A
series of the
Starboard
Investment Trust
PROSPECTUS
February 1
, 201 9
This
prospectus contains information about The
Sector Rotation Fund that you should know before investing. You
should read this prospectus carefully before you invest or send money and keep
it for future reference. For questions or for Shareholder Services, please
call 1-800-773-3863.
Investment
Advisor
Grimaldi
Portfolio Solutions, Inc.
1207 Route
9, Suite 10
Wappingers
Falls, NY 12590
The
securities offered by this prospectus have not been approved or
disapproved by the Securities and Exchange Commission, nor has the
Securities and Exchange Commission passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal
offense.
|
Beginning
on January 1, 2021, paper copies of the Fund’s shareholder reports will no
longer be sent by mail, unless you specifically request paper copies of the
reports. Instead, the reports will be made available on the Fund’s website at
https://www.nottinghamco.com/fundpages/SectorRotation , and you will be notified
by mail each time a report is posted and provided with a website link to access
the report.
Beginning
on January 1, 2019, you may, notwithstanding the availability of shareholder
reports online, elect to receive all future shareholder reports in paper free of
charge. If you invest through a financial intermediary, you can contact your
financial intermediary to request that you continue to receive paper copies of
your shareholder reports. If you invest directly with a Fund, you can call
800-773-3863 to let the Fund know you wish to continue receiving paper copies of
your shareholder reports.
If you
have previously elected to receive shareholder reports electronically, you will
not be affected by this change and you need not take any action. You may elect
to receive shareholder reports ,
prospectuses, and other communications from a Fund electronically anytime
by contacting your financial intermediary (such as a broker-dealer or bank) or,
if you are a direct investor, by enrolling at
https://www.nottinghamco.com/fundpages/SectorRotation .
TABLE
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Back
Cover |
INVESTMENT
OBJECTIVE
The Sector
Rotation Fund (the “Fund”) seeks to achieve
capital appreciation.
FEES
AND EXPENSES OF THE FUND
These
tables describe the fees and expenses that you may pay if you buy and hold
shares of the Fund:
Shareholder
Fees |
|
(fees
paid directly from your investment) |
|
Maximum
Sales Charge (Load) Imposed On Purchases (as
a % of offering price) |
None |
Maximum
Deferred Sales Charge (Load) (as
a % of the lesser of amount purchased or redeemed) |
None |
Redemption
Fee (as
a % of amount redeemed) |
None |
Annual
Fund Operating Expenses |
|
(expenses
that you pay each year as a percentage of the value of your
investment) |
Management
Fees |
1.00% |
Distribution
and/or Service (12b‑1) Fees |
0.25% |
Other
Expenses |
0.71
% |
Acquired
Fund Fees and Expenses 1
|
0.28
% |
Total
Annual Fund Operating Expenses |
2.24
% |
1.
“Acquired Fund” means any investment company in which the Fund invests or
has invested during the previous fiscal year. The “Total Annual Fund
Operating Expenses” and “Net Annual Fund Operating Expenses” will not match the
Fund’s gross and net expense ratios reported in the Financial Highlights from
the Fund’s financial statements, which reflect the operating expenses of the
Fund and do not include Acquired Fund Fees and Expenses.
Example.
This example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the Fund for the time periods indicated and then redeem
all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year and the Fund’s operating expenses
remain the same. The Example includes the Fund’s contractual expense
limitation through January 31, 20 20 . Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
1
Year |
3
Years |
5
Years |
10
Years |
$
227 |
$
700 |
$1,200
|
$2,575
|
Portfolio
Turnover. The Fund pays transaction costs, such as commissions,
when it buys and sells securities (or “turns over” its portfolio). A
higher portfolio turnover rate may indicate higher transaction costs and may
result in higher taxes when Fund shares are held in a taxable account. These
costs, which are not reflected in annual fund operating expenses or in the
example, affect the Fund’s performance. For the Fund’s most recent fiscal year
ended September 30, 2018 , the Fund’s portfolio turnover rate was 219.74 % of
the average value of its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
Sector
Rotation is a strategy that evaluates the relative strength and momentum of
different sectors of the economy in order to identify short-term investment
opportunities. A sector is a segment of the market that isolates very
specific types of assets. Examples of sectors include, but are not limited
to, consumer discretionary, health care, information technology, consumer
staples, commodities, energy, financials, industrials, materials, real estate ,
telecommunications, and utilities . The Advisor employs a proprietary ranking
system to identify the sectors that it believes are showing the greatest
relative strength and increases the Fund’s exposure to those sectors. The Fund
may also invest in a broader asset class or index based on the manager’s
macro-economic forecast .
Under
normal circumstances, the Fund invests in shares of exchange-traded funds
(“ETFs”). An ETF is an open-end investment company that holds a portfolio of
investments designed to track a particular market segment or underlying index.
In seeking to achieve the Fund’s investment objectives, the Advisor may allocate
Fund assets among equity ETFs representing various domestic and foreign markets,
regions and countries. The Fund may invest in ETFs that hold foreign securities
and American Depositary Receipts (“ADRs”) but will not invest in emerging market
securities to a significant extent. The Fund may invest in ETFs designed to
provide investment results that match the performance or inverse (opposite)
performance of an underlying index. Based on the manager’s macro-economic
forecast, t he Fund may also invest in ETFs designed to provide investment
results that match a positive or negative multiple of the performance of an
underlying index. The Fund will invest in securities of issuers across a range
of market capitalizations, including large-, small- and mid-cap issuers, but the
Advisor does not anticipate that the Fund will invest in securities of micro-cap
and nano-cap issuers.
In
selecting investments for the Fund, the Advisor seeks to identify securities
that it believes exhibit attractive valuations based on characteristics such as
price movement, volatility, price to earnings ratios, growth rates, price to
cash flow, and price to book ratios. With respect to the Fund’s inverse
positions, the Advisor seeks to identify securities that are designed to perform
inverse to indexes with valuations that the Advisor believes are unattractive
based on these same characteristics. The Advisor will incorporate asset class
selection as part of the Fund’s overall portfolio. This strategic asset
allocation is the process of dividing securities among different kinds of assets
to optimize the risk/reward trade-off based on achieving capital appreciation.
The Advisor utilizes quantitative research to determine the Fund’s weightings
between stocks, and cash, allocation among sectors and industries, and exposure
to domestic and foreign markets. The Fund expects to engage in active and
frequent trading of its portfolio securities.
From time
to time, the Fund may also focus its investments in a limited number of market
sectors , which may be any of the 11 major market sectors. As of September 30,
2018, the Fund was principally invested in the consumer discretionary, health
care, and information technology sectors.
PRINCIPAL
RISKS OF INVESTING IN THE FUND
The loss
of your money is a principal risk of investing in the Fund. Investments in
the Fund are subject to investment risks, including the possible loss of some or
the entire principal amount invested. There can be no assurance that the Fund
will be successful in meeting its investment objective. An investment in the
Fund is not a deposit or obligation of any bank, is not endorsed or guaranteed
by any bank, and is not insured by the Federal Deposit Insurance Corporation or
any other government agency. Generally, the Fund will be subject to the
following principal risks:
Cybersecurity
Risk. As part of its business, the Advisor processes, stores , and
transmits large amounts of electronic information, including information
relating to the transactions of the Fund. The Advisor and the Fund are therefore
susceptible to cybersecurity risk. Cybersecurity failures or breaches of the
Fund or its service providers have the ability to cause disruptions and impact
business operations, potentially resulting in financial losses, the inability of
Fund shareholders to transact business, violations of applicable privacy and
other laws, regulatory fines, penalties and/or reputational damage. The Fund and
its shareholders could be negatively impacted as a result.
Foreign
Securities Risk. The ETFs held by the Fund may have significant
investments in foreign securities. Foreign securities involve investment risks
different from those associated with domestic securities. Changes in
foreign economies and political climates are more likely to affect the Fund than
a mutual fund that invests exclusively in domestic securities. The value
of foreign currency denominated securities or foreign currency contracts is
affected by the value of the local currency relative to the U.S. dollar. There
may be less government supervision of foreign markets, resulting in non-uniform
accounting practices and less publicly available information about issuers of
foreign currency denominated securities. The value of foreign investments may be
affected by changes in exchange control regulations, application of foreign tax
laws (including withholding tax), changes in governmental administration or
economic or monetary policy (in this country or abroad), or changed
circumstances in dealings between nations. In addition, foreign brokerage
commissions, custody fees, and other costs of investing in foreign securities
are generally higher than in the United States. Investments in foreign issues
could be affected by other factors not present in the United States, including
expropriation, armed conflict, confiscatory taxation, and potential difficulties
in enforcing contractual obligations.
Investments
in ETFs. Since the Fund invests in ETFs, the Fund will be subject to
substantially the same risks as those associated with the direct ownership of
the securities comprising the index on which the ETF is based and the value of
the Fund’s investment will fluctuate in response to the performance of the
underlying index. ETFs typically incur fees that are separate from those
of the Fund. Accordingly, the Fund’s investments in ETFs will result in
the layering of expenses such that shareholders will indirectly bear a
proportionate share of the ETFs’ operating expenses, in addition to paying Fund
expenses. ETFs are subject to additional risks such as the fact that its shares
may trade at a market price that is above or below its net asset value (“NAV”)
or an active market may not develop.
Leveraged
or Inverse ETFs. The Fund may invest in leveraged and/or inverse ETFs,
including multiple inverse (or ultra-short) ETFs. These ETFs are subject to
additional risk not generally associated with traditional ETFs. Leveraged ETFs
seek to multiply the performance of the particular benchmark that is tracked
(which may be an index, a currency or other benchmark). Inverse ETFs seek to
negatively correlate to the performance of the benchmark. These ETFs seek to
achieve their returns by using various forms of derivative transactions,
including by short-selling the underlying index. Ultra-short ETFs seek to
multiply the negative return of the tracked index (e.g., twice the inverse
return). As a result, an investment in an inverse ETF will decrease in value
when the value of the underlying index rises. For example, an inverse ETF
tracking the S&P 500 Index will gain 1% when the S&P falls 1% (if it is
an ultra-short ETF that seeks twice the inverse return, it will gain 2%), and
will lose 1% if the S&P 500 gains 1% (if an ultra-short ETF that seeks twice
the inverse return, it would lose 2%). By investing in ultra-short ETFs and
gaining magnified short exposure to a particular index, the Fund can commit less
assets to the investment in the securities represented on the index than would
otherwise be required.
Manager
Risk. The Advisor’s ability to choose suitable investments has a
significant impact on the ability of the Fund to achieve its investment
objectives. The portfolio manager’s experience is discussed in the section of
this prospectus entitled “Management of the Fund – Investment
Advisor.”
Market
Risk. Market risk refers to the possibility that the value of
securities held by the Fund may decline due to
daily fluctuations in the securities markets. Stock prices change daily
as a result of many factors, including developments affecting the condition of
both individual companies and the market in general. The price of a stock
may
even be affected by factors unrelated to the value or condition of its issuer,
such as changes in interest rates, national and international economic and/or
political conditions and general equity market conditions. In a declining
stock market, prices for all companies (including those in the Fund’s portfolio)
may decline regardless of their long-term prospects. The Fund’s
performance per share will change daily in response to such factors.
Portfolio
Turnover Risk. The Advisor may sell portfolio securities without
regard to the length of time they have been held in order to take advantage of
new investment opportunities or changing market conditions. As portfolio
turnover may involve paying brokerage commissions and other transaction costs,
there could be additional expenses for the Fund. High rates of portfolio
turnover may also result in the realization of short-term capital gains and
losses. The payment of taxes on gains could adversely affect the Fund’s
performance. Any distributions resulting from such gains will be considered
ordinary income for federal income tax purposes.
Sector
Focus Risk. Because the Fund’s investments may, from time to time,
be more heavily invested in particular sectors, the value of its shares may be
especially sensitive to factors and economic risks that specifically affect
those sectors. As a result, the Fund’s share price may fluctuate more
widely than the value of shares of a mutual fund that invests in a broader range
of industries. The specific risks for each of the sectors in which the Fund may
focus its investments include the additional risks described below:
· |
Consumer
Discretionary.
Companies in this sector may be adversely affected by negative
changes in the domestic and international economies, interest rates,
competition, consumer confidence, disposable household income, and
consumer spending. These companies are also subject to severe
competition and changes in demographics and consumer tastes, which may
have an adverse effect on the performance of these
companies. |
· |
Healthcare.
Companies in this sector are subject to extensive litigation based
on product liability and similar claims; dependence on patent protection
and expiration of patents; competitive forces that make it difficult to
raise prices; long and costly regulatory processes; and product
obsolescence; all of which may adversely affect the value of those
holdings. |
· |
Information
Technology.
The performance of companies in this sector may be adversely
affected by intense competition both domestically and internationally;
limited product lines, markets, financial resources, or personnel; rapid
product obsolescence and frequent new product introduction; dramatic and
unpredictable changes in growth rates; and dependence on patent and
intellectual property rights. |
Small-Cap
and Mid-Cap Securities Risk. The Fund or ETFs held by the Fund may
invest in securities of small-cap and mid-cap companies, which involve greater
volatility than investing in larger and more established companies. Small-cap
and mid-cap companies can be subject to more abrupt or erratic share price
changes than larger, more established companies. Securities of these types
of companies have limited market liquidity, and their prices may be more
volatile. You should expect that the value of the Fund’s shares will be
more volatile than a fund that invests exclusively in large-capitalization
companies.
PERFORMANCE
INFORMATION
The
following bar chart and table shown provide an indication of the risks of
investing in the Fund by showing changes in the Fund’s performance from year to
year and by showing how the Fund’s average annual total returns compare to those
of a broad-based securities market index. The Fund’s past performance (before
and after taxes) is not necessarily an indication of how the Fund will perform
in the future. Updated information on the Fund’s results can be obtained by
visiting http://www.navfx.com.
The Fund
was reorganized on June 27, 2011 , from a series of the World Funds Trust, a
Delaware statutory trust (the “Predecessor Fund”), to a series of Starboard
Investment Trust (the “Trust), a Delaware statutory trust (the
“Reorganization”). The performance information shown below includes information
for the Predecessor Fund. The
Predecessor Fund commenced operations on December 30, 2009. Shareholders of the
Predecessor Fund approved the Reorganization on June 22, 2011 , and received
shares of the Fund on June 27, 2011. The performance information shown below is
intended to serve as an illustration of the variability of the Fund’s returns
since the Fund is a continuation of the Predecessor Fund and has the same
investment objectives and strategies and substantially the same investment
policies as the Predecessor Fund. While the Fund is substantially similar to the
Predecessor Fund , and , theoretically , would have invested in the same
portfolio of securities, the Fund’s performance during the same time period may
have been different than the performance of the Predecessor Fund due to, among
other things, differences in fees and expenses.
Calendar
Year Returns
During the
periods shown in the bar chart above, the Fund’s highest quarterly return was
11.37% (quarter ended December 31, 2010) and the Fund’s lowest quarterly return
was -15.67% (quarter ended December 31, 2018).
Average
Annual Total Returns Period Ended
December
31, 2018 |
Past 1
Year |
Past
5 Years |
Since Inception* |
Sector
Rotation Fund Before
taxes After
taxes on distributions After
taxes on distributions and sale of shares |
-5.28
% -7.68
% -1.57
% |
6.22
% 3.99
% 4.32
% |
7.34
% 5.65
% 5.50
% |
S&P
500 Total Return Index (reflects
no deductions for fees and expenses) |
-4.38
% |
8.49
% |
11.72
% |
*
The Predecessor Fund commenced operations on December 30, 2009. The Fund
has the same investment objectives and strategies and substantially the same
investment policies as the Predecessor Fund.
After-tax
returns are calculated using the historical highest individual federal marginal
income tax rates and do not reflect the impact of state and local taxes.
Actual after-tax returns depend on an investor’s tax situation and may differ
from those shown and are not applicable to investors who hold Fund shares
through tax-deferred arrangements such as a 401(k) plan or an individual
retirement account (IRA).
The Fund’s
investment advisor is Grimaldi Portfolio Solutions, Inc. The Fund’s
portfolio is managed on a day-to-day basis by Mark
Anthony Grimaldi. Mr. Grimaldi is p resident
of Grimaldi Portfolio Solutions, Inc. , and has been
the portfolio manager of the Fund since its inception in
2009.
PURCHASE
AND SALE OF FUND SHARES
The
minimum initial investment is $2,500 and the minimum subsequent investment is
$100 ($50 under an automatic investment plan), although the minimums may be
waived or reduced in some cases.
You can
redeem Fund shares directly from the Fund by mail, facsimile, telephone, and
bank wire on any business day . Redemption orders by mail should be sent to the
Sector Rotation Fund, c/o Nottingham Shareholder Services, Post Office Box 4365,
Rocky Mount, North Carolina 27803-0365. Redemption orders by facsimile
should be transmitted to 919-882-9281. Please call the Fund at
1-800-773-3863 to conduct telephone transactions or to receive wire instructions
for bank wire orders. Investors who wish to redeem Fund shares through a
broker-dealer should contact the broker-dealer directly.
TAX
INFORMATION
The Fund’s
distributions will generally be taxed to you as ordinary income or capital
gains, unless you are investing through a tax deferred arrangement, such as a
401(k) plan or an individual retirement account (IRA) . Distributions on
investments made through tax deferred vehicles, such as 401(k) plans or IRAs,
may be taxed later upon withdrawal of assets from those accounts.
FINANCIAL
INTERMEDIARY COMPENSATION
If you
purchase shares of the Fund through a broker-dealer or other financial
intermediary (such as a bank), the Fund may pay the intermediary for the sale of
Fund shares and related services. These payments may create a conflict of
interest by influencing the broker-dealer or other intermediary and your
salesperson to recommend the Fund over another investment. Ask your
salesperson or visit your financial intermediary’s website for more
information.
ADDITIONAL
INFORMATION ABOU T
THE
FUND’S INVESTMENT
The Fund
seeks to achieve capital appreciation. The Fund’s investment objective is not a
fundamental policy and may be changed without shareholder approval by a vote of
the Board. Shareholders will receive 60 days’ prior written notice before a
change to an investment objective takes place. There is no guarantee that the
Fund will achieve its investment objective.
The Fund’s
principal investment strategies are discussed in the “Summary” section. The
Fund’s principal investment strategies may be changed by the Fund’s Board
without shareholder approval unless otherwise noted in this prospectus or the
Fund’s Statement of Additional Information.
Sector
Rotation is a strategy that evaluates the relative strength and momentum of
different sectors of the economy in order to identify short-term investment
opportunities. A sector is a segment of the market that isolates very
specific types of assets. Examples of sectors, include, but are not
limited to, consumer discretionary, health care, information technology,
consumer staples, commodities, energy, financials, industrials, materials, real
estate , telecommunications, and utilities . The Advisor, employs a proprietary
ranking system to identify the sectors that it believes are showing the greatest
relative strength and increases the Fund’s exposure to those sectors. The
Fund may also invest in a broader asset class or index based on the manager’s
macro-economic forecast .
Under
normal circumstances, the Fund invests in shares of ETFs. An ETF is an
open-end investment company that holds a portfolio of investments designed to
track a particular market segment or underlying index. In seeking to achieve the
Fund’s investment objective , the Advisor may allocate Fund assets among
domestic and foreign equity ETFs representing various markets, regions and
countries. The Fund may invest in ETFs that hold foreign securities and ADRs but
will not invest in emerging market securities to a significant extent. The Fund
may invest in ETFs designed to provide investment results that match the
performance or inverse (opposite) performance of an underlying index. Based on
the manager’s macro-economic forecast, t he Fund may also invest in ETFs
designed to provide investment results that match a positive or negative
multiple of the performance of an underlying index. The Fund will invest in
securities of issuers across a range of market capitalizations, including
large-, small- and mid-cap issuers, but the Advisor does not anticipate that the
Fund will invest in securities of micro-cap and nano-cap issuers.
In
selecting investments for the Fund, the Advisor seeks to identify securities
that it believes exhibit attractive valuations based on characteristics such as
price movement, volatility, price to earnings ratios, growth rates, price to
cash flow, and price to book ratios. With respect to the Fund’s inverse
positions, the Advisor seeks to identify securities that are designed to perform
inverse to indexes with valuations that the Advisor believes are unattractive
based on these same characteristics. The Advisor will incorporate asset class
selection as part of the Fund’s overall portfolio. This strategic asset
allocation is the process of dividing securities among different kinds of assets
to optimize the risk/reward trade-off based on achieving capital appreciation.
The Advisor utilizes quantitative research to determine the Fund’s weightings
between stocks, and cash, allocation among sectors and industries, and exposure
to domestic and foreign markets. The Fund expects to engage in active and
frequent trading of its portfolio securities.
In
determining the Fund’s asset allocation, the Advisor considers macroeconomic
trends, its view of the business cycle, and comparable industry/sector strength
based on those cyclical and macroeconomic trends, as well as the underlying
strategy and holdings of potential ETF investments. The Advisor seeks to
allocate the Fund’s investments in advantageous sectors and investments and move
the Fund’s assets out of sectors and investments that the Advisor views as
likely to underperform relative to market conditions.
From time to
time, the Fund may also focus its investments in a limited number of market
sectors , which may be any of the 11 major market sectors . As of September 30,
2018, the Fund was principally invested in the consumer discretionary, health
care, and information technology sectors.
The loss of
your money is a principal risk of investing in the Fund. Investments in
the Fund are subject to investment risks, including the possible loss of some or
the entire principal amount invested. There can be no assurance that the
Fund will be successful in meeting its investment objective. Generally,
the Fund will be subject to the following principal risks:
Cybersecurity
Risk. As part of its business, the Advisor processes, stores and
transmits large amounts of electronic information, including information
relating to the transactions of the Fund. The Advisor and the Fund are therefore
susceptible to cybersecurity risk. Cyber-attacks include, among other behaviors,
stealing or corrupting data maintained online or digitally, denial of service
attacks on websites, the unauthorized release of confidential information and
causing operational disruption. Successful cyber-attacks against, or security
breakdowns of, the Fund or its advisor, custodians, fund accountant, fund
administrator, transfer agent, pricing vendors and/or other third party service
providers may adversely impact the Fund and its shareholders. For instance,
cyber-attacks may interfere with the processing of shareholder transactions,
impact the Fund’s ability to calculate its NAV, cause the release of private
shareholder information or confidential Fund information, impede trading, cause
reputational damage, and subject the Fund to regulatory fines, penalties or
financial losses, reimbursement or other compensation costs, and/or additional
compliance costs. The Fund also may incur substantial costs for cybersecurity
risk management in order to guard against any cyber incidents in the future. The
Fund and its shareholders could be negatively impacted as a
result.
Foreign
Securities Risk. The ETFs held by the Fund may have significant
investments in foreign securities. Foreign securities involve investment
risks different from those associated with domestic securities. Changes in
foreign economies and political climates are more likely to affect the Fund than
a mutual fund that invests exclusively in domestic securities. The value of
foreign currency denominated securities or foreign currency contracts is
affected by the value of the local currency relative to the U.S. dollar. There
may be less government supervision of foreign markets, resulting in non-uniform
accounting practices and less publicly available information about issuers of
foreign currency denominated securities. The value of foreign investments
may be affected by changes in exchange control regulations, application of
foreign tax laws (including withholding tax), changes in governmental
administration or economic or monetary policy (in this country or abroad), or
changed circumstances in dealings between nations. In addition, foreign
brokerage commissions, custody fees, and other costs of investing in foreign
securities are generally higher than in the United States. Investments in
foreign issues could be affected by other factors not present in the United
States, including expropriation, armed conflict, confiscatory taxation, and
potential difficulties in enforcing contractual obligations.
Investments
in ETFs. Since the Fund invests in ETFs, the Fund will be subject
to substantially the same risks as those associated with the direct ownership of
the securities comprising the index on which the ETF is based and the value of
the Fund’s investment will fluctuate in response to the performance of the
underlying index. ETFs typically incur fees that are separate from those
of the Fund. Accordingly, the Fund’s investments in ETFs will result in
the layering of expenses such that shareholders will indirectly bear a
proportionate share of the ETFs’ operating expenses, in addition to paying Fund
expenses. ETFs are subject to the following risks that do not apply to
traditional mutual funds: (i) an ETF’s shares may trade at a market price that
is above or below its NAV; (ii) an active trading market for an ETF’s shares may
not develop or be maintained; (iii) the ETF may employ an investment strategy
that utilizes high leverage ratios; or (iv) trading of an ETF’s shares may be
halted if the listing exchange’s officials deem such action appropriate, the
shares are de-listed from the exchange, or the activation of market-wide
“circuit breakers” (which are tied to large decreases in stock prices) halts
stock trading generally.
Leveraged
or Inverse ETFs. The Fund may invest in leveraged and/or inverse ETFs,
including multiple inverse (or ultra-short) ETFs. These ETFs are subject to
additional risk not generally associated with traditional ETFs. Leveraged ETFs
seek to multiply the performance of the particular benchmark that is tracked
(which may be an index, a currency or other benchmark). Inverse ETFs seek to
negatively correlate to the performance of the benchmark. These ETFs seek to
achieve their returns by using various forms of derivative transactions,
including by short-selling the underlying index. Ultra-short ETFs seek to
multiply the negative return of the tracked index (e.g., twice the inverse
return). As a result, an investment in an inverse ETF will decrease in value
when the value of the underlying index rises. For example, an inverse ETF
tracking the S&P 500 Index will gain 1% when the S&P falls 1% (if it is
an ultra-short ETF that seeks twice the inverse return, it will gain 2%), and
will lose 1% if the S&P 500 gains 1% (if an ultra-short ETF that seeks twice
the inverse return, it would lose 2%). By investing in ultra-short ETFs and
gaining magnified short exposure to a particular index, the Fund can commit less
assets to the investment in the securities represented on the index than would
otherwise be required.
Manager
Risk. The Advisor’s ability to choose suitable investments has a
significant impact on the ability of the Fund to achieve its investment
objectives. The portfolio manager’s experience is discussed in the section of
this prospectus entitled “Management of the Fund – Investment
Advisor.”
Market
Risk. Market risk refers to the possibility that the value of
securities held by the Fund may decline due to
daily fluctuations in the securities markets. Stock prices change
daily as a result of many factors, including developments affecting the
condition of both individual companies and the market in general. The
price of a stock may
even be affected by factors unrelated to the value or condition of its issuer,
such as changes in interest rates, national and international economic and/or
political conditions and general equity market conditions. In a declining
stock market, prices for all companies (including those in the Fund’s portfolio)
may decline regardless of their long-term prospects. The Fund’s
performance per share will change daily in response to such factors.
Portfolio
Turnover Risk. The Advisor may sell portfolio securities without
regard to the length of time they have been held in order to take advantage of
new investment opportunities or changing market conditions. As portfolio
turnover may involve paying brokerage commissions and other transaction costs,
there could be additional expenses for the Fund. High rates of portfolio
turnover may also result in the realization of short-term capital gains and
losses. The payment of taxes on gains could adversely affect the Fund’s
performance. Any distributions resulting from such gains will be considered
ordinary income for federal income tax purposes.
Sector
Focus Risk. Because the Fund’s investments may, from time to time,
be more heavily invested in particular sectors, the value of its shares may be
especially sensitive to factors and economic risks that specifically affect
those sectors. As a result, the Fund’s share price may fluctuate more
widely than the value of shares of a mutual fund that invests in a broader range
of industries. The specific risks for each of the sectors in which the Fund may
focus its investments include the additional risks described below:
· |
Consumer
Discretionary.
Companies in this sector may be adversely affected by negative
changes in the domestic and international economies, interest rates,
competition, consumer confidence, disposable household income, and
consumer spending. These companies are also subject to severe
competition and changes in demographics and consumer tastes, which may
have an adverse effect on the performance of these
companies. |
· |
Healthcare.
Companies in this sector are subject to extensive litigation based
on product liability and similar claims; dependence on patent protection
and expiration of patents; competitive forces that make it difficult to
raise prices; long and costly regulatory processes; and product
obsolescence; all of which may adversely affect the value of those
holdings. |
· |
Information
Technology.
The performance of companies in this sector may be adversely
affected by intense competition both domestically and internationally;
limited product lines, markets, financial resources, or personnel; rapid
product obsolescence and frequent new product introduction; dramatic and
unpredictable changes in growth rates; and dependence on patent and
intellectual property rights. |
Small-Cap
and Mid-Cap Securities Risk. The Fund or ETFs held by the Fund may
invest in securities of small-cap and mid-cap companies, which involve greater
volatility than investing in larger and more established companies. Small-cap
and mid-cap companies can be subject to more abrupt or erratic share price
changes than larger, more established companies. Securities of these types
of companies have limited market liquidity, and their prices may be more
volatile. You should expect that the value of the Fund’s shares will be more
volatile than a fund that invests exclusively in large-capitalization
companies.
The
Fund may, from time to time, take temporary defensive positions that are
inconsistent with the Fund’s principal investment strategies in an attempt to
respond to adverse market, economic, political, or other conditions.
During such an unusual set of circumstances, the Fund may hold up to 100% of its
portfolio in cash or cash equivalent positions. When the Fund takes a
temporary defensive position, the Fund may not be able to achieve its investment
objective.
A
description of the Fund’s policies and procedures with respect to the disclosure
of the Fund’s portfolio securities are available in the Statement of Additional
Information , which is available from the Fund or on the Securities and Exchange
Commission’s web site, www.sec.gov .
Grimaldi
Portfolio Solutions, Inc. (previously Navigator Money Management, Inc.), a New
York corporation formed in 1996 and located at 1207 Route 9, Suite 10,
Wappingers Falls, NY 12590, manages the investments of the Fund pursuant to an
investment advisory agreement (the "Advisory Agreement"). In addition to
the Fund, the Advisor also provides investment advice to individuals, pension
and profit sharing plans, trusts, estates , and
charitable organizations. Subject to the authority of the Board, the Advisor
provides guidance and policy direction in connection with its daily management
of the Fund’s assets. The Advisor is also responsible for the selection of
broker-dealers for executing portfolio transactions, subject to the brokerage
policies established by the Trustees, and the provision of certain executive
personnel to the Fund. As of December 31, 201 8 ,
Grimaldi Portfolio Solutions, Inc., had
approximately $8 3 million in
assets under management.
Portfolio
Manager. Mark Anthony Grimaldi, CFS, the
Fund’s p ortfolio m anager, has been the founder, p resident, and part owner of
the Advisor since 1996 . Mr. Grimaldi has also serve d as v ice p resident
of The Prestige Organization, Inc , since 1996 . He began his career in
money management in 1986 as an i nvestment c oordinator at Meyer Handelman
Company in New York. After two years, he joined Prime Financial Services
as d irector of o perations. In 1992, Mr. Grimaldi accepted a position as
m anager of the Securities Operations division at Marshall & Sterling
Consultants in Poughkeepsie, New York. In 1997, he earned the Certified
Fund Specialist (CFS) designation. Mr. Grimaldi has held various
securities licenses including Series 6, 7, 24, and 63. From March of 1989
through October 2005, Mr. Grimaldi coordinated and taught securities training
classes at Dutchess Community College in Poughkeepsie, New York. In 2004,
Mr. Grimaldi became c hief p ortfolio m anager of the Navigator Newsletters for
which he currently writes the lead economic forecast article. Mr. Grimaldi
co-managed the ETF Market Opportunity Fund (formerly known as the Navigator
Fund), a series of the Aviemore Funds, from January 1, 2008 , through January
30, 2009. Mr. Grimaldi served as the portfolio manager of the Fund’s
predecessor, a fund series of the World Funds Trust, from its inception in 2009
until its reorganization into the Trust in 2011. Mr. Grimaldi graduated from
Albany State University in 1985 with a Bachelor of Arts degree in Economics. In
2014, Mr. Grimaldi co-authored his first book entitled The
Money Compass: Where Your Money Went and How to Get it Back .
The
Statement of Additional Information provides additional information about the p
ortfolio m anager’s compensation, other accounts managed and ownership of
securities in the Fund.
Advisor
Compensation. As full compensation for the investment advisory
services provided to the Fund, the Advisor receives a monthly fee at the annual
rate of 1.00% of the Fund’s average daily net assets. For the fiscal
year ended September 30, 2018, the Advisor earned 1.00% of the average daily net
assets of the Fund and had no waivers or reimbursements.
Disclosure
Regarding Approval of Investment Advisory Agreement
. A
discussion regarding the Board’s basis for approving the investment advisory
agreement for the Fund can be found in the Fund’s annual report to
shareholders for the period ended September 30, 2018 . You may obtain a copy of
the most recent semi-annual and annual reports, free of charge, upon request to
the Fund.
Capital
Investment Group, Inc. (“Distributor”) , is the principal underwriter and
distributor of the Fund’s shares and serves as the Fund’s exclusive agent for
the distribution of the Fund’s shares. The Distributor may sell the Fund’s
shares to or through qualified securities dealers or others.
Rule
12b-1 Distribution Plan. The Fund has adopted a plan of
distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940 ,
as amended (the “1940 Act”) (“Distribution Plan”) that allows the Fund to pay
distribution and/or service fees in connection with the distribution of its
shares and for services provided to shareholders. Under the Fund’s Plan, the
Fund may pay an annual fee up to 0.25% of the average daily net assets of the
Fund for shareholder services and distribution related expenses . Because the
12b-1 fees are paid out of the Fund’s assets on an on-going basis, these fees,
over time, will increase the cost of your investment and may cost you more than
paying other types of sales loads.
Expense
Limitation Agreement. In the interest of limiting expenses of the Fund,
the Advisor has entered into the Expense Limitation Agreement with the Trust,
pursuant to which the Advisor has agreed to waive or limit its fees and to
assume other expenses so that the total annual operating expenses of the Fund
(exclusive of (i) any front-end or contingent deferred loads; (ii) brokerage
fees and commissions; (iii) acquired fund fees and expenses; (iv) fees and
expenses associated with investments in other collective investment vehicles or
derivative instruments (including, for example, option and swap fees and
expenses); (v) borrowing costs (such as interest and dividend expense on
securities sold short); (vi) taxes and (vii) extraordinary expenses, such as
litigation expenses (which may include indemnification of Fund officers and
Trustees and contractual indemnification of Fund service providers (other than
the Advisor)) is limited to 2.14%. The Expense Limitation Agreement runs through
January 31, 2020, and may be terminated by the Board at any time. The Advisor
cannot recoup from the Fund any amounts paid by the Advisor under the Expense
Limitation Agreement.
Shares of
the Fund are sold and redeemed at net asset value. Shares may be purchased
by any account managed by the Advisor and any other institutional investor or
any broker-dealer authorized to sell shares in the Fund. The minimum
initial investment is $2,500. The minimum additional investment is $100.
The Fund may, in the Advisor’s sole discretion, accept certain accounts with
less than the minimum investment.
Determining
a Fund’s Net Asset Value. The price at which you purchase or redeem
shares is based on the next calculation of the NAV after an order is received by
the Fund or its designated agent in good form. An order is considered to
be in good form if it includes all necessary information and documentation
related to a purchase or redemption request and, if applicable, payment in full
of the purchase amount. The Fund’s NAV per share is calculated by dividing
the value of the Fund’s total assets, less liabilities (including Fund expenses,
which are accrued daily), by the total number of outstanding shares of the
Fund. To the extent that the Fund holds portfolio securities that are
primarily listed on foreign exchanges that trade on weekends or other days when
the Fund does not price shares, the NAV of the Fund’s shares may change on days
when shareholders will not be able to purchase or redeem the Fund’s
shares. The NAV per share of the Fund is normally determined at 4:00 p.m.
Eastern time, the time regular trading closes on the New York Stock
Exchange. The Fund does not calculate NAV on business holidays when the
New York Stock Exchange is closed.
The
pricing and valuation of portfolio securities is determined in good faith by
either a valuation committee or the Advisor in accordance with procedures
established by, and under the direction of, the Board. In
determining the value of the Fund’s total assets, portfolio securities are
generally calculated at market value by quotations from the primary market in
which they are traded. Foreign securities listed on foreign
exchanges are valued based on quotations from the primary market in which they
are traded and are translated from the local currency into U.S. dollars using
current exchange rates. Instruments
with maturities of 60 days or less are valued at amortized cost, which
approximates market value. The Fund normally
uses third party pricing services to obtain market quotations. Securities and
assets for which representative market quotations are not readily available or
which cannot be accurately valued using the Fund’s normal
pricing procedures are valued at fair value in good faith by either the
Fund’s valuation committee or the Advisor in accordance with procedures
established by, and under the supervision of, the Board.
Fair value pricing may be used, for example, in situations where (i) an
exchange-traded portfolio security is so thinly traded that there have been no
transactions for that security over an extended period of time or the validity
of a market quotation received is questionable; (ii) the exchange on which the
portfolio security is principally traded closes early; or (iii) trading of the
portfolio security is halted during the day and does not resume prior to the
Fund’s NAV calculation.
Pursuant
to policies adopted by the Board, the Advisor consults with the Fund’s
administrator on a regular basis regarding the need for fair value
pricing. The Advisor is responsible for notifying the Board (or the Fund’s
valuation committee) when it believes that fair value pricing is required for a
particular security. The Fund’s policies regarding fair value pricing are
intended to result in a calculation of the Fund’s NAV that fairly reflects
portfolio security values as of the time of pricing. A
portfolio security’s “fair value” price may differ from the price next available
for that portfolio security using the Fund’s normal
pricing procedures and the fair value price may differ from the price at which
the security may ultimately be traded or sold. If such fair value price
differs from the price that would have been determined using the Fund’s normal
pricing procedures, a shareholder may receive more or less proceeds or shares
from redemptions or purchases of Fund shares, respectively, than a shareholder
would have otherwise received if the security were priced using the Fund’s
normal pricing procedures. The performance of the Fund may also be affected if a
portfolio security’s fair value price were to differ from the security’s price
using the Fund’s normal pricing procedures. To the extent the Fund invests
in other open-end investment companies that are registered under the 1940 Act,
the Fund’s NAV calculations are based upon the NAV reported by such registered
open-end investment companies, and the prospectuses for these companies explain
the circumstances under which they will use fair value pricing and the effects
of using fair value pricing.
Other
Matters. Purchases and redemptions of shares by the same
shareholder on the same day will be netted for the Fund.
Certain
financial intermediaries have agreements with the Fund that allow them to enter
purchase or redemption orders on behalf of clients and customers. These orders
will be priced at the NAV next computed after the orders are received by the
financial intermediary, subject to the order being in good form. Orders received
in good form by the financial intermediary before 4:00 p.m. Eastern Time will
receive a share price based on that day’s NAV and orders received after 4:00
p.m. Eastern Time will receive a price based on the next day’s NAV. You
should look to the financial intermediary through whom you wish to invest for
specific instructions on how to purchase or redeem shares of the
Fund.
Purchases
can be made from the Fund by mail , facsimile, telephone, or bank wire. In
addition, brokers that are authorized designees of the Fund may receive purchase
and redemption orders on behalf of the Fund. These designated brokers are
also authorized to designate other financial intermediaries to receive orders on
behalf of the Fund. Such orders will be deemed to have been received by the Fund
when an authorized designee, or broker-authorized designee, receives the order,
subject to the order being in good form. The orders will be priced at the NAV
next computed after the orders are received by the Fund, the authorized broker,
or broker-authorized designee. Orders received in good form before 4:00 p.m.
Eastern Time will receive a share price based on that day’s NAV and orders
received after 4:00 p.m. Eastern Time will receive a price based on the next
day’s NAV. Investors may also be charged a fee by a broker or agent if
shares are purchased through a broker or agent.
The Fund
reserves the right to (i) refuse any request to purchase shares for any reason
and (ii) suspend the offering of shares at any time. An investor that has
placed a purchase order will be notified as soon as possible in such
circumstances.
Regular
Mail Orders. Payment for shares by mail must be made by check from
a U.S. financial institution and payable in U.S. dollars. Cash, money orders,
and traveler’s checks will not be accepted by the Fund. If checks are
returned due to insufficient funds or other reasons, your purchase will be
canceled. You will also be responsible for any losses or expenses incurred by
the Fund and its administrator and transfer agent. The Fund will charge a $35
fee and may redeem shares of the Fund owned by the purchaser or another
identically registered account in another series of the Trust to recover any
such losses. For regular mail orders, please complete the Fund Shares
Application and mail it, along with your check made payable to the Fund,
to:
The
Sector Rotation Fund
c/o
Nottingham Shareholder Services
116
South Franklin Street
Post
Office Box 4365
Rocky
Mount, North Carolina 27803-0365
The
application must contain your s ocial s ecurity n umber or t axpayer i
dentification n umber. If you have applied for a number prior to completing your
account application but you have not received your number, please indicate this
on the application and include a copy of the form applying for your number.
Taxes are not withheld from distributions to U.S. investors if certain
requirements of the Internal Revenue Service are met regarding the s ocial s
ecurity n umber and t axpayer i dentification n umber.
Bank
Wire Purchases. Purchases may also be made through bank wire
orders. To establish a new account or add to an existing account by wire, please
call the Fund at 1-800-773-3863 for
wire instructions and to advise the Fund of the investment, dollar amount, and
the account identification number.
Additional
Investments. You may also add to your account by mail or wire at
any time by purchasing shares at the then current NAV. The minimum
additional investment is $100 ($50 under an automatic investment plan).
Before adding funds by bank wire, please call the Fund at 1-800-773-3863 for
wire instructions and to advise the Fund of the investment, dollar amount, and
the account identification number. Mail orders should include, if possible, the
“Invest by Mail” stub that is attached to your confirmation statement.
Otherwise, please identify your account in a letter accompanying your purchase
payment.
Automatic
Investment Plan. The automatic investment plan enables shareholders
to make regular monthly or quarterly investments in shares through automatic
charges to their checking account. With shareholder authorization and bank
approval, the Fund will automatically charge the shareholder’s checking account
for the amount specified ($50 minimum), which will be automatically invested in
shares at the public offering price on or about the 21st day of the month. The
shareholder may change the amount of the investment or discontinue the plan at
any time by writing the Fund.
Share
Certificates. The Fund normally does not issue share certificates.
Evidence of ownership of shares is provided through entry in the Fund’s share
registry. Investors will receive periodic account statements (and, where
applicable, purchase confirmations) that will show the number of shares
owned.
Important
Information about Procedures for Opening a New Account. Under the
Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act of 2001), the Fund
is required to obtain, verify, and record information to enable the Fund to form
a reasonable belief as to the identity of each customer who opens an
account. Consequently, when an investor opens an account, the Fund will
ask for the investor’s name, street address, date of birth (for an individual),
social security or other tax identification number (or proof that the investor
has filed for such a number), and other information that will allow the Fund to
identify the investor. The Fund may also ask to see the driver’s license or
other identifying documents of the investor. An investor’s account
application will not be considered “complete” and, therefore, an account will
not be opened and the investor’s money will not be invested until the Fund
receives this required information. In addition, if after opening the investor’s
account the Fund is unable to verify the investor’s identity after reasonable
efforts, as determined by the Fund in its sole discretion, the Fund may (i)
restrict further investments until the investor’s identity is verified; and (ii)
close the investor’s account without notice and return the investor’s redemption
proceeds to the investor. If the Fund closes an investor’s account because the
Fund could not verify the investor’s identity, the Fund will value the account
in accordance with the next NAV calculated after the investor’s account is
closed. In that case, the investor’s redemption proceeds may be worth more
or less than the investor’s original investment. The Fund will not be
responsible for any losses incurred due to the Fund’s inability to verify the
identity of any investor opening an account.
The Fund
typically expects that it will take up to 7 days following the receipt of your
redemption request to pay out redemption proceeds; however, the Fund typically
expects that the payment of redemption proceeds will be initiated the next
business day following the receipt of your redemption request regardless of the
method of payment. The Fund may delay forwarding a redemption check for recently
purchased shares while the Fund determines whether the purchase payment will be
honored. Such delay (which may take up to 15 days from the date of
purchase) may be reduced or avoided if the purchase is made by certified check
or wire transfer. In all cases, the NAV next determined after receipt of the
request for redemption will be used in processing the redemption request. The
Fund expects to pay redemptions from cash, cash equivalents, proceeds from the
sale of additional Fund shares, and then from the sale of portfolio securities
or in kind. These redemption payment methods will be used in regular and
stressed market conditions. The Fund may also suspend redemptions, if permitted
by the 1940 Act: (i) for any period during which the New York Stock Exchange is
closed or trading on the New York Stock Exchange is restricted; (ii) for any
period during which an emergency exists as a result of which the Fund’s disposal
of its portfolio securities is not reasonably practicable, or it is not
reasonably practicable for the Fund to fairly determine the value of its net
assets; or (iii) for such other periods as the Securities and Exchange
Commission may by order permit for the protection of the Fund’s shareholders.
During drastic economic and market changes, telephone redemption privileges may
be difficult to implement.
Regular
Mail Redemptions. Regular mail redemption requests should be
addressed to:
The
Sector Rotation Fund
c/o
Nottingham Shareholder Services
116
South Franklin Street
Post
Office Box 4365
Rocky
Mount, North Carolina 27803-0365
Regular
mail redemption requests should include the following:
(1) |
Your
letter of instruction specifying the account number and number of shares
(or the dollar amount) to be redeemed. This request must be signed
by all registered shareholders in the exact names in which they are
registered; |
(2) |
Any
required signature guarantees (see “Signature Guarantees” below);
and |
(3) |
Other
supporting legal documents, if required in the case of estates, trusts,
guardianships, custodianships, corporations, partnerships, pension or
profit sharing plans, and other
entities. |
Telephone
and Bank Wire Redemptions. Unless you decline the telephone
transaction privileges on your account application, you may redeem shares of the
Fund by telephone. You may also redeem shares by bank wire under certain
limited conditions. The Fund will redeem shares in this manner when so
requested by the shareholder only if the shareholder confirms redemption
instructions in writing.
The Fund
may rely upon confirmation of redemption requests transmitted via facsimile
(FAX# 919-882-9281). The confirmation instructions must include the
following:
(1) Name of
Fund;
(2) Shareholder
name and account number;
(3) Number
of shares or dollar amount to be redeemed;
(4) Instructions
for transmittal of redemption proceeds to the shareholder; and
(5) Shareholder
signature as it appears on the application on file with the Fund.
Redemption
proceeds will not be distributed until written confirmation of the redemption
request is received, per the instructions above. You can choose to have
redemption proceeds mailed to you at your address of record, your financial
institution, or to any other authorized person, or you can have the proceeds
sent by wire transfer to your financial institution ($5,000 minimum).
Redemption proceeds cannot be wired on days in which your financial institution
is not open for business. You can change your redemption instructions
anytime you wish by filing a letter with your new redemption instructions with
the Fund. See “Signature Guarantees” below.
The Fund,
in its discretion, may choose to pass through to redeeming shareholders any
charges imposed by the Fund’s custodian for wire redemptions. If this cost is
passed through to redeeming shareholders by the Fund, the charge will be
deducted automatically from your account by redemption of shares in your
account. Your bank or brokerage firm may also impose a charge for
processing the wire. If wire transfer of funds is impossible or
impractical, the redemption proceeds will be sent by regular mail to the
designated account.
You may
redeem shares, subject to the procedures outlined above, by calling the Fund at
1-800-773-3863. Redemption proceeds will only be sent to the financial
institution account or person named in your Fund Shares Application currently on
file with the Fund. Telephone redemption privileges authorize the Fund to
act on telephone instructions from any person representing him or herself to be
the investor and reasonably believed by the Fund to be genuine. The Fund
will employ reasonable procedures, such as requiring a form of personal
identification, to confirm that instructions are genuine. The Fund will
not be liable for any losses due to fraudulent or unauthorized
instructions. The Fund will also not be liable for following telephone
instructions reasonably believed to be genuine.
Systematic
Withdrawal Plan. A shareholder who owns shares of the Fund valued at
$5,000 or more at the current offering price may establish a systematic
withdrawal plan (“Systematic Withdrawal Plan”) to receive a monthly or quarterly
check in a stated amount (not less than $50). Each month or quarter, as
specified, the Fund will automatically redeem sufficient shares from your
account to meet the specified withdrawal amount. The shareholder may establish
this service whether dividends and distributions are reinvested in shares of the
Fund or paid in cash. Call or write the Fund for an application
form.
Minimum
Account Size. The Trustees reserve the right to redeem involuntarily any
account having a NAV of less than $2,500 (due to redemptions, exchanges, or
transfers, and not due to market action) upon 30-days’ prior written
notice. If the shareholder brings his account NAV up to at least $2,500
during the notice period, the account will not be redeemed. Redemptions
from retirement accounts may be subject to federal income tax.
Shareholders may also be charged a fee by their broker or agent if shares are
redeemed or transferred through their broker or agent.
Redemptions
in Kind. The Fund does not intend, under normal circumstances, to
redeem its shares by payment in kind. It is possible, however, that conditions
may arise in the future that would, in the opinion of the Trustees, make it
undesirable for the Fund to pay for all redemptions in cash. In such cases, the
Trustees may authorize payment to be made in readily marketable portfolio
securities of the Fund. The securities will be chosen by the Fund, may be either
a pro rata payment of each of the securities held by the Fund or a
representative sample of securities, and will be valued at the same value
assigned to them in computing the Fund’s NAV per share. Shareholders receiving
them bear the market risks associated with the securities until they have been
converted into cash , as well as taxable capital gains when the securities are
converted to cash, and may incur brokerage costs when these securities are sold.
An irrevocable election has been filed under Rule 18f-1 of the 1940 Act, wherein
the Fund must pay redemptions in cash, rather than in kind, to any shareholder
of record of the Fund who redeems during any 90-day period, the lesser of (i)
$250,000 or (ii) 1% of the Fund’s NAV at the beginning of such period.
Redemption requests in excess of this limit may be satisfied in cash or in kind
at the Fund’s election.
Signature
Guarantees. To protect your account and the Fund from fraud,
signature guarantees may be required to be sure that you are the person who has
authorized a change in registration or standing instructions for your
account. Signature guarantees are generally required for (i) change of
registration requests; (ii) requests to establish or to change exchange
privileges or telephone and bank wire redemption service other than through your
initial account application; (iii) transactions where proceeds from redemptions,
dividends, or distributions are sent to a financial institution; and (iv)
redemption requests in excess of $50,000. Signature guarantees are
acceptable from a member bank of the Federal Reserve System, a savings and loan
institution, credit union (if authorized under state law), registered
broker-dealer, securities exchange, or association clearing agency and must
appear on the written request for change of registration, establishment or
change in exchange privileges, or redemption request.
Frequent
purchases and redemptions of Fund shares by a shareholder, known as frequent
trading, present a number of risks to the Fund’s other shareholders. These risks
include dilution in the value of Fund shares held by long-term shareholders,
interference with the efficient management of the Fund’s portfolio holdings, and
increased brokerage and administration costs. Due to the potential of a
thin market for some of the Fund’s portfolio securities, as well as overall
adverse market, economic, political, or other conditions that may affect the
sale price of portfolio securities, the Fund could face untimely losses as a
result of having to sell portfolio securities prematurely to meet redemptions.
Frequent trading may also increase portfolio turnover, which may in turn result
in increased capital gains taxes for shareholders.
The Board
has adopted a policy that is intended to discourage frequent trading by
shareholders. The Fund does not accommodate frequent trading. Under the
adopted policy, the Fund’s transfer agent provides a daily record of shareholder
trades to the Advisor. The Fund’s transfer agent also monitors and tests
shareholder purchase and redemption orders for frequent trading. The Advisor has
the discretion to limit investments, by refusing further purchase and exchange
orders, from a shareholder that the Advisor believes has a pattern of trades not
in the best interests of the other shareholders. In addition to this
discretionary policy, the Fund will also limit investments from any shareholder
account that, on two or more occasions during a 60 calendar day period,
purchases and redeems shares over a period of less than 10 days having a
redemption amount within 10% of the purchase amount and greater than
$10,000. In the event such a purchase and redemption pattern occurs, the
shareholder account and any other account with the same taxpayer identification
number will be precluded from investing in the Fund for at least 30 calendar
days after the second redemption transaction.
The Fund
and Advisor intend to apply this policy uniformly, except that the Fund may not
be able to identify or determine that a specific purchase or redemption is part
of a pattern of frequent trading or that a specific shareholder is engaged in
frequent trading, particularly with respect to transactions made through omnibus
accounts or accounts opened through financial intermediaries such as
broker-dealers and banks. Omnibus account arrangements permit multiple investors
to aggregate their respective share ownership and to purchase, redeem, and
exchange Fund shares without the identity of the individual shareholders being
immediately known to the Fund. Like omnibus accounts, accounts opened through
financial intermediaries normally permit shareholders to purchase, redeem, and
exchange Fund shares without the identity of the shareholder being immediately
known to the Fund. Consequently, the ability of the Fund to monitor and
detect frequent trading through omnibus and intermediary accounts is limited,
and there is no guarantee that the Fund can identify shareholders who might be
engaging in frequent trading through these accounts or curtail such
trading.
In
addition, this policy will not apply if the Advisor determines that a purchase
and redemption pattern does not constitute frequent trading, such as inadvertent
errors that result in frequent purchases and redemptions. Inadvertent
errors shall include purchases and/or redemptions made unintentionally or by
mistake (e.g., where a shareholder unintentionally or mistakenly invests in the
Fund and redeems immediately after recognizing the error). The shareholder shall
have the burden of proving to the sole satisfaction of the Advisor that a
purchase and redemption pattern was the result of an inadvertent error. In
such a case, the Advisor may choose to allow further purchase and exchange
orders from such shareholder.
To keep
you informed about your investments, the Fund will send you various account
statements and reports, including:
· |
Confirmation
statements that verify your buy or sell transactions (except in the case
of automatic purchases or redemptions from bank accounts. Please review
your confirmation statements for accuracy.
|
· |
Quarter-end
and year-end shareholder account statements.
|
· |
Reports
for the Fund, which includes portfolio manager commentary, and a
discussion of performance, |
With
eDelivery, you can receive your tax forms, account statements, Fund reports, and
prospectuses online rather than by regular mail. Taking advantage of this free
service not only decreases the clutter in your mailbox, it also reduces your
Fund fees by lowering printing and postage costs. To receive materials
electronically, contact your financial intermediary (such as a broker-dealer or
bank), or, if you are a direct investor, please contact us at 1-800-773-3863 or
visit https://www.nottinghamco.com/fundpages/SectorRotation to sign up for
eDelivery.
The
following information is meant as a general summary for U.S. taxpayers.
Additional tax information appears in the Fund’s Statement
of Additional Information. Shareholders should rely on their own tax
advisors for advice about the particular federal, state, and local tax
consequences to them of investing in the Fund.
The Fund
will distribute most of its income and realized gains to its shareholders every
year. Income dividends paid by the Fund derived from net investment
income, if any, will generally be paid annually. Capital gains distributions, if
any, will b e paid annually. Shareholders may elect to take dividends from net
investment income or capital gains distributions, if any, in cash or reinvest
them in additional Fund shares. Although the Fund will not be taxed on amounts
it distribute s , shareholders will generally be taxed on distributions paid by
the Fund, regardless of whether distributions are received in cash or are
reinvested in additional Fund shares. Distributions may be subject to state and
local taxes, as well as federal taxes.
In
general, a shareholder who sells or redeems shares will realize a capital gain
or loss, which will be long-term or short-term, depending upon the shareholder’s
holding period for the Fund shares. An exchange of shares may be treated
as a sale and any gain may be subject to tax.
As with all mutual funds, the Fund will be required in
certain cases to withhold and remit to the U.S. Treasury a percentage of taxable
dividends of gross proceeds realized upon sale paid to shareholders who: (i)
have failed to provide a correct taxpayer identification number in the manner
required; (ii) are subject to back-up withholding by the Internal Revenue
Service for failure to include properly on their return payments of taxable
interest or dividends; or (iii) have failed to certify to the Fund that they are
not subject to backup withholding when required to do so. Back-up withholding is
not an additional tax. Any amounts withheld from payments to you may be
refunded or credited against your U.S. federal income tax liability, if any,
provided that the required information is furnished to the Internal Revenue
Service.
Shareholders
should consult with their own tax advisors to ensure that distributions and sale
of Fund shares are treated appropriately on their income tax
returns.
The f
inancial h ighlights table is intended to help you understand the Fund’s
financial performance for the past five years . The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). The
financial data in the table has been audited by BBD, LLP, an independent
registered public accounting firm, whose report , along with the Fund’s
financial statements, is incorporated by reference into the Statement of
Additional Information and are included in the annual report which are available
upon request. Further information about the performance of the Fund is contained
in the Annual Report, copies of which may also be obtained at no charge by
calling the Fund at 1-800-773-3863.
THE
SECTOR ROTATION FUND
No
Load Shares
For
a share outstanding during
fiscal
years ended September 30, |
2018
|
2017
|
2016
|
2015
|
2014
|
Net
Asset Value, Beginning of Year |
$
12.99 |
$11.61
|
$11.13
|
$13.06
|
$11.61
|
Income
(Loss) from Investment Operations: Net
investment income (loss) Net
realized and unrealized gain on investments Total
from investment operations |
(
0.10 )
2.48
2.38
|
(0.04)
1.76
1.72
|
0.05
0.79
0.84
|
(0.02)
0.25
0.23
|
0.09
1.58
1.67
|
Less
Distributions: From
net investment income From
net realized gains
Total
distributions |
(0.01)
(
0.78
) (
0.79
)
|
--
(0.34)
(0.34)
|
--
(0.36)
(0.36)
|
(0.08)
(2.08)
(2.16)
|
(0.04)
(0.18)
(0.22)
|
Net
Asset Value, End of Year |
$ 14.58 |
$12.99 |
$11.61 |
$11.13 |
$13.06 |
Total
Return (a) |
19.05 % |
15.17% |
7.55% |
1.85% |
14.50% |
Net
Assets, End of Year (000’s) |
$
26,707 |
$23,798
|
$22,264
|
$22,209
|
$22,244
|
Ratios
of: Gross
expenses to average net assets (b) Net
expenses to average net assets (b)
Net
investment income (loss) to average
net
assets (c) |
1.96
% 1.96
%
(
0.71 )%
|
1.90%
1.89%
(0.35)%
|
1.77%
1.77%
0.41%
|
1.78%
1.78%
(0.08)%
|
1.81%
1.81%
0.67%
|
Portfolio
Turnover Rate |
219.74
% |
333.48%
|
345.74%
|
237.04%
|
218.41%
|
(a)
Includes adjustments in accordance with accounting principles generally accepted
in the United States of America and, consequently, the net asset value for
financial reporting purposes and the returns based upon those net asset values
may differ from the net asset values and returns for shareholder
transactions.
(b)
Does not include expenses of investment companies in which the Fund
invests.
(c)
Recognition of net investment income (loss) by the fund is affected by the
timing of the declaration of dividends by the underlying investment companies in
which the Fund invests.
Additional
information about the Fund is available in the Fund’s Statement
of Additional Information, which is incorporated by reference into this
prospectus. Additional information about the Fund’s investments is also
available in the annual and semi-annual reports to shareholders. The
annual reports include a discussion of market conditions and investment
strategies that significantly affected the Fund’s performance during its last
fiscal year.
The Fund’s
Statement
of Additional Information and the annual and semi-annual reports are
available, free of charge, on the website listed below and upon request by
contacting the Fund (you may also request other information about the Fund or
make shareholder inquiries) as follows:
By
telephone: |
1-800-773-3863
|
By
mail: |
The
Sector Rotation Fund c/o
Nottingham Shareholder Services 116
South Franklin Street Post
Office Box 4365 Rocky
Mount, North Carolina 27803-0365
|
By
e-mail: |
|
On
the Internet: |
www.ncfunds.com
|
Information
about the Fund (including the Statement
of Additional Information) can also be reviewed and copied at the SEC’s
Public Reference Room in Washington, D.C. Inquiries on the operations of the
public reference room may be made by calling the SEC at 1-202-551-8090.
Reports and other information about the Fund is available on the EDGAR Database
on the SEC’s Internet site at http://www.sec.gov, and copies of this information
may be obtained, upon payment of a duplicating fee, by electronic request at the
following e-mail address: [email protected], or by writing the SEC’s Public
Reference Section, Washington, D.C. 20549-1520.
Investment
Company Act File Number 811-22298