Matisse
Funds
PROSPECTUS
August 1,
2023
This
prospectus contains information about the Matisse Funds that you should know before
investing. You should read this prospectus carefully, before you invest or send
money, and keep it for future reference. For questions or for Shareholder
Services, please call 1-800-773-3863.
Investment
Advisor
Deschutes
Portfolio Strategy, LLC
dba Matisse
Capital 15350 SW Sequoia Parkway, Suite 260 Portland, Oregon
97224
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The
Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
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TABLE
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Back
Cover |
INVESTMENT
OBJECTIVE
The
Matisse Discounted Closed-End Fund
Strategy (the “Fund”) seeks long-term capital appreciation and
income.
FEES
AND EXPENSES OF THE FUND
This
table describes the fees and expenses that you may pay if you buy, hold and sell
shares of the Fund. You may pay other fees, such as brokerage commissions
and other fees to financial intermediaries, which are not reflected in the
tables and example below.
Shareholder
Fees
(fees
paid directly from your investment) |
Maximum
Sales Charge (Load) Imposed on Purchases
(as
a % of offering price) |
None
|
Maximum
Deferred Sales Charge (Load)
(as
a % of the lesser of amount purchased or redeemed) |
None
|
Redemption
Fee
(as
a % of amount redeemed) |
None
|
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment) |
Management
Fees |
0.99% |
Distribution
and/or Service (12b-1) Fees |
None |
Other
Expenses |
0.60% |
Interest
Expenses from Borrowing |
0.33% |
Acquired
Fund Fees and Expenses1 |
1.78% |
Total
Annual Fund Operating Expenses |
3.70% |
Fee
Waiver and/or Expense Reimbursement2 |
(0.34)% |
Total
Annual Fund Operating Expenses After Fee
Waiver and/or Expense Reimbursement |
3.36%
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1.
“Acquired Fund Fees and Expenses” are the indirect costs of investing in
other investment companies. The operating expenses in this fee table will not
correlate to the expense ratio in the Fund’s financial statements, once
available, because the financial statements include only the direct operating
expenses incurred by the Fund.
2.
The Fund’s investment advisor, Deschutes Portfolio Strategy, LLC
dba Matisse Capital (the “Advisor”), has entered into an expense limitation
agreement (the “Expense Limitation Agreement”) with the Fund under which it has
agreed to waive or reduce its management fees and assume other expenses of the
Fund in an amount that limits the Fund’s Total Annual Fund Operating Expenses
(exclusive of (i) any front-end or contingent deferred loads; (ii) brokerage
fees and commissions, (iii) acquired fund fees and expenses; (iv) fees and
expenses associated with investments in other collective investment vehicles or
derivative instruments (including, for example, option and swap fees and
expenses); (v) borrowing costs (such as interest and dividend expense on
securities sold short); (vi) taxes; and (vii) extraordinary expenses, such as
litigation expenses (which may include indemnification of Fund officers and
Trustees and contractual indemnification of Fund service providers (other than
the Advisor)) to not more than 1.25% of the average daily net assets of the
Fund. This contractual arrangement is in effect through July 31, 2024, unless
earlier terminated by the Board of Trustees of the Fund (the “Board” or the
“Trustees”) at any time. The Advisor cannot recoup from the Fund any amounts
paid by the Advisor under the Expense Limitation Agreement.
Example. This Example is intended to help you
compare the cost of investing in the Fund with the cost of investing in other
mutual funds. The Example assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem (or you hold) all of your shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and the Fund’s operating expenses remain the same. Although
your actual costs may be higher or lower, based on these assumptions your costs
would be:
Class |
1
Year |
3
Years |
5
Years |
10
Years |
Institutional
Class |
$339 |
$856 |
$1,399 |
$2,882 |
Portfolio Turnover. The Fund pays
transaction costs, such as commissions, when it buys and sells securities (or
“turns over” its portfolio). A higher portfolio turnover rate may indicate
higher transaction costs and may result in higher taxes when Fund shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the Example, affect the Fund’s performance. For the
fiscal year ended March 31, 2023, the Fund’s portfolio turnover rate was 29.50%
of the average value of its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund is a “fund of funds” that seeks to achieve its investment objectives
principally through investments in unaffiliated closed-end funds that pay
regular periodic cash distributions, the interests of which typically trade at
substantial discounts relative to their underlying net asset values. The Advisor
believes this approach is capable of generating capital appreciation and
income.
As
a matter of investment policy, the Fund will invest, under normal circumstances,
at least 80% of net assets, plus borrowings for investment purposes, in
discounted closed-end funds. For purposes of this policy, a closed-end
fund is considered discounted when, in the Advisor’s determination, the fund’s
market value is less than the value of its underlying portfolio. In addition,
the closed-end funds may be domestic or foreign for purposes of this
policy.
Closed-end
funds are investment companies that, unlike an open-end mutual fund, do not
typically issue redeemable shares. Instead, a fixed number of shares trade
on a secondary market, such as the New York Stock Exchange or the NASDAQ Stock
Market. The shares of closed-end funds frequently trade at either a
premium or discount relative to their underlying net asset values. The Fund will
invest in closed-end funds that are trading at substantial discounts relative to
the underlying net asset values and that the Advisor feels are best positioned
to narrow the spread between the underlying net asset value of the fund and the
share price. A closed-end fund is considered to be trading at a
substantial discount when, in the Advisor’s determination, the fund’s market
value is significantly less than the value of its underlying portfolio. The
Advisor believes that these investments will allow the Fund to profit from the
capital appreciation achieved when such spreads decrease and the market prices
of the shares move closer to the net asset values, as well as from the capital
appreciation achieved when general market conditions increase share prices, and
the income generated from closed-end fund distributions.
The
Advisor intends to construct a diversified portfolio that generates regular cash
income. Under normal market conditions, the Fund’s portfolio will hold
shares of approximately 30 to 90 unaffiliated closed-end funds, along with cash,
cash equivalents, and other types of securities in which the Fund may make
limited investments. The closed-end funds in which the Fund invests may
hold either equity securities or fixed income securities. In addition, the
closed-end funds: may invest in foreign securities and American Depository
Receipts (ADRs); may invest in derivative instruments; and may utilize leverage
to acquire their underlying portfolio investments.
In
selecting closed-end funds for the portfolio, the Advisor utilizes a proprietary
research process that attempts to forecast whether the market discount on a
closed-end fund will increase or decrease. The process incorporates quantitative
information about the fund’s discount, dividends, management, expenses,
portfolio, liquidity, and historical pricing. An analysis based on the
same process determines when a closed-end fund should be sold.
The
Fund’s direct investments may be in both domestic and foreign securities. (The
Advisor deems a security to be foreign if a U.S. market is not the principal
trading market.) Foreign securities held by the Fund will principally be
closed-end funds listed and traded in Canada and the United Kingdom. Such
investments will be selected for investment and sold using the same proprietary
research process for domestic closed-end funds, although with adjustments for
local practices and regulations. Investments in foreign securities may be
made directly in foreign markets, including emerging markets, as well as
indirectly through other investment companies and ADRs. To the extent the Fund
invests in ADRs, it may invest in ADRs sponsored by the issuers of the
underlying securities or ADRs organized independently of the issuers.
Based
upon the Advisor’s view of available investment opportunities, as well as for
cash management purposes, the Fund’s portfolio will also include cash and cash
equivalents that provide a temporary pool of liquidity for future investments,
redemptions, and other Fund expenses. Under normal circumstances, the Fund may
hold up to 20% of net assets, plus borrowings for investment purposes, in cash
and cash equivalents. This portion of the Fund’s portfolio will principally be
invested in money market mutual funds.
To
take advantage of opportunities to invest, the Fund may borrow money for
investment purposes (leverage). Any borrowing by the Fund will be subject
to the limitations set forth in the Investment Company Act of 1940, as amended
(the “1940 Act”), and relevant interpretive positions of the staff of the
Securities and Exchange Commission (the “SEC”), which presently allow the Fund
to borrow (including pledging, mortgaging or hypothecating assets) in an amount
up to one-third of its total assets, which include assets purchased with
borrowed money.
PRINCIPAL
RISKS OF INVESTING IN THE FUND
The
loss of your money is a principal risk of investing in the Fund.
Investments in the Fund are subject to investment risks, including the possible
loss of some or the entire principal amount invested. An investment in the Fund
is not a deposit or obligation of any bank, is not endorsed or guaranteed by any
bank, and is not insured by the Federal Deposit Insurance Corporation or any
other government agency. There can be no assurance that the Fund will be
successful in meeting its investment objective. Generally, the Fund will
be subject to the following principal risks:
Closed-End Fund Risk. Closed-end funds
involve investment risks different from those associated with other investment
companies. First, the shares of closed-end funds frequently trade at a
premium or discount relative to their net asset value. When the Fund
purchases shares of a closed-end fund at a discount to its net asset value,
there can be no assurance that the discount will decrease, and it is possible
that the discount may increase and affect whether the Fund will a realize gain
or loss on the investment. Second, many closed-end funds use leverage, or
borrowed money, to try to increase returns. Leverage is a speculative technique
and its use by a closed-end fund entails greater risk and leads to a more
volatile share price. If a close-end fund uses leverage, increases and
decreases in the value of its share price will be magnified. The
closed-end fund will also have to pay interest or dividends on its leverage,
reducing the closed-end fund's return. Third, many closed-end funds have a
policy of distributing a fixed percentage of net assets regardless of the fund’s
actual interest income and capital gains. Consequently, distributions by a
closed-end fund may include a return of capital, which would reduce the fund’s
net asset value and its earnings capacity. Finally, closed-end funds are
allowed to invest in a greater amount of illiquid securities than open-end
mutual funds. Investments in illiquid securities pose risks related to
uncertainty in valuations, volatile market prices, and limitations on resale
that may have an adverse effect on the ability of the fund to dispose of the
securities promptly or at reasonable prices.
Fund of Funds Risk. The Fund is a “fund
of funds.” The term “fund of funds” is typically used to describe
investment companies, such as the Fund, whose principal investment strategy
involves investing in other investment companies, including closed-end funds and
money market mutual funds. Investments in other funds subject the Fund to
additional operating and management fees and expenses. For instance, investors
in the Fund will indirectly bear fees and expenses charged by the funds in which
the Fund invests, in addition to the Fund’s direct fees and expenses. The Fund’s performance depends in part upon the
performance of the funds’ investment advisor, the strategies and instruments
used by the funds, and the Advisor's ability to select funds and effectively
allocate Fund assets among them.
Control of Closed-End Funds Risk.
Although the Fund and the Advisor will evaluate regularly each closed-end fund
in which the Fund invests to determine whether its investment program is
consistent with the Fund’s investment objective, the Advisor will not have any
control over the investments made by a closed-end fund. The investment
advisor to each closed-end fund may change aspects of its investment strategies
at any time. The Advisor will not have the ability to control or otherwise
influence the composition of the investment portfolio of a closed-end
fund.
Fixed Income Securities Risk. When the
closed-end funds invest in fixed income securities, the value of your investment
in the Fund will fluctuate with changes in interest rates. Typically, a rise in
interest rates causes a decline in the value of fixed income securities. In
general, the market price of fixed income securities with longer maturities will
increase or decrease more in response to changes in interest rates than
shorter-term securities. Other risk factors include credit risk (the debtor may
default), extension risk (an issuer may exercise its right to repay principal on
a fixed rate obligation later than expected), and prepayment risk (the debtor
may pay its obligation early, reducing the amount of interest payments). These
risks could affect the value of a particular investment by the Fund, possibly
causing the Fund's share price and total return to be reduced and fluctuate more
than other types of investments.
Pandemic Risk. There is an ongoing global
outbreak of COVID-19, which has spread to over 200 countries and territories,
including the United States. The general uncertainty surrounding the dangers and
impact of COVID-19 has created significant disruption in global supply chains
and economic activity, increasing rates of unemployment and adversely impacting
many industries. The outbreak could have a continued adverse impact on economic
and market conditions and trigger a period of global economic slowdown. The
outbreak of the COVID-19 pandemic has, at times, had, and is expected to
continue to pose a risk of having, a material adverse impact on the Fund’s
market price, NAV and portfolio liquidity among other factors. These impacts
will likely continue to some extent as the outbreak persists and potentially
even longer. The rapid development and fluidity of this situation precludes any
prediction as to the ultimate adverse impact of COVID-19 on economic and market
conditions, and, as a result, present material uncertainty and risk with respect
to the Fund and the performance of its investments. COVID-19 and the current
financial, economic and capital markets environment, and future developments in
these and other areas present uncertainty and risk with respect to the Fund’s
performance, portfolio liquidity, ability to pay distributions and make share
repurchases.
Cybersecurity Risk. As part of
its business, the Advisor processes, stores, and transmits large amounts of
electronic information, including information relating to the transactions of
the Fund. The Advisor and the Fund are therefore susceptible to cybersecurity risk. Cybersecurity failures or
breaches of the Fund or its service providers have the ability to cause
disruptions and impact business operations, potentially resulting in financial
losses, the inability of Fund shareholders to transact business, violations of
applicable privacy and other laws, regulatory fines, penalties, and/or
reputational damage. The Fund and its shareholders could be negatively impacted
as a result.
Equity Securities Risk. Fluctuations in the
value of equity securities held by the closed-end funds will cause the NAV of
the Fund to fluctuate. Equity securities may decline in price if the issuer
fails to make anticipated dividend payments. Common stock is subject to greater
dividend risk than preferred stocks or debt instruments of the same issuer. In
addition, equity securities have experienced significantly more volatility in
returns than other asset classes.
Foreign Securities Risk. The Fund may
invest in foreign securities. Foreign securities involve investment risks
different from those associated with domestic securities. Changes in
foreign economies and political climates are more likely to affect the Fund than
investments in domestic securities. The value of foreign currency
denominated securities or foreign currency contracts is affected by the value of
the local currency relative to the U.S. dollar. There may be less
government supervision of foreign markets, resulting in non-uniform accounting
practices and less publicly available information about issuers of foreign
currency denominated securities. The value of foreign investments may be
affected by changes in exchange control regulations, application of foreign tax
laws (including withholding tax), changes in governmental administration or
economic or monetary policy (in this country or abroad) or changed circumstances
in dealings between nations. In addition, foreign brokerage commissions,
custody fees, and other costs of investing in foreign securities are generally
higher than in the United States. Investments in foreign issues could be
affected by other factors not present in the United States, including
expropriation, armed conflict, confiscatory taxation, and potential difficulties
in enforcing contractual obligations.
o |
ADR
Risk. ADRs may be subject to some of the same risks as direct investments
in foreign companies, which includes international trade, currency,
political, regulator, and diplomatic risks. In a sponsored ADR
arrangement, the foreign issuer assumes the obligation to pay some or all
of the depository’s transaction fees. Under an unsponsored ADR
arrangement, the foreign issuer assumes no obligations and the
depository’s transaction fees are paid directly by the ADR holders.
Because unsponsored ADR arrangements are organized independently and
without the cooperation of the issuer of the underlying securities,
available information concerning the foreign issuer may not be as current
as for sponsored ADRs and voting rights with respect to the deposited
securities are not passed through. |
General Investment Risks. All investments
in securities and other financial instruments involve a risk of financial
loss. No assurance can be given that the Fund's investment program will be
successful. Investors should carefully review the descriptions of the
Fund's investments and their risks described in this prospectus and the Fund’s
Statement of Additional Information.
Investment Advisor Risk. The Advisor’s
ability to choose suitable investments has a significant impact on the ability
of the Fund to achieve its investment objectives.
Quantitative Model Risk. Securities or
other investments selected using quantitative methods may perform differently
from the market as a whole. There can be no assurance that these methodologies
will enable the Fund to achieve its objective.
Leverage Risk. The Fund may leverage or
borrow money from banks to buy securities and pledge its assets in connection
with the borrowing. Use of leverage tends to magnify increases and decreases in the Fund’s
returns and leads to a more volatile share
price. The Fund will also incur borrowing costs in connection with
its use of leverage. If the interest expense of the borrowing is greater
than the return on the securities bought, the use of leverage will decrease the
return to shareholders in the Fund. Leveraging by both the Fund and the
underlying closed-end funds, which often employ leverage, will expose the Fund
to a relatively high level of leveraging risk. There can be no assurance that a
leveraging strategy will be successful during any period in which it is
employed.
Loans Risk. Investments in loans may subject
the Fund to heightened credit risks because loans may be highly leveraged and
susceptible to the risks of interest deferral, default, and/or bankruptcy.
Management Style Risk. Different types of
securities tend to shift into and out of favor with investors depending on
market and economic conditions. The returns from the types of investments
purchased by the Fund (e.g., closed-end funds which pay regular periodic cash
distributions) may at times be better or worse than the returns from other types
of funds. Each type of investment tends to go through cycles of performing
better or worse than the market in general. The performance of the Fund
may thus be better or worse than the performance of funds that focus on other
types of investments, or that have a broader investment style.
Market Risk. Market risk refers to the
possibility that the value of securities held by the Fund may decline due to
daily fluctuations in the market. Market prices for securities change
daily as a result of many factors, including developments affecting the
condition of both individual companies and the market in general. The
price of a security may even be affected by factors unrelated to the value or
condition of its issuer, such as changes in interest rates, economic and
political conditions, and general market conditions. The Fund’s
performance per share will change daily in response to such factors.
Money Market Mutual Fund Risk. The Fund
may invest in money market mutual funds in order to manage its cash
component. An investment in a money market mutual fund is not insured or
guaranteed by a Federal Deposit Insurance Corporation or any other government
agency. Although such funds seek to preserve the value of the Fund’s investment
at $1.00 per share, it is possible to lose money by investing in a money market
mutual fund.
PERFORMANCE
INFORMATION
The
following bar chart and tables provide an indication of the risks of investing
in the Fund by showing changes in the performance from year to year and by
showing how the Fund’s average annual total returns compare to that of a
broad-based securities market index. The Fund’s past performance is not
necessarily an indication of how the Fund will perform in the future. Updated
performance information is available online at
https://fundinfopages.com/MDCEX.
Institutional
Class Shares
Calendar
Year Returns
During
the periods shown in the bar chart above, the Fund’s highest quarterly return
was 19.86% (quarter ended June 30, 2020) and the Fund’s lowest quarterly return
was -37.13% (quarter ended March 31, 2020). The Fund’s year-to-date return as of
June 30, 2023, was 8.94%.
|
Average
Annual Total Returns |
Periods
Ended December 31, 2022 (returns with maximum sales charge) |
Past
1 Year |
Past
5 Years |
Past
10 Years |
Since Inception* |
Institutional
Class Shares |
|
|
|
|
Before
taxes After taxes on distributions After
taxes on distributions and sale of shares |
-6.58% -9.80% -3.88%
|
4.28% -0.79% 2.14%
|
6.39% 2.66% 3.88% |
6.35% 2.62% 3.83% |
S&P
500 Total Return Index |
-18.11% |
9.42% |
12.56% |
10.42% |
S-Network
Composite Closed-End Fund Total
Return Index |
-18.47% |
2.38%
|
4.93%
|
5.77% |
S&P
Target Risk Moderate Index |
-14.41% |
2.43% |
4.29% |
4.45% |
MSCI
EAFE Total Return Index |
-14.45% |
1.54% |
4.67% |
8.21% |
Bloomberg
U.S. Aggregated Total Return Bond
Index |
-13.01% |
0.02%
|
1.06%
|
6.63% |
*The
Institutional Class Shares commenced operations on October 31, 2012.
After-tax
returns are calculated using the historical highest individual federal marginal
income tax rates and do not reflect the impact of state and local taxes.
Actual after-tax returns depend on an investor’s tax situation and may differ
from those shown and are not applicable to investors who hold Fund shares
through tax-deferred arrangements such as a 401(k) plan or an individual
retirement account (IRA).
MANAGEMENT
Investment Advisor. The Fund’s investment
advisor is Deschutes Portfolio Strategy, LLC, dba Matisse Capital.
Portfolio Managers. The Fund’s portfolio
is managed on a day-to-day basis by Bryn Torkelson,
founder and chief investment officer of the Advisor, and Eric Boughton, CFA,
analyst of the Advisor, who have each served as a portfolio manager since the
Fund’s inception in October 2012.
For
more information about Purchase and Sale of Fund Shares, Tax Information, and
Financial Intermediary Compensation, please turn to page 20 of the
Prospectus.
INVESTMENT
OBJECTIVE
The
Matisse Discounted Bond CEF Strategy (the
“Fund”) seeks total return with an emphasis on providing current income.
FEES
AND EXPENSES OF THE FUND
This
table describes the fees and expenses that you may pay if you buy, hold and sell
shares of the Fund. You may pay other fees, such as brokerage commissions
and other fees to financial intermediaries, which are not reflected in the
tables and example below.
Shareholder
Fees
(fees
paid directly from your investment) |
Maximum
Sales Charge (Load) Imposed on Purchases
(as
a % of offering price) |
None
|
Maximum
Deferred Sales Charge (Load)
(as
a % of the lesser of amount purchased or redeemed) |
None
|
Redemption
Fee
(as
a % of amount redeemed) |
None
|
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment) |
Management
Fees |
0.70% |
Distribution
and/or Service (12b-1) Fees |
None |
Other
Expenses |
0.57% |
Interest
Expenses from Borrowing |
0.27% |
Acquired
Fund Fees and Expenses1 |
1.96% |
Total
Annual Fund Operating Expenses |
3.50% |
Fee Waiver and/or
Expense Reimbursement2 |
(0.28)% |
Total
Annual Fund Operating Expenses After
Fee
Waiver and/or Expense Reimbursement |
3.22%
|
1.
“Acquired Fund Fees and Expenses” are the indirect costs of investing in other
investment companies. The operating expenses in this fee table will not
correlate to the expense ratio in the Fund’s financial statements, once
available, because the financial statements include on the direct operating
expenses incurred by the Fund.
2.
The Fund’s investment advisor, Deschutes Portfolio Strategy, LLC dba Matisse Capital (the “Advisor”), has
entered into an expense limitation agreement (the “Expense Limitation
Agreement”) with the Fund under which it has agreed to waive or reduce its
management fees and assume other expenses of the Fund in an amount that limits
the Fund’s Total Annual Fund Operating Expenses (exclusive of (i) any front-end
or contingent deferred loads; (ii) brokerage fees and commissions, (iii)
acquired fund fees and expenses; (iv) fees and expenses associated with
investments in other collective investment vehicles or derivative instruments
(including, for example, option and swap fees and expenses); (v) borrowing costs
(such as interest and dividend expense on securities sold short); (vi) taxes;
and (vii) extraordinary expenses, such as litigation expenses (which may include
indemnification of Fund officers and Trustees and contractual indemnification of
Fund service providers (other than the Advisor)) to not more than 0.99% of the
average daily net assets of the Fund. This contractual arrangement is in effect
through July 31, 2024, unless earlier terminated by the Board of Trustees of the
Fund (the “Board” or the “Trustees”) at any time. The Advisor cannot recoup from
the Fund any amounts paid by the Advisor under the Expense Limitation
Agreement.
Example. This Example is intended to help you
compare the cost of investing in the Fund with the cost of investing in other
mutual funds. The Example assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem (or you hold) all of your shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and the Fund’s operating expenses remain the same. The
Example includes the Fund’s contractual expense limitation through July 31,
2024. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1
Year |
3
Years |
5
Years |
10
Years |
$325 |
$1,048 |
$1,793 |
$3,756 |
Portfolio Turnover. The Fund pays
transaction costs, such as commissions, when it buys and sells securities (or
“turns over” its portfolio). A higher portfolio turnover rate may indicate
higher transaction costs and may result in higher taxes when Fund shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the example, affect the Fund’s performance. For the
most recent fiscal year ended March 31, 2023, the Fund’s portfolio turnover rate
was 57.99% of the average value of its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund is a “fund of funds” that seeks to achieve its investment objective
principally through investments in unaffiliated closed-end funds that are
registered under the Investment Company Act of 1940, as amended (the “1940
Act”). The closed-end funds in the Fund’s portfolio invest primarily in bonds,
pay regular periodic cash distributions, and trade at substantial discounts
relative to the underlying net asset values (“NAVs”). The Advisor believes this
approach is capable of generating high total return and attractive income
relative to many other fixed income investments.
As
a matter of investment policy, the Fund will invest, under normal circumstances,
at least 80% of its net assets, plus any borrowing for investment purposes, in
discounted closed-end funds that primarily invest in bonds. For purposes
of this policy, a closed-end fund is considered discounted when, in the
Advisor's determination, the closed-end fund’s market value is less than the
value of its underlying portfolio, and a closed-end fund is considered to invest
primarily in bonds when, under normal circumstances, at least 80% of its net
assets, plus any borrowing for investment purposes, are invested in bonds. This
policy may be changed without shareholder approval upon 60-days' prior notice to
shareholders.
The
Advisor intends to construct a diversified portfolio that generates regular
income. Under normal market conditions, the Fund's portfolio will hold
shares of approximately 30 to 90 closed-end funds, along with cash, cash
equivalents, and other types of securities in which the Fund may make limited
investments. Each closed-end fund will hold primarily bonds. The bonds
held by the closed-end funds may be below investment grade (also known as “junk”
bonds) but will be rated B or higher by Standard & Poor’s Rating Services or
the equivalent by Moody’s Investor Service, Inc., or Fitch, Inc. and may be of
any maturity or duration. There is no limit to the amount of the Fund’s assets
that may be invested in below investment grade bonds through its investments in
closed-end funds. While the Advisor generally expects a majority of the Fund’s
assets to be invested in investment grade bonds (rated BBB or higher by Standard
& Poor’s Rating Services or the equivalent by Moody’s Investor Service,
Inc., or Fitch, Inc.), when discounts are attractive, up to two-thirds of the
portfolio may be invested in below-investment grade bonds through its
investments in closed-end funds. In addition, the closed-end funds will invest
in loans, preferred securities, convertible securities, foreign income
securities, and derivative instruments for both investment and hedging purposes,
and will utilize leverage to acquire their underlying portfolio
investments.
In
selecting closed-end funds for the portfolio, the Advisor utilizes a proprietary
research process that attempts to forecast whether the market discount on a
closed-end fund will increase or decrease. The process incorporates
quantitative information about each closed-end fund’s discount, dividends,
management, expenses, portfolio, liquidity, and historical pricing. If the
market discount is predicted, in the next 3 to 12 months, to decrease for a
closed-end fund, the Fund typically purchases or increases its position in the
security. If the market discount is predicted, in the next 3 to 12 months, to
increase for a closed-end fund, the Fund typically sells or reduces its position
in the security.
The
Fund's direct investments will be exclusively in US-traded and US-registered
securities; however, the closed-end funds will own foreign-registered and
foreign-traded securities.
Under
normal circumstances, the Fund may hold up to 20% of its net assets in cash or
cash equivalents. Cash equivalents, which can include money market funds, are
instruments or investments of such high liquidity and safety that they are
considered almost as safe as cash. Based upon the Advisor's view of available
investment opportunities, as well as for cash management purposes, the Fund's
portfolio will include cash and cash equivalents that provide a temporary pool
of liquidity for future investments, redemptions, and other Fund expenses.
The Fund actively trades its portfolio investments, which may lead to higher
transaction costs that may affect the Fund’s performance.
To
take advantage of opportunities to invest, the Fund may borrow money for
investment purposes (leverage). Any borrowing by the Fund will be subject to the
limitations set forth in Act, and relevant interpretive positions of the staff
of the U.S. Securities and Exchange Commission (the “SEC”), which presently
allows the Fund to borrow (including pledging, mortgaging, or hypothecating
assets) in an amount up to one-third of its total assets, which include assets
purchased with borrowed money.
PRINCIPAL
RISKS OF INVESTING IN THE FUND
The
loss of your money is a principal risk of investing in the Fund.
Investments in the Fund are subject to investment risks, including the possible
loss of some or the entire principal amount invested. The Fund is subject
to certain risks, including the principal risks noted below, any of which may
adversely affect the Fund’s net asset value per share (“NAV”), trading price,
yield, total return, and ability to meet its investment objectives. An
investment in the Fund is not a deposit or obligation of any bank, is not
endorsed or guaranteed by any bank, and is not insured by the Federal Deposit
Insurance Corporation or any other government agency. The following describes
the risks the Fund bears directly or indirectly through investments in
closed-end funds.
Closed-End Fund Risk. Closed-end funds
involve investment risks different from those associated with other investment
companies. First, the shares of closed-end funds frequently trade at a
premium or discount relative to their NAV. When the Fund purchases shares
of a closed-end fund at a discount to its NAV, there can be no assurance that
the discount will decrease, and it is possible that the discount may increase
and affect whether the Fund will a realize gain or loss on the investment.
Second, many closed-end funds use leverage, or borrowed money, to try to
increase returns. Leverage is a speculative technique and its use by a
closed-end fund entails greater risk and leads to a more volatile share
price. If a closed-end fund uses leverage, increases and decreases in the
value of its share price will be magnified. The closed-end fund will also
have to pay interest or dividends on its leverage, reducing the closed-end
fund's return. Third, many closed-end funds have a policy of distributing
a fixed percentage of net assets regardless of the fund's actual interest income
and capital gains. Consequently, distributions by a closed-end fund may
include a return of capital, which would reduce the fund's NAV and its earnings
capacity. Finally, closed-end funds are allowed to invest in a greater
amount of illiquid securities than open-end mutual funds. Investments in
illiquid securities pose risks related to uncertainty in valuations, volatile
market prices, and limitations on resale that may have an adverse effect on the
ability of the fund to dispose of the securities promptly or at reasonable
prices.
Fund of Funds Risk. The Fund is a "fund
of funds." The term "fund of funds" is typically used to describe
investment companies, such as the Fund, whose principal investment strategy
involves investing in other investment companies, including closed-end funds and
money market mutual funds. Investments in other funds subject the Fund to
additional operating and management fees and expenses. For instance,
investors in the Fund will indirectly bear fees and expenses charged by the
funds in which the Fund invests, in addition to the Fund's direct fees and
expenses. The Fund's performance depends in part upon the performance of
the funds' investment advisor, the strategies and instruments used by the funds,
and the Advisor's ability to select funds and effectively allocate Fund assets
among them.
Control of Closed-End Funds Risk.
Although the Fund and the Advisor will evaluate regularly each closed-end fund
to determine whether its investment program is consistent with the Fund's
investment objective, the Advisor will not have any control over the investments
made by a closed-end fund. The investment advisor to each closed-end fund
may change aspects of its investment strategies at any time. The Advisor
will not have the ability to control or otherwise influence the composition of
the investment portfolio of a closed-end fund.
Fixed Income Securities Risk. When the
closed-end funds in the Fund’s portfolio invest in fixed income securities, the
value of your investment in the Fund will fluctuate with changes in interest
rates. Typically, a rise in interest rates causes a decline in the value of
fixed income securities. In general, the market price of fixed income securities
with longer maturities will increase or decrease more in response to changes in
interest rates than shorter-term securities. Other risk factors include credit
risk (the debtor may default), extension risk (an issuer may exercise its right
to repay principal on a fixed rate obligation later than expected), and
prepayment risk (the debtor may pay its obligation early, reducing the amount of
interest payments). These risks could affect the value of a particular
investment by the Fund, possibly causing the Fund's share price and total return
to be reduced and fluctuate more than other types of investments.
Credit Risk. There is a risk that issuers will not
make payments on fixed income securities held by the closed-end funds, resulting
in losses to the Fund. In addition, the credit quality of fixed income
securities held by the closed-end funds may be lowered if an issuer's financial
condition changes. The issuer of a fixed income security may also default on its
obligations.
Interest Rate Risk. Interest rate risk is the
risk that fixed income prices overall will decline over short or even long
periods of time due to rising interest rates. Securities with longer maturities
and durations tend to be more sensitive to interest rates than securities with
shorter maturities and durations. For example, (a) if interest rates go up by
1.0%, the price of a 4% coupon bond will decrease by approximately 1.0% for a
bond with 1 year to maturity and approximately 4.4% for a bond with 5 years to
maturity and (b) the price of a portfolio with a duration of 5 years would be
expected to fall approximately 5.0% if interest rates rose by 1.0% and a
portfolio with a duration of 2 years would be expected to fall approximately
2.0% if interest rates rose by 1.0%.
Junk Bond Risk. Lower-quality bonds, known as
"high yield" or "junk" bonds, present greater risk than bonds of higher quality,
including an increased risk of default. An economic downturn or period of
rising interest rates could adversely affect the market for these bonds and
reduce a closed-end fund’s ability to sell its bonds. The lack of a liquid
market for these bonds could decrease the Fund's share price.
Prepayment Risk. During periods of declining
interest rates, prepayment of debt securities usually accelerates. Prepayment
may shorten the effective maturities of these securities, reducing their yield
and market value, and the closed-end funds may have to reinvest at a lower
interest rate.
Derivatives Risk. The Fund may invest
indirectly in derivatives through its investments in shares of the closed-end
funds. The closed-end funds may use
derivative instruments, which derive their value from the value of an underlying
security, currency, or index. Derivative instruments involve risks
different from direct investments in the underlying assets, including: imperfect
correlation between the value of the derivative instrument and the underlying
assets; risks of default by the other party to the derivative instrument; risks
that the transactions may result in losses of all or in excess of any gain in
the portfolio positions; and risks that the transactions may not be
liquid.
Pandemic Risk. There is an ongoing global
outbreak of COVID-19, which has spread to over 200 countries and territories,
including the United States. The general uncertainty surrounding the dangers and
impact of COVID-19 has created significant disruption in global supply chains
and economic activity, increasing rates of unemployment and adversely impacting
many industries. The outbreak could have a continued adverse impact on economic
and market conditions and trigger a period of global economic slowdown. The
outbreak of the COVID-19 pandemic has, at times, had, and is expected to
continue to pose a risk of having, a material adverse impact on the Fund’s
market price, NAV and portfolio liquidity among other factors. These impacts
will likely continue to some extent as the outbreak persists and potentially
even longer. The rapid development and fluidity of this situation precludes any
prediction as to the ultimate adverse impact of COVID-19 on economic and market
conditions, and, as a result, present material uncertainty and risk with respect
to the Fund and the performance of its investments. COVID-19 and the current
financial, economic and capital markets environment, and future developments in
these and other areas present uncertainty and risk with respect to the Fund’s
performance, portfolio liquidity, ability to pay distributions and make share
repurchases.
Convertible Securities Risk. Convertible
securities are hybrid securities that have characteristics of both fixed income
and equity securities and are subject to risks associated with both fixed income
and equity securities described below.
Cybersecurity Risk. As part of
its business, the Advisor processes, stores, and transmits large amounts of
electronic information, including information relating to the transactions of
the Fund. The Advisor and the Fund are therefore susceptible to cybersecurity
risk. Cybersecurity failures or breaches of the Fund or its service providers
have the ability to cause disruptions and impact business operations,
potentially resulting in financial losses, the inability of Fund shareholders to
transact business, violations of applicable privacy and other laws, regulatory
fines, penalties, and/or reputational damage. The Fund and its shareholders
could be negatively impacted as a result.
Equity Securities Risk. Fluctuations in the
value of equity securities held by the closed-end funds will cause the NAV of
the Fund to fluctuate. Equity securities may decline in price if the issuer
fails to make anticipated dividend payments. Common stock is subject to greater
dividend risk than preferred stocks or debt instruments of the same issuer. In
addition, equity securities have experienced significantly more volatility in
returns than other asset classes.
o
Preferred Stock Risks. Generally, preferred stockholders have no voting rights
with respect to the issuing company unless certain events occur. In addition,
preferred stock will be subject to greater credit risk than debt instruments of
an issuer and could be subject to interest rate risk like fixed income
securities, as described below. An issuer’s board of directors is generally not
under any obligation to pay a dividend (even if dividends have accrued) and may
suspend payment of dividends on preferred stock at any time. There is also a
risk that the issuer will default and fail to make scheduled dividend payments
on the preferred stock held by the closed-end funds.
Foreign Securities Risk. The Fund may
invest indirectly in foreign securities through its investments in shares of
closed-end funds. Foreign securities involve investment risks different
from those associated with domestic securities. Changes in foreign
economies and political climates are more likely to affect the Fund than
investments in domestic securities. The value of foreign currency
denominated securities or foreign currency contracts is affected by the value of
the local currency relative to the U.S. dollar. There may be less
government supervision of foreign markets, resulting in non-uniform accounting
practices and less publicly available information about issuers of foreign
currency denominated securities. The value of foreign investments may be
affected by changes in exchange control regulations, application of foreign tax
laws (including withholding tax), changes in governmental administration or
economic or monetary policy (in this country or abroad), or changed
circumstances in dealings between nations. In addition, foreign brokerage
commissions, custody fees, and other costs of investing in foreign securities
are generally higher than in the United States. Investments in foreign
issues could be affected by other factors not present in the United States,
including expropriation, armed conflict, confiscatory taxation, and potential
difficulties in enforcing contractual obligations.
General Investment Risks. All investments
in securities and other financial instruments involve a risk of financial
loss. No assurance can be given that the Fund's investment program will be
successful. Investors should carefully review the descriptions of the
Fund's investments and their risks described in this prospectus and the Fund’s
Statement of Additional Information.
Investment Advisor Risk. The Advisor's
ability to choose suitable investments has a significant impact on the ability
of the Fund to achieve its investment objectives. The portfolio managers'
experience is discussed in the section of this prospectus entitled "Management
of the Funds – Investment Advisor."
Quantitative Model Risk. Securities or
other investments selected using quantitative methods may perform differently
from the market as a whole. There can be no assurance that these methodologies
will enable the Fund to achieve its objective.
Leverage Risk. The Fund may leverage or
borrow money from banks to buy securities and pledge its assets in connection
with the borrowing. Use of leverage tends to magnify increases and decreases in
the Fund’s returns and leads to a more volatile share price. The Fund will also
incur borrowing costs in connection with its use of leverage. If the interest
expense of the borrowing is greater than the return on the securities bought,
the use of leverage will decrease the return to shareholders in the Fund.
Leveraging by both the Fund and the underlying closed-end funds, which often
employ leverage, will expose the Fund to a relatively high level of leverage
risk. There can be no assurance that a leveraging strategy will be successful
during any period in which it is employed.
Limited History of Operations Risk. The
Fund is newly formed and has a limited history of operations for investors to
evaluate. Investors bear the risk that the Fund may not grow to or maintain
economically viable size, not be successful in implementing its investment
strategy, and may not employ a successful investment strategy, any of which
could result in the Fund being liquidated at any time without shareholder
approval and/or at a time that may not be favorable for certain shareholders.
Such a liquidation could have negative tax consequences for shareholders.
Loans Risk. Investments in loans may subject
the Fund to heightened credit risks because loans may be highly leveraged and
susceptible to the risks of interest deferral, default, and/or bankruptcy.
Management Style Risk. Different types of
securities tend to shift into and out of favor with investors depending on
market and economic conditions. The returns from the types of investments
purchased by the Fund (e.g., closed-end funds which pay regular periodic cash
distributions) may at times be better or worse than the returns from other types
of funds. Each type of investment tends to go through cycles of performing
better or worse than the market in general. The performance of the Fund
may thus be better or worse than the performance of funds that focus on other
types of investments, or that have a broader investment style.
Market Risk. Market risk refers to the
possibility that the value of securities held by the Fund may decline due to
daily fluctuations in the market. Market prices for securities change
daily as a result of many factors, including developments affecting the
condition of both individual companies and the market in general. The
price of a security may even be affected by factors unrelated to the value or
condition of its issuer, such as changes in interest rates, economic and
political conditions, and general market conditions. The Fund's
performance per share will change daily in response to such factors.
Money Market Mutual Fund Risk. The Fund
may invest in money market mutual funds in order to manage its cash
component. An investment in a money market mutual fund is not insured or
guaranteed by a Federal Deposit Insurance Corporation or any other government
agency. Although such funds seek to preserve the value of the Fund's investment
at $1.00 per share, it is possible to lose money by investing in a money market
mutual fund.
PERFORMANCE
INFORMATION
The
following bar chart and tables provide an indication of the risks of investing
in the Fund by showing changes in the performance from year to year and by
showing how the Fund’s average annual total returns compare to that of a
broad-based securities market index. The Fund’s past performance is not
necessarily an indication of how the Fund will perform in the future. Updated
performance information is available online at
https://fundinfopages.com/MDFIX.
Institutional
Class Shares
Calendar
Year Returns
During
the periods shown in the bar chart above, the Fund’s highest quarterly return
was 11.41% (quarter ended December 31, 2020) and the Fund’s lowest quarterly
return was -9.90% (quarter ended June 30, 2022). The Fund’s year-to-date return
as of June 30, 2023, was 3.88%
Average
Annual Total Returns
Periods
Ended December 31, 2022 (returns with maximum sales charge) |
Past
1 Year |
Since Inception* |
Institutional
Class Shares |
|
|
Before
taxes After taxes on distributions After
taxes on distributions and sale of shares |
-15.84% -18.15% -9.25%
|
6.00% 3.27% 3.82%
|
Bloomberg
U.S. Aggregate Total Return Index |
-13.01% |
-4.79% |
Bloomberg
VLI High Yield Index |
-11.89% |
2.46% |
FT
Taxable Fixed Income CEF Index |
-20.07% |
4.26% |
*The
Institutional Class Shares commenced operations on April 30, 2020.
After-tax
returns are calculated using the historical highest individual federal marginal
income tax rates and do not reflect the impact of state and local taxes.
Actual after-tax returns depend on an investor’s tax situation and may differ
from those shown and are not applicable to investors who hold Fund shares
through tax-deferred arrangements such as a 401(k) plan or an individual
retirement account (IRA). After-tax returns are shown for only one class of
shares and after-tax returns will vary for other classes.
MANAGEMENT
OF THE FUND
Investment Advisor. The Fund’s investment
advisor is Deschutes Portfolio Strategy, LLC, dba Matisse Capital.
Portfolio Managers. The Fund’s portfolio
is managed on a day-to-day basis by Bryn Torkelson
and Eric Boughton, CFA, who have served as portfolio managers of the Fund since
its inception in April 2020. Mr. Torkelson is the founder and Chief
Investment Officer of the Advisor. Mr. Boughton serves as a Portfolio
Manager and Analyst of the Advisor.
For
more information about Purchase and Sale of Fund Shares, Tax Information, and
Financial Intermediary Compensation, please turn to page 20 of the
Prospectus.
The
minimum initial investment is $1,000 and the minimum subsequent investment is
$100. The minimums may be waived or reduced in some cases.
The
Funds’ shares are available for purchase and are redeemable on any business day
through your broker-dealer and directly from the Funds by mail, facsimile,
telephone, and bank wire. Purchase and redemption orders by mail should be sent
to the Matisse Funds, c/o Nottingham Shareholder Services, Post Office Box 4365,
Rocky Mount, North Carolina 27803-0365. Purchase or redemption orders by
facsimile should be transmitted to 919-882-9281. Please call the Funds at
1-800-773-3863 to conduct telephone transactions or to receive wire instructions
for bank wire orders. Investors who wish to redeem Fund shares through a
broker-dealer should contact the broker-dealer directly.
Fund
distributions are generally taxable to you as ordinary income or capital gains,
unless you are investing through a tax deferred arrangement, such as a 401(k)
plan or an individual retirement account (IRA). Distributions on investments
made through tax deferred arrangements will generally be taxed later upon
withdrawal of assets from those accounts.
OTHER
FINANCIAL INTERMEDIARIES
If
you purchase shares of the Funds through a broker-dealer or other financial
intermediary (such as a bank), the Funds, and their related companies, may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Funds over another
investment. Ask your salesperson or visit your financial intermediary’s website
for more information.
The
investment objective for each Fund is listed in the table below. These
investment objectives are not fundamental policies and can be changed without
shareholder approval by a vote of the Board. Shareholders will receive 60 days’
prior written notice before a change to an investment objective takes place.
There is no guarantee that the Funds will achieve its investment
objective.
The
Matisse Discounted Closed-End Fund Strategy’s investment policy to invest, under
normal circumstances, at least 80% of net assets, plus borrowings for investment
purposes, in discounted closed-end funds may be changed without shareholder
approval upon 60-days’ prior notice to shareholders. The Matisse Discounted Bond
CEF Strategy’s investment policy to invest, under normal circumstances, at least
80% of net assets, plus borrowings for investment purposes, in discounted
unaffiliated closed-end funds that primarily invest in bonds may be changed
without shareholder approval upon 60-days’ prior notice to shareholders,
Fund |
Investment
Objective |
Matisse
Discounted Closed-End Fund Strategy |
Long-term
capital appreciation and income. |
Matisse
Discounted Bond CEF Strategy |
Total
return with an emphasis on providing current
income. |
Matisse
Discounted Closed-End Fund Strategy
The
Fund is a “fund of funds” that seeks to achieve its investment objectives
principally through investments in unaffiliated closed-end funds which pay
regular periodic cash distributions, the interests of which typically trade at
substantial discounts relative to their underlying net asset values. The Fund’s
Advisor believes this approach is capable of generating capital appreciation and
income.
As
a matter of investment policy, the Fund will invest, under normal circumstances,
at least 80% of net assets, plus borrowings for investment purposes, in
discounted closed-end funds. For purposes of this policy, a closed-end
fund is considered discounted when, in the Advisor’s determination, the fund’s
market value is less than the value of its underlying portfolio. In
addition, the closed-end funds may be domestic or foreign for purposes of this
policy.
Closed-end
funds are investment companies that, unlike an open-end mutual fund, do not
typically issue redeemable shares. Instead, a fixed number of shares trade
on a secondary market, such as the New York Stock Exchange or the NASDAQ Stock
Market. The shares of closed-end funds frequently trade at either a
premium or discount relative to their underlying net asset values. The
Fund will invest in closed-end funds that are trading at substantial discounts
relative to the underlying net asset values and that the Advisor feels are best
positioned to narrow the spread between the underlying net asset value of the
fund and the share price. A closed-end fund is considered to be trading at
a substantial discount when, in the Advisor’s determination, the fund’s market
value is significantly less than the value of its underlying portfolio.
The Advisor believes that these investments will allow the Fund to profit from
the capital appreciation achieved when such spreads decrease and the market
prices of the shares move closer to the net asset values, as well as from the
capital appreciation achieved when general market conditions increase share
prices, and the income generated from closed-end fund distributions.
The
Advisor intends to construct a diversified portfolio that generates regular cash
income. Under normal market conditions, the Fund’s portfolio will hold
shares of approximately 30 to 90 unaffiliated closed-end funds, along with cash,
cash equivalents, and other types of securities in which the Fund may make
limited investments. The closed-end funds in which the Fund invests may
hold either equity securities or fixed income securities. In addition, the
closed-end funds may invest in foreign securities and American Depository
Receipts (ADRs); may invest in derivative instruments; and may utilize leverage
to acquire their underlying portfolio investments.
In
selecting closed-end funds for the portfolio, the Advisor utilizes a proprietary
research process that attempts to forecast whether the market discount on a
closed-end fund will increase or decrease. The process incorporates
quantitative information about the fund’s discount, dividends, management,
expenses, portfolio, liquidity, and historical pricing. An analysis based
on the same process determines when a closed-end fund should be sold.
The
Fund’s direct investments may be in both domestic and foreign securities.
(The Advisor deems a security to be foreign if a U.S. market is not the
principal trading market.) Foreign securities held by the Fund will
principally be closed-end funds listed and traded in Canada and the United
Kingdom. Such investments will be selected for investment and sold using
the same proprietary research process for domestic closed-end funds, although
with adjustments for local practices and regulations. Investments in
foreign securities may be made directly in foreign markets, including emerging
markets, as well as indirectly through other investment companies and
ADRs. To the extent the Fund invests in ADRs, it may invest in ADRs
sponsored by the issuers of the underlying securities or ADRs organized
independently of the issuers.
Based
upon the Advisor’s view of available investment opportunities, as well as for
cash management purposes, the Fund’s portfolio will also include cash and cash
equivalents that provide a temporary pool of liquidity for future investments,
redemptions, and other Fund expenses. Under normal circumstances, the Fund
may hold up to 20% of net assets, plus borrowings for investment purposes, in
cash and cash equivalents. This portion of the Fund’s portfolio will
principally be invested in money market mutual funds.
To
take advantage of opportunities to invest, the Fund may borrow money for
investment purposes (leverage). Any borrowing by the Fund will be subject
to the limitations set forth in the 1940 Act and relevant interpretive positions
of the staff of the SEC, which presently allow the Fund to borrow (including
pledging, mortgaging or hypothecating assets) in an amount up to one-third of
its total assets, which include assets purchased with borrowed money.
The
Fund’s principal investment strategies are discussed in the “Summary” section.
The Fund’s principal investment strategies may be changed by the Fund’s Board
without shareholder approval unless otherwise noted in this prospectus or the
Fund’s Statement of Additional Information.
The
Fund is a “fund of funds” that seeks to achieve its investment objective
principally through investments in closed-end funds that are registered under
the 1940 Act. The closed-end funds invest primarily in bonds; pay regular
periodic cash distributions; and trade at substantial discounts relative to the
underlying NAVs. The Advisor believes this approach is capable of generating
high total return and attractive income relative to many other fixed income
investments.
As
a matter of investment policy, the Fund will invest, under normal circumstances,
at least 80% of its net assets, plus any borrowing for investment purposes, in
discounted closed-end funds that primarily invest in bonds. For purposes of this
policy, a closed-end fund is considered discounted when, in the Advisor’s
determination, the closed-end fund’s market value is less than the value of its
underlying portfolio and a closed-end fund is considered to invest primarily in
bonds when, under normal circumstances, at least 80% of its net assets, plus any
borrowing for investment purposes, are invested in bonds. This policy may be
changed without shareholder approval upon 60-days’ prior notice to
shareholders.
Closed-end
funds are investment companies that, unlike an open-end mutual fund, do not
typically issue redeemable shares. Instead, a fixed number of shares trade
on a secondary market, such as the New York Stock Exchange or the NASDAQ Stock
Market. The shares of closed-end funds frequently trade at either a premium or
discount relative to their underlying NAVs. The Advisor believes that these
investments will allow the Fund to profit from the capital appreciation achieved
when such spreads decrease and the market prices of the shares move closer to
the such fund’s NAVs, as well as from the capital appreciation achieved when
general market conditions increase share prices, and from the income generated
from closed-end fund distributions.
The
Advisor intends to construct a diversified portfolio that generates regular
income. Under normal market conditions, the Fund’s portfolio will hold shares of
approximately 30 to 90 closed-end funds, along with cash, cash equivalents, and
other types of securities in which the Fund may make limited investments. Each
closed-end fund will hold primarily bonds. The bonds held by the closed-end
funds may be below investment grade (also known as “junk” bonds) but will be
rated B or higher by Standard & Poor’s Rating Services or the equivalent by
Moody’s Investor Service, Inc., or Fitch, Inc., and may be of any maturity or
duration. There is no limit to the amount of the Fund’s assets that may be
invested in below investment grade bonds through its investments in closed-end
funds. While the Advisor generally expects a majority of the Fund’s assets to be
invested in investment grade bonds (rated BBB or higher by Standard & Poor’s
Rating Services or the equivalent by Moody’s Investor Service, Inc., or Fitch,
Inc.), when discounts are attractive, up to two-thirds of the portfolio may be
invested in below-investment grade bonds through its investments in closed-end
funds. In addition, the closed-end funds will invest in loans, equity securities
(preferred and convertible securities), fixed-income securities, foreign income
securities, and derivative instruments for both investment and hedging purposes,
and will utilize leverage to acquire their underlying portfolio
investments.
In
selecting closed-end funds for the portfolio, the Advisor utilizes a proprietary
research process that attempts to forecast whether the market discount on a
closed-end fund will increase or decrease. The process incorporates
quantitative information about each closed-end fund’s discount, dividends,
management, expenses, portfolio, liquidity, and historical pricing. If the
market discount is predicted, in the next 3 to 12 months, to decrease for a
closed-end fund, the Fund typically purchases or increases its position in the
security. If the market discount is predicted, in the next 3 to 12 months, to
increase for a closed-end fund, the Fund typically sells or reduces its position
in the security.
The
Fund’s direct investments will be exclusively in U.S.-traded and U.S.-registered
securities; however, the closed-end funds will own foreign-registered and
foreign-traded securities.
Under
normal circumstances, the Fund may hold up to 20% of its net assets in cash or
cash equivalents. Cash equivalents, which can include money market funds, are
instruments or investments of such high liquidity and safety that they are
considered almost as safe as cash. Based upon the Advisor’s view of
available investment opportunities, as well as for cash management purposes, the
Fund’s portfolio will also include cash and cash equivalents that provide a
temporary pool of liquidity for future investments, redemptions, and other Fund
expenses. The Fund actively trades its portfolio investments, which may
lead to higher transaction costs that may affect the Fund’s performance.
To
take advantage of opportunities to invest, the Fund may borrow money for
investment purposes (leverage). Any borrowing by the Fund will be subject to the
limitations set forth in Act, and relevant interpretive positions of the staff
of the SEC, which presently allows the Fund to borrow (including pledging,
mortgaging, or hypothecating assets) in an amount up to one-third of its total
assets, which include assets purchased with borrowed money.
The
loss of your money is a principal risk of investing in the Funds.
Investments in the Funds are subject to investment risks, including the possible
loss of some or the entire principal amount invested. There can be no
assurance that the Funds will be successful in meeting its investment
objective. Generally, the Funds will be subject to the following principal
risks:
|
Matisse
Discounted Closed-
End
Fund Strategy |
Matisse
Discounted Bond CEF
Strategy |
Closed-End
Fund Risk |
X |
X |
Control
of Closed-End Funds Risk |
X |
X |
Convertible
Securities Risk |
|
X |
Credit
Risk |
|
X |
|
Matisse
Discounted Closed-
End
Fund Strategy |
Matisse
Discounted Bond CEF
Strategy |
Cybersecurity
Risk |
X |
X |
Derivatives
Risk |
|
X |
Equity
Securities Risk |
X |
X |
Fixed
Income Securities Risk |
X |
X |
Foreign
Securities Risk |
X |
X |
Fund
of Funds Risk |
X |
X |
General
Investment Risks |
X |
X |
Interest
Rate Risk |
|
X |
Investment
Advisor Risk |
X |
X |
Junk
Bond Risk |
|
X |
Leverage
Risk |
X |
X |
Limited
History of Operations Risk |
|
X |
Loans
Risk |
X |
X |
Management
Style Risk |
X |
X |
Market
Risk |
X |
X |
Money
Market Mutual Fund Risk |
X |
X |
Pandemic
Risk |
X |
X |
Prepayment
Risk |
|
X |
Quantitative
Model Risk |
X |
X |
Closed-End Fund Risk. Closed-end funds
involve investment risks different from those associated with other investment
companies. First, the shares of closed-end funds frequently trade at a premium
or discount relative to their net asset value. When the Fund purchases
shares of a closed-end fund at a discount to its net asset value, there can be
no assurance that the discount will decrease, and it is possible that the
discount may increase and affect whether the Fund will a realize gain or loss on
the investment. Second, many closed-end funds use leverage, or borrowed
money, to try to increase returns. Leverage is a speculative technique and its
use by a closed-end fund entails greater risk and leads to a more volatile share
price. If a close-end fund uses leverage, increases and decreases in the
value of its share price will be magnified. The closed-end fund will also
have to pay interest or dividends on its leverage, reducing the closed-end
fund's return. Third, many closed-end funds have a policy of distributing
a fixed percentage of net assets regardless of the fund’s actual interest income
and capital gains. Consequently, distributions by a closed-end fund may
include a return of capital, which would reduce the fund’s net asset value and
its earnings capacity. Finally, closed-end funds are allowed to invest in
a greater amount of illiquid securities than open-end mutual funds.
Investments in illiquid securities pose risks related to uncertainty in
valuations, volatile market prices, and limitations on resale that may have an
adverse effect on the ability of the fund to dispose of the securities promptly
or at reasonable prices.
Control of Closed-End Funds Risk.
Although the Fund and the Advisor will evaluate regularly each closed-end fund
in which the Fund invests to determine whether its investment program is
consistent with the Fund’s investment objective, the Advisor will not have any
control over the investments made by a closed-end fund. The investment
advisor to each closed-end fund may change aspects of its investment strategies
at any time. The Advisor will not have the ability to control or otherwise
influence the composition of the investment portfolio of a closed-end
fund.
Convertible Securities Risk. Convertible
securities subject the Fund to the risks associated with both fixed-income
securities and equity securities. The risks of fixed income securities and
equity securities are described below. If a convertible security’s investment
value is greater than its conversion value, its price will likely increase when
interest rates fall and decrease when interest rates rise. If the
conversion value exceeds the investment value, the price of the convertible
security will tend to fluctuate directly with the price of the underlying equity
security.
Credit Risk. Credit risk is the possibility
that an issuer may default on a security by failing to pay interest or principal
when due. If an issuer defaults, a closed-end fund will lose money. Many fixed
income securities receive credit ratings from NRSROs, which assign ratings to
securities by assessing the likelihood of issuer default. Lower credit ratings
correspond to higher credit risk. Fixed income securities generally compensate
for greater credit risk by paying interest at a higher rate. The difference
between the yield of a security and the yield of a U.S. Treasury security with a
comparable maturity (the spread) measures the additional interest paid for risk.
Spreads may increase generally in response to adverse economic or market
conditions. A security’s spread may also increase if the security’s rating is
lowered or the security is perceived to have an increased credit risk. An
increase in the spread will cause the price of the security to decline.
Cybersecurity Risk. As part of its business,
the Advisor processes, stores, and transmits large amounts of electronic
information, including information relating to the transactions of the Fund. The
Advisor and the Fund are therefore susceptible to cybersecurity risk.
Cyber-attacks include, among other behaviors, stealing or corrupting data
maintained online or digitally, denial of service attacks on websites, the
unauthorized release of confidential information and causing operational
disruption. Successful cyber-attacks against, or security breakdowns of, the
Fund or its advisor, custodians, fund accountant, fund administrator, transfer
agent, pricing vendors and/or other third-party service providers may adversely
impact the Fund and its shareholders. For instance, cyber-attacks may interfere
with the processing of shareholder transactions, impact the Fund’s ability to
calculate its NAV, cause the release of private shareholder information or
confidential Fund information, impede trading, cause reputational damage, and
subject the Fund to regulatory fines, penalties or financial losses,
reimbursement or other compensation costs, and/or additional compliance costs.
The Fund also may incur substantial costs for cybersecurity risk management in
order to guard against any cyber incidents in the future. The Fund and its
shareholders could be negatively impacted as a result.
Derivatives Risk. The closed-end funds
held by the Fund may use derivative instruments, which derive their value from
the value of an underlying security, currency, or index. The closed-end
fund’s use of derivatives may involve risks different from, or greater than, the
risks associated with investing in more traditional investments, such as stocks
and bonds. Derivatives can be highly complex and may perform in ways
unanticipated by the closed-end fund’s investment advisor and may not be
available at the time or price desired. The closed-end funds’ use of derivatives
involves the risk that the other party to the derivative contract will fail to
make required payments or otherwise to comply with the terms of the contract. In
the event the counterparty to a derivative instrument becomes insolvent, the
closed-end fund potentially could lose all or a large portion of its investment
in the derivative instrument. Derivatives transactions can create investment
leverage and may be highly volatile, and the closed-end fund could lose more
than the amount it invests. In addition, derivatives transactions can increase
the closed-end fund’s transaction costs. Derivatives may be difficult to value
and highly illiquid, and the closed-end fund may not be able to close out or
sell a derivative position at a particular time or at an anticipated price.
Derivative positions may also be improperly executed or constructed. Use of
derivatives may affect the amount the timing and the character of distributions
to shareholders and, therefore, may increase the amount of taxes payable by
shareholders.
When
a closed-end fund enters into a derivatives transaction as a substitute for or
alternative to a direct cash investment, the closed-end fund is exposed to the
risk that the derivative transaction may not provide a return that corresponds
precisely or at all with that of the underlying investment.
The
regulation of the derivatives markets has increased over the past several years
and additional future regulation of the derivatives markets may make derivatives
more costly, may limit the availability or liquidity of derivatives, or may
otherwise adversely affect the value or performance of derivatives. Any such
adverse developments could impair the effectiveness of a closed-end fund’s
derivatives transactions and cause a closed-end fund to lose value. For
instance, in December 2015, the SEC proposed a new rule that would change the
regulation of the use of derivatives by registered investment companies. If
adopted as proposed, these regulations could significantly limit or impact a
closed-end fund’s ability to invest in derivatives and other instruments, limit
a closed-end fund’s ability to employ certain strategies that use derivatives,
and adversely affect a closed-end fund’s performance, efficiency in implementing
its strategy, liquidity and ability to pursue its investment objective.
Equity Securities Risk. Fluctuations in the
value of equity securities will cause the NAV of the Fund to fluctuate. Equity
securities may decline in price if the issuer fails to make anticipated dividend
payments. Common stock is subject to greater dividend risk than preferred stocks
or debt instruments of the same issuer. In addition, equity securities have
experienced significantly more volatility in returns than other asset
classes.
o
Preferred Stock Risks. Generally, preferred stockholders have no voting
rights with respect to the issuing company unless certain events occur. In
addition, preferred stock will be subject to greater credit risk than debt
instruments of an issuer and could be subject to interest rate risk like fixed
income securities, as described below. An issuer’s board of directors is
generally not under any obligation to pay a dividend (even if dividends have
accrued) and may suspend payment of dividends on preferred stock at any time.
There is also a risk that the issuer will default and fail to make scheduled
dividend payments on the preferred stock held by the closed-end funds.
Fixed-Income Securities Risk. Fixed
income risk factors include credit risk (the debtor may default) and prepayment
risk (the debtor may pay its obligation early or later than expected,
potentially reducing the amount of interest payments or extending time to
principal repayment). These risks could affect the value of a particular
investment possibly causing the Fund's share price and total return to be
reduced and fluctuate more than other types of investments. When the
closed-end fund invests in fixed income securities the value of your investment
in the Fund will fluctuate with changes in interest rates. Typically, a
rise in interest rates causes a decline in the value of fixed income
securities. In general, the market price of debt securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. If the U.S. Federal Reserve’s Federal Open
Market Committee raises the federal funds interest rate target, interest rates
across the U.S. financial system may rise. However, the magnitude of rate
changes across maturities and borrower sectors is uncertain. Rising rates may
decrease liquidity and increase volatility, which may make portfolio management
more difficult and costly to the Fund and its shareholders. Additionally,
default risk increases if issuers must borrow at higher rates. Generally, these
changing market conditions may cause the Fund’s share price to fluctuate or
decline more than other types of investments.
Foreign Securities Risk. The Fund may
invest in foreign securities. Foreign securities involve investment risks
different from those associated with domestic securities. Changes in
foreign economies and political climates are more likely to affect the Fund than
investments in domestic securities. The value of foreign currency
denominated securities or foreign currency contracts is affected by the value of
the local currency relative to the U.S. dollar. There may be less
government supervision of foreign markets, resulting in non-uniform accounting
practices and less publicly available information about issuers of foreign
currency denominated securities. The value of foreign investments may be
affected by changes in exchange control regulations, application of foreign tax
laws (including withholding tax), changes in governmental administration or
economic or monetary policy (in this country or abroad), or changed
circumstances in dealings between nations. In addition, foreign brokerage
commissions, custody fees, and other costs of investing in foreign securities
are generally higher than in the United States. Investments in foreign
issues could be affected by other factors not present in the United States,
including expropriation, armed conflict, confiscatory taxation, and potential
difficulties in enforcing contractual obligations.
o |
ADR
Risk. ADRs may be subject to some of the same risks as direct investments
in foreign companies, which includes international trade, currency,
political, regulator, and diplomatic risks. In a sponsored ADR
arrangement, the foreign issuer assumes the obligation to pay some or all
of the depository’s transaction fees. Under an unsponsored ADR
arrangement, the foreign issuer assumes no obligations and the
depository’s transaction fees are paid directly by the ADR holders.
Because unsponsored ADR arrangements are organized independently and
without the cooperation of the issuer of the underlying securities,
available information concerning the foreign issuer may not be as current
as for sponsored ADRs and voting rights with respect to the deposited
securities are not passed through. |
Fund of Funds Risk. The Fund is a “fund
of funds.” The term “fund of funds” is typically used to describe
investment companies, such as the Fund, whose principal investment strategy
involves investing in other investment companies, including closed-end funds and
money market mutual funds. Investments in other funds subject the Fund to
additional operating and management fees and expenses. For instance,
investors in the Fund will indirectly bear fees and expenses charged by the
funds in which the Fund invests, in addition to the Fund’s direct fees and
expenses. The Fund’s performance depends in
part upon the performance of the funds’ investment advisor, the strategies and
instruments used by the funds, and the Advisor's ability to select funds and
effectively allocate Fund assets among them.
General Investment Risks. All investments
in securities and other financial instruments involve a risk of financial
loss. No assurance can be given that the Fund's investment program will be
successful. Investors should carefully review the descriptions of the
Fund's investments and their risks described in this prospectus and the Fund’s
Statement of Additional Information.
Interest Rate Risk. Interest rate risk is the
risk that fixed income prices overall will decline over short or even long
periods of time due to rising interest rates. Securities with longer maturities
and durations tend to be more sensitive to interest rates than securities with
shorter maturities and durations. For example, (a) if interest rates go up by
1.0%, the price of a 4% coupon bond will decrease by approximately 1.0% for a
bond with 1 year to maturity and approximately 4.4% for a bond with 5 years to
maturity and (b) the price of a portfolio with a duration of 5 years would be
expected to fall approximately 5.0% if interest rates rose by 1.0% and a
portfolio with a duration of 2 years would be expected to fall approximately
2.0% if interest rates rose by 1.0%.
Investment Advisor Risk. The Advisor’s
ability to choose suitable investments has a significant impact on the ability
of the Fund to achieve its investment objectives.
Junk Bond Risk. Lower-quality bonds, known as
"high yield" or "junk" bonds, present a significant risk for loss of principal
and interest. These bonds offer the potential for higher return, but also
involve greater risk than bonds of higher quality, including an increased
possibility that the bond's issuer, obligor, or guarantor may not be able to
make its payments of interest and principal (credit quality risk). If that
happens, the value of the bond may decrease, the Fund's share price may
decrease, and its income distribution may be reduced. An economic downturn
or period of rising interest rates (interest rate risk) could adversely affect
the market for these bonds and reduce a closed-end fund’s ability to sell its
bonds (liquidity risk). The lack of a liquid market for these bonds could
decrease the Fund's share price.
Leverage Risk. The Fund may leverage or
borrow money from banks to buy securities and pledge its assets in connection
with the borrowing. Use of leverage tends to magnify increases and decreases in the Fund’s
returns and leads to a more volatile share
price. The Fund will also incur borrowing costs in connection with
its use of leverage. If the interest expense of the borrowing is greater
than the return on the securities bought, the use of leverage will decrease the
return to shareholders in the Fund. Leveraging by both the Fund and the
underlying closed-end funds, which often employ leverage, will expose the Fund
to a relatively high level of leverage risk. There can be no assurance
that a leveraging strategy will be successful during any period in which it is
employed.
Limited History of Operations Risk. The
Fund has a limited history of operations for investors to evaluate.
Loans Risk. Investments in loans may subject the Fund
to heightened credit risks because loans may be highly leveraged and susceptible
to the risks of interest deferral, default and/or bankruptcy. An economic
downturn would generally lead to a higher non-payment rate, and a loan may lose
significant market value before a default occurs. Moreover, any specific
collateral used to secure a collateralized loan may decline in value or become
illiquid, which would adversely affect the loan’s value. Unlike the securities
markets, there is no central clearinghouse for loan trades and the loan market
has not established enforceable settlement standards or remedies for failure to
settle. Therefore, portfolio transactions in loans may have uncertain settlement
time periods.
Management Style Risk. Different types of
securities tend to shift into and out of favor with investors depending on
market and economic conditions. The returns from the types of investments
purchased by the Fund (e.g., closed-end funds which pay regular periodic cash
distributions) may at times be better or worse than the returns from other types
of funds. Each type of investment tends to go through cycles of performing
better or worse than the market in general. The performance of the Fund
may thus be better or worse than the performance of funds that focus on other
types of investments, or that have a broader investment style.
Market Risk. Market risk refers to the
possibility that the value of securities held by the Fund may decline due to
daily fluctuations in the market. Market prices for securities change
daily as a result of many factors, including developments affecting the
condition of both individual companies and the market in general. The
price of a security may even be affected by factors unrelated to the value or
condition of its issuer, such as changes in interest rates, economic and
political conditions, and general market conditions. The Fund’s
performance per share will change daily in response to such factors.
Money Market Mutual Fund Risk. The Fund
may invest in money market mutual funds in order to manage its cash
component. An investment in a money market mutual fund is not insured or
guaranteed by a Federal Deposit Insurance Corporation or any other government
agency. Although such funds seek to preserve the value of the Fund’s investment
at $1.00 per share, it is possible to lose money by investing in a money market
mutual fund.
Pandemic Risk. There is an ongoing global
outbreak of COVID-19, which has spread to over 200 countries and territories,
including the United States. The general uncertainty surrounding the dangers and
impact of COVID-19 has created significant disruption in global supply chains
and economic activity, increasing rates of unemployment and adversely impacting
many industries. The outbreak could have a continued adverse impact on economic
and market conditions and trigger a period of global economic slowdown. The
outbreak of the COVID-19 pandemic has, at times, had, and is expected to
continue to pose a risk of having, a material adverse impact on the Fund’s
market price, NAV and portfolio liquidity among other factors. These impacts
will likely continue to some extent as the outbreak persists and potentially
even longer. The rapid development and fluidity of this situation precludes any
prediction as to the ultimate adverse impact of COVID-19 on economic and market
conditions, and, as a result, present material uncertainty and risk with respect
to the Fund and the performance of its investments. COVID-19 and the current
financial, economic and capital markets environment, and future developments in
these and other areas present uncertainty and risk with respect to the Fund’s
performance, portfolio liquidity, ability to pay distributions and make share
repurchases.
Prepayment Risk. Prepayment risk occurs
when the issuer of a security can repay principal prior to the security’s
maturity. This is more likely to occur when interest rates fall. Prepayment may
shorten the effective maturities of these securities, reducing their yield and
market value. The prepayment of principal can adversely affect the return of the
closed-end fund since it may have to reinvest the proceeds in securities that
pay a lower interest rate.
Quantitative Model Risk. Securities or
other investments selected using quantitative methods may perform differently
from the market as a whole. There can be no assurance that these methodologies
will enable the Fund to achieve its objective.
An
investment in the Fund should not be considered a complete investment
program. Whether the Fund is an appropriate investment for an investor
will depend largely on his or her financial resources and individual investment
goals and objectives. Investors who engage in short-term trading or other
speculative strategies and styles will not find the Fund to be an appropriate
investment vehicle if they want to invest in the Fund for a short period of
time.
U.S. Government Securities. Closed-end
funds owned by the Fund may invest in U.S. Government securities, defined to be
(i) U.S. Treasury notes, U.S. Treasury bonds, U.S. Treasury bills, and other
U.S. Government obligations; (ii) obligations of the Government National
Mortgage Association (GNMA) and other U.S. Government sponsored entities that
are guaranteed by the U.S. Government; and (iii) obligations of the Federal
National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation
(FHLMC), Federal Housing Administration (FHA), Federal Farm Credit Bank (FFCB),
Federal Home Loan Bank (FHLB), Student Loan Marketing Association (SLMA), The
Tennessee Valley Authority (TVA) and other U.S. Government authorities,
agencies, and instrumentalities. While obligations of some U.S. Government
sponsored entities are supported by the full faith and credit of the U.S.
Government (e.g. GNMA), others are not. No assurance can be given that the
U.S. Government will provide financial support to U.S. Government agencies or
instrumentalities in the future since it is not obligated to do so by law.
The guarantee of the U.S. Government does not extend to the yield or value of
the Fund's shares.
Debentures. A debenture is long-term,
unsecured debt instrument backed only by the integrity of the borrower, not by
collateral, and documented by an indenture. Governments often issue
debentures, in part because they generally cannot guarantee debt with assets
(government assets are public property). The primary risk with this type
of investment is that the issuer will default or go into bankruptcy. As an
unsecured creditor, in the event of default or bankruptcy, the holder of a
debenture does not have a claim against any specific assets of the issuing firm,
so the investor will only be paid from the issuer's assets after the secured
creditors have been paid. A closed-end fund owned by the Fund may invest
in all types of debentures, including corporate and government debentures.
A
full description of the Funds’ policies and procedures with respect to the
disclosure of the Funds’ portfolio securities is available in the Funds’
Statement of Addition Information.
The
Funds may, from time to time, take temporary defensive positions that are
inconsistent with the Funds’ principal investment strategies in an attempt to
respond to adverse market, economic, political, or other conditions.
During such an unusual set of circumstances, the Funds may hold up to 100% of
its portfolio in cash or cash equivalent positions. When the Funds take a
temporary defensive position, the Funds may not be able to achieve their
investment objectives.
The
Funds’ investment advisor is Deschutes Portfolio Strategy, LLC, dba Matisse
Capital, located at 15350 SW Sequoia Parkway, Suite 260, Portland, Oregon 97224.
In addition to the Funds and another series of the Trust, the Advisor also
provides investment advice to individuals through managed accounts, as well as
corporate retirement plans, endowments, foundations and family offices. As of
March 31, 2023, the Advisor had approximately $1.3 billion in assets under
management. Pursuant to the investment advisory agreements with the Trust, the
Advisor provides guidance and policy direction in connection with its daily
management of the Funds’ assets. The Advisor is also responsible for the
selection of broker-dealers for executing portfolio transactions, subject to the
brokerage policies established by the Trustees, and the provision of certain
executive personnel to the Funds.
Advisor Compensation. As full
compensation for the investment advisory services provided to each Fund, the
Advisor receives monthly compensation based on the Fund’s average daily net
assets at the annual rates set forth below. For the fiscal year ended March 31,
2023, the Advisor earned advisory fees after waivers and reimbursements in the
amounts set forth below.
Fund |
Management Fee |
Net Advisory Fee |
|
0.99% |
0.65% |
Matisse
Discounted Bond CEF Strategy |
0.70% |
0.42% |
Expense Limitation Agreement. In the
interest of limiting expenses of the Funds, the Advisor has entered into the
Expense Limitation Agreement with the Trust, pursuant to which the Advisor has
agreed to waive or limit its management fees and to assume other expenses so
that the total annual operating expenses of the Funds (exclusive of (i) any
front-end or contingent deferred loads; (ii) brokerage fees and commissions;
(iii) acquired fund fees and expenses; (iv) fees and expenses associated with
investments in other collective investment vehicles or derivative instruments
(including, for example, option and swap fees and expenses); (v) borrowing costs
(such as interest and dividend expense on securities sold short); (vi) taxes and
(vii) extraordinary expenses, such as litigation expenses (which may include
indemnification of Fund officers and Trustees and contractual indemnification of
Fund service providers (other than the Advisor)) to not more than the amounts
set forth in the table below of the average daily net assets of the Funds. Net
annual operating expenses for the Funds may exceed these limits to the extent
that it incurs expenses enumerated above as exclusions. The Expense Limitation
Agreement runs through July 31, 2024, and may be terminated by the Board at any
time. The Advisor cannot recoup from the Funds any amounts paid by the Advisor
under the Expense Limitation Agreement.
Operating
Expense Limit
|
Fund |
Expense
Cap |
Matisse
Discounted Closed-End Fund Strategy |
1.25% |
Matisse
Discounted Bond CEF Strategy |
0.99% |
Disclosure Regarding Approval of Investment Advisory
Contracts. A discussion regarding the Trustees’ basis for approving
the investment advisory contract for the Funds can be found in each Fund’s
semi-annual report to shareholders for the period ended September 30, 2022. You
may obtain a copy of the annual and semi-annual reports, free of charge, upon
request to the Funds.
Portfolio Managers. Each
Fund’s portfolio is managed on a day-to-day basis by Bryn Torkelson and Eric
Boughton, CFA.
Mr.
Torkelson is the founder and has been the chief investment officer of the
Advisor since 2010. He has been in the investment business since 1981. He
began his career with Smith Barney, and founded the Advisor’s predecessor,
Deschutes Investment Advisors, Inc., in 1997, and the Advisor in 2010. Mr.
Torkelson received a Bachelor of Science in Finance from the University of
Oregon.
Mr.
Boughton has served as a portfolio manager and analyst and has been with the
Advisor since 2010. He provides analytical investment support to the firm and
direct portfolio management to separately managed accounts. Mr. Boughton
received a Bachelor of Science in Mathematics, Applied Analysis, from the
University of Houston, College of Natural Science & Mathematics.
The
Funds’ Statement of Additional Information provides information about each
portfolio manager’s compensation, other accounts managed by each portfolio
manager, and each portfolio manager’s ownership of shares of the Funds.
Capital
Investment Group, Inc. (“Distributor”), is the principal underwriter and
distributor of the Funds’ shares and serves as the Funds’ exclusive agent for
the distribution of the Funds’ shares. The Distributor may sell the Funds’
shares to or through qualified securities dealers or others.
Determining the Funds’ Net Asset Value.
The price at which you purchase or redeem shares is based on the next
calculation of net asset value (“NAV”) after an order is received by the Funds
or their designated agent in good form. An order is considered to be in
good form if it includes all necessary information and documentation related to
a purchase or redemption request and, if applicable, payment in full of the
purchase amount. A Fund’s NAV per share is calculated by dividing the
value of the Fund’s total assets, less liabilities (including Fund expenses,
which are accrued daily), by the total number of outstanding shares of the Fund.
To the extent that a Fund holds portfolio securities that are primarily listed
on foreign exchanges that trade on weekends or other days when that Fund does
not price shares, the NAV of a Fund’s shares may change on days when
shareholders will not be able to purchase or redeem the Fund’s shares. A
Fund’s NAV per share is determined at the close of regular trading on the New
York Stock Exchange (“NYSE”) on the days the NYSE is open for trading. This is
normally 4:00 p.m. Eastern time. A Fund’s shares will not be priced on the days
on which the NYSE is closed for trading. In addition, a Fund’s shares will not
be priced on the holidays listed in the SAI. See the section titled “Net Asset
Value” in the SAI for more detail.
The
pricing and valuation of portfolio securities is determined in good faith the
Board’s Valuation Designee, the Advisor, in accordance with the Funds’ policies
and procedures established by, and under the direction of, the Board.
In determining the value of the Funds’ total
assets, portfolio securities are generally calculated at market value by
quotations from the primary market in which they are traded. Instruments with
maturities of 60 days or less are valued at amortized cost, which approximates
market value. The Funds normally use
third-party pricing services to obtain market quotations. Securities and assets
for which representative market quotations are not readily available or which
cannot be accurately valued using the Funds’ normal pricing procedures are valued at fair value
in good faith by either a valuation committee or the Advisor in
accordance with procedures established by, and under the supervision of, the
Board. Fair value pricing may be used,
for example, in situations where (i) an exchange-traded portfolio security is so
thinly traded that there have been no transactions for that security over an
extended period of time or the validity of a market quotation received is
questionable; (ii) the exchange on which the portfolio security is principally
traded closes early; (iii) private securities; or (iv) trading of the portfolio
security is halted during the day and does not resume prior to the Fund’s NAV
calculation.
Pursuant
to the policies adopted by the Board, the Advisor is responsible for determining
if there is a need for fair value pricing.
The Advisor is responsible for notifying the Board (or the Funds’
valuation committee) when it believes that fair value pricing is required for a
particular security. The Funds’
policies regarding fair value pricing are intended to result in a calculation of
the Funds’ NAV that fairly reflects portfolio security values as of the time of
pricing. A portfolio security’s “fair value”
price may differ from the price next available for that portfolio security using
the Fund’s normal pricing procedures and the
fair value price may differ from the price at which the security may ultimately
be traded or sold. If such fair value price differs from the price
that would have been determined using the Funds’ normal pricing procedures, a
shareholder may receive more or less proceeds or shares from redemptions or
purchases of Fund shares, respectively, than a shareholder would have otherwise
received if the security were priced using the Funds’ normal pricing
procedures. The performance of the Funds may
also be affected if a portfolio security’s fair value price were to differ from
the security’s price using the Funds’ normal pricing procedures. To the extent the Funds invest in other
open-end investment companies that are registered under the 1940 Act, the Fund’s
NAV calculations are based upon the NAV reported by such registered open-end
investment companies, and the prospectuses for these companies explain the
circumstances under which they will use fair value pricing and the effects of
using fair value pricing.
Other Matters. Purchases and redemptions
of shares by the same shareholder on the same day will be netted for the
Funds.
Certain
financial intermediaries have agreements with the Funds that allow them to enter
purchase or redemption orders on behalf of clients and customers. These orders
will be priced at the NAV next computed after the orders are received by the
financial intermediary, subject to the order being in good form. Orders received
in good form by the financial intermediary prior to the NYSE market close
(normally 4:00 p.m. Eastern Time) will receive a share price based on that day’s
NAV and orders received after the NYSE close will receive a price based on the
NAV determined at the close of regular trading on the next day that the NYSE is
open. You should look to the financial intermediary through whom you wish
to invest for specific instructions on how to purchase or redeem shares of the
Funds.
You
may purchase shares of the Funds on any day on which the NYSE is open for
trading. Purchases can be made from the Funds by mail, facsimile, telephone or
bank wire. In addition, brokers that are authorized designees of the Funds may
receive purchase and redemption orders on behalf of the Funds. These
designated brokers are also authorized to designate other financial
intermediaries to receive orders on behalf of the Funds. Such orders will be
deemed to have been received by the Funds when an authorized designee, or
broker-authorized designee, receives the order, subject to the order being in
good form. The orders will be priced at the NAV next computed after the orders
are received by the Funds, authorized broker, or broker-authorized designee.
Orders received in good form prior to the close of the NYSE (normally 4:00 p.m.
Eastern Time) will receive a share price based on that day’s NAV and orders
received after the close of the NYSE will receive a price based on the NAV
determined at the close of regular trading on the next day that the NYSE is
open. Investors may also be charged a fee by a broker or agent if shares
are purchased through a broker or agent.
The
Funds reserve the right to (i) refuse any request to purchase shares for any
reason and (ii) suspend the offering of shares at any time. An investor
that has placed a purchase order will be notified as soon as possible in such
circumstances.
Mail Orders. Payment for shares by mail
must be made by check from a U.S. financial institution and payable in U.S.
dollars. Cash, money orders, and traveler’s checks will not be accepted by
the Funds. If checks are returned due to insufficient funds or other
reasons, your purchase will be canceled. You will also be responsible for
any losses or expenses incurred by the Funds and its administrator and transfer
agent. The Funds will charge a $35 fee and may redeem shares of the Funds
owned by the purchaser or another identically registered account in another
series of the Trust to recover any such losses. For regular mail orders,
please complete the Fund Shares Application and mail it, along with your check
made payable to the Funds, to:
Regular
Mail |
Overnight
Mail |
Matisse Funds [Fund Name] c/o
Nottingham Shareholder Services Post Office Box 4365 Rocky Mount,
N.C. 27803-0365 |
Matisse Funds [Fund Name] c/o
Nottingham Shareholder Services 116 South Franklin Street Rocky
Mount, N.C. 27804 |
The
application must contain your social security number or taxpayer identification
number. If you have applied for a number prior to completing your account
application but you have not received your number, please indicate this on the
application and include a copy of the form applying for your number. Taxes are
not withheld from distributions to U.S. investors if certain requirements of the
Internal Revenue Service are met regarding the Social Security Number and
Taxpayer Identification Number.
Bank Wire Purchases. Purchases may also
be made through bank wire orders. To establish a new account or add to an
existing account by wire, please call the Funds at 1-800-773-3863 for wire instructions and to advise the
Funds of the investment, dollar amount, and the account identification
number.
Additional Investments. You may also add
to your account by mail or wire at any time by purchasing shares at the then
current NAV. The minimum additional investment is $100. Before adding funds by
bank wire, please call the Funds at 1-800-773-3863 for wire instructions and to
advise the Funds of the investment, dollar amount, and the account
identification number. Mail orders should include, if possible, the “Invest by
Mail” stub that is attached to your confirmation statement. Otherwise,
please identify your account in a letter accompanying your purchase
payment.
Automatic Investment Plan. The automatic
investment plan enables shareholders to make regular monthly or quarterly
investments in shares through automatic charges to their checking account. With
shareholder authorization and bank approval, the Funds will automatically charge
the shareholder’s checking account for the amount specified ($100 minimum),
which will be automatically invested in shares at the public offering price on
or about the 21st
day of the month. The shareholder may change the amount of the investment or
discontinue the plan at any time by writing the Funds.
Share Certificates. The Funds do not
issue share certificates. Evidence of ownership of shares is provided through
entry in the Funds’ share registry. Investors will receive periodic
account statements (and, where applicable, purchase confirmations) that will
show the number of shares owned.
Important Information about Procedures for Opening a
New Account. Under the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001 (USA PATRIOT Act of 2001), the Funds are required to obtain, verify, and
record information that enables the Funds to form a reasonable belief as to the
identity of each customer who opens an account. Consequently, when an investor
opens an account, the Funds will ask for the investor’s name, street address,
date of birth (for an individual), social security or other tax identification
number (or proof that the investor has filed for such a number), and other
information that will allow the Funds to identify the investor. The Funds
may also ask to see the driver’s license or other identifying documents of the
investor. An investor’s account application will not be considered “complete”
and, therefore, an account will not be opened and the investor’s money will not
be invested until the Funds receive this required information. In
addition, if after opening the investor’s account the Funds are unable to verify
the investor’s identity after reasonable efforts, as determined by the Funds in
their sole discretion, the Funds may (i) restrict further investments until
the investor’s identity is verified; and (ii) close the investor’s account
without notice and return the investor’s redemption proceeds to the
investor. If the Funds close an investor’s account because the Funds could
not verify the investor’s identity, the Funds will value the account in
accordance with the next NAV calculated after the investor’s account is
closed. In that case, the investor’s redemption proceeds may be worth more
or less than the investor’s original investment. The Funds will not be
responsible for any losses incurred due to the Funds’ inability to verify the
identity of any investor opening an account.
You
can redeem shares of the Funds on any day on which the NYSE is open for trading.
The Funds typically expect that it will take up to seven days following the
receipt of your redemption request to pay out redemption proceeds; however, the
Funds typically expect that the payment of redemption proceeds will be initiated
the next business day following the receipt of your redemption request
regardless of the method of payment. The Funds may delay forwarding a redemption
check for recently purchased shares while the Funds determine whether the
purchase payment will be honored. Such delay (which may take up to 15 days from
the date of purchase) may be reduced or avoided if the purchase is made by
certified check or wire transfer. In all cases, the NAV next determined after
receipt of the request for redemption will be used in processing the redemption
request. The Funds expect to pay redemptions from cash, cash equivalents,
proceeds from the sale of additional Fund shares, and then from the sale of
portfolio securities or in kind. These redemption payment methods will be used
in regular and stressed market conditions. During drastic economic and market
changes, telephone redemption privileges may be difficult to implement. The
Funds may also suspend redemptions, if permitted by the 1940 Act; (i) for any
period during which the NYSE is closed or trading on the NYSE is restricted;
(ii) for any period during which an emergency exists as a result of which the
Funds’ disposal of its portfolio securities is not reasonably practicable, or it
is not reasonably practicable for the Funds to fairly determine the value of its
net assets; or (iii) for such other periods as the Securities and Exchange
Commission may by order permit for the protection of the Funds’
shareholders
Mail Redemptions. Mail redemption
requests should be addressed to:
Regular
Mail |
Overnight
Mail |
Matisse Funds [Fund Name] c/o
Nottingham Shareholder Services Post Office Box 4365 Rocky Mount,
N.C. 27803-0365 |
Matisse Funds [Fund Name] c/o
Nottingham Shareholder Services 116 South Franklin Street Rocky
Mount, N.C. 27804 |
Mail
redemption requests should include the following:
(1) |
Your letter of
instruction specifying the account number, class of shares, and number of
shares (or the dollar amount) to be redeemed. This request must be
signed by all registered shareholders in the exact names in which they are
registered; |
(2) |
Any required signature
guarantees (see “Signature Guarantees” below);
and |
(3) |
Other supporting legal
documents, if required in the case of estates, trusts, guardianships,
custodianships, corporations, partnerships, pension or profit sharing
plans, and other entities. |
Telephone and Bank Wire Redemptions.
Unless you decline the telephonic transaction privileges on your account
application, you may redeem shares of the Funds by telephone. You may also
redeem shares by bank wire under certain limited conditions. The Funds
will redeem shares in this manner when so requested by the shareholder only if
the shareholder confirms redemption instructions in writing.
The
Funds may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 919-882-9281). The confirmation instructions must include
the following:
(1) Name of Fund;
(2) Shareholder
name and account number;
(3) Number
of shares or dollar amount to be redeemed;
(4) Instructions
for transmittal of redemption proceeds to the shareholder; and
(5) Shareholder
signature as it appears on the application on file with the Fund.
You
can choose to have redemption proceeds mailed to you at your address of record,
your financial institution, or to any other authorized person, or you can have
the proceeds sent by wire transfer to your financial institution ($5,000
minimum). Redemption proceeds cannot be wired on days in which your financial
institution is not open for business. You can change your redemption
instructions anytime you wish by filing a letter with your new redemption
instructions with the Funds. See “Signature Guarantees” below.
The
Funds, in their discretion, may choose to pass through to redeeming shareholders
any charges imposed by the Funds’ custodian for wire redemptions. If this cost
is passed through to redeeming shareholders by the Funds, the charge will be
deducted automatically from your account by redemption of shares in your
account. Your bank or brokerage firm may also impose a charge for processing the
wire. If wire transfer of funds is impossible or impractical, the redemption
proceeds will be sent by regular mail to the designated account.
You
may redeem shares, subject to the procedures outlined above, by calling the
Funds at 1-800-773-3863. Redemption proceeds will only be sent to the
financial institution account or person named in your Fund Shares Application
currently on file with the Funds. Telephone redemption privileges
authorize the Funds to act on telephone instructions from any person
representing him or herself to be the investor and reasonably believed by the
Funds to be genuine. The Funds will employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions are
genuine. The Funds will not be liable for any losses due to fraudulent or
unauthorized instructions. The Funds will also not be liable for following
telephone instructions reasonably believed to be genuine.
Systematic Withdrawal Plan. A shareholder
who owns shares of the Funds valued at $5,000 or more at the current offering
price may establish a systematic withdrawal plan (“Systematic Withdrawal Plan”)
to receive a monthly or quarterly check in a stated amount (not less than $50).
Each month or quarter, as specified, the Funds will automatically redeem
sufficient shares from your account to meet the specified withdrawal
amount. The shareholder may establish this service whether dividends and
distributions are reinvested in shares of the Funds or paid in cash. Call
or write the Funds for an application form.
Minimum Account Size. The Trustees reserve the
right to redeem involuntarily any account having a value of less than $1,000
(due to redemptions, exchanges, or transfers, and not due to market action) upon
30-days’ prior written notice. If the shareholder brings his account NAV
up to at least $1,000 during the notice period, the account will not be
redeemed. Redemptions from retirement accounts may be subject to federal
income tax. Shareholders may also be charged a fee by their broker or
agent if shares are redeemed or transferred through their broker or agent.
Redemptions in Kind. The Funds do not
intend, under normal circumstances, to redeem its shares by payment in kind. It
is possible, however, that conditions may arise in the future that would, in the
opinion of the Board, make it undesirable for the Funds to pay for all
redemptions in cash. In such cases, the Board may authorize payment to be made
in readily marketable portfolio securities of the Funds. The securities will be
chosen by the Funds, may be either a pro rata payment of each of the securities
held by the Funds or a representative sample of securities, and will be valued
at the same value assigned to them in computing the Funds’ NAV per share.
Shareholders receiving them bear the market risks associated with the securities
until they have been converted into cash, as well as taxable capital gains when
the securities are converted to cash and may incur brokerage costs when these
securities are sold. An irrevocable election has been filed under Rule 18f-1 of
the 1940 Act wherein the Funds must pay redemptions in cash, rather than in
kind, to any shareholder of record of the Funds who redeems during any 90-day
period, the lesser of (i) $250,000 or (ii) 1% of the Funds’ NAV at the beginning
of such period. Redemption requests in excess of this limit may be
satisfied in cash or in kind at the Funds’ election.
Signature Guarantees. To protect your account
and the Funds from fraud, signature guarantees may be required to be sure that
you are the person who has authorized a change in registration or standing
instructions for your account. Signature guarantees are generally required
for (i) change of registration requests; (ii) requests to establish or to change
exchange privileges or telephone and bank wire redemption service other than
through your initial account application; (iii) transactions where proceeds from
redemptions, dividends, or distributions are sent to a financial institution;
and (iv) redemption requests in excess of $50,000. Signature guarantees
are acceptable from a member bank of the Federal Reserve System, a savings and
loan institution, credit union (if authorized under state law), registered
broker-dealer, securities exchange, or association clearing agency and must
appear on the written request for change of registration, establishment or
change in exchange privileges, or redemption request.
Frequent
purchases and redemptions of Fund shares by a shareholder, known as frequent
trading, present a number of risks to the Funds’ other shareholders. These risks
include dilution in the value of Fund shares held by long-term shareholders,
interference with the efficient management of the Funds’ portfolio holdings, and
increased brokerage and administration costs. Due to the potential of a
thin market for some of the Funds’ portfolio securities, as well as overall
adverse market, economic, political, or other conditions that may affect the
sale price of portfolio securities, the Funds could face untimely losses as a
result of having to sell portfolio securities prematurely to meet redemptions.
Frequent trading may also increase portfolio turnover, which may in turn result
in increased capital gains taxes for shareholders.
The
Board has adopted a policy that is intended to discourage frequent trading by
shareholders. The Funds do not accommodate frequent trading. Under
the adopted policy, the Funds’ transfer agent provides a daily record of
shareholder trades to the Advisor. The Funds’ transfer agent also monitors
and tests shareholder purchase and redemption orders for frequent trading. The
Advisor has the discretion to limit investments, by refusing further purchase
and exchange orders, from a shareholder that the Advisor believes has a pattern
of trades not in the best interests of the other shareholders. In addition to
this discretionary policy, the Funds will also limit investments from any
shareholder account that, on two or more occasions during a 60-calendar day
period, purchases and redeems shares over a period of less than 10 days having a
redemption amount within 10% of the purchase amount and greater than $10,000. In
the event such a purchase and redemption pattern occurs, the shareholder account
and any other account with the same taxpayer identification number will be
precluded from investing in the Funds for at least 30 calendar days after the
second redemption transaction.
The
Funds and Advisor intend to apply this policy uniformly, except that the Funds
may not be able to identify or determine that a specific purchase or redemption
is part of a pattern of frequent trading or that a specific shareholder is
engaged in frequent trading, particularly with respect to transactions made
through omnibus accounts or accounts opened through financial intermediaries
such as broker-dealers and banks. Omnibus account arrangements permit multiple
investors to aggregate their respective share ownership and to purchase, redeem,
and exchange Fund shares without the identity of the individual shareholders
being immediately known to the Funds. Like omnibus accounts, accounts opened
through financial intermediaries normally permit shareholders to purchase,
redeem, and exchange Fund shares without the identity of the shareholder being
immediately known to the Funds. Consequently, the ability of the Funds to
monitor and detect frequent trading through omnibus and intermediary accounts is
limited, and there is no guarantee that the Funds can identify shareholders who
might be engaging in frequent trading through these accounts or curtail such
trading.
In
addition, this policy will not apply if the Advisor determines that a purchase
and redemption pattern does not constitute frequent trading, such as inadvertent
errors that result in frequent purchases and redemptions. Inadvertent
errors shall include purchases and/or redemptions made unintentionally or by
mistake (e.g., where a shareholder unintentionally or mistakenly invests in the
Funds and redeems immediately after recognizing the error). The shareholder
shall have the burden of proving to the sole satisfaction of the Advisor that a
purchase and redemption pattern was the result of an inadvertent error. In
such a case, the Advisor may choose to allow further purchase and exchange
orders from such shareholder.
To
keep you informed about your investments, the Funds will send you various
account statements and reports, including:
• |
Confirmation
statements that verify your buy or sell transactions (except in the case
of automatic purchases or redemptions from bank accounts. Please review
your confirmation statements for accuracy. |
• |
Quarter-end
and year-end shareholder account
statements. |
• |
Reports
for the Funds, which includes portfolio manager commentary,
performance, |
With
eDelivery, you can receive your tax forms, account statements, Fund reports, and
prospectuses online rather than by regular mail. Taking advantage of this free
service not only decreases the clutter in your mailbox, but it also reduces your
Fund fees by lowering printing and postage costs. To receive materials
electronically, contact your financial intermediary (such as a broker-dealer or
bank), or, if you are a direct investor, please contact us at 1-800-773-3863 or
visit https://portal.ncfunds.com/Matisse and click Register to sign up for
eDelivery.
The
following information is meant as a general summary for U.S. taxpayers.
Additional tax information appears in the Funds’ Statement of Additional Information.
Shareholders should rely on their own tax advisors for advice about the
particular federal, state, and local tax consequences to them of investing in
the Funds.
The
Funds intend to meet all requirements under Subchapter M of the Internal Revenue
Code of 1986, as amended, necessary to qualify and be eligible for treatment
each year as a “regulated investment company” and thus does not expect to pay
any U.S. federal income tax on income and capital gains that are timely
distributed to shareholders.
Distributions
from the Funds’ net investments income (other than qualified dividend income),
including distributions out of the Funds’ net short-term capital gains, if any,
are taxable as ordinary income. Distributions by the Funds of net long-term
capital gains, if any, in excess of net short-term capital losses (capital gain
dividends) are taxable as long-term capital gains, regardless of how long Fund
shares have been held. Distributions by the Funds that qualify as qualified
dividend income are taxable at long-term capital gain rates. In addition, a 3.8%
U.S. Medicare contribution tax is imposed on “net investment income,” including,
but not limited to, interests, dividends, and net gain, of U.S. individuals with
income exceeding $200,000 (or $250,000 if married and filing jointly) and of
estates and trusts.
Dividends
will be qualified dividend income if they are attributable to qualified dividend
income received by the Funds. Generally, qualified dividend income includes
dividend income from taxable U.S. corporations and qualified non-U.S.
corporations, provided that the Funds satisfy certain holding period
requirements in respect of the stock of such corporations.
Dividends
received by the Funds from a REIT or another regulated investment company
(“RIC”) generally are qualified dividend income only to the extent such dividend
distributions are made out of qualified dividend income received by such REIT or
RIC.
The
Funds will distribute most of their income and realized gains to its
shareholders every year. Income dividends paid by the Funds derived from net
investment income, if any, will generally be paid monthly or quarterly and
capital gains distributions, if any, will be made annually. Shareholders
may elect to take dividends from net investment income or capital gains
distributions, if any, in cash or reinvest them in additional Fund shares.
Shareholders will generally be taxed on distributions paid by the Funds,
regardless of whether distributions are received in cash or are reinvested in
additional Fund shares. Distributions may be subject to state and local taxes,
as well as federal taxes.
In
general, a shareholder who sells or redeems shares will realize a capital gain
or loss, which will be long-term or short-term, depending upon the shareholder’s
holding period for the Fund shares. An exchange of shares may be treated as a
sale and any gain may be subject to tax.
As
with all mutual funds, the Funds will be required in certain cases to withhold
and remit to the U.S. Treasury a percentage of taxable dividends of gross
proceeds realized upon sale paid to shareholders who: (i) have failed to provide
a correct taxpayer identification number in the manner required; (ii) are
subject to back-up withholding by the Internal Revenue Service for failure to
include properly on their return payments of taxable interest or dividends; or
(iii) have failed to certify to the Funds that they are not subject to backup
withholding when required to do so. Back-up withholding is not an additional
tax. Any amounts withheld from payments to you may be refunded or credited
against your U.S. federal income tax liability, if any, provided that the
required information is furnished to the Internal Revenue Service. The Funds are
required in certain circumstances to apply back-up withholding on taxable
dividends, redemption proceeds, and certain other payments that are paid to any
shareholder who does not furnish certain information and certifications or who
is otherwise subject to back-up withholding.
Shareholders
should consult with their own tax advisors to ensure that distributions and sale
of Fund shares are treated appropriately on their income tax returns.
The
Financial Highlights table is intended to help you understand the Funds’
financial performance for the past five years. The total returns in the table
represent the rate that an investor would have earned or lost on an investment
in the Funds (assuming reinvestment of all dividends and distributions). The
financial data in the table, for the fiscal year ended March 31, 2023, has been
audited by independent registered public accounting firm Cohen & Company,
Ltd. The financial data in the table, prior to the fiscal year ended March 31,
2023, was audited by another independent registered public accounting firm.
This information should be read in conjunction with the Fund’s latest audited
annual financial statements and notes thereto, which are also incorporated by
reference into the Statement of Additional Information, both of which are
available, free of charge, upon request, from the Funds.
Matisse
Discounted Closed-End Fund Strategy
Institutional
Class Shares
(For
a Share Outstanding Throughout Each Year)
|
Year Ended
March
31,
2023 |
Year
Ended
March
31, 2022 |
Year
Ended
March
31, 2021 |
Year
Ended
March
31, 2020 |
Year
Ended
March
31, 2019 |
|
Net
Asset Value, Beginning of Year |
$6.80 |
$9.09 |
$6.16 |
$10.09 |
$11.10 |
Income
(Loss) from Investment
Operations
Net
investment income (e)
Net
realized and unrealized gain
(loss)
on investments
Total
from Investment Operations |
0.15
(0.43) (0.28)
|
0.01
1.16 1.17
|
0.16
3.67 3.83
|
0.28
(3.19) (2.91)
|
0.20
0.31 0.51
|
Less
Distributions
Dividends
(from net investment income)
Distributions
(from capital gains) Return of capital
Total
Distributions |
(0.20) -- (0.33) (0.53)
|
(0.54) (2.92) -- (3.46)
|
(0.67) (0.23) -- (0.90)
|
(0.39) (0.63) -- (1.02)
|
(0.38) (1.14) -- (1.52)
|
Net
Asset Value, End of Year |
$5.99 |
$6.80 |
$9.09 |
$6.16 |
$10.09 |
Total
Return (a) |
(3.66)% |
14.29% |
64.68% |
(32.01)% |
6.53% |
Net
Assets, End of Year (in thousands) |
37,266 |
$43,069 |
$324,921 |
$175,406 |
$49,234 |
Ratios
of:
Gross
expenses to average net assets
(c)(f)
Net
expenses to average net assets
(c)(f)
Net
investment income to average
net assets (b) |
1.92%
1.58%
2.41% |
1.19%
1.19%
0.16% |
1.23%
1.23%
2.02% |
1.66%
1.37%
3.04% |
1.55%
1.38%
2.02% |
Portfolio
turnover rate |
29.50% |
33.89% |
42.63% |
101.38% |
55.00% |
(a)
Includes adjustments in accordance with accounting principles generally accepted
in the United States, and, consequently, the net asset values for financial
reporting purposes and the returns based upon those net asset values may differ
from the net asset values and returns from shareholder transactions.
(b)
Recognition of net investment income by the Fund is affected by the timing of
declaration of dividends by the underlying investment companies in which the
Fund invests.
(c)
Includes interest expenses of 0.33%, 0.00%(d), 0.02%, 0.13%, and 0.14% for the
fiscal years ended March 31, 2023, 2022, 2021, 2020, and 2019,
respectively.
(d)
Less than 0.01% per share.
(e)
Calculated using the average shares method.
(f) The expenses of the
underlying funds are excluded from the Fund’s expense ratio.
Matisse
Discounted Bond CEF Strategy
Institutional
Class Shares
(For
a Share Outstanding during the period or fiscal year ended March 31)
|
Year
Ended
March
31,
2023 |
Year
Ended
March
31,
2022 |
Period
Ended
March
31,
2021(f) |
Net
Asset Value, Beginning of Period |
$11.29 |
$12.43 |
$10.00 |
Income
from Investment Operations
Net
investment income (e)
Net
realized and unrealized gain (loss) on investments
Total
from Investment Operations |
0.55 (1.29) (0.74)
|
0.32 (0.39) (0.07)
|
0.51 2.56 3.07 |
Less
Distributions
Dividends
(from net investment income) Capital
Gains Return of capital
Total Distributions |
(0.57) (0.09) (0.07) (0.73)
|
(0.52) (0.55) -- (1.07)
|
(0.64) -- --
(0.64) |
Net
Asset Value, End of Period |
$9.82 |
$11.29 |
$12.43 |
Total
Return |
(6.27)% |
(1.02)% |
31.34%(c) |
Net
Assets, End of Period (in thousands) |
39,133 |
$32,185 |
$24,642 |
Ratios
of:
Gross
expenses to average net assets (d)(h)
Net
expenses to average net assets (d)(h)
Net
investment income to average net assets (a)(d) |
1.54% 1.26% 5.49%
|
1.38% 0.99% 2.56%
|
2.00%(b)
1.00%(b) 4.71%(b) |
Portfolio
turnover rate |
57.99% |
70.40% |
37.27%(c) |
(a)
Recognition of the net investment income by the Fund is affected by the timing
of declaration of dividends by the underlying investment companies in which the
Fund invests.
(b)
Annualized.
(c)
Not annualized.
(d)
Includes interest expenses of 0.27%, 0.00%(g), and 0.01% for the fiscal
ears/period ended March 31, 2023, 2022, and 2021, respectively.
(e)
Calculated using the average shares method.
(f)
For the period April 30, 2022 (Date of Initial Public Investment) through March
31, 2021.
(g)
Less than 0.01% of average net assets.
(h)
The expenses of the underlying funds are excluded from the Fund’s expense
ratio.
ADDITIONAL
INFORMATION
Additional
information about the Funds is available in the Funds’ Statement of Additional Information, which is
incorporated by reference into this prospectus. Additional information
about the Funds’ investments is also available in the annual and semi-annual
reports to shareholders. The annual report includes a discussion of market
conditions and investment strategies that significantly affected the Funds’
performance during its last fiscal year.
The
Funds’ Statement of Additional
Information and the annual and semi-annual reports are available, free of
charge, on the website listed below and upon request by contacting the Funds
(you may also request other information about the Funds or make shareholder
inquiries) as follows:
By
telephone: |
1-800-773-3863
|
By
mail: |
Matisse
Funds
c/o
Nottingham Shareholder Services
Post
Office Box 4365
Rocky
Mount, North Carolina 27803-0365
|
By
e-mail: |
|
On
the Internet: |
https://fundinfopages.com/MDCEX
https://fundinfopages.com/MDFIX
|
Reports
and other information about the Funds are available on the EDGAR Database on the
SEC’s Internet site at http://www.sec.gov, and copies of this information may be
obtained, upon payment of a duplicating fee, by electronic request at the
following e-mail address:
[email protected].
Investment
Company Act File Number 811-22298