ck0001027596-20221031
STATEMENT
OF ADDITIONAL INFORMATION
February
28, 2023
FIRST
SENTIER AMERICAN LISTED INFRASTRUCTURE FUND
FIRST
SENTIER GLOBAL LISTED INFRASTRUCTURE FUND
c/o
U.S. Bank Global Fund Services
P.O.
Box 701
Milwaukee,
Wisconsin 53201-0701
1-888-898-5040
This
Statement of Additional Information (“SAI”) is not a prospectus and it should be
read in conjunction with the Prospectus dated February 28, 2023, as may be
revised, of the First Sentier American Listed Infrastructure Fund and the First
Sentier Global Listed Infrastructure Fund (each a “Fund” together the “Funds”),
each a series of Advisors Series Trust (the “Trust”). A copy of the Prospectus
may be obtained by contacting the Funds at the address or telephone number above
or by visiting the Funds’ website at www.firstsentierfunds.com.
The
Funds’ financial statements for the fiscal year ended
October 31, 2022, are incorporated herein by reference to the Funds’
annual
report.
A copy of the annual report may be obtained without charge by calling the Funds
at the number listed above.
TABLE
OF CONTENTS
THE
TRUST
The
Trust is a Delaware statutory trust organized under the laws of the State of
Delaware on October 3, 1996, and is registered with the U.S. Securities and
Exchange Commission (the “SEC”) as an open-end management investment company.
The Trust’s Agreement and Declaration of Trust (the “Declaration of Trust”)
permits the Trust’s Board of Trustees (the “Board” or the “Trustees”) to issue
an unlimited number of full and fractional shares of beneficial interest, par
value $0.01 per share, which may be issued in any number of series. The Trust
consists of various series that represent separate investment portfolios. The
Board may from time to time issue other series, the assets and liabilities of
which will be separate and distinct from any other series. This SAI relates only
to the Funds.
The
First Sentier Global Listed Infrastructure Fund (“Global Listed Fund”) commenced
operations on February 28, 2017. The First Sentier American Listed
Infrastructure Fund (“American Listed Fund”) commenced operations on December
29, 2020.
Registration
with the SEC does not involve supervision of the management or policies of the
Funds. The Prospectus of the Funds and this SAI omit certain of the information
contained in the Registration Statement filed with the SEC. Copies of such
information may be obtained from the SEC upon payment of the prescribed fee or
may be accessed free of charge at the SEC’s website at www.sec.gov.
INVESTMENT
POLICIES
The
discussion below supplements information contained in the Funds’ Prospectus as
to the investment policies and risks of each Fund.
Diversification
The
Global Listed Fund is diversified. This means, among other things, that as to
75% of the Fund’s total assets (1) no more than 5% may be in the securities of a
single issuer, and (2) it may not hold more than 10% of the outstanding voting
securities of a single issuer.
Under
applicable federal securities laws, the diversification of a mutual fund’s
holdings is measured at the time the Fund purchases a security. This means that,
as to 75% of the Fund’s total assets (1) no more than 5% may be invested in the
securities of a single issuer, and (2) the Fund may not hold more than 10% of
the outstanding voting securities of a single issuer. 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 the Fund, the Fund may
have a greater percentage of its assets invested in securities of fewer issuers.
Accordingly, 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 mutual fund under applicable federal
securities laws.
Non-Diversification
of Investments
The
American Listed Fund is non-diversified under the Investment Company Act of
1940, as amended (the “1940 Act”), which means that there is no restriction as
to how much the Fund may invest in the securities of any one issuer. However, to
qualify for tax treatment as a regulated investment company under the Internal
Revenue Code of 1986, as amended (the “Code”), the Fund intends to comply, as of
the end of each taxable quarter, with certain diversification requirements
imposed by the Code. Pursuant to these requirements, at the end of each taxable
quarter, each Fund, among other things, will not have investments in the
securities of any one issuer (other than U.S. Government securities) of more
than 25%
of
the value of the Fund’s total assets. In addition, each Fund, with respect to
50% of its total assets, will not have investments in the securities of any
issuer equal to 5% of the Fund’s total assets, and will not purchase more than
10% of the outstanding voting securities of any one issuer. As non-diversified
investment companies, the Fund may be subject to greater risks than diversified
companies because of the larger impact of fluctuation in the values of
securities of fewer issues.
Market
and Regulatory Risk
Events
in the financial markets and economy may cause volatility and uncertainty and
affect performance. Such adverse effect on performance could include a decline
in the value and liquidity of securities held by the Fund, unusually high and
unanticipated levels of redemptions, an increase in portfolio turnover, a
decrease in net asset value (“NAV”), and an increase in Fund expenses. It may
also be unusually difficult to identify both investment risks and opportunities,
in which case investment objectives may not be met. Market events may affect a
single issuer, industry, sector, or the market as a whole. Traditionally liquid
investments may experience periods of diminished liquidity. During a general
downturn in the financial markets, multiple asset classes may decline in value
and the Fund may lose value, regardless of the individual results of the
securities and other instruments in which the Fund invests. It is impossible to
predict whether or for how long such market events will continue, particularly
if they are unprecedented, unforeseen or widespread events or conditions,
pandemics, epidemics and other similar circumstances in one or more countries or
regions. Therefore, it is important to understand that the value of your
investment may fall, sometimes sharply and for extended periods, and you could
lose money.
Governmental
and regulatory actions, including tax law changes, may also impair portfolio
management and have unexpected or adverse consequences on particular markets,
strategies, or investments. Policy and legislative changes in the United States
and in other countries are affecting many aspects of financial regulation, and
may in some instances contribute to decreased liquidity and increased volatility
in the financial markets. The impact of these changes on the markets, and the
practical implications for market participants, may not be fully known for some
time. In addition, economies and financial markets throughout the world are
becoming increasingly interconnected. As a result, whether or not the Fund
invests in securities of issuers located in or with significant exposure to
countries experiencing economic and financial difficulties, the value and
liquidity of the Fund’s investments may be negatively affected.
Percentage
Limitations
Whenever
an investment policy or limitation states a maximum percentage of each 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 a Fund’s acquisition or sale
of such security or other asset. Accordingly, except with respect to borrowing,
any subsequent change in values, net assets or other circumstances will not be
considered in determining whether an investment complies with each Fund’s
investment policies and limitations. In addition, if a bankruptcy or other
extraordinary event occurs concerning a particular investment by a Fund, the
Fund may receive stock, real estate or other investments that the Fund would
not, or could not, buy. If this happens, a Fund would sell such investments as
soon as practicable while trying to maximize the return to its
shareholders.
The
Funds may invest in the following types of investments, each of which is subject
to certain risks, as discussed below:
Equity
Securities
Common
stocks, preferred stocks, convertible securities, rights, warrants and American
Depositary Receipts (“ADRs”) are examples of equity securities in which a Fund
may invest.
All
investments in equity securities are subject to market risks that may cause
their prices to fluctuate over time. Historically, the equity markets have moved
in cycles and the value of the securities in a Fund’s portfolio may fluctuate
substantially from day to day. Owning an equity security can also subject a Fund
to the risk that the issuer may discontinue paying dividends.
Common
Stocks. A
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 risks set forth above, investments in common stocks are
subject to the risk that in the event a company in which a 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 a 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 a Fund.
Preferred
Stocks.
Preferred stocks are equity securities that often pay dividends at a specific
rate and have a preference over common stocks in dividend payments and
liquidation of assets. A preferred stock has a blend of the characteristics of a
bond and common stock. Preferred stock generally does not carry voting rights.
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. Although the
dividend is set at a fixed annual rate, in some circumstances it can be changed
or omitted by the issuer.
Convertible
Securities. Each
Fund may invest in convertible securities. Traditional convertible securities
include corporate bonds, notes and preferred stocks that may be converted into
or exchanged for common stock, and other securities that also provide an
opportunity for equity participation. These securities are convertible either at
a stated price or a stated rate (that is, for a specific number of shares of
common stock or other security). As with other fixed income securities, the
price of a convertible security generally varies inversely with interest rates.
While providing a fixed income stream, a convertible security also affords the
investor an opportunity, through its conversion feature, to participate in the
capital appreciation of the common stock into which it is convertible. As the
market price of the underlying common stock declines, convertible securities
tend to trade increasingly on a yield basis and so may not experience market
value declines to the same extent as the underlying common stock. When the
market price of the underlying common stock increases, the price of a
convertible security tends to rise as a reflection of higher yield or capital
appreciation. In such situations, a Fund may have to pay more for a convertible
security than the value of the underlying common stock.
Rights
and Warrants. Each
Fund may invest in rights and warrants. A right is a privilege granted to
existing shareholders of a corporation to subscribe to shares of a new issue of
common stock and it is issued at a predetermined price in proportion to the
number of shares already owned. Rights normally have a short life, usually two
to four weeks, are freely transferable and entitle the holder to buy the new
common stock at a lower price than the current market. Warrants are options to
purchase equity securities at a specific price for a specific period of time.
They do not represent ownership of the securities, but only the right to buy
them. Hence, warrants have no voting rights, pay no dividends and have no rights
with respect to the assets of the corporation issuing them. The value of
warrants is derived solely from capital appreciation of the underlying equity
securities. Warrants differ from call options in that the underlying corporation
issues warrants, whereas call options may be written by anyone.
An
investment in rights and warrants may entail greater risks than certain other
types of investments. Generally, rights and warrants do not carry the right to
receive dividends or exercise voting rights with respect to the underlying
securities, and they do not represent any rights in the assets of the issuer. In
addition, although their value is influenced by the value of the underlying
security, their value does not
necessarily
change with the value of the underlying securities, and they cease to have value
if they are not exercised on or before their expiration date. Investing in
rights and warrants increases the potential profit or loss to be realized from
the investment as compared with investing the same amount in the underlying
securities.
Small-
and Medium-Sized Companies
To
the extent a Fund invest in the equity securities of small- and medium-sized
companies, it will be exposed to the risks of smaller sized companies. Small-
and medium-sized companies may have narrower markets for their goods and/or
services and may have more limited managerial and financial resources than
larger, more established companies. Furthermore, such companies may have limited
product lines, services, markets, or financial resources or may be dependent on
a small management group. In addition, because these stocks may not be
well-known to the investing public, do not have significant institutional
ownership or are typically followed by fewer security analysts, there will
normally be less publicly available information concerning these securities
compared to what is available for the securities of larger companies. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, can decrease the value and liquidity of securities held by a Fund. As
a result, their performance can be more volatile and they face greater risk of
business failure, which could increase the volatility of a Fund’s
portfolio.
Investment
Companies. Each
Fund may invest in shares of other investment companies including
exchange-traded funds (“ETFs”), money market funds and other mutual funds, in
pursuit of its investment objective, subject to the limitations set forth in the
1940 Act. Each Fund may invest in money market mutual funds in connection with
its management of daily cash positions and for temporary defensive purposes. In
addition to the advisory and operational fees each Fund bears directly in
connection with its own operation, the Funds would also bear their pro rata
portion of each of the other investment company’s advisory and operational
expenses.
Section
12(d)(1)(A) of the 1940 Act generally prohibits a fund from purchasing (1) more
than 3% of the total outstanding voting stock of another fund; (2) securities of
another fund having an aggregate value in excess of 5% of the value of the
acquiring fund; and (3) securities of the other fund and all other funds having
an aggregate value in excess of 10% of the value of the total assets of the
acquiring fund. There are some exceptions, however, to these limitations
pursuant to various rules promulgated by the SEC.
The
Funds may rely on Section 12(d)(1)(F) and Rule 12d1-3 of the 1940 Act, which
provide an exemption from Section 12(d)(1) that allows a Fund to invest all of
its assets in other registered funds, including ETFs, if, among other
conditions: (a) a Fund, together with its affiliates, acquires no more than
three percent of the outstanding voting stock of any acquired fund, and
(b) the sales load or service fee charged on the Fund’s shares is no
greater than the limits set forth in Rule 2341 of the Conduct Rules of the
Financial Industry Regulatory Authority, Inc. (“FINRA”). In accordance with Rule
12d1-1 under the 1940 Act, the provisions of Section 12(d)(1) shall not apply to
shares of money market funds purchased by the Fund, whether or not for temporary
defensive purposes, provided that the Fund does not pay a sales charge,
distribution fee or service fee as defined in Rule 2341 of the Conduct Rules of
FINRA on acquired money market fund shares (or the Adviser must waive its
advisory fees in an amount necessary to offset any sales charge, distribution
fee or service fee).
Rule
12d1-4 permits additional types of fund of fund arrangements without an
exemptive order. The rule imposes certain conditions, including limits on
control and voting of acquired funds’ shares, evaluations and findings by
investment advisers, fund investment agreements, and limits on most three-tier
fund structures.
Exchange-Traded
Funds.
ETFs are open-end investment companies whose shares are listed on a national
securities exchange. An ETF is similar to a traditional mutual fund, but trades
at different prices during the day on a security exchange like a stock. Similar
to investments in other investment companies discussed above, a Fund’s
investments in ETFs will involve duplication of advisory fees and other expenses
since a Fund will be investing in another investment company. In addition, a
Fund’s investment in ETFs is also subject to its limitations on investments in
investment companies discussed above. To the extent a Fund invests in ETFs which
focus on a particular market segment or industry, the Fund will also be subject
to the risks associated with investing in those sectors or industries. The
shares of the ETFs in which a Fund will invest will be listed on a national
securities exchange and a Fund will purchase or sell these shares on the
secondary market at its current market price, which may be more or less than its
NAV per share.
As
a purchaser of ETF shares on the secondary market, a Fund will be subject to the
market risk associated with owning any security whose value is based on market
price. ETF shares historically have tended to trade at or near their NAV, but
there is no guarantee that they will continue to do so. Unlike traditional
mutual funds, shares of an ETF may be purchased and redeemed directly from the
ETFs only in large blocks and only through participating organizations that have
entered into contractual agreements with the ETF. A Fund does not expect to
enter into such agreements and therefore will not be able to purchase and redeem
their ETF shares directly from the ETF.
Foreign
Investments
The
Funds may make investments in securities of non-U.S. issuers (“foreign
securities”).
Depositary
Receipts.
The
American Listed Fund reserves the right to invest up to 20% of its net assets in
American Depositary Receipts (“ADRs”). The Global Listed Fund reserves the right
to invest up to 75% of its net assets in ADRs.
ADRs
evidence ownership of, and represent the right to receive, securities of foreign
issuers deposited in a domestic bank or trust company or a foreign correspondent
bank. Prices of ADRs are quoted in U.S. dollars, and ADRs are traded in the
United States on exchanges or over-the-counter. While ADRs do not eliminate all
the risks associated with foreign investments, by investing in ADRs rather than
directly in the stock of foreign issuers, a Fund will avoid currency and certain
foreign market trading risks during the settlement period for either purchases
or sales. In general, there is a large, liquid market in the United States for
ADRs quoted on a national securities exchange. The information available for
ADRs is subject to the accounting, auditing and financial reporting standards of
the U.S. market or exchange on which they are traded, which standards are
generally more uniform and more exacting than those to which many foreign
issuers may be subject.
In
sponsored programs, an issuer has made arrangements to have its securities
traded in the form of depositary receipts. In unsponsored programs, the issuer
may not be directly involved in the creation of the program. Although regulatory
requirements with respect to sponsored and unsponsored programs are generally
similar, in some cases it may be easier to obtain financial information about an
issuer that has participated in the creation of a sponsored program. There may
be an increased possibility of untimely responses to certain corporate actions
of the issuer, such as stock splits and rights offerings, in an unsponsored
program. Accordingly, there may be less information available regarding issuers
of securities underlying unsponsored programs and there may not be a correlation
between this information and the market value of the depositary receipts. If a
Fund’s investment depends on obligations being met by the arranger as well as
the issuer of an unsponsored program, a Fund will be exposed to additional
credit risk.
Foreign
Currency Transactions (Global Listed Fund)
The
Fund may invest in foreign currency exchange transactions.
Exchange
rates between the U.S. dollar and foreign currencies are a function of such
factors as supply and demand in the currency exchange markets, international
balances of payments, governmental intervention, speculation and other economic
and political conditions.
Foreign
exchange dealers may realize a profit on the difference between the price at
which the Fund buys and sells currencies.
Risks
of Investing in Foreign Securities.
Investments in foreign securities involve certain inherent risks, including the
following:
Political
and Economic Factors.
Individual economies of certain countries may differ favorably or unfavorably
from the United States’ economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment, resource self-sufficiency,
diversification and balance of payments position. The internal politics of
certain foreign countries may not be as stable as those of the United States.
Governments in certain 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 accordingly affected by the trade
policies and economic conditions of their trading partners. Enactment by these
trading partners of protectionist trade legislation could have a significant
adverse effect upon the securities markets of such countries.
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.
Currency
Fluctuations.
A change in the value of any foreign currency against the U.S. dollar will
result in a corresponding change in the U.S. dollar value of an ADR’s underlying
portfolio securities denominated in that currency. Such changes will affect a
Fund to the extent that a Fund is invested in ADRs comprised of foreign
securities.
To
the extent a Fund invests in securities denominated or quoted in currencies
other than the U.S. dollar, the Fund will be affected by changes in foreign
currency exchange rates (and exchange control regulations) which affect the
value of investments in the Fund and the income and appreciation or depreciation
of the investments. Changes in foreign currency exchange ratios relative to the
U.S. dollar will affect the U.S. dollar value of the Fund’s assets
denominated in that currency and the Fund’s yield on such assets. In addition,
the Fund will incur costs in connection with conversions between various
currencies.
The
Global Listed Fund’s foreign currency exchange transactions may be conducted on
a spot basis (that is, cash basis) at the spot rate for purchasing or selling
currency prevailing in the foreign currency exchange market. The Global Listed
Fund also may enter into contracts with banks, brokers or dealers to purchase or
sell securities or foreign currencies at a future date (“forward contracts”). A
foreign currency forward contract is a negotiated agreement between the
contracting parties to exchange a specified amount of currency at a specified
future time at a specified rate. The rate can be higher or lower than the spot
rate between the currencies that are the subject of the contract.
Taxes.
The interest and dividends payable to a Fund on certain of a Fund’s foreign
securities may be subject to foreign taxes or withholding, thus reducing the net
amount of income available for distribution
to
Fund shareholders. A Fund may not be eligible to pass through to its
shareholders any tax credits or deductions with respect to such foreign taxes or
withholding.
In
considering whether to invest in the securities of a non-U.S. company, the
Adviser considers such factors as the characteristics of the particular company,
differences between economic trends and the performance of securities markets
within the United States and those within other countries, and also factors
relating to the general economic, governmental and social conditions of the
country or countries where the company is located. The extent to which a Fund
will be invested in non-U.S. companies, foreign countries and depositary
receipts will fluctuate from time to time within any limitations described in
the Prospectus, depending on the Adviser’s assessment of prevailing market,
economic and other conditions.
Brexit.
In a June 2016 referendum, citizens of the United Kingdom voted to leave the
European Union (“EU”). In March 2017, the United Kingdom formally notified the
European Council of its intention to withdraw from the EU (commonly known as
“Brexit”) by invoking Article 50 of the Treaty on European Union, which
triggered a two-year period of negotiations on the terms of Brexit. Brexit has
resulted in volatility in European and global markets and may also lead to
weakening in political, regulatory, consumer, corporate and financial confidence
in the markets of the United Kingdom and throughout Europe. The longer term
economic, legal, political, regulatory and social framework to be put in place
between the United Kingdom and the EU remains unclear and may lead to ongoing
political, regulatory and economic uncertainty and periods of exacerbated
volatility in both the United Kingdom and in wider European markets for some
time. Additionally, the decision made in the British referendum may lead to a
call for similar referenda in other European jurisdictions, which may cause
increased economic volatility in European and global markets. The mid-to
long-term uncertainty may have an adverse effect on the economy generally and on
the value of a Fund’s investments. This may be due to, among other things:
fluctuations in asset values and exchange rates; increased illiquidity of
investments located, traded or listed within the United Kingdom, the EU or
elsewhere; changes in the willingness or ability of counterparties to enter into
transactions at the price and terms on which a Fund is prepared to transact;
and/or changes in legal and regulatory regimes to which certain of a Fund’s
assets are or become subject. Fluctuations in the value of the British Pound
and/or the Euro, along with the potential downgrading of the United Kingdom’s
sovereign credit rating, may also have an impact on the performance of a Fund’s
assets or investments economically tied to the United Kingdom or
Europe.
The
full impact of Brexit and the nature of the future relationship between the
United Kingdom and the European Union remains uncertain. The United Kingdom and
the European Union reached a trade agreement on December 31, 2020, which became
effective on May 1, 2021 after being approved by all applicable United Kingdom
and European Union governmental bodies in early 2021. The period following the
United Kingdom’s withdrawal from the European Union is expected to be one of
significant political and economic uncertainty particularly until the United
Kingdom government and European Union member states agree and implement the
terms of the United Kingdom’s future relationship with the European Union.
Brexit may create additional economic stresses for the United Kingdom, which may
include causing a contraction of the United Kingdom economy and price volatility
in United Kingdom stocks, decreased trade, capital outflows, devaluation of
pounds sterling, and wider corporate bond spreads due to uncertainty and
declines in business and consumer spending as well as foreign direct investment.
The Fund may be negatively impacted by changes in law and tax treatment
resulting from or following Brexit. Until the economic effects of Brexit become
clearer, and while a period of political, regulatory and commercial uncertainty
continues, there remains a risk that Brexit may negatively impact the value of
investments held by the Funds.
Emerging
Markets (Global Listed Fund)
The
Fund may invest in foreign securities that may include securities of companies
located in developing or emerging markets, which entail additional risks,
including: less social, political and economic stability; smaller securities
markets and lower trading volume, which may result in less liquidity and greater
price volatility; national policies that may restrict an underlying fund’s
investment opportunities, including restrictions on investments in issuers or
industries, or expropriation or confiscation of assets or property; and less
developed legal structures governing private or foreign investment.
Stapled
Securities
A
Fund may invest in stapled securities to gain exposure to many infrastructure
companies in Australia. A stapled security, which is widely used in Australia,
is a security that is comprised of two parts that cannot be separated from one
another, a unit in a trust related to the company and a share of a company. The
resulting security is influenced by both parts, and must be treated as one unit
at all times, such as when buying or selling a security.
The
characteristics and value of a stapled security are influenced by both
underlying securities. The listing of stapled securities on a domestic or
foreign exchange does not guarantee a liquid market for stapled
securities.
Real
Estate Investment Trusts (“REITs”)
Each
Fund may invest in shares of REITs. REITs are pooled investment vehicles which
invest primarily in real estate or real estate related loans. REITs are
generally classified as equity REITs, mortgage REITs or a combination of equity
and mortgage REITs. Equity REITs invest the majority of their assets directly in
real property and derive income primarily from the collection of rents. Equity
REITs can also realize capital gains by selling properties that have appreciated
in value. Mortgage REITs invest the majority of their assets in real estate
mortgages and derive income from the collection of interest payments. Like
regulated investment companies such as a Fund, REITs are not taxed on income
distributed to shareholders provided they comply with certain requirements under
the Code. A Fund will indirectly bear their proportionate share of any expenses
paid by REITs in which they invest in addition to the expenses paid by the Fund.
Investing in REITs involves certain unique risks. Equity REITs may be affected
by changes in the value of the underlying property owned by such REITs, while
mortgage REITs may be affected by the quality of any credit extended. REITs are
dependent upon management skills, are not diversified (except to the extent the
Code requires), and are subject to the risks of financing projects. REITs are
subject to heavy cash flow dependency, default by borrowers, self-liquidation,
and the possibilities of failing to qualify for the exemption from tax for
distributed income under the Code and failing to maintain their exemptions from
the Act. REITs (especially mortgage REITs) are also subject to interest rate
risks.
Investing
in foreign real estate companies makes the Funds more susceptible to risks
associated with the ownership of real estate and with the real estate industry
in general. In addition, foreign real estate companies depend upon specialized
management skills, may not be diversified, may have less trading volume, and may
be subject to more abrupt or erratic price movements than the overall securities
markets. Foreign real estate companies have their own expenses, and each Fund
will bear a proportionate share of those expenses.
Limited
Partnerships and Master Limited Partnerships (Global Listed Fund)
The
Fund may invest in publicly traded limited partnerships and Master Limited
Partnerships (“MLPs”).
MLPs
are businesses organized as limited partnerships that trade their proportionate
shares of the partnership (units) on a public exchange.
MLPs
are required to pay out most or all of their earnings in
distributions.
Generally
speaking, MLP investment returns are enhanced during periods of declining or low
interest rates and tend to be negatively influenced when interest rates are
rising.
As
an income vehicle, the unit price may be influenced by general interest rate
trends independent of specific underlying fundamentals.
In
addition, most MLPs are fairly leveraged and typically carry a portion of
“floating” rate
debt.
As
such, a significant upward swing in interest rates would drive interest expense
higher.
Furthermore,
most MLPs grow by acquisitions partly financed by debt, and higher interest
rates could make it more difficult to make acquisitions.
Initial
Public Offerings
Each
Fund may purchase shares in initial public offerings (“IPOs”). Because IPO
shares frequently are volatile in price, a Fund may hold IPO shares for a very
short period of time. This may increase the turnover of a Fund’s portfolio and
may lead to increased expenses to a Fund, such as brokerage commissions and
transaction costs. By selling shares, a Fund may realize taxable capital gains
that it will subsequently distribute to shareholders. Investing in IPOs
increases risk because IPO shares are frequently volatile in price. As a result,
their performance can be more volatile and they face greater risk of business
failure, which could increase the volatility of a Fund’s portfolio.
Derivatives
The
SEC adopted a final rule related to the use of derivatives, short sales, reverse
repurchase agreements and certain other transactions by registered investment
companies that rescinds and withdraws the guidance of the SEC and its staff
regarding asset segregation and cover transactions. The final rule requires a
Fund that trades derivatives and other transactions which create future payment
or delivery obligations (except reverse repurchase agreements and similar
financing transactions) be subject to a value-at-risk (“VaR”) leverage limit and
certain derivatives risk management program and reporting requirements.
Generally, these requirements apply unless a Fund qualifies as a “limited
derivatives user,” as defined in the final rule. Under the final rule, when a
Fund trades reverse repurchase agreements or similar financing transactions,
including certain tender option bonds, it needs to aggregate the amount of
indebtedness associated with the reverse repurchase agreements or similar
financing transactions with the aggregate amount of any other senior securities
representing indebtedness when calculating the Fund’s asset coverage ratio or
treat all such transactions as derivatives transactions. Reverse repurchase
agreements or similar financing transactions aggregated with other indebtedness
do not need to be included in the calculation of whether a Fund is a limited
derivatives user, but for Funds subject to the VaR testing, reverse repurchase
agreements and similar financing transactions must be included for purposes of
such testing whether treated as derivatives transactions or not. These
requirements may limit the ability of a Fund to use derivatives and reverse
repurchase agreements and similar financing transactions as part of its
investment strategies. These requirements may increase the cost of a Fund’s
investments and cost of doing business, which could adversely affect
investors.
Each
of the Funds is classified as a limited derivatives user under Rule 18f-4 of the
1940 Act. As a limited derivatives user each Fund’s derivatives exposure,
excluding certain currency and interest rate hedging transactions, may not
exceed 10% of its net assets. This restriction is not fundamental and may be
changed by a Fund without a shareholder vote.
Options
Each
Fund may write call options on stocks if the calls are “covered” throughout the
life of the option. A call is “covered” if a Fund owns the optioned securities.
When a Fund writes a call, it receives a premium and gives the purchaser the
right to buy the underlying security at any time during the call period at a
fixed exercise price regardless of market price changes during the call period.
If the call is exercised, a Fund will forgo any gain from an increase in the
market price of the underlying security over the exercise price.
Each
Fund may purchase a call on securities to effect a “closing purchase
transaction,” which is the purchase of a call covering the same underlying
security and having the same exercise price and expiration date as a call
previously written by a Fund on which it wishes to terminate its obligation. If
a Fund is unable to effect a closing purchase transaction, it will not be able
to sell the underlying security
until
the call previously written by a Fund expires (or until the call is exercised
and a Fund delivers the underlying security).
Writing
Call Options
- When a Fund writes a call option it assumes an obligation to sell specified
securities to the holder of the option at a specified price if the option is
exercised at any time before the expiration date.
Call
writers expect to profit if prices remain the same or fall. A Fund could try to
hedge against a decline in the value of securities it already owns by writing a
call option. If the price of that security falls as expected, a Fund would
expect the option to expire and the premium it received to offset the decline of
the security’s value. However, a Fund must be prepared to deliver the underlying
instrument in return for the strike price, which may deprive it of the
opportunity to profit from an increase in the market price of the securities it
holds.
Each
Fund is permitted only to write covered options. A Fund can cover a call option
by owning:
•The
underlying security (or securities convertible into the underlying security
without additional consideration);
•A
call option on the same security with the same or lesser exercise
price;
•A
call option on the same security with a greater exercise price and segregating
cash or liquid securities in an amount equal to the difference between the
exercise prices; or
•Cash
or liquid securities equal to at least the market value of the optioned
securities.
Risks
of Derivatives
- While transactions in derivatives may reduce certain risks, these transactions
themselves entail certain other risks. For example, unanticipated changes in
interest rates, securities prices or currency exchange rates may result in a
poorer overall performance of a Fund than if it had not entered into any
derivatives transactions. Derivatives may magnify a Fund’s gains or losses,
causing it to make or lose substantially more than it invested.
When
used for hedging purposes, increases in the value of the securities a Fund holds
or intends to acquire should offset any losses incurred with a derivative.
Purchasing derivatives for purposes other than hedging could expose the Fund to
greater risks.
Derivative
Management Risk
- If the Adviser incorrectly predicts stock market and interest rate trends, a
Fund may lose money by investing in derivatives. For example, if a Fund were to
write a call option based on its Adviser’s expectation that the price of the
underlying security would fall, but the price were to rise instead, the Fund
could be required to sell the security upon exercise at a price below the
current market price.
When-Issued
Securities
Each
Fund may purchase securities on a when-issued basis, for payment and delivery at
a later date, generally within one month. The price and yield are generally
fixed on the date of commitment to purchase, and the value of the security is
thereafter reflected in a Fund’s NAV. During the period between purchase and
settlement, no payment is made by a Fund and no interest accrues to the Fund. At
the time of settlement, the market value of the security may be more or less
than the purchase price.
Rule
18f-4 under the 1940 Act permits the Funds to invest in securities on a
when-issued or forward-settling basis, or with a non-standard settlement cycle,
notwithstanding the limitation on the issuance of senior securities in Section
18 of the 1940 Act, provided that a Fund intends to physically settle the
transaction
and the transaction will settle within 35 days of its trade date (the
“Delayed-Settlement Securities Provision”). A when-issued, forward-settling, or
non-standard settlement cycle security that does not satisfy the
Delayed-Settlement Securities Provision is treated as a derivatives transaction
under Rule 18f-4. See “Derivatives” above.
Illiquid
and Restricted Securities
Pursuant
to Rule 22e-4 under the 1940 Act, a Fund may not acquire any “illiquid
investment” if, immediately after the acquisition, a Fund would have invested
more than 15% of its net assets in illiquid investments that are assets. An
“illiquid investment” is any investment that a Fund reasonably expects cannot be
sold or disposed of in current market conditions in seven calendar days or less
without the sale or disposition significantly changing the market value of the
investment. The Funds have implemented a liquidity risk management program and
related procedures to identify illiquid investments pursuant to Rule 22e-4. The
15% limits are applied as of the date a Fund purchases an illiquid investment.
It is possible that the Fund’s holding of illiquid investments could exceed the
15% limit, for example as a result of market developments or
redemptions.
Each
Fund may purchase certain restricted securities that can be resold to
institutional investors and which may be determined not to be illiquid
investments pursuant to a Fund’s liquidity risk management program. In many
cases, those securities are traded in the institutional market pursuant to Rule
144A under the Securities act of 1933, as amended (the “1933 Act”) and are
called Rule 144A securities.
Investments
in illiquid investments involve more risks than investments in similar
securities that are readily marketable. Illiquid investments may trade at a
discount from comparable, more liquid investments. Investment of a Fund’s assets
in illiquid investments may restrict the ability of the Fund to dispose of its
investments in a timely fashion and for a fair price as well as its ability to
take advantage of market opportunities. The risks associated with illiquidity
will be particularly acute where a Fund’s operations require cash, such as when
the Fund has net redemptions, and could result in the Fund borrowing to meet
short-term cash requirements or incurring losses on the sale of illiquid
investments.
Restricted
securities sold in private placement transactions between issuers and their
purchasers are neither listed on an exchange nor traded in other established
markets and may be illiquid. In many cases, the privately placed securities may
not be freely transferable under the laws of the applicable jurisdiction or due
to contractual restrictions on resale. To the extent privately placed securities
may be resold in privately negotiated transactions, the prices realized from the
sales could be less than those originally paid by a Fund or less than the fair
value of the securities. A restricted security may be determined to be liquid
under a Fund’s liquidity risk management program established pursuant to Rule
22e-4 depending on market, trading, or investment-specific considerations
related to the restricted security. In addition, issuers whose securities are
not publicly traded may not be subject to the disclosure and other investor
protection requirements that may be applicable if their securities were publicly
traded. If any privately placed securities held by a Fund are required to be
registered under the securities laws of one or more jurisdictions before being
resold, a Fund may be required to bear the expenses of registration. Private
placement investments may involve investments in smaller, less seasoned issuers,
which may involve greater risks than investments in more established companies.
These issuers may have limited product lines, markets or financial resources, or
they may be dependent on a limited management group. In making investments in
private placement securities, a Fund may obtain access to material non-public
information about an issuer of private placement securities, which may restrict
a Fund’s ability to conduct transactions in those securities.
Borrowing
Currently,
the 1940 Act permits each Fund to borrow money in amounts of up to
one-third of a Fund’s total assets from banks for any purpose, and to borrow up
to 5% of a Fund’s total assets from banks or other lenders for temporary
purposes. To limit the risks attendant to borrowing, the 1940 Act
requires a Fund to maintain at all times an “asset coverage” of at least 300% of
the amount of its borrowings. Asset coverage means the ratio that the
value of a Fund’s total assets, minus abilities other than borrowings, bears to
the aggregate amount of all borrowings. Borrowing money to increase a
Fund’s investment portfolio is known as “leveraging.” Borrowing, especially when
used for leverage, may cause the value of a Fund’s shares to be more volatile
than if the Fund did not borrow. This is because borrowing tends to
magnify the effect of any increase or decrease in the value of a Fund’s
portfolio holdings. Borrowed money thus creates an opportunity for greater
gains, but also greater losses. To repay borrowings, a Fund may have to
sell securities at a time and at a price that is unfavorable to the Fund.
There also are costs associated with borrowing money, and these costs would
offset and could eliminate a Fund’s net investment income in any given
period.
The
use of borrowing by a Fund involves special risk considerations that may not be
associated with other funds having similar objectives and policies.
Since
substantially all of a Fund’s assets fluctuate in value, while the interest
obligation resulting from a borrowing will be fixed by the terms of the Fund’s
agreement with its lender, the NAV per share of a Fund will tend to increase
more when its portfolio securities increase in value and to decrease more when
its portfolio assets decrease in value than would otherwise be the case if a
Fund did not borrow. In addition, interest costs on borrowings may
fluctuate with changing market rates of interest and may partially offset or
exceed the return earned on borrowed funds. Under adverse market
conditions, a Fund might have to sell portfolio securities to meet interest or
principal payments at a time when fundamental investment considerations would
not favor such sales. A Fund will reduce its borrowing amount within three days,
if its asset coverage falls below the amount required by the 1940
Act.
Short-Term,
Temporary, and Cash Investments
Each
Fund may invest in any of the following securities and instruments:
Bank
Certificates of Deposit, Bankers’ Acceptances and Time Deposits.
A Fund may acquire 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 a Fund will be
dollar denominated obligations of domestic or foreign banks 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. If a Fund holds instruments of foreign banks or financial
institutions, it may be subject to additional investment risks that are
different in some respects from those incurred by a fund that invests only in
debt obligations of U.S. domestic issuers. See “Foreign Investments” above. Such
risks include future political and economic developments, the possible
imposition of withholding taxes by the particular country in which the issuer is
located on interest income payable on the securities, the possible seizure or
nationalization of foreign deposits, the possible establishment of exchange
controls or the adoption of other foreign governmental restrictions which might
adversely affect the payment of principal and interest on these
securities.
Domestic
banks and foreign banks are subject to different governmental regulations with
respect to the amount and types of loans which may be made and interest rates
which may be charged. In addition, the profitability of the banking industry
depends largely upon the availability and cost of funds for the purpose of
financing lending operations under prevailing money market conditions. General
economic conditions as well as exposure to credit losses arising from possible
financial difficulties of borrowers play an important part in the operations of
the banking industry.
As
a result of federal and state laws and regulations, domestic banks are, among
other things, required to maintain specified levels of reserves, limited in the
amount which they can loan to a single borrower, and subject to other
regulations designed to promote financial soundness. However, such laws and
regulations do not necessarily apply to foreign bank obligations that a Fund may
acquire.
In
addition to purchasing certificates of deposit and bankers’ acceptances, to the
extent permitted under its investment objectives and policies stated above and
in its Prospectus, a Fund may 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.
Savings
Association Obligations.
Each Fund may invest in certificates of deposit (interest bearing time deposits)
issued by savings banks or savings and loan associations that have capital,
surplus and undivided profits in excess of $100 million, based on latest
published reports, or less than $100 million if the principal amount of such
obligations is fully insured by the U.S. government.
Commercial
Paper, Short-Term Notes and Other Corporate Obligations.
Each 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. Issues of commercial paper and short-term
notes will normally have maturities of less than nine months and fixed rates of
return, although such instruments may have maturities of up to one
year.
Special
Risks Related to Cyber Security.
The Funds and their service providers are susceptible to cyber security risks
that include, among other things, theft, unauthorized monitoring, release,
misuse, loss, destruction or corruption of confidential and highly restricted
data; denial of service attacks; unauthorized access to relevant systems,
compromises to networks or devices that the Funds and their service providers
use to service the Funds’ operations; or operational disruption or failures in
the physical infrastructure or operating systems that support the Funds and
their service providers. Cyber attacks against or security breakdowns of the
Funds or their service providers may adversely impact the Funds and their
shareholders, potentially resulting in, among other things, financial losses;
the inability of Fund shareholders to transact business and the Funds to process
transactions; inability to calculate a Fund’s NAV; violations of applicable
privacy and other laws; regulatory fines, penalties, reputational damage,
reimbursement or other compensation costs; and/or additional compliance costs.
The Funds may incur additional costs for cyber security risk management and
remediation purposes. In addition, cyber security risks may also impact issuers
of securities in which the Funds invest, which may cause a Fund’s investment in
such issuers to lose value. There can be no assurance that the Funds or their
service providers will not suffer losses relating to cyber attacks or other
information security breaches in the future.
INVESTMENT
RESTRICTIONS
The
Trust (on behalf of a Fund) has adopted the following restrictions as
fundamental policies, which may not be changed without the affirmative vote of
the holders of a “majority of a Fund’s outstanding voting securities” as defined
in the 1940 Act. Under the 1940 Act, the “vote of the holders of a majority
of
the outstanding voting securities” means the vote of the holders of the lesser
of (i) 67% of the shares of a Fund represented at a meeting at which the
holders of more than 50% of its outstanding shares are represented or
(ii) more than 50% of the outstanding shares of a Fund.
The
Global Listed Fund may not:
(1)With
respect to 75% of its total assets, invest more than 5% of its total assets in
securities of a single issuer or hold more than 10% of the voting securities of
such issuer.
(Does
not apply to investments in the securities of other investment companies or
securities of the U.S. government, its agencies or
instrumentalities.)
(2)Borrow
money, except as permitted under the 1940 Act.
(3)Issue
senior securities, except as permitted under the 1940 Act.
(4)Engage
in the business of underwriting securities, except to the extent that the Fund
may be considered an underwriter within the meaning of the Securities Act in the
disposition of restricted securities.
(5)Invest
25% or more of the market value of its total assets in the securities of
companies engaged in any one industry, except that the Fund will invest over 25%
of its net assets in the securities issued by companies operating in the
infrastructure industry.
(Does
not apply to investments in the securities of other investment companies or
securities of the U.S. government, its agencies or
instrumentalities.)
(6)Purchase
or sell real estate, which term does not include securities of companies which
deal in real estate and/or mortgages or investments secured by real estate, or
interests therein, except that the Fund reserves freedom of action to hold and
to sell real estate acquired as a result of a Fund’s ownership of
securities.
(7)Purchase
or sell physical commodities or contracts relating to physical
commodities.
(8)Make
loans to others, except as permitted under the 1940 Act.
The
American Listed Fund may not:
(1)Borrow
money, except as permitted under the 1940 Act.
(2)Issue
senior securities, except as permitted under the 1940 Act.
(3)Engage
in the business of underwriting securities, except to the extent that a Fund may
be considered an underwriter within the meaning of the Securities Act in the
disposition of restricted securities.
(4)Invest
25% or more of the market value of its total assets in the securities of
companies engaged in any one industry, except that the Fund will invest over 25%
of its net assets in the securities issued by companies operating in the
infrastructure industry. (Does not apply to investments in the securities of
other investment companies or securities of the U.S. government, its agencies or
instrumentalities.)
(5)Purchase
or sell real estate, which term does not include securities of companies which
deal in real estate and/or mortgages or investments secured by real estate, or
interests therein, except that a Fund reserves freedom of action to hold and to
sell real estate acquired as a result of a Fund’s ownership of
securities.
(6)Purchase
or sell physical commodities or contracts relating to physical
commodities.
(7)Make
loans to others, except as permitted under the 1940 Act.
PORTFOLIO
TURNOVER
Although
a Fund generally will not invest for short-term trading purposes, portfolio
securities may be sold without regard to the length of time they have been held
when, in the opinion of the Adviser, 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 a 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.
The
following table shows each Fund’s portfolio turnover rate for the fiscal years
shown:
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| Portfolio
Turnover Rate Fiscal Year Ended October 31, |
|
| 2022 |
2021 |
| American
Listed Fund |
73.76% |
58.21% |
| Global
Listed Fund |
43.81% |
56.09% |
PORTFOLIO
HOLDINGS POLICY
The
Adviser and the Funds maintain portfolio holdings disclosure policies that
govern the timing and circumstances of disclosure to shareholders and third
parties of information regarding the portfolio investments held by a Fund. These
portfolio holdings disclosure policies have been approved by the Board.
Disclosure of a Fund’s complete holdings is required to be made quarterly within
60 days of the end of each fiscal quarter in the annual report and semi-annual
report to Fund shareholders and in the quarterly holdings report on Part F of
Form N-PORT. These reports are available, free of charge, on the EDGAR database
on the SEC’s website at www.sec.gov.
Pursuant
to the Trust’s portfolio holdings disclosure policies, information about a
Fund’s portfolio holdings is not distributed to any person unless:
▪The
disclosure is required pursuant to a regulatory request, court order or is
legally required in the context of other legal proceedings;
▪The
disclosure is made to a mutual fund rating and/or ranking organization, or
person performing similar functions, who is subject to a duty of
confidentiality, including a duty not to trade on any non-public
information;
▪The
disclosure is made to internal parties involved in the investment process,
administration, operation or custody of the Funds, including, but not limited to
U.S. Bancorp Fund Services, LLC, doing business as U.S. Bank Global Fund
Services (“Fund Services”) and the Trust’s Board of Trustees, attorneys,
auditors or accountants;
▪The
disclosure is made: (a) in connection with a quarterly, semi-annual or annual
report that is available to the public; or (b) relates to information that is
otherwise available to the public; or
▪The
disclosure is made with the prior written approval of either the Trust’s Chief
Compliance Officer (“CCO”) or his or her designee.
Certain
of the persons listed above receive information about the Funds’ portfolio
holdings on an ongoing basis. The Funds believe that these third parties have
legitimate objectives in requesting such portfolio holdings information and
operate in the best interest of a Fund’s shareholders. These persons
include:
▪A
mutual fund rating and/or ranking organization, or person performing similar
functions, who is subject to a duty of confidentiality, including a duty not to
trade on any non-public information;
▪Rating
and/or ranking organizations, specifically: Lipper; Morningstar; Standard &
Poor’s; Bloomberg; Vickers-Stock Research Corporation; Thomson Financial; and
Capital-Bridge, all of which currently receive such information no later than 15
calendar days following the end of a calendar quarter; or
▪Internal
parties involved in the investment process, administration, operation or custody
of the Funds, specifically: Fund Services; the Trust’s Board of Trustees; and
the Trust’s attorneys and accountants (currently, Sullivan & Worcester LLP
(“Sullivan & Worcester”) and Tait, Weller & Baker LLP, respectively),
all of which typically receive such information after it is
generated.
Any
disclosures to additional parties not described above is made with the prior
written approval of either the Trust’s CCO or his or her designee, pursuant to
the Trust’s Policy and Procedures Regarding Disclosure of Portfolio
Holdings.
The
CCO or designated officer of the Trust will approve the furnishing of non-public
portfolio holdings to a third party only if they consider the furnishing of such
information to be in the best interest of the Funds and their shareholders and
if no material conflict of interest exists regarding such disclosure between
shareholders interest and those of the Adviser, Distributor or any affiliated
person of the Funds. No consideration may be received by the Funds, the Adviser,
any affiliate of the Adviser or their employees in connection with the
disclosure of portfolio holdings information. The Board receives and reviews
annually a list of the persons who receive non-public portfolio holdings
information and the purpose for which it is furnished.
MANAGEMENT
The
overall management of the Trust’s business and affairs is invested with its
Board. The Board approves all significant agreements between the Trust and
persons or companies furnishing services to it, including the agreements with
the Adviser, Administrator, Custodian and Transfer Agent, each as defined
herein. The day-to-day operations of the Trust are delegated to its officers,
subject to the Funds’ investment objectives, strategies and policies and to the
general supervision of the Board. The Trustees and officers of the Trust, their
ages and positions with the Trust, terms of office with the Trust and length of
time served, their business addresses and principal occupations during the past
five years and other directorships held are set forth in the table below.
Independent
Trustees(1)
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Name,
Address
and Age |
Position
Held with the Trust |
Term
of Office and Length of Time Served* |
Principal
Occupation
During Past Five Years |
Number
of Portfolios
in
Fund Complex
Overseen
by Trustee(2) |
Other
Directorships Held During Past Five Years(3) |
David
G. Mertens
(age 62)
615 E. Michigan Street
Milwaukee, WI
53202 |
Trustee |
Indefinite
term; since March 2017. |
Partner
and Head of Business Development Ballast Equity Management, LLC (a
privately-held investment advisory firm) (February 2019 to present);
Managing Director and Vice President, Jensen Investment Management, Inc.
(a privately-held investment advisory firm) (2002 to 2017). |
3 |
Trustee,
Advisors Series Trust (for series not affiliated with the
Funds). |
Joe
D. Redwine
(age 75)
615 E. Michigan Street
Milwaukee, WI
53202 |
Trustee |
Indefinite
term; since September 2008. |
Retired;
formerly Manager, President, CEO, U.S. Bancorp Fund Services, LLC, and its
predecessors, (May 1991 to July 2017). |
3 |
Trustee,
Advisors Series Trust (for series not affiliated with the
Funds). |
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Name,
Address
and Age |
Position
Held with the Trust |
Term
of Office and Length of Time Served* |
Principal
Occupation
During Past Five Years |
Number
of Portfolios
in
Fund Complex
Overseen
by Trustee(2) |
Other
Directorships Held During Past Five Years(3) |
Raymond
B. Woolson
(age 64)
615 E. Michigan Street
Milwaukee, WI
53202 |
Chairman
of the Board
Trustee |
Indefinite
term; since January 2020.
Indefinite
term; since January 2016. |
President,
Apogee Group, Inc. (financial consulting firm) (1998 to
present). |
3 |
Trustee,
Advisors Series Trust (for series not affiliated with the Funds);
Independent Trustee, DoubleLine Funds Trust (an open-end investment
company with 19 portfolios), DoubleLine Opportunistic Credit Fund,
DoubleLine Income Solutions Fund, and DoubleLine Yield Opportunities Fund
from 2010 to present; Independent Trustee, DoubleLine ETF Trust (an
open-end investment company with 2 portfolios) from March 2022 to
present. |
Michele
Rackey
(age 63)
615 E. Michigan Street
Milwaukee, WI
53202
|
Trustee |
Indefinite
term; since January 2023. |
Chief
Executive Officer, Government Employees Benefit Association (GEBA)
(benefits and wealth management organization) (2004 to 2020); Board
Member, Association Business Services Inc. (ABSI) (for-profit subsidiary
of the American Society of Association Executives) (2019 to
2020). |
3 |
Trustee,
Advisors Series Trust (for series not affiliated with the
Funds). |
Officers
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Name,
Address
and Age |
Position
Held
with the Trust |
Term
of Office and Length of Time Served |
Principal
Occupation
During Past Five Years |
Jeffrey
T. Rauman
(age 54)
615 E. Michigan Street
Milwaukee, WI
53202
|
President,
Chief Executive Officer and Principal Executive Officer |
Indefinite
term; since December 2018. |
Senior
Vice President, Compliance and Administration, U.S. Bank Global Fund
Services (February 1996 to present). |
Kevin
J. Hayden
(age 51)
615 E. Michigan Street
Milwaukee, WI
53202
|
Vice
President, Treasurer and Principal Financial Officer |
Indefinite
term; since January 2023. |
Vice
President, Compliance and Administration, U.S. Bank Global Fund Services
(June 2005 to present). |
Cheryl
L. King
(age 61)
615 E. Michigan Street
Milwaukee, WI
53202
|
Assistant
Treasurer |
Indefinite
term; since January 2023. |
Vice
President, Compliance and Administration, U.S. Bank Global Fund Services
(October 1998 to present). |
Richard
R. Conner
(age 40)
615 E. Michigan Street
Milwaukee, WI
53202
|
Assistant
Treasurer |
Indefinite
term; since December 2018. |
Assistant
Vice President, Compliance and Administration, U.S. Bank Global Fund
Services (July 2010 to present). |
Michael
L. Ceccato
(age 65)
615 E. Michigan Street
Milwaukee, WI
53202
|
Vice
President, Chief Compliance Officer and AML Officer |
Indefinite
term; since September 2009. |
Senior
Vice President, U.S. Bank Global Fund Services and Senior Vice President,
U.S. Bank N.A. (February 2008 to present). |
Elaine
E. Richards
(age 54)
2020 E. Financial Way, Suite 100
Glendora,
CA 91741
|
Vice
President and Secretary |
Indefinite
term; since September 2019. |
Senior
Vice President, U.S. Bank Global Fund Services (July 2007 to
present). |
* The
Trustees have designated a mandatory retirement age of 75, such that each
Trustee, serving as such on the date he or she reaches the age of 75, shall
submit his or her resignation not later than the last day of the calendar year
in which his or her 75th birthday occurs (“Retiring Trustee”). Upon request, the
Board may, by vote of a majority of Trustees eligible to vote on such matter,
determine whether or not to extend such Retiring Trustee’s term and on the
length of a one-time extension of up to three additional years. At a meeting
held December 7-8, 2022, by vote of the majority of Trustees (not including
Mr. Redwine), Mr. Redwine’s term as Trustee was extended for three additional
years.
(1)The
Trustees of the Trust who are not “interested persons” of the Trust as defined
under the 1940 Act (“Independent Trustees”).
(2)As
of October 31, 2022, the Trust is comprised of 34 active portfolios managed by
unaffiliated investment advisers. The term “Fund Complex” applies only to the
Funds. The Funds do not hold themselves out as related to any other series
within the Trust for investment purposes, nor do they share the same investment
adviser with any other series.
(3)“Other
Directorships Held” includes only directorships of companies required to
register or file reports with the SEC under the Securities Exchange Act of 1934,
as amended, (that is, “public companies”) or other investment companies
registered under the 1940 Act.
Additional
Information Concerning Our Board of Trustees
The
Role of the Board
The
Board provides oversight of the management and operations of the Trust. Like all
mutual funds, the day-to-day responsibility for the management and operations of
the Trust is the responsibility of various
service
providers to the Trust, such as the Trust’s investment advisers, distributor,
administrator, custodian, and transfer agent, each of whom are discussed in
greater detail in this SAI. The Board approves all significant agreements
between the Trust and its service providers, including the agreements with the
investment advisers, distributor, administrator, custodian and transfer agent.
The Board has appointed various senior individuals of certain of these service
providers as officers of the Trust, with responsibility to monitor and report to
the Board on the Trust’s day-to-day operations. In conducting this oversight,
the Board receives regular reports from these officers and service providers
regarding the Trust’s operations. The Board has appointed a Chief Compliance
Officer (“CCO”) who administers the Trust’s compliance program and regularly
reports to the Board 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’s review of recent Trust operations. From time
to time one or more members of the Board may also meet with Trust officers in
less formal settings, between formal “Board Meetings,” to discuss various
topics. In all cases, however, the role of the Board and of any individual
Trustee is one of oversight and not of management of the day-to-day affairs of
the Trust and its oversight role does not make the Board a guarantor of the
Trust’s investments, operations or activities.
Board
Leadership Structure
The
Board has structured itself in a manner that it believes allows it to
effectively perform its oversight function. It has established three standing
committees, an Audit Committee, a Nominating and Governance Committee and a
Qualified Legal Compliance Committee (the “QLCC”), which are discussed in
greater detail under “Board Committees,” below. Currently, all of the members of
the Board are Independent Trustees, which are Trustees that are not affiliated
with the Adviser or its affiliates or any other investment adviser in the Trust
or with its principal underwriter. The Independent Trustees have engaged their
own independent counsel to advise them on matters relating to their
responsibilities in connection with the Trust.
The
President, Chief Executive Officer and Principal Executive Officer of the Trust
is not a Trustee, but rather is a senior employee of the Administrator who
routinely interacts with the unaffiliated investment advisers of the Trust and
comprehensively manages the operational aspects of the Funds in the Trust. The
Trust has appointed Raymond Woolson, an Independent Trustee, as Chairman of the
Board, and he acts as a liaison with the Trust’s service providers, officers,
legal counsel, and other Trustees between meetings, helps to set Board meeting
agendas, and serves as Chairman during executive sessions of the Independent
Trustees.
The
Board reviews its structure annually. The Trust has determined that it is
appropriate to separate the Principal Executive Officer and Board Chairman
positions because the day-to day responsibilities of the Principal Executive
Officer are not consistent with the oversight role of the Trustees and because
of the potential conflict of interest that may arise from the Administrator’s
duties with the Trust. Given the specific characteristics and circumstances of
the Trust as described above, the Trust has determined that the Board’s
leadership structure is appropriate.
Board
Oversight of Risk Management
As
part of its oversight function, the Board receives and reviews various risk
management reports and assessments and discusses these matters with appropriate
management and other personnel. Because risk management is a broad concept
comprised of many 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 Nominating and Governance Committee meets regularly with
the CCO to discuss compliance and operational risks and the
Audit
Committee meets with the Treasurer and the Trust’s independent public accounting
firm to discuss, among other things, the internal control structure of the
Trust’s financial reporting function. The full Board receives reports from the
Adviser and portfolio managers as to investment risks as well as other risks
that may be also discussed in Audit Committee.
Information
about Each Trustee’s Qualification, Experience, Attributes or
Skills
The
Board believes that each of the Trustees has the qualifications, experience,
attributes and skills (“Trustee Attributes”) appropriate to their continued
service as Trustees of the Trust in light of the Trust’s business and structure.
Each of the Trustees 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 table above. In addition, the
majority of the Trustees have served on boards for organizations other than the
Trust, as well as having served on the Board of the Trust for a number of years.
They therefore have substantial board experience and, in their service to the
Trust, have gained substantial insight as to the operation of the Trust. The
Board annually conducts a ‘self-assessment’ wherein the effectiveness of the
Board and individual Trustees is reviewed.
In
addition to the information provided in the table above, below is certain
additional information concerning each particular Trustee and certain of their
Trustee Attributes. The information provided below, and in the table above, is
not all-inclusive. Many Trustee Attributes involve intangible elements, such as
intelligence, integrity, work ethic, the ability to work together, the ability
to communicate effectively, the ability to exercise judgment, the ability to ask
incisive questions, and commitment to shareholder interests. In conducting its
annual self-assessment, the Board has determined that the Trustees have the
appropriate attributes and experience to continue to serve effectively as
Trustees of the Trust.
David
G. Mertens.
Mr. Mertens has substantial mutual fund experience and is experienced with
financial, accounting, investment and regulatory matters. He currently serves as
Partner and Head of Business Development of Ballast Equity Management, LLC, a
privately-held investment advisory firm. Mr. Mertens also gained substantial
mutual fund experience through his tenure as Managing Director and Vice
President of Jensen Investment Management, Inc. (“Jensen”) from 2002 to 2017.
Prior to Jensen, Mr. Mertens held various roles in sales and marketing
management with Berger Financial Group, LLC from 1995 to 2002, ending as Senior
Vice President of Institutional Marketing for Berger Financial Group and
President of its limited purpose broker-dealer, Berger
Distributors.
Joe
D. Redwine.
Mr. Redwine has substantial mutual fund experience and is experienced with
financial, accounting, investment and regulatory matters through his experience
as President and CEO of U.S. Bancorp Fund Services, LLC, (now known as U.S. Bank
Global Fund Services), a full-service provider to mutual funds and alternative
investment products. In addition, he has extensive experience consulting with
investment advisers regarding the legal structure of mutual funds, distribution
channel analysis and actual distribution of those funds. Mr. Redwine serves
as an Audit Committee Financial Expert for the Trust.
Raymond
B. Woolson.
Mr. Woolson has served on a number of mutual fund boards and is experienced with
financial, accounting, investment and regulatory matters through his experience
as Lead Independent Trustee and Audit Committee Chairman for the DoubleLine
Funds as well as through his service as President of Apogee Group, Inc., a
company providing financial consulting services. Mr. Woolson also has
substantial mutual fund operations, financial and investment experience through
his prior service in senior and management positions in the mutual fund
industry, including service as Senior Managing
Director
in Investment Management for Mass Mutual Life Insurance Company, where he
oversaw fund accounting, fund administration and client services and also served
as Chief Financial Officer and Treasurer for various funds and other investment
products. Mr. Woolson has also served as a consultant for Coopers & Lybrand
(now known as, “PricewaterhouseCoopers” or “PWC”) where he provided management
consulting services to the mutual fund industry and the investment management
areas of the banking and insurance industries.
Michele
Rackey.
Ms. Rackey has
substantial experience in mutual funds and investment management through her
experience as CEO of Government Employees Benefits Association (GEBA) and also
with The ARK Funds. Ms. Rackey
is
experienced with financial, accounting, investment and regulatory matters and
serves as an Audit Committee Financial Expert for the Trust. Ms. Rackey
was
CEO of GEBA for 17 years and Chief Operating Officer of the ARK Funds for 9
years. Ms. Rackey
has
a BS in Business Administration from the University of Illinois at Chicago and
has an MBA from Keller Graduate School of Management in Chicago. Ms. Rackey
previously
held FINRA series 6, 7 and 63 licenses as well as a Maryland Life and Health
License.
Board
Committees
The
Trust has established the following three standing committees and the membership
of each committee to assist in its oversight functions, including its oversight
of the risks the Trust faces: the Audit Committee, the QLCC, and the Nominating
and Governance Committee. There is no assurance, however, that the Board’s
committee structure will prevent or mitigate risks in actual practice. The
Trust’s committee structure is specifically not intended or designed to prevent
or mitigate the Fund’s investment risks. The Fund is designed for investors that
are prepared to accept investment risk, including the possibility that as yet
unforeseen risks may emerge in the future.
The
Audit Committee is comprised of all of the Independent Trustees.
Mr. Redwine is the Chairman of the Audit Committee. The Audit Committee
typically meets once per year with respect to the various series of the Trust.
The function of the Audit Committee, with respect to each series of the Trust,
is to review the scope and results of the audit and any matters bearing on the
audit or the Fund’s financial statements and to ensure the integrity of the
Fund’s pricing and financial reporting. The Audit Committee met once with
respect to the Funds during the Funds’ fiscal year ended October 31,
2022.
The
Audit Committee also serves as the QLCC for the Trust 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”). An issuer attorney who becomes aware of
evidence of a material violation by the Trust, or by any officer, director,
employee, or agent of the Trust, may report evidence of such material violation
to the QLCC as an alternative to the reporting requirements of
Rule 205.3(b) (which requires reporting to the chief legal officer and
potentially “up the ladder” to other entities). The QLCC did not meet with
respect to the Trust during the fiscal year ended October 31, 2022.
The
Nominating and Governance Committee is comprised of all, and only of, the
Independent Trustees. The Nominating and Governance Committee is responsible for
seeking and reviewing candidates for consideration as nominees for Trustees as
is considered necessary from time to time and meets only as necessary. The
Nominating and Governance Committee will consider nominees recommended by
shareholders for vacancies on the Board. Recommendations for consideration by
the Nominating and Governance Committee should be sent to the President of the
Trust 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 Trust’s By-Laws. 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 Trust at the principal executive office of the
Trust between 120 and 150 days prior to the shareholder meeting at which any
such nominee would be voted on.
The
Nominating and Governance Committee meets regularly with respect to the various
series of the Trust. The Nominating and Governance Committee is also responsible
for, among other things, assisting the Board in its oversight of the Trust’s
compliance program under Rule 38a-1 under the 1940 Act, reviewing and
making recommendations regarding Independent Trustee compensation and the
Trustees’ annual “self-assessment.” Mr. Mertens is the Chairman of the
Nominating and Governance Committee.
The
Nominating and Governance Committee did not meet with respect to the Trust
during the fiscal year ended October 31, 2022.
Trustee
Ownership of Fund Shares and Other Interests
The
following table shows the amount of shares in the Funds and the amount of shares
in the aggregate owned by the Trustees as of the calendar year ended
December 31, 2022.
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| Dollar
Range of Equity
Securities in the
American Listed Fund |
Dollar
Range of Equity
Securities in the
Global Listed Fund |
Aggregate
Dollar Range
of Equity Securities in all
Registered
Investment
Companies Overseen by
Trustee in Family of
Investment
Companies |
|
| (None,
$1-$10,000, $10,001-$50,000, $50,001-$100,000,
Over
$100,000) |
| Independent
Trustees |
|
| |
| David
G. Mertens |
None |
None |
Over
$100,000 |
| Raymond
B. Woolson |
None |
None |
Over
$100,000 |
| Joe
D. Redwine |
None |
None |
Over
$100,000 |
|
Michele
Rackey(1) |
None |
None |
None |
(1) Ms.
Rackey began serving as a Trustee on January 1, 2023.
As
of December 31, 2022, neither the Independent Trustees nor members of their
immediate family, own securities beneficially or of record in the Adviser, the
Distributor, as defined below, or an affiliate of the Adviser or Distributor.
Accordingly, neither the Independent Trustees nor members of their immediate
family, have direct or indirect interest, the value of which exceeds $120,000,
in the Adviser, the Distributor or any of their affiliates. In addition, during
the two most recently completed calendar years, neither the Independent Trustees
nor members of their immediate families have conducted any transactions (or
series of transactions) in which the amount involved exceeds $120,000 and to
which the Adviser, the Distributor or any affiliate thereof was a
party.
Compensation
Effective
January 1, 2023, the Independent Trustees each receive an annual retainer of
$102,500 per year allocated among each of the various portfolios comprising the
Trust, an additional $6,000 per regularly scheduled Board meeting, and an
additional $500 per special meeting, paid by the Trust or applicable
advisors/portfolios, as well as reimbursement for expenses incurred in
connection with attendance at Board meetings. Prior to January 1, 2023, the
annual retainer was $100,000. The Trust Chairman, Chairman of the Audit
Committee, and Chairman of the Nominating and Governance Committee each receive
a separate annual fee of $10,000, $5,000, and $3,000, respectively, provided
that the separate fee for the Chairman of the Audit Committee will be waived if
the same individual serves as both Trust Chairman and Audit Committee Chairman.
The Trust has no pension or retirement plan. No other entity affiliated with the
Trust pays any compensation to the Trustees. Set forth below is the compensation
received by the Independent Trustees from the Funds for the fiscal year ended
October 31, 2022.
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Aggregate
Compensation from the American Listed Fund(1) |
Aggregate
Compensation from the Global Listed Fund(1) |
Pension
or Retirement Benefits Accrued as Part of Fund Expenses |
Estimated
Annual Benefits Upon Retirement |
Total
Compensation from Fund Complex Paid to Trustees(2) |
| Independent
Trustee |
|
|
|
| |
|
Gail
S. Duree(3) |
$167 |
$167 |
None |
None |
$334 |
| David
G. Mertens |
$3,890 |
$3,890 |
None |
None |
$7,780 |
| Raymond
B. Woolson |
$4,094 |
$4,094 |
None |
None |
$8,188 |
| Joe
D. Redwine |
$3,948 |
$3,948 |
None |
None |
$7,896 |
|
Michele
Rackey(4) |
None |
None |
None |
None |
None |
(1)For
the Funds’ fiscal year ended October 31, 2022.
(2)There
are currently numerous portfolios comprising the Trust. The term “Fund Complex”
applies only to the Funds. For the Funds’ fiscal year ended October 31, 2022,
aggregate Independent Trustees’ fees for the Trust were $415,500.
(3)Ms.
Duree retired from her role as Trustee effective December 31, 2021.
(4)Ms.
Rackey began serving as a Trustee effective January 1, 2023.
PROXY
VOTING POLICIES AND PROCEDURES
The
Board has adopted Proxy Voting Policies and Procedures (the “Policies”) on
behalf of the Trust which delegate the responsibility for voting proxies to the
Adviser, subject to the Board’s continuing oversight. The Policies require that
the Adviser vote proxies received in a manner consistent with the best interests
of the Funds and their shareholders. The Policies also require the Adviser to
present to the Board, at least annually, the Adviser’s Policies and a record of
each proxy voted by the Adviser on behalf of the Funds, including a report on
the resolution of all proxies identified by the Adviser as involving a conflict
of interest.
The
Adviser will vote proxies based on its view of what is best for the long-term
investors in the companies in question. The Adviser maintains written policies
and procedures regarding proxy voting and makes appropriate disclosures about
its proxy policy and practice. The policy and practice include the
responsibility to monitor corporate actions, receive and vote client proxies,
and disclose any potential conflicts of interest as well as information
available to clients about the voting of proxies for their portfolio securities
and maintaining relevant and required records.
Voting
Guidelines
The
Adviser will vote proxies in accordance with its view of the long term best
interests of the company’s shareholders, which, in the Adviser’s view, is in the
best interests of its clients. In the absence of specific voting guidelines from
a client, the Adviser’s policy is to vote all proxies from a specific issuer the
same way for all clients.
The
Trust is required to file a Form N-PX, with the Funds’ complete proxy voting
record for the 12 months ended June 30, no later than August 31 of each
year. Each Fund’s proxy voting record is available without charge, upon request,
by calling toll-free 1-888-898-5040 and on the SEC’s website at www.sec.gov.
CONTROL
PERSONS, PRINCIPAL SHAREHOLDERS,
AND
MANAGEMENT OWNERSHIP
A
principal shareholder is any person who owns of record or beneficially 5% or
more of the outstanding shares of a 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. Shareholders with a controlling interest could affect the outcome of
voting or the direction of management of a Fund.
As
of January 31, 2023.
American
Listed Fund
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| Name
and Address |
%
Ownership |
Type
of Ownership |
|
US
Bank NA Cust
Randy
G Paas IRA Rollover
c/o
First
Sentier Investors (US) LLC
10
East 53rd
Street, 21st
Floor
New
York, New York 10022
|
80.12% |
Beneficial |
|
Bachar
Beaini
c/o
First
Sentier Investors (US) LLC
10
East 53rd
Street, 21st
Floor
New
York, New York 10022
|
7.32% |
Beneficial |
|
U.S.
Bank NA Cust
Jeffrey
E. Schmidt IRA Rollover
c/o
First
Sentier Investors (US) LLC
10
East 53rd
Street, 21st
Floor
New
York, New York 10022
|
6.38% |
Beneficial |
c/o
Reliance Trust Company WI
Maril & Co FBO SG
4900 W Brown Deer
Road
Milwaukee, WI 53223-2422 |
6.05% |
Record |
Global
Listed Fund
|
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| |
| Name
and Address |
%
Ownership |
Type
of Ownership |
Capinco
c/o U.S. Bank NA
P.O. Box 1787
Milwaukee, WI 53201-1787 |
96.51% |
Record |
CODES
OF ETHICS
The
Trust and the Adviser have each adopted separate Codes of Ethics under Rule
17j-1 of the 1940 Act. These Codes of Ethics permit, subject to certain
conditions, access persons of the Adviser to invest in securities that may be
purchased or held by a Fund. The Distributor, as defined below, relies on the
principal underwriter’s exception under Rule 17j-1(c)(3), of the 1940 Act,
specifically where the Distributor is not affiliated with the Trust or the
Adviser, and no officer, director or general partner of the Distributor serves
as an officer, director or general partner of the Trust or the
Adviser.
THE
FUNDS’ INVESTMENT ADVISER
First
Sentier Investors (US) LLC, located at 10 East 53rd
Street, 21st
Floor, New York, New York, 10022, acts as investment adviser to the Funds
pursuant to an investment advisory agreement (the “Advisory Agreement”) with the
Trust. The Adviser is 100% owned by the Mitsubishi UFJ Financial Group, Inc.,
therefore the Mitsubishi UFJ Financial Group, Inc. is a control person of the
Adviser.
First
Sentier Investors (Australia) IM Ltd (“First Sentier” or the “Sub-Adviser”),
located at Level 5, Tower Three International Towers Sydney, 300 Barangaroo
Avenue, Barangaroo NSW 2000 Australia, serves as the Sub-Adviser to each Fund
pursuant to a separate sub-advisory agreement (the “Sub-
Advisory
Agreement”) with the Adviser. The Sub-Adviser is an affiliate of the Adviser.
The Sub-Adviser is 100% owned by the Mitsubishi UFJ Financial Group, Inc.,
therefore the Mitsubishi UFJ Financial Group, Inc. is a control person of the
Sub-Adviser.
In
consideration of the services to be provided by the Adviser pursuant to the
Advisory Agreement, the Adviser is entitled to receive from each Fund an
investment management fee computed daily and payable monthly. For each Fund, the
fees are calculated at the annual rate of 0.75% of average daily net assets.
For
the fiscal periods included below, the American Listed Fund paid the following
management fees to the Adviser:
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Fiscal
Period Ended October 31, |
Management
Fees Accrued |
Management
Fees Waived |
Management
Fees Recouped |
Net
Management Fee
Paid to Adviser |
| 2022 |
$29,776 |
$29,776 |
$0 |
$0 |
| 2021 |
$23,290 |
$23,290 |
$0 |
$0 |
For
the fiscal years included below, the Global Listed Fund paid the following
management fees to the Adviser:
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Fiscal
Year Ended October 31, |
Management
Fees Accrued |
Management
Fees Waived |
Management
Fees Recouped |
Net
Management Fee
Paid to Adviser |
| 2022 |
$543,360 |
$210,284 |
$0 |
$333,076 |
| 2021 |
$481,206 |
$225,162 |
$0 |
$256,044 |
| 2020 |
$337,759 |
$249,900 |
$0 |
$87,859 |
The
Adviser oversees the investment advisory services provided to the Funds.
Pursuant to the Sub-Advisory Agreement, and under the supervision of the Adviser
and the Board, the Sub-Adviser is responsible for the day-to-day investment
management of the Funds. The Sub-Adviser is compensated by the Adviser from the
management fees paid to the Adviser.
The
amount paid to the Sub-Adviser is based on the Adviser’s internal transfer
pricing policy (discussed below). The percentage of compensation the Sub-Adviser
receives from the Adviser is subject to adjustment according to the Adviser’s
transfer pricing methodology and therefore is subject to change.
The
Adviser is a multi-national business and is therefore required to apportion net
profit or loss before tax among the countries where it conducts business in a
manner that fairly reflects where the effort giving rise to the profit or loss
takes place. This is called “transfer pricing” and is required to ensure that
the Adviser pays appropriate taxes in countries where it conducts business. On a
regular basis (quarterly or monthly) the Adviser analyzes the total revenues of
the group of companies and apportions it among the various entities in the group
based on a methodology that has been recommended by external auditors to comply
with relevant tax regulations.
Currently
the method of apportionment used is the “proportional weighted effort method.”
This method uses remuneration of the individuals providing the service as a
proxy for effort (the highest earner being 1 unit of effort and all others
being a proportion of that). Revenue is apportioned around the jurisdictions by
calculating the total effort spent on each fund and then applying this by
individuals’ locations. Based on the percentages calculated, the entity that has
contracted with a fund (client) will then pay out a portion of its revenue to
the other jurisdictions.
After
their initial two-year period, the Advisory Agreement and Sub-Advisory Agreement
will continue in effect for successive annual periods so long as such
continuation is specifically approved at least annually by the vote of
(1) the Board (or a majority of the outstanding shares of a Fund), and
(2) a majority of the Trustees who are not interested persons of any party
to the Advisory Agreement and Sub-Advisory Agreement, in each case, cast in
person at a meeting called for the purpose of voting on such approval. The
Advisory Agreement and Sub-Advisory Agreement may be terminated at any time,
without penalty, by either party to the Advisory Agreement and Sub-Advisory
Agreement upon a 60-day written notice and is automatically terminated in the
event of its “assignment,” as defined in the 1940 Act.
In
addition to the management fees payable to the Adviser, each Fund is responsible
for its own operating expenses, including: fees and expenses incurred in
connection with the issuance, registration and transfer of its shares; brokerage
and commission expenses; all expenses of transfer, receipt, safekeeping,
servicing and accounting for the cash, securities and other property of the
Trust for the benefit of a Fund including all fees and expenses of its custodian
and accounting services agent; interest charges on any borrowings; costs and
expenses of pricing and calculating its daily NAV per share and of maintaining
its books of account required under the 1940 Act; taxes, if any; a pro rata
portion of expenditures in connection with meetings of a Fund’s shareholders and
the Trust’s Board that are properly payable by the Funds; salaries and expenses
of officers and fees and expenses of members of the Board or members of any
advisory board or committee who are not members of, affiliated with or
interested persons of the Adviser or Administrator; insurance premiums on
property or personnel of the Funds which inure to their benefit, including
liability and fidelity bond insurance; the cost of preparing and printing
reports, proxy statements, prospectuses and the statement of additional
information of the Funds or other communications for distribution to existing
shareholders; legal counsel, auditing and accounting fees; trade association
membership dues (including membership dues in the Investment Company Institute
allocable to a Fund); fees and expenses (including legal fees) of registering
and maintaining registration of its shares for sale under federal and applicable
state and foreign securities laws; all expenses of maintaining shareholder
accounts, including all charges for transfer, shareholder recordkeeping,
dividend disbursing, redemption, and other agents for the benefit of a Fund, if
any; and all other charges and costs of its operation plus any extraordinary and
non-recurring expenses, except as otherwise prescribed in the Advisory
Agreement.
Though
each Fund is responsible for its own operating expenses, the Adviser has
contractually agreed to waive a portion or all of the management fees payable to
it by a Fund and/or to pay Fund operating expenses to the extent necessary to
limit a Fund’s aggregate annual operating expenses (excluding acquired fund fees
and expenses, interest, taxes, extraordinary expenses, and any other
class-specific expenses, such as shareholder servicing plan fees to the limit
set forth in the Annual Fund Operating Expenses table of the Prospectus. The
Adviser may request recoupment of previously waived fees and paid expenses in
any subsequent month in the 36-month period from the date of the management fee
reduction and expense payment if the aggregate amount actually paid by a Fund
toward the operating expenses for such fiscal year (taking into account the
reimbursement) will not cause a Fund to exceed the lesser of: (1) the
expense limitation in place at the time of the management fee reduction and
expense payment; or (2) the expense limitation in place at the time of the
reimbursement. Any such recoupment is also contingent upon the Board’s
subsequent review and ratification of the recouped amounts. Such recoupment may
not be paid prior to a Fund’s payment of current ordinary operating
expenses.
PORTFOLIO
MANAGERS
Sub-Adviser
Portfolio Managers
Mr.
Andrew Greenup and Ms. Jessica Jouning are the portfolio managers
principally responsible for the day-to-day management of the American Listed
Fund. The following table shows the number of other
accounts
managed by the portfolio managers and the total assets in the accounts managed
within various categories as of February 1, 2023:
Mr.
Andrew Greenup
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Type
of Accounts |
Number
of Accounts
(excluding the Funds) |
Total
Assets |
Number
of Accounts with Advisory Fee based on Performance |
Total
Assets
of Accounts with Advisory Fee based on Performance |
| Registered
Investment Companies |
2 |
$1,331
million |
0 |
$0 |
| Other
Pooled Investments |
10 |
$5,923
million |
0 |
$0 |
| Other
Accounts |
6 |
$768
million |
0 |
$0 |
Ms.
Jessica Jouning
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Type
of Accounts |
Number
of Accounts
(excluding the Funds) |
Total
Assets |
Number
of Accounts with Advisory Fee based on Performance |
Total
Assets
of Accounts with Advisory Fee based on Performance |
| Registered
Investment Companies |
0 |
$0 |
0 |
$0 |
| Other
Pooled Investments |
0 |
$0 |
0 |
$0 |
| Other
Accounts |
0 |
$0 |
0 |
$0 |
Mr.
Peter Meany, Mr. Andrew Greenup and Mr. Edmund Leung, are the portfolio managers
principally responsible for the day-to-day management of the Global Listed
Fund.
The
following table shows the number of other accounts managed by the portfolio
managers and the total assets in the accounts managed within various categories
as of February 1, 2023:
Mr.
Peter Meany
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Type
of Accounts |
Number
of Accounts (excluding the
Funds) |
Total
Assets |
Number
of Accounts with Advisory Fee based on Performance |
Total
Assets of Accounts with Advisory Fee based on
Performance |
| Registered
Investment Companies |
2 |
$1,331
million |
0 |
$0 |
| Other
Pooled Investments |
14 |
$6,268
million |
0 |
$0 |
| Other
Accounts |
6 |
$768
million |
0 |
$0 |
Mr.
Andrew Greenup
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Type
of Accounts |
Number
of Accounts (excluding the Funds) |
Total
Assets |
Number
of Accounts with Advisory Fee based on Performance |
Total
Assets of Accounts with Advisory Fee based on Performance |
|
Registered
Investment Companies |
2 |
$1,331
million |
0 |
$0 |
|
Other
Pooled Investments |
10 |
$5,923
million |
0 |
$0 |
|
Other
Accounts |
6 |
$768
million |
0 |
$0 |
Mr.
Edmund Leung
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Type
of Accounts |
Number
of Accounts (excluding the Funds) |
Total
Assets |
Number
of Accounts with Advisory Fee based on Performance |
Total
Assets of Accounts with Advisory Fee based on Performance |
|
Registered
Investment Companies |
2 |
$1,331
million |
0 |
$0 |
|
Other
Pooled Investments |
8 |
$5,788
million |
0 |
$0 |
|
Other
Accounts |
4 |
$400
million |
0 |
$0 |
Sub-Adviser
Portfolio
Manager Material Conflicts of Interest. The
Sub-Adviser uses a trade allocation policy to ensure that all clients are
treated equally in relation to trade allocations. Under this policy, partially
executed aggregate orders are allocated between accounts on a pro rata basis.
The Sub-Adviser aggregates orders for different accounts in the same stock,
provided this is in line with normal principles of fairness. The investment
team, in conjunction with the independent compliance team, provides oversight to
ensure that no client is disadvantaged due to portfolio construction variances
within similar strategies.
Portfolio
Manager Compensation.
The portfolio managers receive a fixed, base salary that is paid at market
median to be competitive, and is regularly reviewed using specialized market
data providers and industry contacts. Portfolio managers receive annual bonuses
that are based on a Fund’s pre-tax performance against its benchmark index over
1-, 3- and 5-year periods. Bonus levels are also based on Fund performance
versus the fund performance of peers and on qualitative measures, including
collaboration with other investment teams and business units and interactions
with clients and consultants. The portfolio managers receive deferred
compensation which has been structured as a profit share arrangement designed to
retain and directly align employee interests with the success of a Fund. A
percentage of the profit that the global listed infrastructure team produces is
used to create a pool. The pool is allocated amongst the team, based upon
individual performance and allocations are deferred and paid after three years.
The portfolio managers also have fixed retirement plans.
Securities
Owned in the Funds by Portfolio Managers.
As of February 1, 2023, the portfolio managers did not beneficially own
securities in the Funds.
SERVICE
PROVIDERS
Fund
Administrator, Transfer Agent and Fund Accountant
Pursuant
to an administration agreement (the “Administration Agreement”), U.S. Bank
Global Fund Services (“Fund Services” or the “Administrator”), 615 East Michigan
Street, Milwaukee, Wisconsin 53202, acts as the Administrator to the Funds. Fund
Services provides certain services to each Fund including, among other
responsibilities, coordinating the negotiation of contracts and fees with, and
the monitoring of performance and billing of, the Funds’ independent contractors
and agents; preparation for signature by an officer of the Trust of all
documents required to be filed for compliance by the Trust and the Funds with
applicable laws and regulations, excluding those of the securities laws of
various states; arranging for the computation of performance data, including NAV
per share and yield; responding to shareholder inquiries; and arranging for the
maintenance of books and records of the Funds, and providing, at its own
expense, office facilities, equipment and personnel necessary to carry out its
duties. In this capacity, Fund Services does not have any responsibility or
authority for the management of the Funds, the determination of investment
policy, or for any matter pertaining to the distribution of Fund
shares.
Pursuant
to the Administration Agreement, as compensation for its services, Fund Services
receives from each Fund a combined fee for fund administration and fund
accounting services based on a Fund’s current average daily net assets. The
Funds paid the following to the Administrator for the fiscal years shown
below:
|
|
|
|
|
|
|
|
|
|
|
| |
|
| Administration
Fees Paid During Fiscal Years Ended |
|
| October
31, 2022 |
October
31, 2021 |
October
31, 2020 |
|
American
Listed Fund(1) |
$102,009 |
$82,074 |
N/A |
| Global
Listed Fund |
$107,129 |
$104,542 |
$100,498 |
(1) American
Listed Fund commenced operations on December 29, 2020.
Fund
Services also is entitled to certain out-of-pocket expenses. Fund Services also
acts as fund accountant, transfer agent (the “Transfer Agent”) and dividend
disbursing agent under separate agreements. Additionally, Fund Services provides
CCO services to the Trust under a separate agreement. The cost of the CCO
services is charged to the Funds and approved by the Board
annually.
Custodian
Pursuant
to a Custody Agreement between the Trust and U.S. Bank National Association,
located at 1555 North RiverCenter Drive, Suite 302, Milwaukee,
Wisconsin 53212 (the “Custodian”), the Custodian serves as the custodian of a
Fund’s assets, holds a Fund’s portfolio securities in safekeeping, and keeps all
necessary records and documents relating to its duties. The Custodian is
compensated with an asset-based fee plus transaction fees and is reimbursed for
out-of-pocket expenses.
The
Custodian and Administrator do not participate in decisions relating to the
purchase and sale of securities by a Fund. The Administrator, Transfer Agent and
Custodian (as defined below) are affiliated entities under the common control of
U.S. Bancorp. The Custodian and its affiliates may participate in revenue
sharing arrangements with the service providers of mutual funds in which a Fund
may invest.
Independent
Registered Public Accounting Firm and Legal Counsel
Tait,
Weller & Baker LLP, Two Liberty Place, 50 South 16th Street, Suite 2900,
Philadelphia, Pennsylvania 19102 is the independent registered public accounting
firm for the Funds, whose services include auditing each Fund’s financial
statements and the performance of related tax services.
Sullivan
& Worcester LLP, 1633 Broadway, 32nd Floor, New York, New York 10019,
serves as legal counsel to the Trust. Sullivan & Worcester also serves as
independent legal counsel to the Board of Trustees.
EXECUTION
OF PORTFOLIO TRANSACTIONS
Throughout
this section titled, “Execution of Portfolio Transactions,” “Adviser” refers to
both the Adviser and the Sub-Adviser with respect to each Fund.
Pursuant
to the Advisory Agreement, the Adviser determines which securities are to be
purchased and sold by a Fund and which broker-dealers are eligible to execute a
Fund’s portfolio transactions. Purchases and sales of securities in the
over-the-counter market will generally be executed directly with a
“market-maker” unless, in the opinion of the Adviser, a better price and
execution can otherwise be obtained by using a broker for the
transaction.
Purchases
of portfolio securities for a 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 a 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.
In
placing portfolio transactions, the Adviser will seek best execution. 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. Portfolio transactions may be placed with
broker-dealers who sell shares of a Fund subject to rules adopted by FINRA and
the SEC.
Investment
decisions for each Fund are made independently from those of other client
accounts or mutual funds managed or advised by the Adviser. Nevertheless, it is
possible that at times identical securities will be acceptable for both a Fund
and one or more of such client accounts or mutual funds. In such event, the
position of a 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 a Fund at the same
time, a 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, a 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 a Fund is purchasing or selling, each
day’s transactions in such security will be allocated between a Fund and all
such client accounts or mutual funds in a manner deemed equitable by the
Adviser, taking into account the respective sizes of the accounts and the amount
of cash available for investment, the investment objective of the account, and
the ease with which a clients appropriate amount can be bought, as well as the
liquidity and volatility of the account and the urgency involved in making an
investment decision for the client. It is recognized that in some cases this
system could have a detrimental effect on the price or value of the security
insofar as each Fund is concerned. In other cases, however, it is believed that
the ability of a Fund to participate in volume transactions may produce better
executions for the Fund.
During
the fiscal years shown below, the Funds paid brokerage commissions as
follows:
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Fiscal
Years Ended October 31, |
|
| 2022 |
2021 |
2020 |
| American
Listed Fund |
$2,004 |
$1,912 |
N/A |
| Global
Listed Fund |
$27,516 |
$30,216 |
$29,470 |
The
Adviser did not direct either Fund’s brokerage transactions to a broker because
of the receipt of research services during the fiscal year ended October 31,
2022.
The
Funds did not acquire securities of their regular brokers or dealers during the
fiscal year ended October 31, 2022.
MARKETING
AND SUPPORT PAYMENTS
The
Adviser, out of its own resources and without additional cost to a Fund or its
shareholders, may provide additional cash payments or other compensation to
certain financial intermediaries who sell shares of a Fund. Such payments may be
divided into categories as follows:
Support
Payments.
Payments may be made by the Adviser to certain financial intermediaries in
connection with the eligibility of a Fund to be offered in certain programs
and/or in connection with meetings between the Fund’s representatives and
financial intermediaries and its sales representatives.
Such
meetings may be held for various purposes, including providing education and
training about a 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 Adviser also may pay cash or non-cash compensation to sales representatives
of financial intermediaries in the form of (i) occasional gifts; (ii) occasional
meals, tickets or other entertainments; and/or (iii) sponsorship support for the
financial intermediary’s client seminars and cooperative advertising. In
addition, the Adviser pays 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 a 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 Fund shares.
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
You
may purchase shares of each Fund from securities brokers, dealers or financial
intermediaries (collectively, “Brokers”). Investors should contact their
Financial Intermediary directly for appropriate instructions, as well as
information pertaining to accounts and any service or transaction fees that may
be charged. Each Fund may enter into arrangements with certain Brokers whereby
such Brokers are authorized to accept your order on behalf of a Fund. If you
transmit your order to these Brokers before the close of regular trading
(generally 4:00 p.m., Eastern Time) on a day that the NYSE is open for business,
shares will be purchased at the appropriate per share price next computed after
it is received by the Financial Intermediary. Investors should check with their
Financial Intermediary to determine if it participates in these
arrangements.
The
public offering price of Fund shares is the NAV per share. Shares are purchased
at the public offering price next determined after the Transfer Agent receives
your order in good order. In most cases, in order to receive that day’s public
offering price, the Transfer Agent must receive your order in good order before
the close of regular trading on the NYSE, normally 4:00 p.m., Eastern
Time.
The
Trust reserves the right in its sole discretion (i) to suspend the
continued offering of each Fund’s shares and (ii) to reject purchase orders
in whole or in part when in the judgment of the Adviser or the Distributor such
rejection is in the best interest of a Fund.
In
addition to cash purchases, Fund shares may be purchased by tendering payment
in-kind in the form of shares of stock, bonds or other securities. Any
securities used to buy Fund shares must be readily marketable, their acquisition
consistent with a Fund’s objectives and otherwise acceptable to the Adviser and
the Board.
How
to Sell Shares and Delivery of Redemption Proceeds
You
can sell your Fund shares any day the NYSE is open for regular trading, either
directly to a Fund or through your Financial Intermediary.
A
Fund will be deemed to have received a redemption order when a
Financial
Intermediary or, if applicable, a Financial Intermediary’s authorized designee,
receives the order.
Payments
to shareholders for shares of a Fund redeemed directly from the Fund will be
made as promptly as possible, but no later than seven days after receipt by the
Transfer Agent of the written request in proper form, with the appropriate
documentation as stated in the Prospectus, except that a 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 for other than weekends and holidays; (b) an emergency exists as
determined by the SEC making disposal of portfolio securities or valuation of
net assets of a Fund not reasonably practicable; or (c) for such other
period as the SEC may permit for the protection of a Fund’s shareholders. Under
unusual circumstances, a Fund may suspend redemptions, or postpone payment for
more than seven days, but only as authorized by SEC rules.
The
value of shares on redemption or repurchase may be more or less than the
investor’s cost, depending upon the market value of a Fund’s portfolio
securities at the time of redemption or repurchase.
Telephone
Redemptions
Shareholders
with telephone transaction privileges established on their account may redeem
Fund shares up to $100,000 by telephone. Upon receipt of any instructions or
inquiries by telephone from the shareholder, a Fund or its authorized agents may
carry out the instructions and/or respond to the inquiry consistent with the
shareholder’s previously established account service options. For joint
accounts, instructions or inquiries from either party will be carried out
without prior notice to the other account owners. In acting upon telephone
instructions, a Fund and its agents use procedures that are reasonably designed
to ensure that such instructions are genuine. These include recording all
telephone calls, requiring pertinent information about the account and sending
written confirmation of each transaction to the registered owner.
Fund
Services will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. If Fund Services fails to employ
reasonable procedures, the Funds and Fund Services may be liable for any losses
due to unauthorized or fraudulent instructions. If these procedures are
followed, however, to the extent permitted by applicable law, neither a Fund nor
its agents will be liable for any loss, liability, cost or expense arising out
of any redemption request, including any fraudulent or unauthorized request. For
additional information, contact Fund Services.
DETERMINATION
OF SHARE PRICE
The
NAV of a Fund is determined as of the close of regular trading on the New York
Stock Exchange (the “NYSE”) (generally 4:00 p.m., Eastern Time), each day the
NYSE is open for trading. The NYSE annually announces the days on which it will
not be open for trading. It is expected that the NYSE will not be open for
trading on the following holidays: New Year’s Day, Martin Luther King, Jr. Day,
Washington’s Birthday/Presidents’ Day, Good Friday, Memorial Day, Juneteenth
National Independence Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
NAV
is calculated by adding the value of all securities and other assets
attributable to a Fund (including interest and dividends accrued, but not yet
received), then subtracting liabilities attributable to the Fund (including
accrued expenses). The net asset amount attributable to the Class Y shares is
divided by the number of shares held by investors of the applicable
class.
Generally,
a Fund’s investments are valued at market value or, in the absence of a market
value, at fair value as determined in good faith by the Fund’s valuation
designee. The Board has designated the
Adviser
as its “valuation designee” under Rule 2a-5 of the 1940 Act, subject to its
oversight. Fair value determinations are then made in good faith in accordance
with procedures adopted by the Adviser. Pursuant to those procedures, the
valuation designee considers, among other things: (1) the last sales price
on the securities exchange, if any, on which a security is primarily traded;
(2) the mean between the bid and asked prices; (3) price quotations
from an approved pricing service; and (4) other factors as necessary to
determine a fair value under certain circumstances.
Securities
primarily traded in the NASDAQ Global Market®
for which market quotations are readily available shall be valued using the
NASDAQ®
Official Closing Price (“NOCP”). If the NOCP is not available, such securities
shall be valued at the last sale price on the day of valuation, or if there has
been no sale on such day, at the mean between the bid and asked prices. OTC
securities which are not traded in the NASDAQ Global Market®
shall be valued at the most recent sales price. Securities and assets for which
market quotations are not readily available (including restricted securities
which are subject to limitations as to their sale) are valued at fair value as
determined in good faith under the Adviser’s procedures.
Short-term
debt obligations with remaining maturities in excess of 60 days are valued at
current market prices, as discussed above. In order to reflect their fair value,
short-term securities with 60 days or less remaining to maturity are, unless
conditions indicate otherwise, amortized to maturity based on their cost to the
Fund if acquired within 60 days of maturity or, if already held by the Fund on
the 60th day, based on the value determined on the 61st day.
Each
Fund’s securities, including ADRs, EDRs and GDRs, which are traded on securities
exchanges are valued at the last sale price on the exchange on which such
securities are traded, as of the close of business on the day the securities are
being valued or, lacking any reported sales, at the mean between the last
available bid and asked price. Securities that are traded on more than one
exchange are valued on the exchange determined by the Adviser to be the primary
market.
In
the case of foreign securities, the occurrence of certain events after the close
of foreign markets, but prior to the time a Fund’s NAV is calculated (such as a
significant surge or decline in the U.S. or other markets) often will result in
an adjustment to the trading prices of foreign securities when foreign markets
open on the following business day. If such events occur, the Fund will value
foreign securities at fair value, taking into account such events, in
calculating the NAV. In such cases, use of fair valuation can reduce an
investor’s ability to seek to profit by estimating a Fund’s NAV in advance of
the time the NAV is calculated. The Adviser anticipates that a Fund’s portfolio
holdings will be fair valued only if market quotations for those holdings are
considered unreliable or are unavailable.
An
option that is written or purchased by a Fund shall be valued using composite
pricing via the National Best Bid and Offer quotes. Composite pricing looks at
the last trade on the exchange where the option is traded. If there are no
trades for an option on a given business day, as of closing, a Fund will value
the option at the mean of the highest bid price and lowest ask price across the
exchanges where the option is traded. For options where market quotations are
not readily available, fair value shall be determined by the Fund’s valuation
designee.
All
other assets of the Funds are valued in accordance with procedures adopted by
the Adviser.
Redemptions
In-Kind
The
Trust has elected to be governed by Rule 18f-1 under the 1940 Act so that a Fund
is obligated to redeem its shares solely in cash up to the lesser of $250,000 or
1% of its net asset value during any 90-day period for any shareholder of a
Fund. Each Fund has reserved the right to pay the redemption price of its
shares
in excess of $250,000 or 1% of its net asset value either totally or partially,
by a distribution in-kind of portfolio securities (instead of cash). The
securities so distributed would be valued at the same amount as that assigned to
them in calculating the NAV per share for the shares being sold. If a
shareholder receives a distribution in-kind, the shareholder could incur
brokerage or other charges in converting the securities to cash. A redemption
in-kind is a taxable event for you.
The
Funds do not intend to hold any significant percentage of its portfolio in
illiquid securities, although each Fund, like virtually all mutual funds, may
from time to time hold a small percentage of securities that are illiquid. In
the unlikely event a Fund were to elect to make an in-kind redemption, the Funds
expect that they would follow the Trust protocol of making such distribution by
way of a pro rata distribution of securities that are traded on a public
securities market or are otherwise considered liquid pursuant to the Funds’
liquidity policies and procedures. Except as otherwise may be approved by the
Trustees, the securities that would not be included in an in-kind distribution
include (1) unregistered securities which, if distributed, would be
required to be registered under the Securities Act of 1933 (the “1933 Act”), as
amended; (2) securities issued by entities in countries which
(a) restrict or prohibit the holding of securities by non-nationals other
than through qualified investment vehicles, such as a fund, or (b) permit
transfers of ownership of securities to be effected only by transactions
conducted on a local stock exchange; and (3) certain Fund assets that,
although they may be liquid and marketable, must be traded through the
marketplace or with the counterparty to the transaction in order to effect a
change in beneficial ownership.
DISTRIBUTIONS
AND TAX INFORMATION
Distributions
Dividends
from net investment income and distributions from net profits from the sale of
securities are generally made annually. Also, each Fund typically distributes
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 a Fund is accompanied by a brief explanation of the form and
character of the distribution. In January of each year, each Fund will issue to
each shareholder a statement of the federal income tax status of all
distributions.
Tax
Information
Each
series of the Trust is treated as a separate entity for federal income tax
purposes. Each Fund, as a series of the Trust, intends to qualify and has
elected to be treated as a regulated investment company under Subchapter M of
the Internal Revenue Code of 1986, as amended (the “Code”), and to comply with
all applicable requirements regarding the source of its income, diversification
of its assets and timing and amount of distributions. Each Fund’s policy is to
distribute to its shareholders all of its net investment income and any net
realized long term capital gains for each fiscal year in a manner that complies
with the distribution requirements of the Code, so that a Fund will not be
subject to any federal income or excise taxes. If a Fund does not qualify as a
regulated investment company, it will be taxed as a regular corporation and will
not be entitled to deduct the dividends paid to shareholders. The Funds can give
no assurances that distributions will be sufficient to eliminate all taxes. To
avoid the non-deductible excise tax, a Fund must distribute (or be deemed to
have distributed) by December 31 of each calendar year (i) at least 98% of
its ordinary income for such year, (ii) at least 98.2% of the excess of its
realized capital gains over its realized capital losses for the 12-month period
ending on October 31 during such year, and (iii) any amounts from the prior
calendar year that were not distributed and on which no federal income tax was
paid by a Fund.
In
order to qualify as a regulated investment company, each Fund must, among other
things, derive at least 90% of its gross income each year from dividends,
interest, payments with respect to loans of stock and securities, gains from the
sale or other disposition of stock or securities or foreign currency gains
related to investments in stock or securities, or other income (generally
including gains from options, futures or forward contracts) derived with respect
to the business of investing in stock, securities or currency, and net income
derived from an interest in a qualified publicly traded partnership. Each Fund
must also satisfy the following two asset diversification tests. At the end of
each quarter of each taxable year, (i) at least 50% of the value of a
Fund’s total assets must be represented by cash and cash items (including
receivables), U.S. government securities, the securities of other regulated
investment companies, and other securities, with such other securities being
limited in respect of any one issuer to an amount not greater than 5% of the
value of a Fund’s total assets and not more than 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of a
Fund’s total assets may be invested in the securities of any one issuer (other
than U.S. government securities or the securities of other regulated investment
companies), the securities of any two or more issuers (other than the securities
of other regulated investment companies) that a Fund controls (by owning 20% or
more of their outstanding voting stock) and that are determined to be engaged in
the same or similar trades or businesses or related trades or businesses, or the
securities of one or more qualified publicly traded partnerships. Each Fund must
also distribute each taxable year sufficient dividends to its shareholders to
claim a dividends paid deduction equal to at least the sum of 90% of a Fund’s
investment company taxable income before the dividends paid deduction (which
generally includes dividends, interest, and the excess of net short-term capital
gain over net long-term capital loss) and 90% of a Fund’s net tax-exempt
interest, if any.
Net
investment income generally consists of interest and dividend income, less
expenses. Net realized capital gains for a fiscal year are computed by taking
into account any capital loss carryforward of a Fund. Net capital losses not
fully utilized in one taxable year may be carried forward indefinitely to offset
income of the Fund in future years. As of October 31, 2022, the Funds had no
capital loss carryforwards.
Distributions
of net investment income and net short-term capital gains are taxable to
shareholders as ordinary income. For individual shareholders, a portion of the
distributions paid by a Fund may be qualified dividend income currently eligible
for taxation at long-term capital gain rates to the extent a Fund reports the
amount distributed as a qualifying dividend and certain holding period
requirements are met. In the case of corporate shareholders, a portion of the
distributions may qualify for the intercorporate dividends-received deduction to
the extent a Fund reports the amount distributed as a qualifying dividend. The
aggregate amount so reported to either individual or corporate shareholders
cannot, however, exceed the aggregate amount of qualifying dividends received by
a Fund for its taxable year. In view of a Fund’s investment policies, it is
expected that dividends from domestic corporations will be part of a Fund’s
gross income and that, accordingly, part of the distributions by a Fund may be
eligible for qualified dividend income treatment for individual shareholders, or
for the dividends-received deduction for corporate shareholders. However, the
portion of a Fund’s gross income attributable to qualifying dividends is largely
dependent on a Fund’s investment activities for a particular year and therefore
cannot be predicted with any certainty. Further, the dividends-received
deduction may be reduced or eliminated if Fund shares held by a corporate
investor are treated as debt financed or are held for less than 46 days.
Dividends from a Fund and gains from the sale of Fund shares are subject to the
federal 3.8% Medicare tax applicable to taxpayers in the higher income
brackets.
Any
long-term capital gain distributions are taxable to shareholders as long-term
capital gains regardless of the length of time shares have been held. There is
no requirement that a Fund take into consideration any tax implications when
implementing its investment strategy. Capital gains distributions are not
eligible for qualified dividend income treatment or the dividends-received
deduction referred to in the
previous
paragraph. Distributions of any net investment income and net realized capital
gains will be taxable as described above, whether received in shares or in cash.
Shareholders who choose to receive distributions in the form of additional
shares will have a cost basis for federal income tax purposes in each share so
received equal to the NAV of a share on the reinvestment date. Distributions are
generally taxable when received or deemed to be received. However, distributions
declared in October, November or December to shareholders of record on a date in
such a month and paid the following January are taxable as if received on
December 31. Distributions are includable in alternative minimum taxable income
in computing alternative minimum tax of a shareholder who is an individual.
Shareholders should note that a Fund may make taxable distributions of income
and capital gains even when share values have declined.
For
taxable years beginning after 2017 and before 2025, non-corporate taxpayers
generally may deduct 20% of “qualified business income” derived either directly
or through partnerships or S corporations. For this purpose, “qualified business
income” generally includes ordinary dividends paid by a real estate investment
trust (“REIT”) and certain income from publicly traded partnerships. Regulations
recently adopted by the United States Treasury allow non-corporate shareholders
of a Fund to benefit from the 20% deduction with respect to net REIT dividends
received by a Fund if a Fund meets certain reporting requirements, but do not
permit any such deduction with respect to publicly traded
partnerships.
Redemption
of Fund shares may result in recognition of a taxable gain or loss. Any loss
realized upon redemption or sales of shares within six months from the date of
their purchase will be treated as a long-term capital loss to the extent of any
amounts treated as distributions of long-term capital gains during such
six-month period. Any loss realized upon a redemption or sale may be disallowed
under certain wash sale rules to the extent shares of a Fund are purchased
(through reinvestment of distributions or otherwise) within 30 days before or
after the redemption.
Under
the Code, a Fund will be required to report to the Internal Revenue Service all
distributions of taxable income and capital gains as well as gross proceeds from
the redemption of Fund shares, except in the case of exempt shareholders, which
includes most corporations. Pursuant to the backup withholding provisions of the
Code, distributions of any taxable income and capital gains and proceeds from
the redemption of Fund shares may be subject to withholding of federal income
tax, currently at the rate set under Section 3406 of the Code, in the case of
non-exempt shareholders who fail to furnish a Fund with their taxpayer
identification numbers and with required certifications regarding their status
under the federal income tax law
or
if the IRS notifies a Fund that such backup withholding is required. If the
withholding provisions are applicable, any such distributions and proceeds,
whether taken in cash or reinvested in additional shares, will be reduced by the
amounts required to be withheld. Corporate and other exempt shareholders should
provide a Fund with their taxpayer identification numbers or certify their
exempt status in order to avoid possible erroneous application of backup
withholding. By law, a Fund must withhold as backup withholding a percentage
(currently, 24%) of your taxable distributions and redemption proceeds if you do
not provide your correct Social Security or taxpayer identification number and
certify that you are not subject to backup withholding, or if the Internal
Revenue Service instructs a Fund to do so. Backup withholding is not an
additional tax and any amounts withheld may be credited against a shareholder’s
ultimate federal income tax liability if proper documentation is timely
provided. Each Fund reserves the right to refuse to open an account for any
person failing to provide a certified taxpayer identification
number.
The
Foreign Account Tax Compliance Act (“FATCA”).
A 30% withholding tax on a Fund’s ordinary income distributions generally
applies if paid to a foreign entity unless: (i) if the foreign entity is a
“foreign financial institution,” it undertakes certain due diligence, reporting,
withholding and certification obligations, (ii) if the foreign entity is
not a “foreign financial institution,” it identifies certain of its U.S.
investors
or (iii) the foreign entity is otherwise excepted under FATCA. If
withholding is required under FATCA on a payment related to your shares,
investors that otherwise would not be subject to withholding (or that otherwise
would be entitled to a reduced rate of withholding) on such payment generally
will be required to seek a refund or credit from the IRS to obtain the benefits
of such exemption or reduction. A Fund will not pay any additional amounts in
respect of amounts withheld under FATCA. You should consult your tax advisor
regarding the effect of FATCA based on your individual
circumstances.
Unrelated
Business Taxable Income (“UBTI”)
Income
of a regulated investment company that would be UBTI if earned directly by a
tax-exempt entity generally will not constitute UBTI when distributed to a
tax-exempt shareholder of the regulated investment company. Notwithstanding this
blocking effect, a tax-exempt shareholder could realize UBTI where the regulated
investment company receives excess inclusion income from a real estate mortgage
investment conduit (“REMIC”) or a real estate investment trust (“REIT”) that is
invested in a taxable mortgage pool. The Funds do not intend to invest in REMICs
or REITs that have a history of paying excess inclusion income that may give
rise to UBTI for tax-exempt shareholders.
A
tax-exempt shareholder could also realize UBTI by virtue of its investment in a
Fund if shares in a Fund constitute debt-financed property in the hands of the
tax-exempt shareholder as defined in Section 514(b) of the Code.
This
discussion and the related discussion in the Prospectus have been prepared by
Fund management. The information above is only a summary of some of the tax
considerations generally affecting a Fund and its shareholders. No attempt has
been made to discuss individual tax consequences and this discussion should not
be construed as applicable to all shareholders’ tax situations. Investors should
consult their own tax advisors to determine the suitability of a Fund and the
applicability of any state, local or foreign taxation. No rulings with respect
to tax matters of a Fund will be sought from the Internal Revenue Service.
Sullivan & Worcester has expressed no opinion in respect
thereof.
DISTRIBUTION
The
Trust has entered into a Distribution Agreement (the “Distribution Agreement”)
with Quasar Distributors, LLC, 111 East Kilbourn Avenue, Suite 2200,
Milwaukee, WI 53202 (the “Distributor”), pursuant to which the Distributor acts
as the Funds’ distributor, provides certain administration services and promotes
and arranges for the sale of Fund shares. The offering of the Funds’ shares is
continuous. The Distributor is a registered broker-dealer and member of
FINRA.
The
Distribution Agreement continues in effect only if such continuance is
specifically approved at least annually by the Board or by vote of a majority of
a Fund’s outstanding voting securities and, in either case, by a majority of the
Trustees who are not parties to the Distribution Agreement or “interested
persons” (as defined in the 1940 Act) of any such party. The Distribution
Agreement is terminable without penalty by the Trust on behalf of a Fund on 60
days’ written notice when authorized either by a majority vote of a Fund’s
shareholders or by vote of a majority of the Board, including a majority of the
Trustees who are not “interested persons” (as defined in the 1940 Act) of the
Trust, or by the Distributor on 60 days’ written notice, and will automatically
terminate in the event of its “assignment” (as defined in the 1940
Act).
Shareholder
Servicing Plan
Each
Fund has adopted a Shareholder Servicing Plan (the “Servicing Plan”) with
respect to the Class I shares of a Fund under which the Adviser will provide, or
arrange for others to provide, certain specified shareholder services. Such
services include: (1) aggregating and processing purchase and redemption
requests
and transmitting such orders to the transfer agent; (2) providing
shareholders with a service that invests the assets of their accounts in shares
of a Fund pursuant to specific or pre-authorized instructions;
(3) processing dividend and distribution payments from a Fund on behalf of
shareholders; (4) providing information periodically to shareholders
showing their positions; (5) arranging for bank wires; (6) responding
to shareholder inquiries concerning their investment; (7) providing
sub-accounting with respect to shares of a Fund beneficially owned by
shareholders or the information necessary for sub-accounting; (8) if
required by law, forwarding shareholder communications (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices); and (9) providing similar services as may
reasonably be requested.
As
compensation for the provision of shareholder services, each Fund may pay the
Adviser a monthly fee up to an annual rate of 0.10% of the average daily net
assets of the Class I shares of a Fund. Currently, the American Listed Fund’s
accrual of the fee is set at 0.00% through at least February 27, 2024, and any
accrual increase must first be approved by the Board. The Adviser will pay
certain banks, trust companies, broker-dealers and other financial
intermediaries (each, a “Participating Organization”) out of the fees the
Adviser receives from a Fund under the Servicing Plan to the extent that the
Participating Organization performs shareholder servicing functions for a Fund’s
shares owned by its customers.
The
American Listed Fund did not pay any servicing plan fees for the periods shown.
For the fiscal years shown below, the Global Listed Fund paid the following in
servicing plan fees:
|
|
|
|
|
|
|
|
| |
| Fiscal
Year Ended October 31, 2022 |
Fiscal
Year Ended October 31, 2021 |
Fiscal
Year Ended October 31, 2020 |
| $72,435 |
$64,071 |
$40,531 |
ANTI-MONEY
LAUNDERING PROGRAM
The
Trust has established an Anti-Money Laundering 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”). In
order to ensure compliance with this law, the Trust’s 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.
Procedures
to implement the Program include, but are not limited to, determining that the
Funds’ Distributor and Transfer Agent have established proper anti-money
laundering procedures, reporting suspicious and/or fraudulent activity, checking
shareholder names against designated government lists, including Office of
Foreign Asset Control (“OFAC”), and a complete and thorough review of all new
opening account applications. The Trust will not transact business with any
person or legal entity whose identity and beneficial owners, if applicable,
cannot be adequately verified under the provisions of the USA PATRIOT
Act.
GENERAL
INFORMATION
The
Declaration of Trust permits the Trustees to issue an unlimited number of full
and fractional shares of beneficial interest and to divide or combine the shares
into a greater or lesser number of shares without thereby changing the
proportionate beneficial interest in a Fund. Each share represents an interest
in a Fund proportionately equal to the interest of each other share. Upon a
Fund’s liquidation, all shareholders would share pro rata in the net assets of a
Fund available for distribution to shareholders.
With
respect to the Funds, the Trust may offer more than one class of shares. The
Trust has adopted a Multiple Class Plan pursuant to Rule 18f-3 under the 1940
Act, detailing the attributes of each class of a Fund and reserved the right to
create and issue additional series or classes. Each share of a series or class
represents an equal proportionate interest in that series or class with each
other share of that series or class. Currently, each Fund offers one class of
shares: Class I shares.
The
shares of each series or class participate equally in the earnings, dividends
and assets of the particular series or class. Expenses of the Trust which are
not attributable to a specific series or class are allocated among all the
series in a manner believed by management of the Trust to be fair and equitable.
Shares have no pre-emptive or conversion rights. Shares, when issued, are fully
paid and non-assessable, except as set forth below. Shareholders are entitled to
one vote for each share held. Shares of each series or class generally vote
together, except when required under federal securities laws to vote separately
on matters that only affect a particular class, such as the approval of
distribution plans for a particular class.
The
Trust is not required to hold annual meetings of shareholders but will hold
special meetings of shareholders of a series or class when, in the judgment of
the Trustees, it is necessary or desirable to submit matters for a shareholder
vote. Shareholders have, under certain circumstances, the right to communicate
with other shareholders in connection with requesting a meeting of shareholders
for the purpose of removing one or more Trustees. Shareholders also have, in
certain circumstances, the right to remove one or more Trustees without a
meeting. No material amendment may be made to the Declaration of Trust without
the affirmative vote of the holders of a majority of the outstanding shares of
each portfolio affected by the amendment. The Declaration of Trust provides
that, at any meeting of shareholders of the Trust or of any series or class, a
Shareholder Servicing Agent may vote any shares as to which such Shareholder
Servicing Agent is the agent of record and which are not represented in person
or by proxy at the meeting, proportionately in accordance with the votes cast by
holders of all shares of that portfolio otherwise represented at the meeting in
person or by proxy as to which such Shareholder Servicing Agent is the agent of
record. Any shares so voted by a Shareholder Servicing Agent will be deemed
represented at the meeting for purposes of quorum requirements. Any series or
class may be terminated (i) upon the merger or consolidation with, or the
sale or disposition of all or substantially all of its assets to, another
entity, if approved by the vote of the holders of two thirds of its outstanding
shares, except that if the Board recommends such merger, consolidation or sale
or disposition of assets, the approval by vote of the holders of a majority of
the series’ or class’ outstanding shares will be sufficient, or (ii) by the
vote of the holders of a majority of its outstanding shares, or (iii) by
the Board by written notice to the series’ or class’ shareholders. Unless each
series and class is so terminated, the Trust will continue
indefinitely.
The
Declaration of Trust also provides that the Trust shall maintain appropriate
insurance (for example, fidelity bonding and errors and omissions insurance) for
the protection of the Trust, its shareholders, Trustees, officers, employees and
agents covering possible tort and other liabilities. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which both inadequate insurance existed and the
Trust itself was unable to meet its obligations.
Rule
18f-2 under the 1940 Act provides that as to any investment company which has
two or more series outstanding and as to any matter required to be submitted to
shareholder vote, such matter is not deemed to have been effectively acted upon
unless approved by the holders of a “majority” (as defined in the Rule) of the
voting securities of each series affected by the matter. Such separate voting
requirements do not apply to the election of Trustees or the ratification of the
selection of accountants. The Rule contains special provisions for cases in
which an advisory contract is approved by one or more, but not all, series. A
change in investment policy may go into effect as to one or more series whose
holders so approve the change even though the required vote is not obtained as
to the holders of other affected series.
FINANCIAL
STATEMENTS
The
annual
report
and semiannual
report
for the Funds for the fiscal year ended October 31, 2022 and the period
ended April 30, 2022, are separate documents supplied upon request and the
financial statements, accompanying notes and report of the independent
registered public accounting firm appearing therein are incorporated by
reference in this SAI.
