ck0000720498-20230630
MATRIX
ADVISORS VALUE FUND, INC.
10
Bank Street, Suite 590
White
Plains, NY 10606
TICKER:
MAVFX
STATEMENT
OF ADDITIONAL INFORMATION
October
28, 2023
This
Statement of Additional Information (“SAI”) is not a prospectus, and it should
be read in conjunction with the Prospectus dated October
28, 2023,
as amended and supplemented from time to time (the “Prospectus”), of Matrix
Advisors Value Fund, Inc. (the “Fund”). This SAI is incorporated into the
Prospectus in its entirety. Matrix Asset Advisors, Inc. (the “Advisor”) is the
investment advisor to the Fund.
The
Fund’s audited financial statements for its fiscal year ended June 30,
2023
are contained in the Fund’s annual report to shareholders for the fiscal year
ended June
30, 2023
and are incorporated by reference into this SAI.
To
obtain a copy of the Fund’s Prospectus and/or the Fund’s annual report free of
charge, please call 1-866-209-1965.
TABLE
OF CONTENTS
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| Page |
| THE
FUND |
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| INVESTMENT
OBJECTIVE AND POLICIES |
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| INVESTMENT
RESTRICTIONS |
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| DIRECTORS
AND OFFICERS |
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| CONTROL
PERSONS AND PRINCIPAL SHAREHOLDERS |
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| INVESTMENT
ADVISOR |
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| PORTFOLIO
MANAGER |
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| DISTRIBUTOR |
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| EXECUTION
OF PORTFOLIO TRANSACTIONS |
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| PORTFOLIO
TURNOVER |
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| MARKETING
AND SUPPORT PAYMENTS |
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| ADDITIONAL
PURCHASE AND REDEMPTION INFORMATION |
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| DISTRIBUTIONS
AND TAX INFORMATION |
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| COST
BASIS REPORTING |
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| DETERMINATION
OF SHARE PRICE |
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| DISCLOSURE
OF PORTFOLIO HOLDINGS |
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| GENERAL
INFORMATION |
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| FINANCIAL
STATEMENTS |
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| APPENDIX
A |
A-1 |
THE
FUND
The
Fund is an open-end management investment company organized as a Maryland
corporation on May 4, 1983. The Fund is registered with the Securities and
Exchange Commission (the “SEC”) as a management investment company. Such a
registration does not involve supervision of the management or policies of the
Fund. Much of the information contained in this SAI expands on subjects
discussed in the Prospectus. No investment in shares of the Fund should be made
without first reading the Prospectus.
INVESTMENT
OBJECTIVE AND POLICIES
The
Fund is a mutual fund with the investment objective of seeking to achieve a
total rate of return, which is comprised of capital appreciation and current
income.
Diversification
The
Fund is diversified. Under applicable federal laws, to qualify as a diversified
fund, the Fund, with respect to 75% of its total assets, may not invest greater
than 5% of its total assets in any one issuer and may not hold greater than 10%
of the outstanding voting securities of one issuer. The remaining 25% of the
Fund’s total assets does not need to be “diversified” and may be invested in
securities of a single issuer, subject to other applicable laws. The
diversification of a mutual fund’s holdings is measured at the time the Fund
purchases a security. However, if the Fund purchases a security and holds it for
a period of time, the security may become a larger percentage of the Fund’s
total assets due to movements in the financial markets. If the market affects
several securities held by a Fund, the Fund may have a greater percentage of its
assets invested in securities of fewer issuers. As such, the Fund is subject to
the risk that its performance may be hurt disproportionately by the poor
performance of relatively few securities despite the Fund qualifying as a
diversified fund under applicable federal laws.
Description
of Permitted Investments
The
following discussion supplements the discussion of the Fund’s investment
objective and policies as set forth in the Prospectus. There can be no assurance
the investment objective of the Fund will be attained.
Whenever
an investment policy or limitation states a maximum percentage of the Fund’s
assets that may be invested in any security or other asset, or sets forth a
policy regarding quality standards, such standard or percentage limitation will
be determined immediately after and as a result of the Fund’s acquisition or
sale of such security or other asset. Accordingly, except with respect to
borrowing and illiquid securities, any subsequent change in values, net assets
or other circumstances will not be considered in determining whether the Fund
complies with its investment policies and limitations. In addition, if a
bankruptcy or other extraordinary event occurs concerning a particular
investment by the Fund, the Fund may receive stock, real estate or other
investments that the Fund would not or could not buy. If this happens the Fund
would sell such investments as soon as practicable while trying to maximize the
return to its shareholders.
Common
Stock
The
Fund invests primarily in common stocks of large-capitalization companies.
Common stock represents a proportionate share of the ownership of a company and
its value is based on the success of the company’s business, any income paid to
stockholders, the value of its assets, and general market conditions. In
addition to the general market risks described in the Prospectus, investments in
common stock are subject to the risk that if a company in which the Fund invests
is liquidated, the holders of preferred stock and creditors of that company will
be paid in full before any payments are made to the Fund as a holder of common
stock. It is possible that all assets of that company will be exhausted before
any payments are made to the Fund.
Preferred
Stock
As
a non-principal investment strategy, the Fund may invest in preferred stocks. A
preferred stock is a blend of the characteristics of a bond and common stock. It
can offer the higher yield of a bond and has priority over common stock in
equity ownership but does not have the seniority of a bond and, unlike common
stock, its participation in the issuer’s growth may be limited. Preferred stock
has preference over common stock in the receipt of dividends and in any residual
assets after payment to creditors should the issuer be dissolved.
Although
the dividend is set at a fixed annual rate, in some circumstances it can be
changed or omitted by the issuer.
Convertible
Securities
As
a non-principal investment strategy, the Fund may invest in convertible
securities (bonds, notes, debentures, preferred stock and other securities
convertible into common stocks) that may offer higher income than the common
stocks into which they are convertible. The convertible securities in which the
Fund may invest include fixed-income or zero-coupon debt securities, which may
be converted or exchanged at a rate or determinable exchange ratio into
underlying shares of common stock. Prior to their conversion, convertible
securities may have characteristics similar to non-convertible debt securities.
While convertible securities generally offer lower yields than non-convertible
debt securities of similar quality, their prices may reflect changes in the
value of the underlying common stock. Convertible securities generally entail
less credit risk than the issuer’s common stock. In addition to the general
market risks described in the Prospectus, the market value of convertible
securities is also affected by prevailing interest rates, the credit quality of
the issuer and any call provisions.
Investment
Companies
As
a non-principal investment strategy, the Fund may invest its assets in shares of
other registered investment companies, including money market mutual funds. The
Fund’s investments in money market mutual funds may be used for cash management
purposes and to maintain liquidity in order to satisfy redemption requests or
pay unanticipated expenses. The Fund limits its investments in securities issued
by other investment companies in accordance with the Investment Company Act of
1940, as amended (“1940 Act”), and consistent with its investment
restrictions herein. Section 12(d)(1) of the 1940 Act precludes the Fund
from acquiring: (i) more than 3% of the total outstanding shares of another
investment company; (ii) shares of another investment company having an
aggregate value in excess of 5% of the value of the total assets of the Fund; or
(iii) shares of another registered investment company and all other
investment companies having an aggregate value in excess of 10% of the value of
the total assets of the Fund. However, Section 12(d)(1)(F) of the 1940 Act
provides that the provisions of paragraph 12(d) shall not apply to securities
purchased or otherwise acquired by the Fund if: (i) immediately after such
purchase or acquisition not more than 3% of the total outstanding shares of such
investment company is owned by the Fund and all affiliated persons of the Fund;
and (ii) the Fund has not offered or sold, and is not proposing to offer or
sell its shares through a principal underwriter or otherwise at a public or
offering price that includes a sales load of more than 1 1/2%. These
restrictions may not apply to the Fund’s investments in money market mutual
funds, if the Fund’s investments fall within the exceptions set forth under the
rules and regulations of the 1940 Act.
If
the Fund invests in investment companies, pursuant to Section 12(d)(1)(F),
it must comply with the following voting restrictions: when the Fund exercises
voting rights, by proxy or otherwise, with respect to investment companies owned
by the Fund, the Fund will either seek instruction from the Fund’s shareholders
with regard to the voting of all proxies and vote in accordance with such
instructions, or vote the shares held by the Fund in the same proportion as the
vote of all other holders of such security. In addition, an investment company
purchased by the Fund pursuant to Section 12(d)(1)(F) shall not be required
to redeem its shares in an amount exceeding 1% of such investment company’s
total outstanding shares in any period of less than thirty days. In addition to
the advisory and operational fees the Fund bears directly in connection with its
own operation, the Fund also bears its pro rata portion of the advisory and
operational expenses of each other investment company in which it
invests.
Rule
12d1-4 of the 1940 Act provides an exemption from Section 12(d)(1) that allows a
fund to invest all of its assets in other registered funds, including ETFs, if
the fund satisfies certain conditions specified in the Rule, including, among
other conditions, that the funds and their advisory group will not control
(individually
or in the aggregate) an acquired fund (e.g., hold more than 25% of the
outstanding voting securities of an acquired fund that is a registered open-end
investment company).
The
Fund’s investment in other investment companies may include shares of
exchange-traded funds (collectively, “ETFs”). An ETF is a fund whose shares are
bought and sold on a securities exchange as if it were a single security. ETFs
may be structured as investment companies that are registered under the 1940
Act, typically as open-end funds or unit investment trusts. ETFs may be based on
specific domestic and foreign market securities indices or actively managed by
the ETF’s investment adviser(s). An “index-based ETF” seeks to provide
investment results that match the performance of an index by holding in its
portfolio either the contents of the index or a representative sample of the
securities in the index. An “enhanced ETF” seeks to provide investment results
based on the fund’s investment objective without regard to a particular index.
In seeking to provide such results, an ETF, and in particular, an enhanced ETF,
may engage in short sales of securities included in the underlying index and may
invest in derivatives instruments, such as equity index swaps, futures
contracts, and options on securities, and stock indices. Alternatively, ETFs may
be structured as grantor trusts or other forms of pooled investment vehicles
that are not registered or regulated under the 1940 Act. These ETFs typically
hold commodities, precious metals, currency or other non-securities investments.
ETFs, like mutual funds, have expenses associated with their operation, such as
advisory and custody fees. When the Fund invests in an ETF, in addition to
directly bearing expenses associated with its own operations, including the
brokerage costs associated with the purchase and sale of shares of the ETF, the
Fund will bear a pro rata portion of the ETF’s expenses. In addition, it may be
more costly to own an ETF than to directly own the securities or other
investments held by the ETF because of ETF expenses. The risks of owning shares
of an ETF generally reflect the risk of owning the underlying securities or
other investments held by the ETF, although lack of liquidity in the market for
the shares of an ETF could result in the ETF’s value being more volatile than
the underlying securities or other investments.
Foreign
Securities
As
a non-principal investment strategy, the Fund may invest up to 10% of its total
assets in securities of foreign issuers that are listed and traded on national
securities exchanges or traded over-the-counter in the United States, such as
American Depositary Receipts (“ADRs”). Other than ADRs, the Fund considers
securities traded on U.S. exchanges to be U.S. securities.
Risks
of Investing in Foreign Securities. Investments
in foreign securities involve certain inherent risks, including the
following:
Political
and Economic Factors.
Individual foreign economies of certain countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment, resource self-sufficiency, and
diversification and balance of payments position. The internal politics of some
foreign countries may not be as stable as those of the United States.
Governments in some foreign countries also continue to participate to a
significant degree, through ownership interest or regulation, in their
respective economies. Action by these governments could include restrictions on
foreign investment, nationalization, expropriation of goods or imposition of
taxes, and could have a significant effect on market prices of securities and
payment of interest. The economies of many foreign countries are heavily
dependent upon international trade and are affected by the trade policies and
economic conditions of their trading partners. If these trading partners enacted
protectionist trade legislation, it could have a significant adverse effect upon
the securities markets of such countries.
Currency
Fluctuations.
The Fund may invest in securities denominated in foreign currencies. A change in
the value of any such currency against the U.S. dollar will result in a
corresponding change in the U.S. dollar value of the Fund’s assets denominated
in that currency. Such changes will also affect the Fund’s income. The value of
the Fund’s assets may also be affected by currency restrictions and exchange
control regulations enacted from time to time.
Market
Characteristics. The
Advisor expects that many foreign securities in which the Fund invests will be
purchased in over-the-counter markets or on exchanges located in the countries
in which the principal offices of the issuers of the various securities are
located, if that is the best available market. Foreign exchanges and
markets
may be more volatile than those in the United States. While growing, they
usually have substantially less volume than U.S. markets, and the Fund’s foreign
securities may be less liquid and more volatile than U.S. securities. Also,
settlement practices for transactions in foreign markets may differ from those
in United States markets and may include delays beyond periods customary in the
United States. Foreign security trading practices, including those involving
securities settlement where Fund assets may be released prior to receipt of
payment or securities, may expose the Fund to increased risk in the event of a
failed trade or the insolvency of a foreign broker-dealer.
Legal
and Regulatory Matters.
Certain foreign countries may have less supervision of securities markets,
brokers and issuers of securities, and less financial information available to
issuers, than is available in the United States.
Taxes.
The interest and dividends payable on some of the Fund’s foreign portfolio
securities may be subject to foreign withholding taxes, thus reducing the net
amount of income available for distribution to Fund shareholders.
Costs.
To the extent that the Fund invests in foreign securities, its expense ratio is
likely to be higher than those of investment companies investing only in
domestic securities, since the cost of maintaining the custody of foreign
securities is higher.
Options
on Securities
As
a non-principal investment strategy, the Fund may write (sell) covered call
options on its portfolio securities (“covered options”) in an attempt to enhance
gain, although it has no present intention to do so and may only do so to the
extent of up to 5% of its net assets.
When
the Fund writes a covered call option, it gives the purchaser of the option the
right, upon exercise of the option, to buy the underlying security at the price
specified in the option (the “exercise price”) at any time during the option
period, generally ranging up to nine months. If the option expires unexercised,
the Fund will realize income to the extent of the amount received for the option
(the “premium”). If the call option is exercised, a decision over which the Fund
has no control, the Fund must sell the underlying security to the option holder
at the exercise price. By writing a covered option, the Fund forgoes, in
exchange for the premium less the commission (“net premium”) the opportunity to
profit during the option period from an increase in the market value of the
underlying security above the exercise price.
The
Fund may terminate its obligation as writer of a call option by purchasing an
option with the same exercise price and expiration date as the option previously
written. This transaction is called a “closing purchase
transaction.”
Closing
purchase transactions enable the Fund to immediately realize gains or minimize
losses on its options positions. There is no assurance that a liquid secondary
market on an options exchange will exist for any particular option, or at any
particular time, and for some options no secondary market may exist. In
addition, stock index prices may be distorted by interruptions in the trading of
securities of certain companies or of issuers in certain industries, which could
disrupt trading in option positions on such indices and preclude the Fund from
closing out its options positions. If the Fund is unable to effect a closing
purchase transaction with respect to options it has written, it will not be able
to terminate its obligations or minimize its losses under such options prior to
their expiration.
The
hours of trading for options may not conform to the hours during which the
underlying securities are traded. To the extent that the options markets close
before the markets for the underlying securities, significant price and rate
movements may take place in the underlying markets that cannot be reflected in
the options markets.
The
Fund has adopted a derivatives risk management program (“DRMP”) in accordance
with Rule 18f-4 of the 1940 Act, which permits funds to enter into derivatives
transactions (such as options on securities) as long as certain requirements and
limitations are met by such funds. However, a “limited derivatives user”
exemption exists under Rule 18f-4 and, in lieu of adopting a full DRMP, the Fund
is required to comply with a 10% notional exposure-based limit on derivatives
transactions and to adopt written policies and procedures
reasonably
designed to manage the Fund’s derivatives risks. To the extent it invests in
derivatives (such as options on securities), the Fund expects to qualify as a
“limited derivatives user.”
Short-Term
Investments
As
a non-principal investment strategy, the Fund may invest in any of the following
securities and instruments:
Certificates
of Deposit, Bankers’ Acceptances and Time
Deposits.
The Fund may hold certificates of deposit, bankers’ acceptances and time
deposits. Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank for a definite period of time and earning a
specified return. Bankers’ acceptances are negotiable drafts or bills of
exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are “accepted” by a bank, meaning in effect that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Certificates of deposit and bankers’ acceptances acquired by the Fund will be
dollar- denominated obligations of domestic banks, savings and loan associations
or financial institutions which, at the time of purchase, have capital, surplus
and undivided profits in excess of $100 million (including assets of both
domestic and foreign branches), based on latest published reports, or less than
$100 million if the principal amount of such bank obligations are fully
insured by the U.S. Government.
In
addition to buying certificates of deposit and bankers’ acceptances, the Fund
may also make interest-bearing time or other interest-bearing deposits in
commercial or savings banks. Time deposits are non-negotiable deposits
maintained at a banking institution for a specified period of time at a
specified interest rate.
Commercial
Paper and Short-Term Notes. The
Fund may invest a portion of its assets in commercial paper and short-term
notes. Commercial paper consists of unsecured promissory notes issued by
corporations. Commercial paper and short-term notes normally have maturities of
less than nine months and fixed rates of return, although such instruments may
have maturities of up to one year.
Commercial
paper and short-term notes consist of issues rated at the time of purchase “A-2”
or higher by S&P, “Prime-2” or higher by Moody’s, or similarly rated by
another nationally recognized statistical ratings organization or, if unrated,
will be determined by the Advisor to be of comparable quality.
Illiquid
Securities
The
Fund may not invest more than 5% of the value of its net assets in illiquid
securities. The Advisor will monitor the amount of illiquid securities in the
Fund’s portfolio, under the supervision of the Board, to ensure compliance with
this investment restriction.
In
connection with the implementation of the SEC’s liquidity risk management rule,
the term “illiquid security” is defined as a security that the Fund reasonably
expects cannot be sold or disposed of in current market conditions in seven days
or less without the sale or disposition significantly changing the market value
of the security. The Fund is subject to guidelines as set forth in the Fund’s
liquidity risk management program.
Temporary
Defensive Strategies
Under
normal market conditions, the Fund invests substantially all of its assets in
the securities and investments described above. The Fund, however, may
temporarily depart from its principal investment strategies by investing up to
100% of its assets in cash, cash equivalents, money market mutual funds, or
high-quality short-term money market instruments, in response to adverse market,
economic or political conditions, or in other appropriate circumstances.
INVESTMENT
RESTRICTIONS
The
following policies and investment restrictions have been adopted by the Fund and
(unless otherwise noted) are fundamental and cannot be changed without the
affirmative vote of a majority of the Fund’s
outstanding
voting securities. As used herein, a “majority of the Fund’s outstanding voting
securities” means the lesser of:
1)67%
or more of the Fund’s shares present at a shareholder meeting if the holders of
more than 50% of the Fund’s outstanding shares are present in person or by
proxy; or
2)More
than 50% of the Fund’s outstanding shares.
In
accordance with these restrictions, the Fund may not:
1.Purchase
any securities which would cause more than 5% of the Fund’s total assets at the
time of such purchase to be invested in the securities of any issuer, but this
limitation does not apply to obligations issued or guaranteed by the U.S.
Government;
2.Purchase
any securities which would cause the Fund at the time of such purchase to own
more than 10% of the outstanding voting securities of any class of any issuer,
but this limitation does not apply to obligations issued or guaranteed by the
U.S. Government;
3.Purchase
any securities which would cause 25% or more of the Fund’s total assets at the
time of such purchase to be invested in the securities of issuers engaged in any
one industry;
4.Invest
in companies for the purpose of exercising management or control;
5.Purchase
or sell real estate, although the Fund may invest in the readily marketable
securities of companies whose business involves the purchase or sale of real
estate;
6.Purchase
or sell commodities or commodities contracts;
7.Purchase
the securities of any investment company, except (i) in the open market where no
profit to a sponsor or dealer other than customary brokerage commissions results
from such purchases or (ii) if acquired in connection with a plan of
reorganization;
8.Purchase
securities on margin;
9.Effect
short sales of any securities;
10.Make
loans, except by the acquisition of a portion of an issue of publicly traded
bonds, debentures, notes, and other debt securities;
11.Borrow
money, except for temporary emergency purposes in amounts not in excess of 5% of
the Fund’s total assets;
12.Mortgage,
pledge or hypothecate securities;
13.Act
as an underwriter of securities except insofar as the Fund might technically be
deemed an underwriter for purposes of the Securities Act of 1933, as
amended, upon the disposition of certain securities;
14.Purchase
or retain the securities of any issuer if the Fund’s officers or directors, or
those of the Advisor, who each own 0.5% of the outstanding securities of such
issuer, together own beneficially more than 5% of such securities;
or
15.Issue
any class of securities senior to any other class of securities.
In
addition to the restrictions set forth above, the Fund’s investment objective
may not be changed without the affirmative vote of a majority of the Fund’s
outstanding voting securities.
As
a matter of operating, but not fundamental policy, which can be changed without
shareholder approval, the Fund may not purchase any securities which would cause
more than 5% of the Fund’s net assets at the time of such purchase to be
invested in illiquid securities. If such policy were to be changed, such
investments in illiquid securities would be limited to no more than 15% of the
Fund’s net assets. In connection with the implementation of Rule 22e-4 under the
1940 Act, these limitations apply to investments in illiquid securities that are
“assets” (i.e.,
investments that have positive values).
Except
with respect to borrowing and illiquid securities, if a percentage restriction
set forth in the Prospectus or in this SAI is adhered to at the time of
investment, a subsequent increase or decrease in a percentage resulting from a
change in the values of assets will not constitute a violation of that
restriction.
The
Fund has a loan agreement (i.e.,
a line of credit) with U.S. Bank N.A. Consistent with fundamental investment
restriction No. 11, the Fund will only draw on its line of credit for temporary
emergency purposes.
DIRECTORS
AND OFFICERS
The
overall management of the business and affairs of the Fund is vested with the
Fund’s Board of Directors (the “Board of Directors”). The day-to-day operations
of the Fund are delegated to the Fund’s officers subject to the investment
objectives and policies of the Fund and to general supervision by the Board of
Directors. The directors and officers of the Fund (“Directors” and “Officers”)
are as follows:
Directors
and Officers of the Fund
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Name,
Address(1)
and
Year of Birth |
Position(s)
Held with the Fund |
Term
of Office and Date Elected(2) |
Principal
Occupations During
Past Five Years |
Number
of Portfolios in Fund Complex(3)
Overseen
by Director |
Other
Directorships Held by Director for the Past Five Years |
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Interested
Director |
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David
A. Katz, CFA(4)
(Born
1962) |
Director,
President and Treasurer |
Since
1997 |
Chief
Investment Officer (1986 to present) and President (1990 to present) of
the Advisor, and portfolio manager of the Fund (1996 to
present). |
2 |
Trustee,
Matrix Advisors Funds Trust (mutual fund) (2016 (inception) to
present) |
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Independent
Directors |
T.
Michael Tucker
(Born 1942) |
Independent
Director |
Since
1997 |
Retired;
formerly, owner of T. Michael Tucker, a certified public accounting firm
(1977 to 2005 and 2011 to 2019); formerly, Consultant, Carr Riggs &
Ingram, LLP, a certified public accounting firm (2005 to 2011). |
2 |
Trustee,
Matrix Advisors Funds Trust (mutual fund) (2016 (inception) to
present) |
Larry
D. Kieszek
(Born 1950) |
Independent
Director and Chairman |
Since
1997 |
Retired;
formerly Partner of Purvis, Gray & Company, LLP, a certified public
accounting firm (1974 to 2015). |
2 |
Trustee,
Matrix Advisors Funds Trust (mutual fund) (2016 (inception) to
present) |
David
S. Wyler
(Born 1969)
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Independent
Director
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Since
2016
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Head,
Advanced TV, TransUnion (March 2021 - present); Vice President of Advanced
TV & Digital Video at IRI Worldwide (market research company)
(December 2017 to December 2020); Vice President of Business Development
at iQ Media (audience intelligence firm) (May to September 2017); Senior
Director of Sales at Simulmedia (TV targeting company) (2016 – 2017); Vice
President of Business Development at Resonate (marketing intelligence
firm) (2014 – 2016); Vice President Business Development at Experian (2013
– 2014). |
2
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Trustee,
Matrix Advisors Funds Trust (mutual fund) (2016 (inception) to
present)
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(1)
The address of each Director is 10 Bank Street, Suite 590, White Plains, NY
10606.
(2)
Each Director will hold office for an indefinite term until the earliest of (i)
the next meeting of shareholders, if any, called for the
purpose
of considering the election or re-election of such Director and until the
election and qualification of his or her successor, if
any,
elected at such meeting, or (ii) the date of a Director’s death, resignation or
retirement, or a Director is removed by the
shareholders,
in accordance with the Fund’s By-Laws, as amended, and Articles of Incorporation
of the Fund, as amended.
(3)
The “Fund Complex” includes the Fund and a series of the Matrix Advisors Funds
Trust.
(4)
“Interested person” of the Fund is defined in the 1940 Act. Mr. Katz is
considered an “interested person” because of his affiliation
with
the Advisor.
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Officers
of the Fund |
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Name,
Address(1)
and
Year of Birth |
Position(s)
Held with the Fund |
Term
of Office and Date Elected(2) |
Principal
Occupation
During Past Five Years |
Steven
G. Roukis, CFA
(Born 1967) |
Senior
Vice President |
Since
2000 |
Managing
Director and Senior Portfolio Manager of the Advisor (2005 to
present). |
Lon
F. Birnholz
(Born 1960)
|
Executive
Vice President and Secretary |
Since
2006 |
Senior
Managing Director of the Advisor (1999 to present). |
Jordan
F. Posner
(Born 1957) |
Senior
Vice President |
Since
2006 |
Managing
Director and Senior Portfolio Manager of the Advisor (2005 to
present). |
Jonathan
M. Tom
(Born 1983) |
Senior
Vice President |
Since
2016 |
Chief
Operating Officer of the Advisor (2015 to present); Head Fixed Income
Trader of the Advisor (2011 to present); Equity Research Analyst of the
Advisor (2005 to present). |
Stephan
J. Weinberger, CFA
(Born 1955) |
Senior
Vice President |
Since
2010 |
Managing
Director and Senior Portfolio Manager of the Advisor (2010 to present).
|
Jacqueline
Mandel
(Born 1964) |
Vice
President, Assistant Secretary,
Chief Compliance Officer and AML
Compliance Officer |
Since
2022 |
Chief
Compliance Officer of the Advisor (February 2022 to present); Marketing
Consultant of the Advisor (July 2021 to January 2022); Investment
Management Sales Associate of Arrow Partners, Inc. (a
third-party
marketing
firm)(January 2021 to January 2022); Analyst of Knightspoint Partners LLC
(an investment firm)(2018 to 2020); Independent Consultant of Berens
Capital Management, LLC (an investment firm)(November 2017 to January
2018); and Research Associate of Moisson Partners Inc. (a consulting
firm)(2016 to February
2018). |
(1)The
address of each Officer is 10 Bank Street, Suite 590, White Plains, NY
10606.
(2)Each
Officer will hold office for an indefinite term until the date he or she resigns
or retires or until his or her successor is elected and qualifies.
Additional
Information Concerning Our Board of Directors
The
Role of the Board of Directors
The
Board of Directors provides oversight of the management and operations of the
Fund. Like all mutual funds, the day-to-day responsibility for the management
and operation of the Fund is the responsibility of various service providers to
the Fund, such as the Advisor and the Fund’s portfolio manager, distributor,
administrator, custodian, and transfer agent, each of whom are discussed in
greater detail in this SAI. The Board of Directors has appointed various senior
individuals of the Advisor as officers of the Fund, with responsibility to
monitor and report to the Board of Directors on the Fund’s operations. In
conducting this oversight, the Board of Directors receives regular reports from
these officers and service providers regarding the Fund’s operations. For
example, the Treasurer provides reports as to financial reporting matters and
the Fund’s portfolio manager reports on the performance of the Fund’s portfolio.
The Board of Directors has appointed a Chief Compliance Officer who administers
the Fund’s compliance program and regularly reports to the Board of Directors as
to compliance matters. Some of these reports are provided as part of formal
“board meetings” which are typically held quarterly, in person, and involve the
Board of Directors’ review of recent Fund operations. From time to time, one or
more members of the Board of Directors may also meet with management in less
formal settings, between formal board meetings to discuss various topics. In all
cases, however, the role of the Board of Directors and of any individual
Director is one of oversight and not of management of the day-to-day affairs of
the Fund.
Board
Leadership Structure
The
Board of Directors has structured itself in a manner that it believes allows it
to perform its oversight function effectively. It has established four standing
committees, a Nominating Committee and an Audit Committee (which also serves as
the Qualified Legal Compliance Committee), which are discussed in greater detail
below under “Board Committees”. All of the Directors, except Mr. Katz, are
“Independent Directors”, which are Directors that are not affiliated with the
Advisor, the Fund’s principal underwriter, or their affiliates. The Nominating
Committee and Audit Committee are composed entirely of Independent Directors.
The Chairman of the Board of Directors is an Independent Director. The Board of
Directors has determined not to combine the Chairman position and the principal
executive officer position and has appointed Mr. Katz, the Chief Investment
Officer and President of the Advisor, as President of the Fund. The Board of
Directors reviews its structure and the structure of its committees annually.
The Board of Directors has determined that the structure of the Independent
Chairman, the composition of the Board of Directors, and the function and
composition of its various committees are appropriate means to address any
potential conflicts of interest that may arise.
Board
Oversight of Risk Management
As
part of its oversight function, the Board of Directors receives and reviews
various reports and assessments and discusses these matters with appropriate
management and other personnel. Because risk management is a broad concept
comprised of many disparate elements (such as, for example, investment risk,
issuer and counterparty risk, compliance risk, operational risks, business
continuity risks, etc.) the oversight of different types of risks is handled in
different ways. For example, the Board of Directors reviews compliance reports
from the Fund’s Chief Compliance Officer as well as the Fund’s administrator and
engages in discussions with each of them as necessary, in its oversight of
compliance activities affecting the Fund. By way of further example, the
Independent Directors ask for reports and engage in discussions with personnel
of the Advisor as necessary to review other types of risks, such as business
continuity risk or investment risk. The Audit Committee also meets with the
Fund’s independent public accounting firm to discuss, among other things, the
internal control structure of the Fund’s financial reporting function. Not all
risks that may affect the Fund or its portfolio can be identified, or processes
and controls developed to eliminate or mitigate their occurrence or effects, and
some risks are simply beyond any control of the Fund, the Advisor, its
affiliates or other service providers.
Information
about Each Director’s Qualifications, Experience, Attributes or
Skills
The
Board of Directors believes that each of its members has the qualifications,
experience, attributes and skills (“Director Attributes”) appropriate to their
continued service as Directors of the Fund in light of the Fund’s business and
structure. Each of the Directors has substantial business and professional
backgrounds that indicate they have the ability to critically review, evaluate
and access information provided to them. Certain of these business and
professional experiences are set forth in detail in the charts above. In
addition, each of the Directors has served on boards for organizations other
than the Fund, and Messrs. Kieszek and Tucker have served on the Board of
Directors for more than 25
years. Collectively, the Directors therefore have substantial board experience
and, in their service to the Fund, have gained substantial insight as to the
operation of the Fund. The Independent Directors annually conduct a
“self-assessment” wherein the effectiveness of the Board is
reviewed.
In
addition to the information provided in the previous charts, additional
information concerning each particular Director and certain of their Director
Attributes is provided below. The information provided below, and in the chart
above, is not all-inclusive. Many Director Attributes involve intangible
elements, such as intelligence, work ethic, the ability to work together and the
ability to communicate effectively, exercise judgment, ask incisive questions,
manage people and problems or to develop solutions. In conducting its annual
self-assessment, the Directors have determined that they have the appropriate
attributes and experience to continue to serve effectively as Directors of the
Fund. In addition, the summaries set forth below as to the qualifications,
attributes and skills of the Directors are furnished in response to disclosure
requirements imposed by the SEC, do not constitute any representation or
guarantee that the Board of Directors or any Director has any special expertise
or experience, and do not impose any greater or additional responsibility or
obligation on, or change any standard of care of, any such person or on the
Board of Directors as a whole than otherwise would be the case.
Director
Attributes
David
A. Katz, CFA.
Mr. Katz has served as a Director of the Fund since 1997, as President and
Treasurer of the Fund since 1997 and as the Fund’s portfolio manager since 1996.
Mr. Katz has served as Chief Investment Officer of the Advisor since 1986 and as
President of the Advisor since 1990. In addition to his investment management
experience, Mr. Katz is also a CFA charterholder. Through his experience as a
Director and officer of the Fund, his investment management experience and his
experience as a CFA charterholder, Mr. Katz is experienced with financial,
accounting, regulatory and investment matters. Such experience helps Mr. Katz
exercise the business judgment necessary to fulfill the requirements and
obligations of his position on the Board of Directors and to effectively
evaluate Fund management.
T.
Michael Tucker.
Mr. Tucker has served as an
Independent
Director of the Fund since 1997 and is currently the Chairman of the
Audit
Committee.
Mr. Tucker is currently retired. From 1977 to 2005 and from 2011 to 2019, Mr.
Tucker was the owner of T. Michael Tucker, a certified public accounting firm.
Mr. Tucker formerly served as a consultant with Carr Riggs & Ingram,
LLP, a certified public accounting firm, from 2005 to 2011. Through his
experience as a Director and his many years of accounting experience,
Mr. Tucker is experienced with financial, accounting, regulatory and
investment matters. Such experience helps Mr. Tucker exercise the business
judgment necessary to fulfill the requirements and obligations of his position
on the Board of Directors and to effectively evaluate Fund
management.
Larry
D. Kieszek.
Mr. Kieszek has served as an
Independent
Director of the Fund since 1997 and is currently the Chairman of the
Board.
Mr. Kieszek is currently retired. He served as a Partner at Purvis, Gray
& Company, LLP, a certified public accounting firm, from 1974 to 2015.
Through his experience as a Director and his many years of accounting
experience, Mr. Kieszek is experienced with financial, accounting,
regulatory and investment matters. Such experience helps Mr. Kieszek
exercise the business judgment necessary to fulfill the requirements and
obligations of his position on the Board of Directors and to effectively
evaluate Fund management.
David
S. Wyler. Mr.
Wyler has served as an
Independent
Director of the Fund since 2016. He currently serves as Head of Advanced TV at
TransUnion. He served as Vice President of Advanced TV & Digital Video at
IRI Worldwide from December 2017 to December 2020. Prior to that he served as
Vice President of Business Development for iQMedia, an audience intelligence
company that helps marketers link their media investments to desired audience
outcomes from May through September 2017. Prior to joining iQ Media, Mr. Wyler
was Senior Director of Sales at Simulmedia, an advanced TV targeting and
execution company, from 2016 until 2017. Prior to that, Mr. Wyler was Vice
President of Business Development for Resonate, a marketing intelligence firm
from 2014 through 2016. Mr. Wyler was Vice President of Business Development for
the AdTruth division of 41st Parameter, a fraud prevention firm, from 2012 until
it was acquired by Experian in 2013. He served as Vice President of Business
Development for Experian from 2013 until 2014. Through his experience as a
Director of the Fund and his many years as a senior executive in the marketing
and market intelligence fields, Mr. Wyler is experienced with financial,
accounting, and marketing matters. Such experience helps Mr. Wyler exercise the
business judgment necessary to fulfill the requirements and obligations of his
position on the Board of Directors and to effectively evaluate Fund
management.
Independent
Directors receive a fee of $750 per regular meeting and $500 per special
meeting. Additionally, all Independent Directors are reimbursed for
out-of-pocket expenses incurred in connection with attending the Board of
Directors meetings. The Fund does not offer pension or retirement benefits to
its Directors or officers. The table below sets forth the compensation of the
Directors for the fiscal year ended June
30, 2023.
|
|
|
|
|
|
|
|
| |
|
Name
and Position |
Aggregate
Compensation
from
the Fund |
Total
Compensation
from
the Fund and Fund Complex(1)
Paid
to Directors |
|
Mr.
Katz, Interested Director(2) |
$0 |
$0 |
| Mr.
Tucker, Independent Director |
$3,000 |
$4,000 |
| Mr.
Kieszek, Independent Director |
$3,000 |
$4,000 |
| Mr.
Wyler, Independent Director |
$3,000 |
$4,000 |
(1)The
“Fund Complex” includes the Fund and a single series of Matrix Advisors Funds
Trust.
(2)
Directors
or officers of the Fund who are also directors, officers, employees or
shareholders of the Advisor do not receive
renumeration
from the Fund for serving as directors or officers.
Directors
Ownership of Fund Securities
The
following table sets forth the dollar range of Fund securities beneficially
owned by each Director as of December
31, 2022,
stated using the following ranges: None, $1 - $10,000, $10,001 - $50,000,
$50,001 - $100,000, or over $100,000.
|
|
|
|
|
|
|
|
| |
| Name
of Director |
Aggregate
Dollar Range of Equity Securities Beneficially Owned in the Fund
(1) |
Aggregate
Dollar Range of Equity Securities Beneficially Owned in the Fund
Complex |
| Independent
Directors |
| |
| T.
Michael Tucker |
over
$100,000 |
Over
$100,000 |
| Larry
D. Kieszek |
over
$100,000 |
Over
$100,000 |
| David
S. Wyler |
$10,000
- $50,000 |
$10,001-$50,000 |
| Interested
Director |
| |
| David
A. Katz |
over
$100,000 |
Over
$100,000 |
(1)Beneficial
ownership is determined in accordance with Rule 16a-1(a)(2) under the Securities
Exchange Act of 1934, as amended. Includes only the Fund.
As
of September 30, 2023, the Directors and Officers as a group owned 18.43% of the
outstanding shares of the Fund.
Board
Committees
Audit
Committee
The
Fund has an Audit Committee, which is composed of all of the Independent
Directors. The Audit Committee is responsible for selecting, overseeing, and
setting the compensation of the independent auditors and is responsible for
pre-approving all audit and non-audit services performed by the auditors for the
Fund and for pre-approving certain non-audit services performed by the auditors
for the Advisor and certain control persons of the Advisor. The Audit Committee
also reviews financial statements and other audit-related matters for the Fund
and holds discussions with management and with the independent auditors
concerning the scope of the audit and the auditor’s independence. The Audit
Committee meets twice a year, and if necessary, more frequently. The
Audit Committee met two times during the fiscal year ended June 30, 2023.
The
Audit Committee also serves as the Fund’s Qualified Legal Compliance Committee
(“QLCC”) for the purpose of compliance with Rules 205.2(k) and 205.3(c) of
the Code of Federal Regulations, regarding alternative reporting procedures for
attorneys retained or employed by an issuer who appear and practice before the
SEC on behalf of the issuer (the “issuer attorneys”).
Nominating
Committee
The
Nominating Committee, which is composed of all the Independent Directors, is
responsible for seeking and reviewing candidates for consideration as nominees
for the position of Directors as is considered necessary from time to time. The
Nominating Committee will review shareholders nominations to fill vacancies on
the Board of Directors. Such recommendations for consideration by the Nominating
Committee should be sent to the President of the Fund in writing together with
the appropriate biographical information concerning each such proposed nominee,
and such recommendation must comply with the notice provisions set forth in the
Fund’s Articles of Incorporation, as amended. In general, to comply with such
procedures, such nominations, together with all required biographical
information, must be delivered to and received by the President of the Fund at
the principal executive offices of the Fund not later than 60 days prior to the
shareholder meeting at which any such nominee would be voted on. There are no
policies in place regarding nominees recommended by shareholders. The
Nominating Committee met once during the fiscal year ended June 30,
2023.
Pricing
Committee
The
Advisor has established a Pricing Committee, which is subject to Board oversight
but is not a committee of the Board. The Pricing Committee implements the
Advisor’s responsibilities as the valuation designee under the Fund’s Amended
Pricing and Fair Value Procedures, including performing fair value
determinations for holdings, in accordance with Rule 2a-5 under the 1940 Act.
Board
Interest in the Advisor and Distributor
As
of December 31,
2022,
none of the Independent Directors or members of their immediate families owned
any securities of the Advisor, Quasar Distributors, LLC, the Fund’s distributor
(the “Distributor”), or any other entity directly or indirectly controlling,
controlled by, or under common control with the Advisor or the Distributor.
During the two most recently completed calendar years, none of the Independent
Directors or members of their immediate families conducted any transactions (or
series of transactions) with the Advisor, the Distributor or any affiliate of
the Advisor or the Distributor in which the amount involved exceeded $120,000.
Each of the Independent Directors has a relationship with the Advisor whereby
the Advisor manages separate accounts on their behalf.
CONTROL
PERSONS AND PRINCIPAL SHAREHOLDERS
A
principal shareholder is any person who owns of record or beneficially 5% or
more of the outstanding shares of the Fund. A control person is one who owns
beneficially or through controlled companies more than 25% of the voting
securities of a company or acknowledges the existence of control. A controlling
person possesses the ability to control the outcome of matters submitted for
shareholder vote by the Fund. As of September 30, 2023,
the following shareholders owned of record or beneficially more than 5% of the
Fund’s outstanding shares:
|
|
|
|
|
|
|
|
| |
| Name
and Address |
Percentage
Ownership |
Type
of Ownership |
Charles
Schwab & Co., Inc.
211 Main Street
San Francisco, CA
94105-1905 |
56.81% |
Record |
National
Financial Services LLC
499 Washington Blvd., Fl. 4th
Jersey City, NJ
07310-1995 |
16.13% |
Record |
David
Katz*
c/o Matrix Asset Advisors, Inc.
10 Bank Street, Suite
590
White Plains, NY 10606 |
7.31% |
Beneficial |
|
|
| |
|
|
| |
*Mr.
Katz’s shares, which are beneficially owned, may be reflected more than once in
the table above, as they may also be reported in the holdings for Charles Schwab
& Co., Inc. and National Financial Services, LLC, as record holder for such
shares.
INVESTMENT
ADVISOR
Matrix
Asset Advisors, Inc. serves as the Fund’s investment advisor under an advisory
agreement (the “Advisory Agreement”), which provides that the Advisor will
obtain and evaluate information relating to the economy, industries, businesses,
securities markets and securities, formulate a continuing program for the
management of the Fund’s assets in a manner consistent with its investment
objective, and implement this program by selecting on a discretionary basis the
securities to be purchased or sold by the Fund and placing orders for such
purchases and sales. In addition, the Advisor provides for the Fund’s office
needs, supervises the maintenance of the Fund’s books and records, provides the
Fund with persons competent to perform all of these executive and administrative
functions, supervises and coordinates the activities of the Fund’s institutional
and other agents (e.g.,
custodian, transfer agent, independent accountants, outside legal counsel), and
permits its officers and employees to serve as directors and officers of the
Fund, all without additional cost to the Fund. Certain directors and officers of
the Advisor presently serve as directors or officers of the Fund.
The
Fund pays all other expenses incurred in the operation of the Fund, except as
provided below, including taxes, fees and commissions, bookkeeping expenses,
share issuance expenses, expenses of redemption of shares, charges of its
custodian and transfer agent, costs of preparing and printing reports and
prospectuses for the Fund’s existing shareholders, registration fees, auditing
and legal expenses, and expenses and fees of outside directors.
The
Advisor also has agreed to pay the fees and expenses of printing and
distributing reports or prospectuses prepared for the Fund in connection with
the offering or sale of its shares, of preparing and setting in type, printing
and mailing all advertising and sales literature and all other expenses in
connection with the offer and sale of Fund shares not specifically allocated to
the Fund.
The
Advisory Agreement continues in effect from year to year, if such continuation
is specifically approved at least annually by the Board of Directors at a
meeting called for that purpose, or by vote of the holders of a majority of the
Fund’s shares, and in either case, also by a vote of a majority of directors who
are not “interested persons” of the Advisor or the Fund within the meaning of
the 1940 Act. The Advisory
Agreement
is subject to termination by either party without penalty on 60 days’
written notice to the other and terminates automatically in the event of its
assignment.
The
Advisory Agreement provides that neither the Advisor, its directors, officers or
employees, nor certain other persons performing specific functions for the Fund,
shall be liable to the Fund, except for any loss resulting from willful
misfeasance, bad faith, gross negligence or reckless disregard of
duty.
A
discussion regarding the basis for the Board of Directors’ approval of the
Investment Advisory Agreement is available in the Fund’s semi-annual report to
shareholders for the period ended December
31, 2022 and
will be available in the Fund’s semi-annual report to shareholders for the
period ending December
31, 2023.
The
Fund has agreed to pay the Advisor, as compensation for all services rendered,
staff and facilities provided and expenses paid or assumed, an annual fee,
payable monthly, of 0.75% of the Fund’s average daily net assets. The advisory
fees paid to the Advisor for the services provided to the Fund for the past
three fiscal years were as follows:
For
the Year Ended June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 2023 |
2022 |
2021 |
|
|
| |
| Advisory
Fees Accrued |
$405,671 |
$493,171 |
$413,720 |
|
|
| |
| Advisory
Fees Waived |
($127,806) |
($111,340) |
($119,038) |
|
|
| |
| Total
Advisory Fees paid to the Advisor |
$277,865 |
$381,831 |
$294,682 |
|
|
| |
Fund
Expenses.
The
Advisor has agreed to waive its management fee and/or reimburse the Fund’s
operating expenses through at least October
31, 2024,
to the extent necessary to ensure that the Fund’s total operating expenses
(excluding front-end or contingent deferred loads, taxes, leverage interest,
brokerage commissions, acquired fund fees and expenses, expenses incurred in
connection with any merger or reorganization, or extraordinary expenses such as
litigation) do not exceed 0.99% of the Fund’s average daily net assets. The
expense cap/reimbursement agreement can be terminated at any time, and without
payment or penalty, by the Board upon 60 days’ written notice to the Advisor.
The agreement may not be terminated by the Advisor without the consent of the
Board. The expense cap/reimbursement agreement has the effect of lowering the
overall expense ratio for the Fund and increasing the Fund’s overall return to
investors during the time any such amounts are waived and/or reimbursed. The
Advisor is permitted to recoup any expenses or fees it has waived or reimbursed
within a three-year period from the date of the waiver or reimbursement, if the
expense ratios in those future years are less than the limits specified above
and less than the limits in effect at that future time. The expense
cap/reimbursement agreement may have the effect of increasing the Fund’s overall
expense ratio during any periods where the Advisor recoups previously waived or
reimbursed expenses. Currently,
the Advisor has agreed not to seek reimbursement of such management fee waivers
and/or expense reimbursements.
Control
Person of the Investment Advisor
David
A. Katz, President and Chief Investment Officer of the Advisor and Director,
President and Treasurer of the Fund, beneficially owns more than 50% of the
outstanding stock of the Advisor. Accordingly, Mr. Katz is deemed to
control the Advisor.
PORTFOLIO
MANAGER
Mr.
Katz is the Advisor’s President and Chief Investment Officer and has overall
responsibility for the firm’s investment efforts. He graduated summa
cum laude
from Union College with a Bachelor of Arts degree in Economics. He received a
Master of Business Administration degree, with a concentration in Finance, from
New York University Graduate School of Business in 1987, graduating with
distinction. His numerous works on value investing have earned him various
awards and distinctions at the undergraduate and graduate levels. Mr. Katz is a
CFA charterholder. After initially working at Management Asset Corporation in
Westport, Connecticut, Mr. Katz co-founded Value Matrix Management with the late
John M. Gates in 1986.
He
served as the firm’s Senior Vice President and Chief Investment Officer and was
Head of the Investment Policy Committee. In 1990, he merged the Value Matrix
Management organization into Matrix Asset Advisors, Inc. Mr. Katz chairs the
Investment Policy Committee and is a Portfolio Manager/Analyst. He appears
frequently as a guest on CNBC and Bloomberg Radio.
Other
Accounts Managed
The
following table provides information relating to other accounts managed by
Mr. Katz, the Fund’s Portfolio Manager, as of June
30, 2023:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Category
of Account |
Total
Number of Accounts Managed |
Total
Assets in Accounts Managed |
Number
of Accounts for which Advisory Fee is Based on Performance |
Assets
in Accounts for which Advisory Fee is Based on Performance |
|
Other
Registered Investment Companies |
1 |
$38.934
million |
0 |
0 |
|
Other
Pooled Investment Vehicles |
0 |
0 |
0 |
0 |
|
Other
Accounts |
602 |
$922.544
million |
0 |
0 |
Compensation
Mr.
Katz’s compensation in connection with his management of the Fund and other
accounts includes a fixed base salary and a performance bonus. He does not
receive deferred compensation. Compensation is based on the overall
profitability of the Advisor which is driven by the Advisor’s aggregate equity
performance on its overall assets under management. Compensation is not tied to
the performance or assets under management for any specific fund or account. The
following is a description of Mr. Katz’s compensation as of June
30, 2023.
Base
Salary:
Mr.
Katz receives a fixed annual base salary. Base salary amounts are determined by
the compensation committee of the Advisor, based upon a number of factors
including the employee’s experience, overall performance, responsibilities, and
the competitive marketplace. At Mr. Katz’s discretion, a portion of his
salary may be contributed to the Advisor’s defined benefit plan. Mr. Katz,
however, does not receive any additional compensation from the Advisor as a
result of his participation in its defined benefit plan.
Performance
Bonus:
Mr. Katz
receives a performance bonus that is determined based upon the Advisor’s overall
profitability, which is driven by both the short- and long-term investment
performance (both absolute and relative) and the overall assets under management
of the accounts advised by the Advisor, including the Fund. The Advisor uses the
S&P 500®
Index as its performance benchmark. Bonus compensation takes into account short-
and long-term performance returns. The bonus compensation is not guaranteed and
is paid at the discretion of the Advisor.
Retirement
Plan:
Mr.
Katz participates in the Advisor’s retirement plan. The retirement plan is based
upon the Fund’s pre-tax and after-tax performance. The Advisor uses the S&P
500 Index as its performance benchmark. Retirement plan compensation is tied to
the Advisor’s overall profitability, which is driven by the Advisor’s short-term
as well as long-term investment performance (both absolute and relative) and the
Advisor’s overall assets under management.
Potential
Conflicts of Interest
The
Advisor focuses on Large Cap Value and Dividend Income strategies for its equity
accounts and does not anticipate any conflicts of interest arising between the
investment strategy of the Fund and the investment strategy of other accounts
due to the policies and procedures that are in place. The Advisor maintains and
follows the “MAA Client Trading Policy and Procedures” outlining the method of
sequencing trade orders among clients, including the Fund. All orders are
aggregated to the extent feasible with the intent to achieve net best
execution.
The
exception to this would be those accounts with directed brokerage. In general,
no priority is to be given to any brokerage house in terms of the timing of
orders. Orders will be placed to maximize the number of clients and the number
of shares that can be bought or sold for these clients without materially
affecting the market and to minimize stock price movement. The allocation of
partial orders is based upon a portfolio’s weighting in an asset class, industry
group, sector and security. Thereafter, partial fills are allocated
alphabetically (listing identified as alphabetical from Axys account code and
families or grouped accounts are filled at the same time whenever possible). The
alphabetical listing will be sorted with a rotation of the alphabet based upon
the calendar day of the month. The Advisor makes every effort to maintain a fair
order generation and allocation methodology favoring no client or client group
and eliminating any perceived conflict of interest.
As
the Advisor manages separate client accounts and advises a mutual fund, the
Advisor is cognizant of the issues involved with managing and trading these
different accounts. The Advisor has safeguards in place to ensure that no
account is advantaged or disadvantaged versus the other accounts.
Portfolio
Manager Ownership of Fund Securities
As
of June 30, 2023, Mr. Katz beneficially owned over $1 million worth of equity
securities in the Fund.
DISTRIBUTOR
The
Fund’s distributor, Quasar Distributors, LLC, 111 East Kilbourn Avenue, Suite
2200, Milwaukee, Wisconsin 53202, a Delaware limited liability company, is the
distributor for the shares of the Fund pursuant to a Distribution Agreement (the
“Distribution Agreement”) between the Advisor and Distributor. The Distributor
is a registered broker-dealer and member of the Financial Industry Regulatory
Authority, Inc. (“FINRA”). Shares of the Fund are offered on a continuous basis.
The Distribution Agreement provides that the Distributor, as agent in connection
with the distribution of Fund shares, will use its best efforts to distribute
the Fund’s shares. The Distributor’s fees and expenses are paid by the Advisor.
The Fund does not pay any such fees and expenses.
EXECUTION
OF PORTFOLIO TRANSACTIONS
Pursuant
to the Advisory Agreement, the Advisor determines which securities are to be
purchased and sold by the Fund and which broker-dealers are eligible to execute
the Fund’s portfolio transactions. Purchases and sales of securities in the
over-the-counter market will be executed on an agency or “market-maker” basis
depending upon the Advisor’s determination of favorable execution.
Purchases
of portfolio securities for the Fund also may be made directly from issuers or
from underwriters. Where possible, purchase and sale transactions will be
effected through dealers (including banks) which specialize in the types of
securities which the Fund will be holding, unless better executions are
available elsewhere. Dealers and underwriters usually act as principal for their
own accounts. Purchases from underwriters will include a concession paid by the
issuer to the underwriter and purchases from dealers will include the spread
between the bid and the asked price. If the execution and price offered by more
than one dealer or underwriter are comparable, the order may be allocated to a
dealer or underwriter that has provided research or other services as discussed
below.
In
placing portfolio transactions, the Advisor will use its reasonable efforts to
choose broker-dealers capable of providing the services necessary to obtain the
most favorable price and execution available. The full range and quality of
services available will be considered in making these determinations, such as
the size of
the
order, the difficulty of execution, the operational facilities of the firm
involved, the firm’s risk in positioning a block of securities, and other
factors. The Advisor considers such information, which is in addition to and not
in lieu of the services required to be performed by it under the Advisory
Agreement with the Fund, to be useful in varying degrees, but of indeterminable
value. Portfolio transactions may be placed with broker-dealers who sell shares
of the Fund subject to rules adopted by the FINRA and SEC and in accordance with
any policies and procedures adopted by the Fund pursuant to such
rules.
While
it is the Fund’s general policy to seek first to obtain the most favorable price
and execution available in selecting a broker-dealer to execute portfolio
transactions for the Fund, in accordance with Section 28(e) of the Securities
Exchange Act of 1934, as amended, when it is determined that more than one
broker-dealer can deliver best execution, weight is also given to the ability of
a broker-dealer to furnish brokerage and research services to the Fund or to the
Advisor, even if the specific services are not directly useful to the Fund and
may be useful to the Advisor in advising other clients. In negotiating
commissions with a broker or evaluating the spread to be paid to a dealer, the
Fund may therefore pay a higher commission or spread than would be the case if
no weight were given to the furnishing of these supplemental services, provided
that the amount of such commission or spread has been determined in good faith
by the Advisor to be reasonable in relation to the value of the brokerage and/or
research services provided by such broker-dealer. The standard of reasonableness
is to be measured in light of the Advisor’s overall responsibilities to the
Fund.
Investment
decisions for the Fund are made with the Fund’s specific investment objective
and strategies in mind. Nevertheless, it is possible that at times identical
securities will be acceptable for both the Fund and one or more of such client
accounts or mutual funds. In such event, the position of the Fund and such
client account(s) or mutual funds in the same issuer may vary and the length of
time that each may choose to hold its investment in the same issuer may likewise
vary. However, to the extent any of these client accounts or mutual funds seek
to acquire the same security as the Fund at the same time, the Fund may not be
able to acquire as large a portion of such security as it desires, or it may
have to pay a higher price or obtain a lower yield for such security. Similarly,
the Fund may not be able to obtain as high a price for, or as large an execution
of, an order to sell any particular security at the same time. If one or more of
such client accounts or mutual funds simultaneously purchases or sells the same
security that the Fund is purchasing or selling, each day’s transactions in such
security will be allocated between the Fund and all such client accounts or
mutual funds in a manner deemed equitable by the Advisor, taking into account
the respective sizes of the accounts and the amount being purchased or sold. It
is recognized that in some cases this system could have a detrimental effect on
the price or value of the security insofar as the Fund is concerned. In other
cases, however, it is believed that the ability of the Fund to participate in
volume transactions may produce better executions for the Fund.
The
Advisor may execute trades for the Fund with broker-dealers that are affiliated
with the Fund, the Advisor, or their affiliates. During the Fund’s most recent
fiscal year, the Advisor did not execute any trades with affiliated
broker-dealers.
The
Fund does not effect securities transactions through brokers in accordance with
any formula, and it does not direct securities transactions to brokers in
exchange for selling shares of the Fund. To the knowledge of the Fund’s
management, no Director or Officer of the Fund has any material direct or
indirect interest in any broker that will effect the Fund’s portfolio
transactions.
The
Fund paid the following amounts in brokerage commissions during the past three
fiscal years:
Brokerage
Commissions Paid
During the Fiscal Year Ended June 30,
|
|
|
|
|
|
|
|
|
|
|
| |
| 2023 |
2022 |
2021 |
|
| |
| $8,737 |
$9,001 |
$9,084 |
|
| |
The
following table indicates the portion of the Fund’s aggregate brokerage for the
fiscal year ended June
30, 2023 (from
the tables above) that was directed to brokers who, in addition to providing
trade execution, also supplied the Fund with research services.
|
|
|
|
|
| |
| Dollar
Value of Securities Traded |
Related
Soft Dollar Brokerage Commissions
|
| $19,317,572 |
$6,416 |
The
Fund did not acquire securities of its regular brokers or dealers (as defined in
Rule 10b-1 under the 1940 Act) during the most recent fiscal
year.
PORTFOLIO
TURNOVER
Although
the Fund generally will not invest for short-term investment purposes, portfolio
securities may be sold without regard to the length of time they have been held
when, in the opinion of the Advisor, investment considerations warrant such
action. Portfolio turnover rate is calculated by dividing (1) the lesser of
purchases or sales of portfolio securities for the fiscal year by (2) the
monthly average of the value of portfolio securities owned during the fiscal
year. A 100% turnover rate would occur if all the securities in the Fund’s
portfolio, with the exception of securities whose maturities at the time of
acquisition were one year or less, were sold and either repurchased or replaced
within one year. A high rate of portfolio turnover (100% or more) generally
leads to higher transaction costs and may result in a greater number of taxable
transactions. See “Execution of Portfolio Transactions,” above.
The
Fund’s annual portfolio turnover rates for the past two fiscal years are as
follows:
Year
Ended June 30,
MARKETING
AND SUPPORT PAYMENTS
The
Advisor, out of its own resources and without additional cost to the Fund or its
shareholders, may provide additional cash payments or other compensation to
certain financial intermediaries (“Financial Intermediaries”) who sell shares of
the Fund. The Advisor does not currently intend to make such payments, but
reserves the right to initiate payments in the future without notice to
shareholders. These payments may be divided into categories as
follows:
Support
Payments
The
Advisor may make payments to certain Financial Intermediaries in connection with
the eligibility of the Fund to be offered in certain programs and/or in
connection with meetings between the Fund’s representatives and Financial
Intermediaries and their sales representatives. Such meetings may be held for
various purposes, including providing education and training about the Fund and
other general financial topics to assist Financial Intermediaries’ sales
representatives in making informed recommendations to, and decisions on behalf
of, their clients.
Entertainment,
Conferences and Events
The
Advisor also may provide non-cash compensation to sales representatives of
Financial Intermediaries in the form of (1) occasional gifts;
(2) occasional meals, tickets or other entertainments; and/or
(3) sponsorship support for the Financial Intermediary’s client seminars
and cooperative advertising. In addition, the Advisor may pay for exhibit space
or sponsorships at regional or national events of Financial
Intermediaries.
The
prospect of receiving, or the receipt of additional payments or other
compensation as described above by Financial Intermediaries may provide such
intermediaries and/or their salespersons with an incentive to favor sales of
shares of the Fund, and other mutual funds whose affiliates make similar
compensation available, over sale of shares of mutual funds (or non-mutual fund
investments) not making such payments. You may
wish
to take such payment arrangements into account when considering and evaluating
any recommendations relating to the Fund shares.
As
of the date of this SAI, the Advisor does not have agreements with any firms to
pay such support payments. Future support payments may be structured in three
ways: (1) as a percentage of net sales; (2) as a percentage of net
assets; and/or (3) a flat fee.
ADDITIONAL
PURCHASE AND REDEMPTION INFORMATION
The
information provided below supplements the information contained in the
Prospectus regarding the purchase and redemption of Fund shares.
How
to Buy Shares
The
public offering price of the Fund shares is the Fund’s net asset value (“NAV”).
Shares are purchased at the public offering price next determined after the
Fund’s transfer agent receives your order in proper form as discussed in the
Prospectus. In order to receive that day’s public offering price, the Fund’s
transfer agent must receive your order in proper form before the close of
regular trading on the New York Stock Exchange (“NYSE”), normally 4:00 p.m.,
Eastern Time.
The
NYSE annually announces the days on which it will not be open for trading. The
most recent announcement indicates that it will not be open on weekends and on
the following days: New Year’s Day, Martin Luther King Jr. Day, Presidents’ Day,
Good Friday, Memorial Day, Juneteenth National Independence Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. However, the NYSE may close
on days not included in that announcement.
Automatic
Investment Plan. As
discussed in the Prospectus, the Fund provides an automatic investment plan for
the convenience of investors who wish to purchase shares of the Fund on a
regular basis. All record keeping and custodial costs of the automatic
investment plan are paid by the Fund. The market value of the Fund’s shares is
subject to fluctuation, so before undertaking any plan for systematic
investment, the investor should keep in mind that this plan does not assure a
profit and does not protect against depreciation in declining
markets.
How
to
Sell Shares
You
can sell your Fund shares any day the NYSE is open for regular
trading.
Delivery
of redemption proceeds. The
Fund typically expects to send the redemption proceeds on the next business day
(a day when the NYSE is open for normal business) after the redemption request
is received in good order and prior to market close, regardless of whether the
redemption proceeds are sent via check, wire, or ACH transfer. The Fund may
suspend the right of redemption or postpone the date of payment during any
period when (a) trading on the NYSE is restricted as determined by the SEC
or the NYSE is closed other than for weekends and holidays; (b) an
emergency exists as determined by the SEC making disposal of portfolio
securities or valuation of net assets of the Fund not reasonably practicable; or
(c) for such other period as the SEC may permit for the protection of the
Fund’s shareholders. Under unusual circumstances, the Fund may suspend
redemptions, or postpone payment for up to seven days, as permitted by federal
securities law.
The
value of shares on redemption or repurchase may be more or less than the
investor’s cost, depending upon the market value of the Fund’s portfolio
securities at the time of redemption or repurchase.
Redemptions-in-kind.
The
Fund has made an election pursuant to Rule 18f-1 under the 1940 Act which
obligates it to pay in cash all redemptions to any shareholder of record unless
a shareholder requests a redemption, within a 90-day period of shares having a
value in excess of (i) $250,000, or (ii) 1% of the Fund’s NAV,
whichever is less. In this case, the Fund is permitted to pay the redemption
price in whole or in part by a distribution of securities from its portfolio. In
that event, the value of the securities distributed would be equal to the amount
redeemed, determined at the same time, and in the same manner, as the redemption
price is determined. Shareholders who receive redemption payments in securities
may incur brokerage costs in converting the securities they receive into cash
and will bear any market risks associated
with
such securities until they are converted into cash. For federal income tax
purposes, redemptions-in-kind are taxed in the same manner to a redeeming
shareholder as redemptions paid in cash.
DISTRIBUTIONS
AND TAX INFORMATION
Distributions
Distributions
of the Fund’s net investment income and net capital gains from the sale of
securities, if any, are generally made annually. The Fund expects to distribute
any undistributed net investment income on or about December 31 of each
year. Any net capital gains realized through the period ended October 31 of
each year will also be distributed by December 31 of each
year.
Each
distribution by the Fund is accompanied by a brief explanation of the form and
character of the distribution. In January of each year, the Fund will issue to
each shareholder a statement of the federal income tax status of all
distributions.
Tax
Information
Changes
in income tax laws, potentially with retroactive effect, could impact the Fund’s
investments or the tax consequences to you of investing in the Fund.
The
Fund intends to qualify and elect to be treated as a “regulated investment
company” under Subchapter M of Subtitle A, Chapter 1 of the Internal Revenue
Code of 1986, as amended (the “Code”), and, as such, should pay no federal
income or excise taxes on its investment company taxable income or net capital
gain distributed to Fund shareholders, provided that the Fund complies with all
applicable requirements regarding the source of its income, diversification of
its assets, and timing and amount of its distributions. Consistent with the
distribution requirements of the Code, each year the Fund intends to distribute
substantially all of its investment company taxable income and any net capital
gain, after offsetting against any available capital loss carryovers for each
fiscal year. Investment company taxable income generally consists of interest,
dividends, net short-term capital gain, and net gain from foreign currency
transactions, less expenses. The availability of investment company taxable
income for distributions is dependent on the level of the Fund’s income and
expenses, and the actual amount and timing of any distribution is subject to the
discretion of the Board of Directors.
Distributions
of investment company taxable income received by corporate shareholders may be
eligible for the intercorporate dividends-received deduction. The intercorporate
dividends-received deduction will apply to that portion of the distributions of
investment company taxable income attributable to dividends received by the Fund
from U.S. corporations and designated by the Fund as qualifying for the
dividends-received deduction. Among other limitations, any distribution of
investment company taxable income made by the Fund will not be eligible for the
intercorporate dividends-received deduction with respect to any share which is
held by a corporate shareholder for 45 days or less during the 91-day period
beginning 45 days before such share becomes ex-dividend with respect to
such distribution.
For
non-corporate shareholders, a portion of the distributions of investment company
taxable income made by the Fund may consist of qualified dividend income
eligible for taxation at the reduced federal income tax rates applicable to
long-term capital gains, to the extent the Fund reports the amount distributed
as qualified dividend income and the shareholder meets certain holding period
requirements with respect to his or her Fund shares. Except as discussed above,
distributions of investment company taxable income are taxable to shareholders
as ordinary income.
Net
capital gain distributions are taxable to shareholders as long-term capital
gains regardless of the length of time a shareholder has held Fund shares.
Distributions of net capital gain are not eligible for qualified dividend income
treatment, or the dividends-received deduction referred to above.
Shareholders
should carefully consider the impact of buying Fund shares just before the
declaration of a distribution of investment company taxable income or net
capital gain. Any such distribution paid shortly after a purchase of shares will
reduce the NAV of the shares by the amount of the distribution. The
distribution,
though in effect a partial return of capital (to the extent it is paid on the
shares so purchased), would be taxable as described above.
Shareholders
will recognize gain or loss upon the sale or redemption of Fund shares. Such
gain or loss will be capital gain or loss if the shares were held as capital
assets by the shareholder and will be long-term or short-term depending upon the
shareholder’s holding period for such shares. If a shareholder’s holding period
exceeds 12 months, any gain on the sale or redemption of Fund shares may be
eligible for the reduced federal income tax rates applicable to long-term
capital gains.
As
of June
30, 2023,
the Fund had no short-term capital loss carryover, which retains its original
character as short-term capital loss, and which may offset future net capital
gains, if any, to the extent provided by treasury regulations and no
post-October losses.
Certain
individuals, trusts and estates may be subject to a Net Investment Income
(“NII”) tax of 3.8% (in addition to the regular income tax). The NII tax is
imposed on the lesser of (i) a taxpayer’s investment income, net of
deductions properly allocable to such income or (ii) the amount by which
such taxpayer’s modified adjusted gross income exceeds certain thresholds
($250,000 for married individuals filing jointly, $200,000 for unmarried
individuals and $125,000 for married individuals filing separately). The Fund’s
distributions are includable in a shareholder’s investment income for purposes
of this NII tax. In addition, any capital gain realized upon the sale or
redemption of Fund shares is includable in a shareholder’s investment income for
purposes of this NII tax.
If
the Fund fails to qualify as a regulated investment company for any reason and
fails to obtain relief following a failure, the Fund would be subject to
taxation as a regular corporation. In such case, in addition to federal
corporate income taxes, other state and local income taxes applicable to
corporations may also apply. Distributions to you would be taxed as dividend
income to the extent of the Fund’s then-current and accumulated earnings and
profits. Such dividends might be eligible for the special tax treatment
applicable to qualified dividend income discussed above.
Under
the Foreign Account Tax Compliance Act (“FATCA”), the Fund may be required to
withhold a generally nonrefundable 30% tax on (i) distributions of investment
company taxable income and (ii) distributions of net capital gain and the gross
proceeds of a sale or redemption of Fund shares paid to (A) certain “foreign
financial institutions” unless such foreign financial institution agrees to
verify, monitor, and report to the IRS the identity of certain of its
accountholders, among other items (or unless such entity is otherwise deemed
compliant under the terms of an intergovernmental agreement between the United
States and the entity’s country of residence), and (B) certain “non-financial
foreign entities” unless such entity certifies to the Fund that it does not have
any substantial U.S. owners or provides the name, address, and taxpayer
identification number of each substantial U.S. owner, among other items.
In December 2018, the IRS and Treasury Department released proposed Treasury
Regulations that would eliminate FATCA withholding on Fund distributions of net
capital gain and the gross proceeds from a sale or redemption of Fund
shares. Although taxpayers are entitled to rely on these proposed Treasury
Regulations until final Treasury Regulations are issued, these proposed Treasury
Regulations have not been finalized, may not be finalized in their proposed
form, and are potentially subject to change. This FATCA withholding tax
could also affect the Fund’s return on its investments in foreign securities or
affect a shareholder’s return if the shareholder holds its Fund shares through a
foreign intermediary. You are urged to consult your tax adviser regarding
the application of this FATCA withholding tax to your investment in the Fund and
the potential certification, compliance, due diligence, reporting, and
withholding obligations to which you may become subject in order to avoid this
withholding tax.
The
foregoing is a summary discussion of the federal income tax consequences of
certain aspects of an investment in the Fund and is based on federal income tax
laws and regulations in effect on the date of this SAI, which could change,
potentially with retroactive effect. This discussion is not intended to be
comprehensive. and investors are urged to consult their own tax advisors
concerning specific questions regarding federal, state, local, and foreign
taxation.
COST
BASIS REPORTING
The
Fund is required to report to certain shareholders and the IRS the cost basis of
Fund shares acquired on or after January 1, 2012, by such shareholders (“covered
shares”) when such shareholders sell or redeem these shares. These requirements
do not apply to shares held through a tax-deferred arrangement, such as a 401(k)
plan or an IRA, or to shares held by tax-exempt organizations, banks, financial
institutions, corporations (other than S corporations), credit unions, and
certain other entities and governmental bodies. Shares acquired before January
1, 2012 (“non-covered shares”) are treated as if held in a separate account from
covered shares. The Fund is not required to determine or report your cost basis
in non-covered shares and is not responsible for the accuracy or reliability of
any information provided for non-covered shares.
The
cost basis of a share is generally its purchase price adjusted for
distributions, returns of capital, and other corporate actions. Cost basis is
used to determine whether the sale or redemption of a share results in a capital
gain or loss. If you sell or redeem covered shares during any year, then the
Fund will report the gain or loss, cost basis, and holding period of such
covered shares to you and the IRS on Form 1099.
A
cost basis method is the method by which the Fund determines which specific
shares are deemed to be sold or redeemed when you sell or redeem less than your
entire holding of Fund shares and have made multiple purchases of Fund shares on
different dates at differing net asset values. If you do not affirmatively elect
a cost basis method, the Fund will use the average cost method, which averages
the basis of all covered shares in your account regardless of holding period,
and covered shares sold or redeemed are deemed to be those with the longest
holding period first. You may elect in writing (and not over the telephone) any
alternate IRS-approved cost basis method to calculate the cost basis in your
covered shares.
The
default cost basis method applied by the Fund or the alternate method elected by
you may not be changed after the settlement date of a sale or redemption of Fund
shares.
If
you hold Fund shares through a broker or another nominee, please contact that
broker or nominee with respect to the reporting of cost basis and available
elections for your account.
You
are encouraged to consult your tax adviser regarding the application of these
cost basis reporting rules and, in particular, which cost basis calculation
method you should elect.
DETERMINATION
OF SHARE PRICE
As
noted in the Prospectus, the NAV of the Fund will be determined once daily as of
the close of public trading on the NYSE (normally, 4:00 p.m., Eastern Time) on
each day that the NYSE is open for trading. The Fund does not expect to
determine the NAV of its shares on any day when the NYSE is not open for trading
even if there is sufficient trading in its portfolio securities on such days to
materially affect the NAV per share. However, the NAV of the Fund’s shares may
be determined on days the NYSE is closed or at times other than 4:00 p.m.,
Eastern Time, if the Board of Directors decides it is necessary.
Securities
traded on a national securities exchange are valued at the last reported sale
price at the close of regular trading on each day the exchanges are open for
trading. Securities trading on the NASDAQ Stock Market Inc. (“NASDAQ”) are
valued at the NASDAQ Official Closing Price.
The
Fund may have portfolio securities that are primarily listed on foreign
exchanges that trade on weekdays or other days when the Fund does not price its
shares, and thus the value of the Fund’s shares may change on days when
shareholders will not be able to purchase or redeem the Fund’s shares. In
addition, with regard to foreign securities and certain domestic securities
(e.g.,
domestic securities traded on an exchange that closes early), a significant
event occurring after the close of trading but before the valuation of the
Fund’s NAV may mean that the closing price for the security may not constitute a
readily available market quotation and may accordingly require that the security
be priced at its fair value in accordance with the fair value procedures
established by the Fund. The Advisor will monitor for significant events that
may call into question the reliability of market quotations. Such events may
include: situations relating to a single issue in a market sector; significant
fluctuations in U.S. or foreign markets; natural disasters, armed conflicts,
governmental actions or other developments not tied directly to the securities
markets. Where the Advisor determines that an adjustment should be made in the
security’s value because significant intervening events
have
caused the Fund’s NAV to be materially inaccurate, the Advisor will seek to have
the security “fair valued” in accordance with the Fund’s fair value procedures.
Fair value pricing involves judgments that are inherently subjective and
inexact, and it is not possible to determine with certainty when, and to what
extent, an event will affect a market price. As a result, there can be no
assurance that fair value pricing will reflect actual market value and it is
possible that the fair value determined for a security may differ materially
from the value that could be realized upon the sale of the
security.
The
NAV per share of the Fund is calculated as follows: all liabilities incurred or
accrued are deducted from the valuation of total assets which includes accrued
but undistributed income; the resulting net assets are divided by the number of
shares of the Fund outstanding at the time of the valuation and the result
(adjusted to the nearest cent) is the NAV per share.
An
example of how the Fund calculated its total offering price per share as of
June 30,
2023 is
as follows:
|
|
|
|
|
|
|
|
| |
| Net
Assets |
= |
NAV
per Share |
| Shares
Outstanding |
| |
| $56,876,661 |
| $79.03 |
| 719,691 |
| |
DISCLOSURE
OF PORTFOLIO HOLDINGS
The
Board of Directors has adopted the Advisor’s policies and procedures relating to
the disclosure of Fund portfolio holdings information (the “Policy”). The Policy
prohibits the disclosure of portfolio holdings unless:
(1)the
disclosure is in response to a regulatory request and the Fund’s Chief
Compliance Officer (the “CCO”) has authorized such disclosure;
(2)the
disclosure is to a mutual fund rating or statistical agency or person performing
similar functions where there is a legitimate business purpose for such
disclosure and such entity has signed a confidentiality or similar agreement
including a duty not to trade on such information, where available, with the
Fund or its agents and the CCO has authorized such disclosure (procedures to
monitor the use of any non-public information by these entities may include the
use of (a) annual certifications reaffirming that the entity has utilized
such information in accordance with the terms of the agreement between the
entity and the Fund or its agents or (b) the conditioning of the receipt of
such information upon the entity agreeing to maintain the confidentiality of the
information, along with other representations, where such representations
accompany the transmittal of the information);
(3)the
disclosure is made to parties involved in the investment process, administration
or custody of the Fund, including its Board of Directors;
(4)the
disclosure is in connection with (a) a quarterly, semi-annual or annual report
that is publicly available or (b) other periodic disclosure that is publicly
available; or
(5)the
disclosure is made pursuant to prior written approval of the CCO.
The
Advisor shall not accept on behalf of itself, its affiliates, or the Fund any
compensation or other consideration in connection with the disclosure of
portfolio holdings of the Fund. In the event of a conflict between the interests
of the Fund and the interests of Advisor or an affiliated person of the Advisor,
the CCO shall make a determination, with respect to the conflict, that she
believes is in the best interests of the Fund and shall report such
determination to the Board of Directors at the end of the quarter in which such
determination was made. Any employee of the Advisor who suspects a breach of
this obligation must report the matter immediately to the CCO or to his or her
supervisor.
Any
disclosure made pursuant to Item 5 above shall be reported to the Board of
Directors at the next quarterly meeting. This Policy may change at any time
without prior notice to shareholders.
The
Advisor and/or the Fund currently does not maintain ongoing arrangements with
rating or statistical agencies or agencies providing similar functions. A
schedule of the Fund’s complete portfolio holdings,
current
as of month-end, will be available on the Fund’s website no earlier than
15 days after the end of each month. This information will remain available
on the website at least until updated for the next month or until the Fund files
with the SEC its semi-annual or annual shareholder report or quarterly portfolio
holdings report that includes such period. The most recent schedule is available
on the Fund’s website at http://www.matrixadvisorsvaluefund.com or by
calling toll free at 1-800-366-6223. The Fund may terminate or modify this
Policy at any time without further notice to shareholders.
In
addition, portfolio holdings information may be provided to the Fund’s service
providers on an as-needed basis in connection with the services provided to the
Fund by such service providers. Information may be provided to these parties
without a time lag. Service providers that may be provided with information
concerning the Fund’s portfolio holdings include the Advisor and its affiliates,
legal counsel, independent registered public accounting firm, custodian, fund
accounting agent, administrator, financial printers, proxy voting service
providers and broker-dealers who are involves in executing portfolio
transactions on behalf of the Fund. Portfolio holdings information may also be
provided to the Board of Directors.
The
entities to whom the Fund provides portfolio holdings information, either by
explicit arrangement or by virtue of their respective duties to the Fund, are
required to maintain the confidentiality of the information provided. Neither
the Fund nor the Advisor or its affiliates receives any compensation or other
consideration in connection with these ongoing arrangements. There can be no
guarantee that the Policy will be effective in preventing the potential misuse
of confidential information regarding the Fund’s portfolio holdings by
individuals or entities in possession of such information.
GENERAL
INFORMATION
Shareholder
Reports
Investors
in the Fund will be informed of the Fund’s progress through periodic reports.
Financial statements certified by an independent registered public accounting
firm will be submitted to shareholders at least annually.
Service
Providers
U.S.
Bank N.A., located at 1555 N. Rivercenter Drive, Suite 302, Milwaukee, Wisconsin
53212, serves as custodian of the securities and other assets of the Fund,
delivers and receives payment for securities sold, receives and pays for
securities purchased, collects income from investments and performs other
duties, all as directed by the Fund officers. U.S. Bancorp Fund Services, LLC,
doing business as U.S. Bank Global Fund Services (“Fund Services”), located at
615 East Michigan Street, Milwaukee, Wisconsin 53202, serves as the Fund’s
transfer and shareholder service agent and administrator. The Fund’s custodian,
administrator and transfer agent are affiliated companies. The Fund’s custodian
and transfer agent do not participate in decisions relating to the purchase and
sale of securities by the Fund.
Fund
Services acts as transfer agent to the Fund. The services provided by the
transfer agent either by Fund Services or another party pursuant to an agreement
with Fund Services, include processing purchase and redemption transactions,
establishing and maintaining shareholder accounts and records, disbursing
dividends declared by the Fund, day-to-day administration of matters related to
the corporate existence of the Fund (other than rendering investment advice),
maintenance of its records and preparation, mailing and filing of reports,
assistance in monitoring the total number of shares sold in each state for “blue
sky” purposes and assistance in the preparation of the Fund’s registration
statement under federal and state securities laws.
Pursuant
to a Fund Administration Servicing Agreement and a Fund Accounting Servicing
Agreement, each between Fund Services and the Advisor, Fund Services also
performs certain administrative, accounting and tax reporting functions for the
Fund, including the preparation and filing of federal and state tax returns,
preparing and filing securities registration compliance filings with various
states, compiling data for and preparing notices to the SEC, preparing financial
statements for the annual and semi-annual reports to the SEC and current
investors, monitoring the Fund’s expense accruals and performing securities
valuations and, from time to time, monitoring the Fund’s compliance with their
investment objectives and restrictions.
Pursuant
to the Fund’s Administration Servicing Agreement, for the periods shown below
the Fund paid Fund Services the following:
|
|
|
|
|
| |
|
Matrix
Advisors Value Fund, Inc. |
Fee
Paid |
| Fiscal
Year Ended June 30, 2023 |
$78,735 |
| Fiscal
Year Ended June 30, 2022 |
$90,195 |
| Fiscal
Year Ended June 30, 2021 |
$76,953 |
|
| |
|
| |
|
| |
Tait,
Weller & Baker LLP (“TWB”), located at Two Liberty Place, 50 South 16th
Street, Suite 2900, Philadelphia, Pennsylvania 19102, serves as the Fund’s
independent registered public accounting firm. TWB
audits and reports on the Fund’s annual financial statements, reviews certain
regulatory reports and the Fund’s federal income tax returns and performs other
auditing and tax services when engaged to do so.
Godfrey
& Kahn, S.C., located at 833 E. Michigan, Suite 1800, Milwaukee, Wisconsin
53202, serves as counsel to the Fund and the Independent Directors.
Capital
Stock
The
Fund’s shares are denominated “Common Stock, $.01 par value.” Shares have no
pre-emptive rights and are fully paid and non-assessable. Shares have
non-cumulative voting rights, which means the holders of more than 50% of the
shares voting for the election of directors can elect all of the directors if
they choose to do so, in which event the holders of the remaining less than 50%
of the shares voting for the election of directors will not be able to elect any
directors.
Shareholders
are entitled to one vote for each share held and fractional votes for fractional
shares held and will vote on any matter submitted to a shareholder vote. The
Fund does not intend to hold meetings of shareholders in any year in which the
1940 Act does not require shareholders to act upon any of the following matters:
(i) election of directors; (ii) approval of an investment advisory
agreement; (iii) approval of a distribution agreement; or
(iv) ratification of selection of an independent registered public
accounting firm.
Code
of Ethics
The
Board of Directors of each of the Fund and the Advisor have adopted Codes of
Ethics under Rule 17j-1 of the 1940 Act. These Codes permit, subject
to certain conditions, personnel of the Advisor to invest in securities that may
be purchased or held by the Fund. These Codes of Ethics include reporting and
other obligations to monitor personal transactions and ensure that such
transactions are consistent with the best interests of the Fund. The Distributor
relies on the principal underwriter’s exception under Rule 17j-1(c)(3) from the
requirement to adopt a code of ethics pursuant to Rule 17j-1 because the
Distributor is not affiliated with the Fund or the Advisor and no officer,
director, or general partner of the Distributor serves as an officer or director
of the Fund or the Advisor.
Anti-Money
Laundering Program
The
Fund has established an Anti-Money Laundering Compliance Program (the “Program”)
as required by the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA PATRIOT
Act”). To ensure compliance with this law, the Program provides for the
development of internal practices, procedures and controls, designation of
anti-money laundering compliance officers, an ongoing training program and an
independent audit function to determine the effectiveness of the Program. Ms.
Jacqueline Mandel serves as the AML Compliance Officer of the Fund.
Procedures
to implement the Program include, but are not limited to, determining that the
Distributor and the Fund’s transfer agent have established proper anti-money
laundering procedures, reporting suspicious and/or fraudulent activity and a
complete and thorough review of all new opening account applications. The Fund
will not transact business with any person or entity whose identity cannot be
adequately verified under the provisions of the USA PATRIOT Act.
As
a result of the Program, the Fund may be required to “freeze” the account of a
shareholder if the shareholder appears to be involved in suspicious activity or
if certain account information matches information on government lists of known
terrorists or other suspicious persons, or the Fund may be required to transfer
the account or proceeds of the account to a governmental agency.
Proxy
Voting Policies
The
Board of Directors has delegated responsibility to vote proxies to the Advisor,
subject to the Board’s oversight. A summary of the Advisor’s proxy voting
procedures, attached as Appendix
A
to this SAI, are reviewed periodically, and accordingly are subject to change.
In addition, a copy of the Fund’s proxy voting procedures are also available by
calling 1-800-366-6223 and will be sent within three business days of receipt of
a request.
The
Advisor has retained an independent, third-party proxy voting service, ISS
Governance Services (“ISS”), to provide advice and counsel with respect to proxy
voting matters. The Advisor will generally follow the proxy voting guidelines
maintained by ISS in the voting of proxies for client accounts unless the client
provides the Advisor with its own proxy voting guidelines. ISS’ general
positions on various proposals are as follows:
Director
Matters
– ISS votes on director nominees on a case-by-case basis, examining factors
including independence of the board and its committees, attendance at board
meetings, corporate governance provisions and takeover activity, and long-term
company performance. ISS votes against proposals to classify the board, for
shareholder proposals that a majority or more of directors be independent unless
the board composition already meets ISS’ threshold for independence, and for
shareholder proposals asking that audit, compensation and/or nominating
committees be composed exclusively of independent directors.
Shareholder
Rights
– ISS votes against proposals to restrict or prohibit shareholder ability to
take action by written consent or to call special meetings, proposals to require
supermajority shareholder votes and proposals to eliminate cumulative voting.
ISS votes for shareholder proposals that ask a company to submit its poison pill
for shareholder ratification.
Compensation
and Benefits Plans
– ISS votes with respect to equity-based compensation plans on a case-by-case
basis, using methodology based primarily on the transfer of shareholder wealth
(the dollar cost of pay plans to shareholders instead of simply focusing on
voting power dilution). ISS also votes with respect to the following issues on a
case-by-case basis: management proposals seeking approval to reprice options,
management proposals for an advisory vote on executive compensation, votes on
employee stock purchase plans, and all other shareholder proposals regarding
executive and director pay.
Auditors
– ISS generally votes for proposals to ratify auditors, unless an auditor is not
independent, fees for non-audit services are excessive, or there is reason to
believe that the auditor has rendered an opinion which is neither accurate nor
indicative of the company’s financial position.
Information
regarding the Fund’s proxy voting record relating to portfolio securities during
the most recent 12‑month period ended June 30 is filed with the SEC on Form
N-PX no later than August 31 of each year. The Fund’s Form N-PX is available
without charge, upon request, by calling toll-free at 1-800-366-6223 and by
accessing the SEC’s website at www.sec.gov.
FINANCIAL
STATEMENTS
The
annual report to shareholders for the Fund for the fiscal year ended
June
30, 2023
is a separate document and the financial statements, accompanying notes and
report of independent registered public accounting firm appearing therein are
incorporated by reference in this SAI. The 2023
Annual Report was filed with the SEC on
September 7, 2023.
APPENDIX
A
Matrix
Asset Advisors, Inc.
Proxy
Voting Procedures
Matrix
Asset Advisors’ standard investment management agreement implicitly authorizes
Matrix Asset Advisors to vote proxies on behalf of the Client’s account.
Therefore, unless the Client expressly reserves proxy voting responsibility, it
is Matrix Asset Advisors’ responsibility to vote proxies relating to securities
held for the Client’s account.
ERISA
Accounts:
Unless proxy voting responsibility has been expressly reserved and is being
exercised by another “named fiduciary” for an ERISA plan client, Matrix Asset
Advisors, as the investment adviser for the account, must vote all proxies
relating to securities held for the plan’s account. Matrix Asset Advisors shall
make appropriate arrangements with each account custodian to have proxies
forwarded, on a timely basis, to the Client or other appropriate person, and
shall endeavor to correct any delays or other problems relating to timely
delivery of proxies and proxy materials.
Fiduciary
obligations of prudence and loyalty require an investment adviser with proxy
voting responsibility to vote proxies on issues that affect the value of the
Client’s investment. Proxy voting decisions must be made solely in the best
interests of the Client. In voting proxies, Matrix Asset Advisors is required to
consider those factors that may affect the value of the Client’s investment and
may not subordinate the interests of the Client to unrelated
objectives.
Matrix
Asset Advisors has retained an independent, third-party proxy voting service,
Institutional Shareholder Services Governance Services (“ISS”), to provide
advice and counsel on proxy voting. Matrix generally follows the proxy voting
guidelines maintained by ISS in the voting of proxies for client accounts,
unless the client provides Matrix with its own proxy voting guidelines. A copy
of the guidelines Matrix follows will be sent to clients annually.
For
Matrix holdings (companies owned in client portfolios per Matrix’s investment
discretion), ISS monitors corporate actions and provides information and
analyses with regard to proxy voting issues. Matrix has further retained ISS to
vote proxies on its behalf, and Matrix will monitor the application of the
guidelines by ISS, and will vote issues contrary to, or issues not covered by,
the guidelines only when Matrix believes it is in the best interest of the
Client. ISS maintains the proxy voting records. Where the Client has provided
proxy voting guidelines to Matrix, those guidelines will be followed, unless it
is determined that a different vote would add more value to the Client’s holding
of the security in question. A written explanation of the rationale for the
deviation from the Client’s proxy voting guidelines will be maintained.
Direction from a Client on a particular proxy vote will take precedence over the
guidelines.
ISS,
on Matrix’s behalf, may also vote proxies for companies held in restricted
accounts.
Should
a material conflict arise between Matrix Asset Advisors’ interest and that of
its clients (i.e.,
Matrix owns shares in a Client, Matrix manages a pension plan for a company
whose management is soliciting proxies, or a Firm employee has a relative
involved in Management at an investee company), the proxies will be voted in
accordance with the recommendation of the independent third-party proxy voting
service. A written record will be maintained describing the conflict of
interest, the resolution of the conflict, and an explanation of how the vote
taken was in the client’s best interest.
Matrix
Asset Advisors may refrain from voting the proxy if the cost of voting the proxy
exceeds the expected benefit to the client, for example in the case of voting a
foreign security when the proxy must be translated into English or the vote must
be cast in person. Additionally, Matrix Asset Advisors may refrain from voting a
proxy when the shares owned are small and the impact of the vote would be
immaterial.
Information
regarding how the Fund voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is available (1) without charge upon
request by calling toll-free at 1-800-366-6223 and (2) on the SEC’s website at
www.sec.gov.
Recordkeeping.
In accordance with the recordkeeping rules, Matrix Asset Advisors will retain:
(i)Copies
of its proxy voting policies and procedures.
(ii)A
copy of each proxy statement received regarding client securities (maintained by
the proxy voting service and/or Matrix Asset Advisors).
(iii)A
record of each vote cast on behalf of a client (maintained by the proxy voting
service and/or Matrix Asset Advisors).
(iv)A
copy of any document created that was material to the voting decision or that
memorializes the basis for that decision.
(v)A
copy of each written request for proxy voting information and a copy of any
written response by Matrix Asset Advisors to any request for proxy voting
information.
Matrix
Asset Advisors will maintain these materials in an easily accessible place for
not less than five years from the end of the fiscal year during which the last
entry took place, the first two years in Matrix Asset Advisors’ principal
office.