Reasons we can share your personal information | | | | Does the Fund share? | | | | Can you limit this sharing? | | |
| | For our everyday business purposes — such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus | | | | Yes | | | | No | | |
| | For our marketing purposes — to offer our products and services to you | | | | No | | | | We don’t share | | |
| | For joint marketing with other financial companies | | | | No | | | | We don’t share | | |
| | For our affiliates’ everyday business purposes — information about your transactions and experiences | | | | Yes | | | | No | | |
| | For our affiliates’ everyday business purposes — information about your creditworthiness | | | | No | | | | We don’t share | | |
| | For our affiliates to market to you | | | | No | | | | We don’t share | | |
| | For nonaffiliates to market to you | | | | No | | | | We don’t share | | |
PRIVACY POLICY — Continued
(Unaudited)
| | What we do | | | | | | |
| | How does the Fund protect my personal information? | | | | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings. | | |
| | How does the Fund collect my personal information? | | | | We collect your personal information, for example, when you • open an account • provide account information • give us your contact information • make a wire transfer • tell us where to send money We also collect your information from others, such as credit bureaus, affiliates, or other companies. | | |
| | Why can’t I limit all sharing? | | | | Federal law gives you the right to limit only • sharing for affiliates’ everyday business purposes — information about your creditworthiness • sharing for affiliates from using your information to market to you • sharing for nonaffiliates to market to you State laws and individual companies may give you additional rights to limit sharing. | | |
| | Definitions | | | | | | |
| | Affiliates | | | | Companies related by common ownership or control. They can be financial and nonfinancial companies. • Our affiliates include companies such as Vivaldi Asset Management, LLC. | | |
| | Nonaffiliates | | | | Companies not related by common ownership or control. They can be financial and nonfinancial companies. • The Funddoesn’t share with nonaffiliates so they can market to you. | | |
| | Joint marketing | | | | A formal agreement between nonaffiliated financial companies that together market financial products or services to you. • The Fund doesn’t jointly market. | | |
| | Questions? | | | | Call 1-877-779-1999. | | |
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party.
(c) There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description.
(d) The registrant has not granted any waivers, during the period covered by this report, including an implicit waiver, from a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item's instructions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by the report, the registrant's board of trustees has determined that Mr. David G. Lee and Mr. Robert Seyferth are qualified to serve as the audit committee financial experts serving on its audit committee and that they are "independent," as defined by Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Audit Fees
(a) The aggregate fees billed for the last fiscal year ended March 31, 2019, and the fiscal period June 12, 2017 through March 31, 2018, for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements are $38,300 and $31,500, respectively.
Audit-Related Fees
(b) The aggregate fees billed for the last fiscal year ended March 31, 2019, and the fiscal period June 12, 2017 through March 31, 2018, for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item are $0 and $0, respectively. The fees listed in item 4 (b) are related to out-of-pocket expenses in relation to the annual audit of the registrant.
Tax Fees
(c) The aggregate fees billed for the last fiscal year ended March 31, 2019, and the fiscal period June 12, 2017 through March 31, 2018, for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning are $6,250 and $5,600, respectively.
All Other Fees
(d) The aggregate fees billed for the last fiscal year ended March 31, 2019, and the fiscal period June 12, 2017 through March 31, 2018, for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item are $0 and $0, respectively.
(e)(1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
The Registrant's Audit Committee must pre-approve the audit and non-audit services of the Auditors prior to the Auditor's engagement.
(e)(2) The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows:
(b) 0%
(c) 0%
(d) 0%
(f) The percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the fiscal period April 1, 2018 through March 31, 2019 that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was less than fifty percent.
(g) The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the for the last fiscal year ended March 31, 2019, and the fiscal period June 12, 2017 through March 31, 2018 of the registrant was $0 and $0, respectively.
(h) The registrant's audit committee of the board of trustees has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Vivaldi Asset Management, LLC
Proxy Policy and Procedure
January 2018
INTRODUCTION
Vivaldi Asset Management, LLC (“Vivaldi”) acts as either the advisor or sub-advisor to a number of registered investment companies (the “Funds”). In accord with Rule 206(4)-6 of the Investment Advisers Act of 1940, as amended, Vivaldi has adopted the following policies and procedures to provide information on Vivaldi’s proxy policy generally as well as on procedures for each of the Funds specifically (the “Proxy Policy and Procedure”). These policies and procedures apply only to Vivaldi. Investment managers engaged as sub-advisors for one of the Funds are required to vote proxies in accord with their own policies and procedures and any applicable management agreements.
GENERAL GUIDELINES
Vivaldi’s Proxy Policy and Procedure is designed to ensure that proxies are voted in a manner (i) reasonably believed to be in the best interests of the Funds and their shareholders1 and (ii) not affected by any material conflict of interest. Vivaldi considers shareholders’ best economic interests over the long term (i.e. addresses the common interest of all shareholders over time). Although shareholders may have differing political or social interests or values, their economic interest is generally uniform.
Vivaldi has adopted voting guidelines to assist in making voting decisions on common issues. The guidelines are designed to address those securities in which the Funds generally invest and may be revised in Vivaldi’s discretion. Any non-routine matters not addressed by the proxy voting guidelines are addressed on a case-by-case basis, taking into account all relevant facts and circumstances at the time of the vote, particularly where such matters have a potential for major economic impact on the issuer’s structure or operations. In making voting determinations, Vivaldi typically will rely on the individual portfolio managers who invest in and track particular companies as they are the most knowledgeable about, and best suited to make decisions regarding, particular proxy matters. In addition, Vivaldi may conduct research internally and/or use the resources of an independent research consultant. Vivaldi may also consider other materials such as studies of corporate governance and/or analyses of shareholder and management proposals by a certain sector of companies and may engage in dialogue with an issuer’s management.
Vivaldi acknowledges its responsibility to identify material conflicts of interest related to voting proxies. Vivaldi’s employees are required to disclose to the Chief Compliance Officer any personal conflicts, such as officer or director positions held by them, their spouses or close relatives, in any publicly traded company. Conflicts based on business relationships with Vivaldi, any affiliate or any person associated with Vivaldi will be considered only to the extent that Vivaldi has actual knowledge of such relationships. Vivaldi then takes appropriate steps to address identified conflicts. Typically, in those instances when a proxy vote may present a conflict between the interests of the Fund, on the one hand, and Vivaldi’s interests or the interests of a person affiliated with Vivaldi on the other, Vivaldi will abstain from making a voting decision and will document the decision and reasoning for doing so.
In some cases, the cost of voting a proxy may outweigh the expected benefits. For example, casting a vote on a foreign security may involve additional costs such as hiring a translator or traveling to the foreign country to vote the security in person. Vivaldi may abstain from voting a proxy if the effect on shareholders’ economic interests or the value of the portfolio holding is indeterminable or insignificant.
In certain cases, securities on loan as part of a securities lending program may not be voted. Nothing in the proxy voting policies shall obligate Vivaldi to exercise voting rights with respect to a portfolio security if it is prohibited by the terms of the security or by applicable law or otherwise.
Vivaldi will not discuss with members of the public how they intend to vote on any particular proxy proposal.
1 Actions taken in accord with the best interests of the Funds and their shareholders are those which align most closely with the Funds’ stated investment objectives and strategies
SPECIAL CONSIDERATIONS
The Funds are subject to the restrictions of Sections 12(d)(1)(A) and (B) of the Investment Company Act of 1940. Generally, these provisions require that any fund and any entity controlled by that fund (including ETFs that are registered investment companies), in the aggregate, (i) may not own more than three percent (3%) of the total outstanding voting securities of any registered open-end or closed-end investment company, including money market funds; (ii) may not own an amount greater than 5% of the fund’s total assets in the securities of any investment company; and (iii) may invest more than 10% of its total assets in the securities of other investment companies.2 Section 12(d)(1)(F) of the Act provides that the Section 12(d)(1) limitations do not apply to the securities acquired by a fund if (i) immediately after the purchase or acquisition of not more than 3% of the total outstanding stock of such registered investment company is owned by the fund and all affiliated persons of the fund, and (ii) the fund is not proposing to offer or sell any security issued by it through a principal underwriter or otherwise at a public or offering price which includes a sales load of more than one and a half percent (1.5%). In the event that one of Funds relies upon Section 12(d)(1)(F), Vivaldi, acting on behalf of the Fund, will, when voting with respect to any investment company owned by the Fund, comply with either of the following voting restrictions:
Seek instruction from the Fund’s shareholders with regard to the voting of all proxies and vote in accordance with such instructions, or
Vote the shares held by the Fund in the same proportion as the vote of all other holders of such security.
ISS PROXYEDGE
Vivalidi has entered into a contractual relationship with Institutional Shareholder Services Inc. (“ISS”) through which ISS provides certain proxy management services to Vivaldi’s portfolio management teams. Specifically, ISS (i) provides access to the ISS ProxyExchange web-based voting and research platform to access vote recommendations, research reports, execute vote instructions and run reports relevant to Subscriber’s proxy voting environment; (ii) implements and maps Vivaldi’s designated proxy voting policies to applicable accounts and generates vote recommendations based on the application of such policies; and (iii) monitors Vivaldi’s incoming ballots, performs ballot-to-account reconciliations with Vivaldi and its third party providers to help ensure that ISS is receiving all ballots for which Vivaldi has voting rights.
ISS provides two options for how proxy ballots are executed:
1. | Implied Consent: ISS executes ballots on Vivaldi’s behalf based on policy guidelines chosen at the time Vivaldi entered into the relationship with ISS. |
2. | Mandatory Signoff: ISS is not permitted to mark or process any ballot on Vivaldi’s behalf without first receiving Vivaldi’s specific voting instructions via ProxyExchange. |
Vivaldi has opted for Option 1. Implied Consent and in so doing has chosen to allow ISS to vote proxies on its behalf “with management’s recommendations.” Vivaldi has the option however to change its vote from the “with management’s recommendations” default at any point prior to the voting deadline if the portfolio managers following the subject company determine it is in the best interests of the Funds and their shareholders to do so. In those instances when the subject company’s management has not provided a voting recommendation, Vivaldi will either vote based on its own determination of what would align most closely with the best interests of the Funds and their shareholders or will opt to allow ISS to submit an “abstain” vote on its behalf. In addition, in those limited instances when share blocking3 may apply, Vivaldi has instructed ISS not to cast a vote on Vivaldi’s behalf unless Vivaldi provides specific instructions via ProxyExchange.
2 The three percent (3%) limit is measured at the time of investment.
3 Proxy voting in certain countries requires share blocking. Shareholders wishing to vote their proxies must deposit their shares shortly before the meeting date with a designated depositary. During this blocking period, any shares held by the designated depositary cannot be sold until the meeting has taken place and the shares have been returned to Vivaldi’s custodian banks. Vivaldi generally opts not to participate in share blocking proxies given these restrictions on their ability to trade.
FUND-SPECIFIC POLICIES AND PROCEDURES
Infinity Core Alternative Fund (“ICAF”)
ICAF is a “fund of funds” that invests primarily in general or limited partnerships, funds, corporations, trusts or other investment vehicles (collectively, “Investment Funds”). While it is unlikely that ICAF will receive notices or proxies from Investment Funds (or in connection with any other portfolio securities), to the extent that ICAF does receive such notices or proxies and ICAF has voting interests in such Investment Funds, the responsibility for decisions regarding proxy voting for securities held by ICAF lies with Vivaldi as ICAF’s advisor. Vivaldi will vote such proxies in accordance with the proxy policies and procedures noted above.
ICAF will be required to file Form N-PX with its complete proxy voting record for the twelve months ended June 30th, no later than August 31st of each year. The Fund’s Form N PX filing will be available: (i) without charge, upon request, by calling 1.877.779.1999 or (ii) by visiting the SEC’s website at www.sec.gov.
All Other Funds
With the exception of the Vivaldi Merger Arbitrage Fund, the Funds for which Vivaldi is presently either an advisor or a sub-advisor are managed by multiple internal and external portfolio management teams. As is noted above, the policies and procedures outlined within this Proxy Policy and Procedure apply to those securities being held in that portion of the Funds’ portfolios managed by a Vivaldi portfolio manager only.
Each Fund will be required to file Form N-PX annually, with its complete proxy voting record for the twelve months immediately prior to the Fund’s year-end, no later than sixty (60) days following the Fund’s year-end. The Fund’s Form N-PX filing will be available: (i) without charge, upon request, from the Fund’s administrator or (ii) by visiting the SEC’s website at www.sec.gov.
Angel Oak Capital Advisors
PROXY POLICY AND PROCEDURE
Angel Oak Capital Advisors, LLC (“Angel Oak” or the “Firm”), as a matter of policy and as a fiduciary to our Clients1, has responsibility for voting proxies for portfolio securities consistent with the best economic interests of our Clients.
Investment advisers registered with the U.S. Securities and Exchange Commission (“SEC”), which exercise voting authority with respect to Client securities, are required by Rule 206(4)-6 of the Investment Advisers Act of 1940 to (a) adopt and implement written policies and procedures that are reasonably designed to ensure that Client securities are voted in the best interests of Clients, which must include how an adviser addresses material conflicts that may arise between an adviser’s interests and those of its Clients; (b) to disclose to Clients how they may obtain information from the adviser with respect to the voting of proxies for their securities; (c) to describe to Clients a summary of its proxy voting policies and procedures and, upon request, furnish a copy to its Clients; and (d) maintain certain records relating to the adviser’s proxy voting activities when the adviser does have proxy voting authority.
Angel Oak will vote all proxies in the best interests of Clients and in accordance with the procedures outlined below, unless otherwise mandated by investment management agreement or applicable law. Our policy includes the responsibility to monitor corporate actions, receive and vote Client proxies, and disclose any potential conflicts of interest as well as making information available to Clients about the voting of proxies for their portfolio securities and maintaining relevant and required records.
Proxy voting is an important right of shareholders and reasonable care and diligence must be undertaken to ensure that such rights are properly and timely exercised.
1 Clients of Angel Oak include: Publicly offered open-end and closed-end registered investment companies registered under the Investment Company Act of 1940 (“Registered Funds”); private investment funds organized as onshore or offshore pooled investment vehicles exempt from registration under the Investment Company Act of 1940 (“Private Funds”); and institutional and individual investors (“Separately Managed Accounts”).
Voting Procedures
· | All proxies that are sent to Clients and received by Angel Oak to vote on behalf of Clients will be logged by Angel Oak Operations personnel and provided to the portfolio manager responsible for the asset class subject to the proxy. |
· | The portfolio manager will determine which Client accounts hold the security to which the proxy relates. |
· | Prior to voting any proxy, the portfolio manager, in consultation with the Chief Compliance Officer (“CCO”) if necessary, will determine if there are any conflicts of interest related to the proxy. If a conflict is identified, the conflict will be addressed as outlined below. |
· | Absent material conflicts, the portfolio manager will determine how Angel Oak should vote the proxy in accordance with applicable voting guidelines. Operations personnel will vote the proxy per the portfolio manager’s instructions in a timely and appropriate manner. |
Voting Guidelines
· | In the absence of specific voting guidelines from the Client, Angel Oak will vote proxies in the best interests of each particular Client. Angel Oak’s policy is to vote all proxies from a specific issuer the same way for each Client absent qualifying restrictions from a Client. Clients are permitted to place reasonable restrictions on Angel Oak’s voting authority in the same manner that they may place such restrictions on the selection of account securities or other investment guidelines. |
· | Angel Oak will generally vote in favor of routine corporate housekeeping proposals such as the election of directors and selection of auditors, absent conflicts of interest raised by an auditor’s non-audit services. Angel Oak will seek to maximize long-term value for Clients, protect Clients’ rights, and promote governance structures and practices that reinforce the accountability of corporate management and boards of directors to shareholders. |
· | Angel Oak will generally vote against proposals that cause board members to become entrenched or cause unequal voting rights. |
· | In reviewing proposals, Angel Oak will further consider the opinion of management as well as the effect of the proposal on management, shareholder value, and the issuer’s business practices. |
· | In certain circumstances, Angel Oak may refrain from voting where the economic or other opportunity cost of voting a company’s proxy exceeds any anticipated benefits of that proxy proposal. In each situation, the portfolio manager’s decision not to vote will be documented, reviewed by Compliance, and retained in the Firm’s books and records. |
Conflicts of Interest
· | Angel Oak will identify any conflicts that exist between the interests of Angel Oak and the Client by reviewing the relationship of Angel Oak with the issuer of each security to determine if Angel Oak or any of its employees has any financial, business, or personal relationship with the issuer. |
· | If a material conflict of interest exists, the CCO will disclose the conflict to the affected Client(s), to give the Client(s) an opportunity to vote the proxies themselves, or to address the voting issue through other objective means such as voting in a manner consistent with a predetermined voting policy or receiving an independent third-party voting recommendation. |
· | Angel Oak will maintain a record of the voting resolution of any conflict of interest. |
Client Requests for Information
· | All Client requests for information regarding proxy votes, or policies and procedures, received by any employee should be forwarded to the CCO. |
· | In response to any request, the CCO will prepare a written response to the Client with the information requested, and as applicable will include the name of the issuer, the proposal voted upon, and how Angel Oak voted the Client’s proxy with respect to each proposal about which the Client inquired. |
Use of Third-Party Proxy Advisory Services
The SEC has noted that registered investment advisers may prove that proxies were voted in the best interest of their clients by casting votes based on recommendations of independent third-parties. Currently, Angel Oak predominantly trades fixed-income products which generally have little to no voting authority and therefore very few proxies are voted by Angel Oak. Given the limited level of proxies, Angel Oak has not engaged a third-party proxy advisory service. In the future, Angel Oak may engage such a service. At that time, Angel Oak would be required to vet the independence of the firm engaged to cast those votes, ascertain whether the firm has the capacity and competency to adequately analyze proxy voting issues, evaluate the staffing adequacy and quality of the firm’s personnel, and review the robustness of the firm’s policies and procedures to ensure accurate votes and mitigate conflicts of interest.
Certification
Given the limited level of proxies that Angel Oak expects to see in addition to the expectation of portfolio manager’s in-depth level of monitoring and knowledge of their issuer positions, Compliance expects portfolio managers to certify each quarter, as part of a portfolio manager certification, that all proxies, if any, for their positions have been voted in the best interest of the Clients. Compliance expects that such certification will demonstrate that Angel Oak personnel are constantly reminded of their obligations under this policy even in extended periods of little to zero proxy activities for the Firm’s positions.
Recordkeeping
Angel Oak will retain the following proxy records in accordance with the SEC’s five-year retention requirement.
· | These policies and procedures and any amendments; |
· | Each proxy statement that Angel Oak receives; |
· | A record of each vote that Angel Oak casts; |
· | Any document Angel Oak created that was material to making a decision on how to vote proxies, or that memorializes that decision including periodic reports to the CCO or proxy committee, if applicable; |
· | Any documentation of a determination that a conflict of interest exists and the resolution of that conflict; and |
· | A copy of each written request from a Client for information on how Angel Oak voted such Client’s proxies, and a copy of any written response. |
RiverNorth Capital Management
PROXY VOTING POLICIES AND PROCEDURES
Pursuant to the recent adoption by the Securities and Exchange Commission (the "Commission") of Rule 206(4)-6 (17 CFR 275.206(4)-6) and amendments to Rule 204-2 (17 CFR 275.204-2) under the Investment Advisers Act of 1940 (the "Act"), it is a fraudulent, deceptive, or manipulative act, practice or course of business, within the meaning of Section 206(4) of the Act, for an investment adviser to exercise voting authority with respect to client securities, unless (i) the adviser has adopted and implemented written policies and procedures that are reasonably designed to ensure that the adviser votes proxies in the best interests of its clients, (ii) the adviser describes its proxy voting procedures to its clients and provides copies on request, and (iii) the adviser discloses to clients how they may obtain information on how the adviser voted their proxies.
In its standard investment advisory agreement, RiverNorth Capital Management, LLC (RiverNorth Capital) specifically states that it does not vote proxies and the client, including clients governed by ERISA, is responsible for voting proxies. Therefore, RiverNorth Capital will not vote proxies for these clients. However, RiverNorth Capital will vote proxies on behalf of investment company clients ("Funds"). RiverNorth Capital has instructed all custodians, other than Fund custodians, to forward proxies directly to its clients, and if RiverNorth Capital accidentally receives a proxy for any non-Fund client, current or former, the Chief Compliance Officer will promptly forward the proxy to the client. In order to fulfill its responsibilities to Funds, RiverNorth Capital (hereinafter "we" or "our") has adopted the following policies and procedures for proxy voting with regard to companies in any Fund's investment portfolios.
KEY OBJECTIVES
The key objectives of these policies and procedures recognize that a company's management is entrusted with the day-to-day operations and longer term strategic planning of the company, subject to the oversight of the company's board of directors. While "ordinary business matters" are primarily the responsibility of management and should be approved solely by the corporation's board of directors, these objectives also recognize that the company's shareholders must have final say over how management and directors are performing, and how shareholders' rights and ownership interests are handled, especially when matters could have substantial economic implications to the shareholders.
Therefore, we will pay particular attention to the following matters in exercising our proxy voting responsibilities as a fiduciary for our clients:
Accountability. Each company should have effective means in place to hold those entrusted with running a company's business accountable for their actions. Management of a company should be accountable to its board of directors and the board should be accountable to shareholders.
Alignment of Management and Shareholder Interests. Each company should endeavor to align the interests of management and the board of directors with the interests of the company's shareholders. For example, we generally believe that compensation should be designed to reward management for doing a good job of creating value for the shareholders of the company.
Transparency. Promotion of timely disclosure of important information about a company's business operations and financial performance enables investors to evaluate the performance of a company and to make informed decisions about the purchase and sale of a company's securities.
DECISION METHODS
We generally believe that the individual portfolio managers that invest in and track particular companies are the most knowledgeable and best suited to make decisions with regard to proxy votes. Therefore, we rely on those individuals to make the final decisions on how to cast proxy votes.
No set of proxy voting guidelines can anticipate all situations that may arise. In special cases, we may seek insight from our managers and analysts on how a particular proxy proposal will impact the financial prospects of a company, and vote accordingly.
In some instances, a proxy vote may present a conflict between the interests of a client, on the one hand, and our interests or the interests of a person affiliated with us, on the other. In such a case, we will abstain from making a voting decision and will forward all of the necessary proxy voting materials to the client to enable the client to cast the votes.
Notwithstanding the forgoing, the following policies will apply to investment company shares owned by a Fund. Under Section 12(d)(l) of the Investment Company Act of 1940, as amended, (the "1940 Act"), a fund may only invest up to 5% of its total assets in the securities of any one investment company, but may not own more than 3% of the outstanding voting stock of any one investment company or invest more than l0% of its total assets in the securities of other investment companies. However, Section 12(d)(l)(F) of the l 940 Act provides that the provisions of paragraph 12(d)(l ) shall not apply to securities purchased or otherwise acquired by a fund if (i) immediately after such purchase or acquisition not more than 3% of the total outstanding stock of such registered investment company is owned by the fund and all affiliated persons of the fund; and (ii) the fund is not proposing to offer or sell any security issued by it through a principal underwriter or otherwise at a public or offering price which includes a sales load of more than l Y,% percent. Therefore, each Fund (or the Adviser acting on behalf of the Fund) must comply with the following voting restrictions unless it is determined that the Fund is not relying on Section 12(d)( l )(F):
• | when the Fund exercises voting rights, by proxy or otherwise, with respect to any investment company owned by the Fund, the Fund will either |
o | seek instruction from the Fund's shareholders with regard to the voting of all proxies and vote in accordance with such instructions, or |
o | vote the shares held by the Fund in the same proportion as the vote of all other holders of such security. |
PROXY VOTING GUIDELINES
Election of the Board of Directors
We believe that good corporate governance generally starts with a board composed primarily of independent directors, unfettered by significant ties to management, all of whose members are elected annually. We also believe that turnover in board composition promotes independent board action, fresh approaches to governance, and generally has a positive impact on shareholder value. We will generally vote in favor of non-incumbent independent directors.
The election of a company's board of directors is one of the most fundamental rights held by shareholders. Because a classified board structure prevents shareholders from electing a full slate of directors annually, we will generally support efforts to declassify boards or other measures that permit shareholders to remove a majority of directors at any time, and will generally oppose efforts to adopt classified board structures.
Approval of Independent Auditors
We believe that the relationship between a company and its auditors should be limited primarily to the audit engagement, although it may include certain closely related activities that do not raise an appearance of impaired independence.
We will evaluate on a case-by-case basis instances in which the audit firm has a substantial non audit relationship with a company to determine whether we believe independence has been, or could be, compromised.
Equity-based compensation plans
We believe that appropriately designed equity-based compensation plans, approved by shareholders, can be an effective way to align the interests of shareholders and the interests of directors, management, and employees by providing incentives to increase shareholder value. Conversely, we are opposed to plans that substantially dilute ownership interests in the company, provide participants with excessive awards, or have inherently objectionable structural features.
We will generally support measures intended to increase stock ownership by executives and the use of employee stock purchase plans to increase company stock ownership by employees. These may include:
I . Requiring senior executives to hold stock in a company.
2. Requiring stock acquired through option exercise to be held for a certain period of time.
These are guidelines, and we consider other factors, such as the nature of the industry and size of the company, when assessing a plan's impact on ownership interests.
Corporate Structure
We view the exercise of shareholders' rights, including the rights to act by written consent, to call special meetings and to remove directors, to be fundamental to good corporate governance.
Because classes of common stock with unequal voting rights limit the rights of certain shareholders, we generally believe that shareholders should have voting power equal to their equity interest in the company and should be able to approve or reject changes to a company's by- laws by a simple majority vote.
We will generally support the ability of shareholders to cumulate their votes for the election of directors.
Shareholder Rights Plans
While we recognize that there are arguments both in favor of and against shareholder rights plans, also known as poison pills, such measures may tend to entrench current management, which we generally consider to have a negative impact on shareholder value. Therefore, while we will evaluate such plans on a case by case basis, we will generally oppose such plans.
CLIENT INFORMATION
A copy of these Proxy Voting Policies and Procedures is available to our clients, without charge, upon request, by calling 1-800-646-0148. We will send a copy of these Proxy Voting Policies and Procedures within three business days of receipt of a request, by first-class mail or other means designed to ensure equally prompt delivery.
In addition, we will provide each client, without charge, upon request, information regarding the proxy votes cast by us with regard to the client's securities.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a)(1) Identification of Portfolio Manager(s) or Management Team Members and Description of Role of Portfolio Manager(s) or Management Team Members
The following table provides biographical information about the members RiverNorth Capital Management, LLC and Angel Oak Capital Advisors, LLC (the "Sub-Advisers"), who are primarily responsible for the day-to-day portfolio management of The Relative Value Fund as of June 7, 2019:
Name of Portfolio Management Team Member | Title | Length of Time of Service to the Fund | Business Experience During the Past 5 Years | Role of Portfolio Management Team Member |
Michael Peck | President & Co-Chief Investment Officer | Since Inception | President, Co-Chief Investment Officer, and Portfolio Manager, Vivaldi Capital Management, LLC (2012 – present) | Portfolio Management |
Scott Hergott | Director of Research & Co-Chief Investment Officer | Since Inception | Director of Research, Co-Chief Investment Officer, and Portfolio Manager, Vivaldi Capital Management, LLC (2013 – present) | Portfolio Management |
Brian Murphy | Senior Research Analyst | Since Inception | Senior Research Analyst and Portfolio Manager, Vivaldi Capital Management, LLC (2014 – present); Director, Voyager Management, LLC (2010 – 2014) | Portfolio Management |
Kyle Mowery | Portfolio Manager | Since Inception | Portfolio Manager, Vivaldi Capital Management, LLC (2015 – present); Managing Partner, GrizzlyRock Capital, LLC (2012 – present) | Portfolio Management |
Jeff O’Brien | Portfolio Manager | Since Inception | Portfolio Manager, Vivaldi Capital Management, LLC (2014 – present); Founder and Managing Member of Glenfinnen Capital, LLC (2000 – 2014) | Portfolio Management |
Daniel Lancz | Portfolio Manager | Since Inception | Portfolio Manager, Vivaldi Capital Management, LLC (2014 – present); Director of Research, Glenfinnen Capital, LLC (2003 – 2014) | Portfolio Management |
Patrick Galley | Chief Investment Officer, Portfolio Manager | Since inception | CIO/PM, RiverNorth Capital Management, LLC (2004- present). | Portfolio Management |
Steve O’Neill | Portfolio Manager | Since inception | PM, RiverNorth Capital Management, LLC (2007- present). | Portfolio Management |
Sreeni Prabu | Managing Partner & Chief Investment Officer | 10/26/2017 | Managing Partner & Chief Investment Officer, Angel Oak Capital Advisors, 2009-present | Portfolio Management |
Sam Dunlap | Senior Portfolio Manager | 10/26/2017 | Senior Portfolio Manager, Angel Oak Capital Advisors, 2009-present | Portfolio Management |
Berkin Kologlu | Senior Portfolio Manager | 10/26/2017 | Senior Portfolio Manager, Angel Oak Capital Advisors, 2013-present; Executive Director, UBS, 2013-2007 | Portfolio Management |
Colin McBurnette | Portfolio Manager | 10/26/2017 | Portfolio Manager, Angel Oak Capital Advisors, 2012-present | Portfolio Management |
(a)(2) Other Accounts Managed by Portfolio Manager(s) or Management Team Member and Potential Conflicts of Interest
The following table provides information about portfolios and accounts, other than The Relative Value Fund, for which the members of the Investment Committee of the Sub-Adviser are primarily responsible for the day-to-day portfolio management as of March 31, 2019:
Name of Portfolio Management Team Member | Number of Accounts and Total Value of Assets for Which Advisory Fee is Performance-Based: | Number of Other Accounts Managed and Total Value of Assets by Account Type for Which There is No Performance-Based Fee: | |||||
Name
| Registered investment companies | Other pooled investment vehicles | Other accounts | Registered investment companies | Other pooled investment vehicles | Other accounts | |
Michael Peck | 0 $0 | 0 $0 | 0 $0 | 2 accounts $130M | 0 $0 | 0 $0 | |
Scott Hergott | 0 $0 | 0 $0 | 0 $0 | 2 accounts $130M | 0 $0 | 0 $0 | |
Brian Murphy | 0 $0 | 0 $0 | 0 $0 | 2 accounts $130M | 0 $0 | 0 $0 | |
Kyle Mowery | 0 $0 | 1 accounts $96.5M | 0 $0 | 3 accounts $123M | 0 $0 | 0 $0 | |
Jeff O’Brien | 0 $0 | 1 accounts $15.7M | 0 $0 | 3 accounts $610M | 0 $0 | 0 $0 | |
Daniel Lancz | 0 $0 | 1 accounts $15.7M | 0 $0 | 3 accounts $610M | 0 $0 | 0 $0 | |
Patrick Galley | 0 $0 | 4 accounts $437M | 0 $0 | 10 accounts $3.2B | 0 $0 | 2 accounts $23M | |
Steve O’Neill | 0 $0 | 3 accounts $358M | 0 $0 | 9 accounts $2.9B | 0 $0 | 2 accounts $23M |
Sreeni Prabu | 0 $0 | 7 accounts $691.8M | 0 $0 | 7 accounts $7.8B | 1 account $687M | 0 $0 | |
Sam Dunlap | 0 $0 | 1 account $104.3M | 0 $0 | 3 accounts $7.4B | 1 account $687M | 7 accounts $305.5M | |
Berkin Kologlu | 0 $0 | 1 account $104.3M | 0 $0 | 5 accounts $7.5B | 1 account $687M | 6 accounts $304.2M | |
Colin McBurnette | 0 $0 | 1 account $104.3M | 0 $0 | 5 accounts $7.6B | 1 account $687M | 3 accounts $26.8M | |
Conflicts of Interest
The Investment Manager, Sub-Advisers and Portfolio Managers may manage multiple funds and/or other accounts, and as a result may be presented with one or more of the following actual or potential conflicts:
The management of multiple funds and/or other accounts may result in the Investment Manager, a Sub-Adviser or Portfolio Manager devoting unequal time and attention to the management of each fund and/or other account. The Investment Manager seeks to manage such competing interests for the time and attention of a Portfolio Manager by having the Portfolio Manager focus on a particular investment discipline. Most other accounts managed by a Portfolio Manager are managed using the same investment models that are used in connection with the management of the Fund.
If the Investment Manager, a Sub-Adviser or Portfolio Manager identifies a limited investment opportunity which may be suitable for more than one fund or other account, a fund may not be able to take full advantage of that opportunity due to an allocation of filled purchase or sale orders across all eligible funds and other accounts. To deal with these situations, the Investment Manager and Sub-Advisers have adopted procedures for allocating portfolio transactions across multiple accounts.
The Investment Manager and Sub-Advisers have adopted certain compliance procedures which are designed to address these types of conflicts. However, there is no guarantee that such procedures will detect each and every situation in which a conflict arises.
(a)(3) Compensation Structure of Portfolio Manager
Compensation of the Investment Committee
The members of the Investment Committee are not directly compensated for their work with respect to the Fund; however, each member of the Investment Committee is an equity owner of the parent company of the Sub-Adviser and therefore benefits indirectly from the revenue generated from the Sub-Advisory Agreement.
(a)(4) Disclosure of Securities Ownership
Portfolio Management Team’s Ownership of Shares
Name of Portfolio Management Team Member: | Dollar Range of Shares Beneficially Owned by Portfolio Management Team Member: |
Michael Peck | $0 - $10,000 |
Scott Hergott | $10,001 - $50,000 |
Brian Murphy | $0 - $10,000 |
Kyle Mowery | None |
Jeff O’Brien | None |
Daniel Lancz | None |
Patrick Galley | None |
Steve O’Neill | None |
Sreeni Prabu | None |
Sam Dunlap | None |
Berkin Kologlu | None |
(b) Not Applicable
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 the shareholders may recommend nominees to the registrant's board of trustees, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17CFR 229.407), or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant's 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 COMPANIES.
Not applicable.
ITEM 13. EXHIBITS.
(a)(1) Code of ethics or any amendments thereto, that is subject to disclosure required by item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto
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)The Relative Value Fund
By (Signature and Title)* /s/ Michael Peck
Michael Peck, President
(Principal Executive Officer)
DateJune 7, 2019
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/ Michael Peck
Michael Peck, President
(Principal Executive Officer)
DateJune 7, 2019
By (Signature and Title)* /s/ Chad Eisenberg
Chad Eisenberg, Treasurer
(Principal Financial Officer)
DateJune 7, 2019
* Print the name and title of each signing officer under his or her signature.
** Signatures on this page are for all the series
· | The Relative Value Fund |
· | Vivaldi Opportunities Fund |