Ticker
Symbol NAVFX
A series of the
Starboard
Investment Trust
PROSPECTUS
February 1, 20 20
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, as permitted by
regulations adopted by the Securities and Exchange Commissions, paper copies of
the Fund’s shareholder reports will no longer be sent by mail, unless you
specifically request paper copies of the reports from the Fund or from your
financial intermediary (such as a broker-dealer or bank) . 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.
If you already 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
.
You may 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. Your election to
receive reports in paper will apply to all funds held with your financial
intermediary.
TABLE
OF CONTENTS
|
2 |
|
9
|
|
9 |
|
9 |
|
10 |
|
13 |
|
13 |
|
1 3 |
|
1 3 |
|
15 |
|
1 5 |
|
1 5 |
|
1 6 |
|
17 |
|
1 8 |
|
2 1 |
|
2 2 |
|
2 3 |
|
2 3 |
|
2 4 |
|
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 |
0.80% |
Acquired Fund Fees and Expenses1 |
0.21% |
Total Annual Fund Operating
Expenses |
2.26% |
Fee Waiver and/or Expense Reimbursement 2
|
0.03% |
Total Annual Fund
Operating Expenses After Fee Waiver and/or Expense
Reimbursement |
2.23%
|
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.
2.
The Fund’s Investment Advisor, Grimaldi Portfolio Solutions, Inc. (the
“Advisor”), has entered into an expense limitation agreement (the “Expense
Limitation Agreement”) with the Fund under which it has agreed to waive or
reduce its management fees and assume other expenses of the Fund in an amount
that limits the Fund’s Total Annual Fund Operating Expenses (exclusive of (i)
any front-end or contingent deferred loads; (ii) brokerage fees and commissions,
(iii) acquired fund fees and expenses; (iv) fees and expenses associated with
investments in other collective investment vehicles or derivative instruments
(including, for example, option and swap fees and expenses); (v) borrowing costs
(such as interest and dividend expense on securities sold short); (vi) taxes;
and (vii) extraordinary expenses, such as litigation expenses (which may include
indemnification of Fund officers and Trustees and contractual indemnification of
Fund service providers (other than the Advisor)) to not more than 2.14% of the
average daily net assets of the Fund. This contractual arrangement is in effect
through January 31, 2021, unless earlier terminated by the Board of Trustees of
the Fund (the “Board” or the “Trustees”) for any reason at any time. The Advisor
cannot recoup from the Fund any amounts paid by the Advisor under the expense
limitation agreement.
Example. This E xample is intended to
help you compare the cost of investing in the Fund with the cost of investing in
other mutual funds. The E xample assumes that you invest $10,000 in the Fund for
the time periods indicated and then redeem (or you hold) all of your shares at
the end of those periods. The E xample 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, 202 1 . 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 |
$226 |
$703 |
$1,207 |
$2,593 |
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 E xample, affect the Fund’s performance. For the
Fund’s most recent fiscal year ended September 30, 201 9 , the Fund’s portfolio
turnover rate was 184.39 % 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, the 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, 201 9 , the Fund was
principally invested in the consumer discretionary, consumer staples,
industrials, 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. The Fund is subject to certain risks, including the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value per shares (“NAV”), trading price, yield, total return, and ability
to meet its investment objectives. 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. |
• |
Consumer Staples.
Companies in this sector may be adversely affected by negative
changes in the domestic and international economies, interest rates,
competition, consumer confidence, and consumer spending. These companies
also are subject to the risk that government regulation could affect the
permissibility of using various production methods and food additives,
which regulations could affect company profitability. The success of food,
household, and personal product companies may be strongly affected by
consumer tastes, marketing campaigns, and other factors affecting supply
and demand. |
• |
Industrials. Companies in this
sector are affected by supply and demand both for their specific product
or service and for industrial sector products in general. Government
regulation, world events, and economic conditions will affect the
performance of these companies. These companies can also be cyclical,
subject to sharp price movements, and significantly affected by government
spending policies. |
• |
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 performance information is available online at
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, 201 9 |
Past 1 Year |
Past 5 Years |
Past 10 Years
|
Sector Rotation
Fund Return Before T axes Return After taxes on D
istributions Return After taxes on D istributions and S ale of S
hares |
22.22% 20.39% 14.93%
|
8.23% 6.63% 6.28%
|
8.75% 7.04% 6.71%
|
S&P 500 Total
Return Index (reflects no deductions for fees , expenses , or taxes
) |
31.49%
|
11.69%
|
13.55%
|
* 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).
MANAGEMENT
OF THE FUND
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
president 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.
The Fund’s shares are
available for purchase and are redeemable on any business day through your
broker-dealer or directly from the Fund by mail, facsimile, telephone, and bank
wire. Purchase and r edemption 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. Purchase and r edemption 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 purchase or redeem Fund shares
through a broker-dealer should contact the broker-dealer directly.
TAX
INFORMATION
Fund distributions are
generally taxable 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 arrangement will generally be taxed later upon withdrawal of assets
from those accounts.
PAYMENTS TO
BROKER-DEALERS
AND
OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of
the Fund through a broker-dealer or other financial intermediary (such as a
bank), the Fund , and its related companies, 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.
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, the 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, 201 9 , the Fund was
principally invested in the consumer discretionary, consumer staples,
industrials, 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. |
• |
Consumer Staples. Companies in
this sector may be adversely affected by negative changes in the domestic
and international economies, interest rates, competition, consumer
confidence, and consumer spending. These companies also are subject to the
risk that government regulation could affect the permissibility of using
various production methods and food additives, which regulations could
affect company profitability. The success of food, household, and personal
product companies may be strongly affected by consumer tastes, marketing
campaigns, and other factors affecting supply and demand.
|
• |
Industrials. Companies in this
sector are affected by supply and demand both for their specific product
or service and for industrial sector products in general. Government
regulation, world events, and economic conditions will affect the
performance of these companies. These companies can also be cyclical,
subject to sharp price movements, and significantly affected by government
spending policies. |
• |
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 is available in the Statement of Additional
Information.
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. Pursuant to the
investment advisory agreement with the Trust, 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 September 30 , 201 9 , Grimaldi Portfolio Solutions, Inc., had
approximately $ 80 million in assets under management.
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, 2019 ,
the Advisor earned 0.98% of the average daily net assets of the Fund, after fee
waivers .
Disclosure Regarding
Approval of Investment Advisory Agreement. A discussion regarding the Board’s
basis for approval of the investment advisory agreement for the Fund can be
found in the Fund’s annual report to shareholders for the period ended September
30, 2019. You may obtain a copy of the most recent semi-annual and annual
reports, free of charge, upon request to the Fund.
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 reduce its management fees and to assume
other expenses of the Fund in an amount that limits the Fund’s Total A
nnual O perating E xpenses 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%. This
contractual arrangement is in effect through January 31, 2021, unless 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.
Portfolio Manager. Mark Anthony Grimaldi,
CFS, the Fund’s portfolio manager, has been the founder, president, and part
owner of the Advisor since 1996. Mr. Grimaldi has also served as vice
president of The Prestige Organization, Inc, since 1996. He began his
career in money management in 1986 as an investment coordinator at Meyer
Handelman Company in New York. After two years, he joined Prime Financial
Services as director of operations. In 1992, Mr. Grimaldi accepted a
position as manager 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 chief portfolio manager 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 portfolio manager’s
compensation, other accounts managed and ownership of securities in 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.
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 the 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
determined at the close of regular trading on the New York Stock Exchange
(“NYSE”) on the days the NYSE is open for trading. This is normally 4:00 p.m.
Eastern time . The Fund ’s shares will not be priced on the days on which the
NYSE is closed for trading. In addition, the Fund’s shares will not be priced on
the holidays listed in the SAI. See the section titled “Net Asset Value” in the
SAI for more details.
The pricing and valuation
of portfolio securities is determined in good faith by a valuation
committee in accordance with the Fund’s policies and 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 prior to the NYSE market close (normally 4:00
p.m. Eastern Time ) will receive a share price based on that day’s NAV and
orders received after the NYSE closes will receive a price based on the NAV
determined at the close of regular trading on the next day that the NYSE is open
. 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.
You may purchase shares of
the Fund on any day on which the NYSE is open for trading. 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 prior to the close of
the NYSE (normally 4:00 p.m. Eastern Time) will receive a share price based on
that day’s NAV and orders received after the close of the NYSE will receive a
price based on the NAV determined at the close of regular trading on the next
day that the NYSE is open . 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 social security number or taxpayer identification number. 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 social security number and taxpayer identification
number.
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 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.
You can redeem shares of
the Fund on any day on which the NYSE is open for trading. The Fund typically
expects that it will take up to seven 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. During drastic economic and market changes,
telephone redemption privileges may be difficult to implement. The Fund may also
suspend redemptions, if permitted by the 1940 Act: (i) for any period during
which the NYSE is closed or trading on the NYSE 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.
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 telephon ic 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.
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 NAV 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 value 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 Board , make it undesirable for the Fund to pay for all
redemptions in cash. In such cases, the Board 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 intends to meet
all requirements under Subchapter M of the Internal Revenue Code of 1986, as
amended, necessary to qualify and be eligible for treatment each year as a
“regulated investment company” and thus does not expect to pay any U.S. federal
income tax on income and capital gains that are timely distributed to
shareholders.
Distributions from the
Fund’s net investments income (other than qualified dividend income), including
distributions out of the Fund’s net short-term capital gains, if any, are
taxable as ordinary income. Distributions by the Fund of net long-term capital
gains, if any, in excess of net short-term capital losses (capital gain
dividends) are taxable as long-term capital gains, regardless of how long Fund
shares have been held. Distributions by the Fund that qualify as qualified
dividend income are taxable at long-term capital gain rates. In addition, a 3.8%
U.S. Medicare contribution tax is imposed on “net investment income,” including,
but not limited to, interests, dividends, and net gain, of U.S. individuals with
income exceeding $200,000 (or $250,000 if married and filing jointly) and of
estates and trusts.
Dividends will be qualified
dividend income if they are attributable to qualified dividend income received
by the Fund. Generally, qualified dividend income includes dividend income from
taxable U.S. corporations and qualified non-U.S. corporations, provided that the
Fund satisfies certain holding period requirements in respect of the stock of
such corporations.
Dividends received by the
Fund from a REIT or another regulated investment company (“RIC”) generally are
qualified dividend income only to the extent such dividend distributions are
made out of qualified dividend income received by such REIT or RIC.
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 be
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. S hareholders 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. The Fund is required
in certain circumstances to apply back-up withholding on taxable dividends,
redemption proceeds, and certain other payments that are paid to any shareholder
who does not furnish certain information and certifications or who is otherwise
subject to back-up withholding.
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. Certain information reflects financial results for a single
Fund share. 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 included in the Fund’s
annual report to shareholders. The annual report is incorporated by reference
into the Statement of Additional Information , both of which are available, free
of charge, upon request, from the Fund .
THE SECTOR ROTATION
FUND
No Load Shares
(For a
Share Outstanding Throughout each Year)
|
Year
Ended September 30, 2019 |
|
2019
|
2018
|
2017
|
2016
|
2015
|
Net
Asset Value, Beginning of Year |
$14.58
|
$12.99 |
$11.61 |
$11.13 |
$13.06 |
Income (Loss) from
Investment Operations: Net investment income (loss)
(a) Net realized and unrealized gain (loss) on
investments Total
from investment operations |
(0.05) (0.46)
(0.51)
|
(0.10) 2.48
2.38 |
(0.04) 1.76
1.72 |
0.05 0.79
0.84 |
(0.02) 0.25
0.23 |
Less
Distributions: From net investment
income From net realized
gains
Total
distributions |
(0.38) (0.75)
(1.13)
|
(0.01) (0.78) (0.79)
|
-- (0.34) (0.34)
|
-- (0.36) (0.36)
|
(0.08) (2.08) (2.16)
|
Net
Asset Value, End of Year |
$12.94 |
$14.58 |
$12.99 |
$11.61 |
$11.13 |
Total
Return (a) |
(2.41)% |
19.05% |
15.17% |
7.55% |
1.85% (b) |
Net Assets, End of
Year (000’s) |
$24,941
|
$26,707 |
$23,798 |
$22,264 |
$22,209 |
Ratios
of: Gross expenses to average net assets ( c ) Net
expenses to average net assets ( c ) Net
investment income (loss) to average net assets (c) ( d ) |
2.05% 2.02% (0.38)%
|
1.96% 1.96% (0.71)%
|
1.90% 1.89% (0.35)%
|
1.77% 1.77% 0.41%
|
1.78% 1.78% (0.08)%
|
Portfolio Turnover
Rate |
184.39%
|
219.74% |
333.48% |
345.74% |
237.04% |
(a)
Calculated using the average shares method.
(b)
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.
(
c ) Does not include expenses of investment companies in which the Fund
invests.
(
d ) Recognition of net investment income(loss) by the F und 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
|
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].
Investment
Company Act File Number 811-22298