Filed with the Securities and Exchange Commission on April 10, 2017
1933 Act Registration File No. 033-20827
1940 Act File No. 811- 05518
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |
x |
Pre-Effective Amendment No. |
o |
Post-Effective Amendment No. 216 |
x |
|
|
and/or |
|
|
|
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |
x |
Amendment No. 218 |
x |
(Check Appropriate Box or Boxes)
THE RBB FUND, INC.
(Exact Name of Registrant as Specified in Charter)
615 East Michigan Street,
Milwaukee, Wisconsin 53202
(Address of Principal Executive Offices, including Zip Code)
Registrants Telephone Number, including Area Code: (302) 791-1851
Copies to:
SALVATORE FAIA |
|
MICHAEL P. MALLOY, ESQUIRE |
The RBB Fund, Inc. |
|
Drinker Biddle & Reath LLP |
615 East Michigan Street, |
|
One Logan Square, Suite 2000 |
Milwaukee, Wisconsin 53202 |
|
Philadelphia, Pennsylvania 19103-6996 |
Approximate Date of Proposed Public Offering: As soon as practicable after the Registration Statement becomes effective.
x |
immediately upon filing pursuant to paragraph (b) |
o |
on (date) pursuant to paragraph (b) |
o |
60 days after filing pursuant to paragraph (a)(1) |
o |
on (date) pursuant to paragraph (a)(1) |
o |
75 days after filing pursuant to paragraph (a)(2) |
o |
on (date) pursuant to paragraph (a)(2) of Rule 485. |
If appropriate, check the following box:
o |
This post-effective amendment designates a new effective date for a previously filed post-effective amendment. |
ABBEY CAPITAL FUTURES STRATEGY FUND
of
T
HE
RBB F
UND
, I
NC
.
CLASS I SHARES (TICKER: ABYIX)
CLASS A SHARES (TICKER: ABYAX)
CLASS C SHARES (TICKER: ABYCX)
CLASS T SHARES (Not Currently Available for Sale)
PROSPECTUS
April 10, 2017
Investment Adviser:
ABBEY CAPITAL LIMITED
1-2 Cavendish Row
Dublin 1, Ireland
The Securities and Exchange Commission (the "SEC") and the Commodity Futures Trading Commission have not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.
TABLE OF CONTENTS
SUMMARY SECTION |
1 |
||||||
FUND INFORMATION |
10 |
||||||
More Information About Fund Investments |
10 |
||||||
More Information About Risks |
10 |
||||||
Principal Risks |
10 |
||||||
Non-Principal Risks |
14 |
||||||
DISCLOSURE OF PORTFOLIO HOLDINGS |
15 |
||||||
MORE INFORMATION ABOUT MANAGEMENT OF THE FUND |
16 |
||||||
Investment Adviser |
16 |
||||||
Trading Advisers |
17 |
||||||
SHAREHOLDER INFORMATION |
26 |
||||||
Pricing of Fund Shares |
26 |
||||||
Sales Charges |
27 |
||||||
Purchase of Fund Shares |
29 |
||||||
Redemption of Fund Shares |
33 |
||||||
Market Timing |
35 |
||||||
Exchange Privilege |
36 |
||||||
Dividends and Distributions |
36 |
||||||
More Information About Taxes |
37 |
||||||
Distribution Arrangements |
39 |
||||||
Additional Information |
39 |
||||||
FINANCIAL HIGHLIGHTS |
40 |
||||||
APPENDIX A |
A-1 |
||||||
FOR MORE INFORMATION ABOUT THE FUND |
Back Cover |
i
SUMMARY SECTION
Investment Objective
The investment objective of the Abbey Capital Futures Strategy Fund (the "Fund") is to seek long-term capital appreciation. Current income is a secondary objective.
Expenses and Fees
This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund (the "Shares"). You may qualify for sales charge discounts if you invest, or agree to invest in the future, at least $25,000 in Class A Shares or at least $250,000 in Class T Shares of the Fund. More information about these and other discounts is available from your financial professional, in the section of the Prospectus entitled "Shareholder Information Sales Charges" and in the section of the Fund's Statement of Additional Information ("SAI") entitled "Purchase and Redemption Information Reducing or Eliminating the Front-End Sales Charge." Financial intermediaries may impose different sales charge waivers for Class A and Class T Shares, and these variations are described in Appendix A of the Prospectus.
Class I |
Class A |
Class C |
Class T |
||||||||||||||||
Shareholder Fees (fees paid directly from your investment) | |||||||||||||||||||
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) |
None |
5.75 |
% |
None |
2.50 |
% |
|||||||||||||
Maximum Deferred Sales Charge (Load) |
None |
None (6) |
None |
None |
|||||||||||||||
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends |
None |
None |
None |
None |
|||||||||||||||
Redemption Fee (as a percentage of amount redeemed,
if applicable) |
None |
None |
None |
None |
|||||||||||||||
Annual Fund Operating Expenses
(expenses that you pay
each year as a percentage of the value of your investment) |
|||||||||||||||||||
Management Fees (1)(5) |
1.77 |
% |
1.77 |
% |
1.77 |
% |
1.77 |
% |
|||||||||||
Distribution and/or Service (12b-1) Fees |
None |
0.25 |
% |
1.00 |
% |
0.25 |
% |
||||||||||||
Interest Expense |
0.02 |
% |
0.02 |
% |
0.02 |
% |
0.02 |
% (2) |
|||||||||||
Other Expenses |
0.18 |
% |
0.18 |
% |
0.18 |
% |
0.18 |
% (2) |
|||||||||||
Total Annual Fund Operating Expenses |
1.97 |
% |
2.22 |
% |
2.97 |
% |
2.22 |
% |
|||||||||||
Fee Waivers and/or Expense Reimbursements (4) |
(0.16 |
%) |
(0.16 |
%) |
(0.16 |
%) |
(0.16 |
%) |
|||||||||||
Total Annual Fund Operating Expenses after Fee Waivers
and/or Expense Reimbursements (3) |
1.81 |
% |
2.06 |
% |
2.81 |
% |
2.06 |
% |
(1) "Management Fees" have been restated to reflect current fees. Prior to February 28, 2017, the management fee was 1.97%.
(2) "Interest Expense" and "Other Expenses" for Class T Shares are estimated for the current fiscal year.
(3) Total Annual Fund Operating Expenses after Fee Waivers and/or Expense Reimbursements, excluding interest expenses are:
Class I |
Class A |
Class C |
Class T |
||||||||||||
1.79 |
% |
2.04 |
% |
2.79 |
% |
2.04 |
% |
(4) The Adviser has contractually agreed to waive its advisory fee and/or reimburse expenses in order to limit Total Annual Fund Operating Expenses (excluding certain items discussed below) to 1.79%, 2.04%, 2.79% and 2.04% of the Fund's average daily net assets attributable to Class I Shares, Class A Shares, Class C Shares and Class T Shares, respectively. In determining the Adviser's obligation to waive advisory fees and/or
1
reimburse expenses, the following expenses are not taken into account and could cause net Total Annual Fund Operating Expenses to exceed 1.79%, 2.04%, 2.79% or 2.04%, as applicable: acquired fund fees and expenses, brokerage commissions, extraordinary items, interest or taxes. This contractual limitation is in effect until April 30, 2018 for Class I Shares, Class A Shares, Class C Shares and Class T Shares, and may not be terminated without the approval of the Board of Directors of The RBB Fund, Inc. If at any time the Fund's Total Annual Fund Operating Expenses (not including acquired fund fees and expenses, brokerage commissions, extraordinary items, interest or taxes) for a year are less than 1.79%, 2.04%, 2.79% and 2.04%, as applicable, the Adviser may recoup any waived or reimbursed amounts from the Fund within three years from the date on which such waiver or reimbursement was made by the Adviser, provided such reimbursement does not cause the Fund to exceed expense limitations that were in effect at the time of the waiver or reimbursement.
(5) Management Fees include advisory fees paid to both Abbey Capital Limited (the "Adviser") and one or more trading advisers (the "Trading Advisers"). There are no performance fees charged by the Adviser or Trading Advisers either at the Fund or at the Fund's wholly-owned Subsidiary.
(6) A contingent deferred sales charge of 1.00% is assessed on certain redemptions of Class A Shares made within 12 months after purchase where no initial sales charge was paid at time of purchase as part of an investment of $1,000,000 or more.
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 Class A, Class C and Class T Shares, and $1,000,000 in Class I Shares, in the Fund for the time periods indicated and then redeem all of your Shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that 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:
1 Year |
3 Years |
5 Years |
10 Years |
||||||||||||||||
Class I Shares |
$ |
18,389 |
$ |
60,287 |
$ |
104,762 |
$ |
228,293 |
|||||||||||
Class A Shares |
$ |
770 |
$ |
1,214 |
$ |
1,682 |
$ |
2,973 |
|||||||||||
Class C Shares |
$ |
284 |
$ |
903 |
$ |
1,548 |
$ |
3,278 |
|||||||||||
Class T Shares |
$ |
457 |
$ |
915 |
$ |
1,400 |
$ |
2,733 |
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 Shares are held in a taxable account. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the Example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 0% of the average value of its portfolio. In accordance with industry practice, derivative instruments and instruments with a maturity of one year or less at the time of acquisition are excluded from the calculation of the portfolio turnover rate, which leads to the 0% portfolio turnover rate reported above. If those instruments were included in the calculation, the Fund would have a high portfolio turnover rate.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by allocating its assets between a "Managed Futures" strategy and a "Fixed Income" strategy.
The Managed Futures strategy will be achieved by the Fund investing up to 25% of its total assets in Abbey Capital Offshore Fund Limited, a wholly-owned and controlled subsidiary of the Fund organized under the laws of
2
the Cayman Islands (the "Subsidiary"). The Adviser may allocate assets of the Subsidiary to a single Managed Futures portfolio or multiple Managed Futures portfolios that include investment styles or sub-strategies such as (i) trend following, (ii) discretionary, fundamentals-based investing with a focus on macroeconomic analysis, (iii) strategies that pursue both fundamental and technical trading approaches, (iv) other specialized approaches to specific or individual market sectors such as equities, interest rates, metals, agricultural and soft commodities and (v) systematic trading strategies which incorporate technical and fundamental variables.
The Managed Futures strategy investments are designed to achieve capital appreciation in the financial and commodities futures markets. The Adviser intends to allocate the assets of the Subsidiary to one or more Trading Advisers to manage in percentages determined at the discretion of the Adviser. Each Trading Adviser invests according to a Managed Futures strategy in one or a combination of (i) options, (ii) futures, (iii) forwards, (iv) spot contracts or (v) swaps, including total return swaps, each of which may be tied to (i) commodities, (ii) financial indices and instruments, (iii) foreign currencies, or (iv) equity indices. Each current Trading Adviser is registered with the U.S. Commodity Futures Trading Commission (the "CFTC") as a Commodity Trading Advisor. Trading Advisers that are not registered with the SEC as investment advisers provide advice only regarding matters that do not involve securities.
The Fixed Income strategy invests the Fund's assets primarily in investment grade fixed income securities (of all durations and maturities) in order to generate interest income and capital appreciation, which may add diversification to the returns generated by the Fund's Managed Futures strategy. The Fund must set aside liquid assets, or engage in other SEC or staff-approved measures, to "cover" open positions with respect to certain kinds of derivative instruments. The Fixed Income strategy investments may be used to help cover the Fund's derivative positions.
The Fund's Adviser seeks returns, in part, by (i) using Managed Futures strategy investments that are not expected to have returns that are highly correlated to the broad equity market and (ii) through actively managed Fixed Income strategy investments that are not expected to have returns that are highly correlated to the broad equity market or the Managed Futures strategy. The Adviser believes that utilizing non-correlated strategies may mitigate losses in generally declining markets. However, there can be no assurance that losses will be avoided. Investment strategies that have historically been non-correlated or demonstrated low correlations to one another or to major world financial market indices may become correlated at certain times, such as during a liquidity crisis in global financial markets.
The trading strategies employ several different trading styles using different research and trading methodologies, in a wide range of global financial and commodity markets operating over multiple time frames. Many of the styles use systematic, automated trading systems, using a combination of mathematical, statistical, technical analysis, pattern recognition and macroeconomic models aimed at profiting from market trends of different durations. Trading Advisers may use discretionary approaches aimed at identifying value investments and turning points in trends. All Trading Advisers utilize a disciplined approach to risk management. The Adviser and Trading Advisers from time to time will employ hedging techniques. Key principles of the Fund's sell discipline include predetermined relative-value objectives for sectors, issuers and specific securities, pricing performance or fundamental performance that varies from expectations, deteriorating fundamentals, overvaluation and alternative investments offering the opportunity to achieve more favorable risk-adjusted returns.
The markets traded include bonds, money markets, foreign exchange markets and commodity markets. Most of the trading is done in derivative markets, usually listed futures markets, but some trading in cash markets may take place when this is the most effective way to enter or exit a trading position. Both long and short positions will be taken in all markets traded. Contracts are positioned either long or short based on various characteristics related to their prices. For example, the Fund may short a particular underlying security or instrument if the Adviser or a Trading Adviser believes the price of the underlying security or instrument will decrease. The Fund invests in U.S. and non-U.S. markets and in developed and emerging markets.
3
As much of the trading within the Fund is in futures markets, the Fund is likely to have cash balances surplus to margin requirements. The cash portfolio will be invested on a short-term, highly liquid, basis, to meet margin calls on the futures positions.
The Fund is "non-diversified" for purposes of the Investment Company Act of 1940, as amended, (the "1940 Act") which means that the Fund may invest in fewer securities at any one time than a diversified fund. The Fund may not invest more than 15% of its net assets in illiquid securities. The Fund's investments in certain derivative instruments and its short selling activities involve the use of leverage.
Generally, the Subsidiary invests primarily in commodity futures, but it may also invest in financial futures, option and swap contracts, fixed income securities, pooled investment vehicles, including those that are not registered pursuant to the 1940 Act and other investments intended to serve as margin or collateral for the Subsidiary's derivative positions. The Fund invests in the Subsidiary in order to gain exposure to the commodities markets within the limitations of the federal tax laws, rules and regulations that apply to registered investment companies. Unlike the Fund, the Subsidiary may invest without limitation in commodity-linked derivatives, however, the Subsidiary complies with the same 1940 Act asset coverage requirements with respect to its investments in commodity-linked derivatives that are applicable to the Fund's transactions in derivatives.
In addition, to the extent applicable to the investment activities of the Subsidiary, the Subsidiary is subject to the same fundamental investment restrictions and will follow the same compliance policies and procedures as the Fund. Unlike the Fund, the Subsidiary will not seek to qualify as a regulated investment company ("RIC") under Subchapter M of Subtitle A, Chapter 1, of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund is the sole shareholder of the Subsidiary and does not expect shares of the Subsidiary to be offered or sold to other investors.
Principal Investment Risks
Risk is inherent in all investing. The value of your investment in the Fund, as well as the amount of return you receive on your investment, may fluctuate significantly from day to day and over time. You may lose part or all of your investment in the Fund or your investment may not perform as well as other similar investments.
The principal risk factors affecting shareholders' investments in the Fund (and, indirectly, in the Subsidiary) are set forth below.
• Commodity Sector Risk: Exposure to the commodities markets may subject the Fund to greater volatility than investments in traditional securities. The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments. The prices of energy, industrial metals, precious metals, agriculture and livestock sector commodities may fluctuate widely due to factors such as changes in value, supply and demand and governmental regulatory policies. The commodity-linked securities in which the Fund invests may be issued by companies in the financial services sector, and events affecting the financial services sector may cause the Fund's Share value to fluctuate.
• Counterparty Risk: Counterparty risk is the risk that the other party(s) to an agreement or a participant to a transaction, such as a broker or the FCM, might default on a contract or fail to perform by failing to pay amounts due or failing to fulfill the obligations of the contract or transaction.
• Credit Risk: Credit risk refers to the possibility that the issuer of the security will not be able to make principal and interest payments when due. Changes in an issuer's credit rating or the market's perception of an issuer's creditworthiness may also affect the value of the Fund's investment in that issuer. Securities rated in the four highest categories by the rating agencies are considered investment grade but they may
4
also have some speculative characteristics. Investment grade ratings do not guarantee that bonds will not lose value.
• Currency Risk: Investment in foreign securities also involves currency risk associated with securities that trade or are denominated in currencies other than the U.S. dollar and which may be affected by fluctuations in currency exchange rates. An increase in the strength of the U.S. dollar relative to a foreign currency may cause the U.S. dollar value of an investment in that country to decline. Foreign currencies also are subject to risks caused by inflation, interest rates, budget deficits and low savings rates, political factors and government controls. Forward foreign currency exchange contracts may limit potential gains from a favorable change in value between the U.S. dollar and foreign currencies. Unanticipated changes in currency pricing may result in poorer overall performance for the Fund than if it had not engaged in these contracts.
• Derivatives Risk: The Fund's investments in derivative instruments including options, forward currency exchange contracts, swaps and futures, which may be leveraged, may result in losses. Investments in derivative instruments may result in losses exceeding the amounts invested.
• Emerging Markets Risk: Investment in emerging market securities involves greater risk than that associated with investment in foreign securities of developed foreign countries. These risks include volatile currency exchange rates, periods of high inflation, increased risk of default, greater social, economic and political uncertainty and instability, less governmental supervision and regulation of securities markets, weaker auditing and financial reporting standards, lack of liquidity in the markets, and the significantly smaller market capitalizations of emerging market issuers.
• Fixed Income Securities Risk: Fixed income securities in which the Fund may invest are subject to certain risks, including: interest rate risk, prepayment risk and credit/default risk. Interest rate risk involves the risk that prices of fixed income securities will rise and fall in response to interest rate changes. Prepayment risk involves the risk that in declining interest rate environments prepayments of principal could increase and require the Fund to reinvest proceeds of the prepayments at lower interest rates. Credit risk involves the risk that the credit rating of a security may be lowered.
• Foreign Investments Risk: International investing is subject to special risks, including currency exchange rate volatility, political, social or economic instability, and differences in taxation, auditing and other financial practices. The Fund may invest in securities of foreign issuers either directly or through depositary receipts. Depositary receipts may be available through "sponsored" or "unsponsored" facilities. Holders of unsponsored depositary receipts generally bear all of the costs of the unsponsored facility. The depository of an unsponsored facility is frequently under no obligation to distribute shareholder communications received from the issuer of the deposited security or to pass through, to the holders of the receipts, voting rights with respect to the deposited securities. The depository of unsponsored depositary receipts may provide less information to receipt holders.
• Forward and Futures Risk: The successful use of forward and futures contracts draws upon the Adviser's and Trading Advisers' skill and experience with respect to such instruments and are subject to special risk considerations. The primary risks associated with the use of futures contracts are (a) the imperfect correlation between the change in market value of instruments held by the Fund and the price of the forward or futures contract; (b) possible lack of a liquid secondary market, and possible regulatory position limits and restrictions, for a forward or futures contract and the resulting inability to close a forward or futures contract when desired; (c) losses caused by unanticipated market movements, which are potentially unlimited; (d) the Adviser's and Trading Advisers' inability to predict correctly the direction of securities prices, interest rates, currency exchange rates and other economic factors; (e) the possibility that the counterparty will default in the performance of its obligations; and (f) if the Fund has insufficient cash, it may have to sell securities from its portfolio to meet daily variation margin requirements, and the Fund may have to sell securities at a time when it may be disadvantageous to do so.
5
• Hedging Transactions Risk: The Adviser and Trading Advisers from time to time employ various hedging techniques. The success of the Fund's hedging strategy will be subject to the Adviser's and Trading Advisers' ability to correctly assess the degree of correlation between the performance of the instruments used in the hedging strategy and the performance of the investments in the portfolio being hedged. Since the characteristics of many securities change as markets change or time passes, the success of the Fund's hedging strategy will also be subject to the Adviser's and Trading Advisers' ability to continually recalculate, readjust, and execute hedges in an efficient and timely manner. For a variety of reasons, the Adviser and Trading Advisers may not seek to establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged. Such imperfect correlation may prevent the Fund from achieving the intended hedge or expose the Fund to risk of loss. In addition, it is not possible to hedge fully or perfectly against any risk, and hedging entails its own cost.
• High Portfolio Turnover Risk: The risk that when investing on a shorter-term basis, the Fund may as a result trade more frequently and incur higher levels of brokerage fees and commissions, and cause higher levels of current tax liability to shareholders in the Fund.
• Interest Rate Risk: Interest rate risk is the risk that prices of fixed income securities generally increase when interest rates decline and decrease when interest rates increase. The Fund may lose money if short term or long term interest rates rise sharply or otherwise change in a manner not anticipated by the Adviser and Trading Advisers. It is likely there will be less governmental action in the near future to maintain low interest rates. The negative impact on fixed income securities from the resulting rate increases for that and other reasons could be swift and significant.
• Leveraging Risk: Investments in derivative instruments may give rise to a form of leverage. Trading Advisers may engage in speculative transactions which involve substantial risk and leverage, such as making short sales. The use of leverage by the Adviser and Trading Advisers may increase the volatility of the Fund. These leveraged instruments may result in losses to the Fund or may adversely affect the Fund's net asset value ("NAV") or total return, because instruments that contain leverage are more sensitive to changes in interest rates. The Fund may also have to sell assets at inopportune times to satisfy its obligations in connection with such transactions.
• Manager Risk: If the Adviser and Trading Advisers make poor investment decisions, it will negatively affect the Fund's investment performance.
• Management Risk: The Fund is subject to the risk of poor stock selection. In other words, the individual stocks in the Fund may not perform as well as expected, and/or the Fund's portfolio management practices do not work to achieve their desired result.
• Market Risk: The NAV of the Fund will change with changes in the market value of its portfolio positions. Investors may lose money.
• Multi-Manager Dependence Risk: The success of the Fund's investment strategy depends both on the Adviser's ability to select Trading Advisers and to allocate assets to those Trading Advisers and on each Trading Adviser's ability to execute the relevant strategy and select investments for the Fund and the Subsidiary. The Trading Advisers' investment styles may not always be complementary, which could affect the performance of the Fund.
• New Adviser Risk: The Trading Advisers may be newly registered or not registered with the SEC and/or have not previously managed a mutual fund. Accordingly, investors in the Fund bear the risk that a Trading Adviser's inexperience may limit its effectiveness.
• Non-Diversification Risk: The Fund is non-diversified. Compared to other funds, the Fund may invest more of its assets in a smaller number of companies. Gains or losses on a single stock may have greater impact on the Fund.
6
• Short Sales Risk: Short sales of securities may result in gains if a security's price declines, but may result in losses if a security's price rises. In a rising market, short positions may be more likely to result in losses because securities sold short may be more likely to increase in value. Short selling also involves the risks of: increased leverage, and its accompanying potential for losses; the potential inability to reacquire a security in a timely manner, or at an acceptable price; the possibility of the lender terminating the loan at any time, forcing the Fund to close the transaction under unfavorable circumstances; the additional costs that may be incurred; and the potential loss of investment flexibility caused by the Fund's obligations to provide collateral to the lender and set aside assets to cover the open position. The Fund may engage in short sales that are either "uncovered" or "against the box." A short sale is "against the box" if at all times during which the short position is open, the Fund owns at least an equal amount of the securities or securities convertible into, or exchangeable without further consideration for, securities of the same issue as the securities that are sold short. Short sales "against the box" may protect the Fund against the risk of losses in the value of a portfolio security because any decline in value of the security should be wholly or partially offset by a corresponding gain in the short position. Any potential gains in the security, however, would be wholly or partially offset by a corresponding loss in the short position. Short sales that are not "against the box" involve a form of investment leverage, and the amount of the Fund's loss on a short sale is potentially unlimited.
• Subsidiary Risk: By investing in the Subsidiary, the Fund is indirectly exposed to the risks associated with the Subsidiary's investments. The derivatives and other investments held by the Subsidiary are generally similar to those that are permitted to be held by the Fund and are subject to the same risks that apply to similar investments if held directly by the fund. The Subsidiary is not registered under the 1940 Act, and, unless otherwise noted in this Prospectus, is not subject to all the investor protections of the 1940 Act. Changes in the laws of the United States and/or the Cayman Islands could result in the inability of the Fund and/or the Subsidiary to continue to operate as it does currently and could adversely affect the Fund.
• Tax Risk: In order to qualify as a RIC, the Fund must meet certain requirements regarding the source of its income, the diversification of its assets and the distribution of its income. The Internal Revenue Service ("IRS") has issued a ruling that income realized from certain types of commodity-linked derivatives would not be qualifying income. The Fund's investment in the Subsidiary is expected to provide the Fund with exposure to the commodities markets within the limitations of the Code for qualification as a RIC, but there is a risk that the IRS could assert that the income derived from the Fund's investment in the Subsidiary and certain commodity-linked structured notes will not be considered qualifying income for purposes of the Fund remaining qualified as a RIC for U.S. federal income tax purposes. In addition, pursuant to recent guidance issued by the Treasury and the IRS, the Subsidiary's commodity related income for a taxable year will only be treated as qualifying income to the extent the Subsidiary actually distributes such income out of its earnings and profits to the Fund for such taxable year. If the Fund were to fail to qualify as a RIC and became subject to federal income tax, shareholders of the Fund would be subject to diminished returns. Changes in the laws of the United States and/or the Cayman Islands could result in the inability of the Fund and/or its Subsidiary to operate as described in this Prospectus and the SAI and could adversely affect the Fund. For example, the Cayman Islands does not currently impose any income, corporate or capital gains tax or withholding tax on the Subsidiary. If Cayman Islands law changes such that the Subsidiary must pay Cayman Islands taxes, Fund shareholders would likely suffer decreased investment returns.
Performance Information
The following performance information provides some indication of the risks of investing in the Fund. The bar chart below shows the performance of the Fund's Class I Shares from year to year. Performance information
7
represents only past performance, before and after taxes, and does not necessarily indicate future results. Updated performance information is available online at www.abbeycapital.com or by calling 1-844-261-6484 (toll free).
Abbey Capital Futures Strategy Fund Class I Shares
Total Return for Calendar Year Ended December 31
During the period shown in the chart, the highest quarterly return was 8.86% (for the quarter ended March 31, 2015) and the lowest quarterly return was -4.90% (for the quarter ended June 30, 2015). The year-to-date total return for the three months ended March 31, 2017 was -1.55%.
Average Annual Total Returns
The table below compares the average annual total returns of the Class I, Class A and Class C Shares for one year and since inception to a broad-based market index for the same periods. Average annual returns for Class T Shares are not included because they had not commenced operations prior to the date of this Prospectus. The returns for Class T Shares would be substantially similar to returns for Class I Shares because the shares are invested in the same portfolio of securities, and would differ only to the extent that the classes have different expenses.
Average Annual Total Returns for the
Periods Ended December 31, 2016 |
|||||||||||||||||||
1 Year |
Since
Inception July 1, 2014 |
Since
Inception August 29, 2014 |
Since
Inception October 6, 2015 |
||||||||||||||||
Class I Shares |
|||||||||||||||||||
Return Before Taxes |
-3.81 |
% |
7.14 |
% |
N/A |
N/A |
|||||||||||||
Return After Taxes on Distributions (1) |
-3.81 |
% |
6.73 |
% |
N/A |
N/A |
|||||||||||||
Return After Taxes on Distributions and Sale of
Fund Shares (1) |
-2.16 |
% |
5.31 |
% |
N/A |
N/A |
|||||||||||||
Class A Shares |
|||||||||||||||||||
Return Before Taxes |
-9.60 |
% |
N/A |
3.13 |
% |
N/A |
|||||||||||||
Class C Shares |
|||||||||||||||||||
Return Before Taxes |
-4.72 |
% |
N/A |
N/A |
-3.23 |
% |
|||||||||||||
S&P 500
®
Total Return Index
(reflects no deduction for fees, expenses and taxes) |
11.96 |
% |
7.43 |
% |
7.11 |
% |
12.92 |
% |
(1) 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. In certain cases, the figure representing "Return after Taxes on Distributions and Sale of Fund Shares" may be higher than the other return figures for the same period, since a higher after-tax return results when a capital loss occurs upon redemption and provides an assumed tax deduction that benefits the investor. After-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Class I Shares only. After-tax returns for Class A Shares, Class C Shares and Class T Shares will vary.
8
Management of the Fund
Investment Adviser and Trading Advisers
Abbey Capital Limited, 1-2 Cavendish Row, Dublin 1, Ireland, serves as the investment adviser to the Fund. Altis Partners (Jersey) Limited, Aspect Capital Limited, Cantab Capital Partners LLP, Conquest Capital LLC, Eclipse Capital Management, Inc., Graham Capital Management, LP, Harmonic Capital Partners LLP, P/E Global, LLC, Revolution Capital Management, LLC, and Trigon Investment Advisors LLC each serve as a Trading Adviser to the Fund.
Portfolio Managers
The Fund is managed by the following co-portfolio managers.
Title |
Portfolio Manager Since: |
||||||||||
Abbey Capital Limited |
|||||||||||
Anthony Gannon |
Chief Executive Officer |
Inception (July 1, 2014) |
|||||||||
Mick Swift |
Deputy Chief Executive Officer and
Research Director |
Inception (July 1, 2014) |
Purchase and Sale Information
The minimum initial investment for Class A Shares, Class C Shares and Class T Shares is $2,500, and the minimum initial investment for Class I Shares is $1,000,000. There is a minimum amount of $100 for subsequent investment in Class A Shares, Class C Shares and Class T Shares, and $1,000 in Class I Shares. Class T Shares are not currently available for sale.
You can only purchase and redeem Shares of the Fund on days the New York Stock Exchange ("NYSE") is open. Shares of the Fund may be available through certain brokerage firms, financial institutions and other industry professionals that have entered into a distribution agreement with the Distributor (collectively, "Service Organizations"). Class T Shares are available only to investors who are investing through a Service Organization. Not all Service Organizations make Class T Shares available to their clients. You may redeem Class T Shares on any business day by contacting your Service Organization. Consult Appendix A and a representative of your Service Organization about the availability of Class T Shares. Class I, Class A and Class C Shares of the Fund may also be purchased and redeemed directly through The RBB Fund, Inc. (the "Company") by the means described below.
Purchase and Redemption by Mail:
Regular Mail:
Abbey Capital Futures Strategy Fund
c/o U.S. Bancorp Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
Overnight Delivery:
Abbey Capital Futures Strategy Fund
c/o U.S. Bancorp Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
Purchase by Wire:
Before sending any wire, call U.S. Bancorp Fund Services, LLC (the "Transfer Agent") at 1-844-261-6484 to confirm the current wire instructions for the Abbey Capital Futures Strategy Fund.
Redemption by Telephone:
Call the Transfer Agent at 1-844-261-6484.
Taxes
The Fund intends to make distributions that generally may be taxed at ordinary income or capital gains rates.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund may pay the intermediary for the sale of Shares and other related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.
9
FUND INFORMATION
More Information About Fund Investments
This section provides some additional information about the Fund's investments and certain portfolio management techniques that the Fund may use. More information about the Fund's investments and portfolio management techniques, and related risks, is included in the Statement of Additional Information ("SAI").
The Fund's investment objective is non-fundamental and may be changed by the Board of Directors of the Company (the "Board of Directors") without the approval of the Fund's shareholders. However, as a matter of policy, the Fund would not materially change its investment objective without informing shareholders at least 60 days in advance of any such change.
The investments and strategies described in this Prospectus are those that the Fund uses under normal conditions. The Fund may depart from its principal investment strategy in response to adverse market, economic, political or other conditions by taking temporary defensive positions (up to 100% of its assets) in all types of money market and short-term debt securities. If the Fund were to take a temporary defensive position, it may be unable for a time to achieve its investment objective.
This Prospectus describes the Fund's principal investment strategies, and the Fund will normally invest in the types of securities described in this Prospectus. In addition to the investments and strategies described in this Prospectus, the Fund also may invest, to a lesser extent, in other securities, use other strategies and engage in other investment practices that are not part of its principal investment strategy. These investments and strategies, as well as those described in this Prospectus, are described in detail in the Fund's SAI. There is no guarantee that the Fund will achieve its investment objective.
More Information About Risks
The following provides additional information about the principal and certain non-principal risks of investing in the Fund and, indirectly, in the Subsidiary. More information about the Fund's risks is included in the SAI.
Principal Risks
Commodity-Linked Derivatives. The Fund may gain exposure to the commodities markets through commodity-linked structured notes, swap agreements and commodity futures and options. These instruments have one or more commodity-dependent components. They are derivative instruments because at least part of their value is derived from the value of an underlying commodity index, commodity futures contract, index or other readily measurable economic variable. The prices of commodity-linked derivative instruments may move in different directions than investments in traditional equity and debt securities when the value of those traditional securities is declining due to adverse economic conditions. As an example, during periods of rising inflation, historically debt securities have tended to decline in value due to the general increase in prevailing interest rates. Conversely, during those same periods of rising inflation, historically the prices of certain commodities, such as oil and metals, have tended to increase. There cannot be any guarantee that derivative instruments will perform in that manner in the future, and at certain times the price movements of commodity-linked investments have been parallel to debt and equity securities.
Counterparties. To the extent the Fund invests in loans or securities traded over-the-counter, swaps, "synthetic" or derivative instruments, repurchase agreements, certain types of options or other customized financial instruments, the Fund takes the risk of non-performance by the other party to the contract. This risk may include credit risk of the counterparty and the risk of settlement default. This risk may differ materially from those entailed in exchange-traded transactions that generally are supported by guarantees of clearing organizations, daily marking-to-market and settlement, and segregation and minimum capital requirements applicable to intermediaries. Transactions entered
10
directly between two counterparties generally do not benefit from such protections and expose the parties to the risk of counterparty default.
Credit/Default Risk. The credit rating of an issuer or guarantor of a security in which the Fund invests may be lowered or an issuer or guarantor of a security or the counterparty to a derivatives contract or a repurchase agreement may default on its payment obligations. The risk of loss due to default by issuers of lower-rated securities is greater because low-rated securities generally are unsecured and often are subordinated to the rights of other creditors of the issuers of such securities. The Fund also may incur additional expenses in seeking recovery on defaulted securities. The creditworthiness of firms used by the Fund to effect securities transactions in emerging and frontier market countries may not be as strong as in some developed countries. As a result, the Fund could be subject to a greater risk of loss on its securities transactions if a firm defaults on its responsibilities.
Derivative Contracts. The Fund may, but need not, use derivative contracts for any of the following purposes:
• To seek to hedge against the possible adverse impact of changes in stock market prices, currency exchange rates or interest rates in the market value of its securities or securities to be purchased;
• As a substitute for buying or selling currencies or securities; or
• To seek to enhance the Fund's return in non-hedging situations (which is considered a speculative activity).
Examples of derivative contracts include: futures and options on securities, securities indices or currencies; options on these futures; forward foreign currency contracts; and interest rate or currency swaps. The Fund may use derivative contracts involving foreign currencies. A derivative contract will obligate or entitle the Fund to deliver or receive an asset or cash payment that is based on the change in value of one or more securities, currencies or indices. Even a small investment in derivative contracts can have a big impact on the Fund's stock market, currency and interest rate exposure. Therefore, using derivatives can disproportionately increase losses and reduce opportunities for gains when stock prices, currency rates or interest rates are changing. The Fund may not fully benefit from or may lose money on derivatives if changes in their value do not correspond accurately to changes in the value of the Fund's holdings. The other parties to certain derivative contracts present the same types of default risk as issuers of fixed income securities in that the counterparty may default on its payment obligations or become insolvent. Derivatives can also make the Fund less liquid and harder to value, especially in declining markets.
Fixed Income Investments. The Fund invests a portion of its assets in fixed income securities. Fixed income investments include bonds, notes (including structured notes), mortgage-backed securities, asset-backed securities, convertible securities, Eurodollar and Yankee dollar instruments, preferred stocks and money market instruments. Fixed income securities may be issued by corporate and governmental issuers and may have all types of interest rate payment and reset terms, including (without limitation) fixed rate, adjustable rate, zero coupon, contingent, deferred, payment-in-kind and auction rate features. The principal debt investments of the Fund will be fixed and floating rate securities with no reset terms.
The credit quality of securities held in the Fund's portfolio is determined at the time of investment. If a security is rated differently by multiple ratings organizations, the Fund treats the security as being rated in the higher rating category. The Fund invests primarily in investment grade fixed income securities that are rated as low as Baa by Moody's Investors Service or BBB by S&P Global Ratings (or their equivalents, or, if unrated, determined by the Adviser or applicable Sub-Adviser to be of comparable credit quality). The Fund may choose not to sell securities that are downgraded below those credit ratings after their purchase. Periods of rising interest rates may result in decreased liquidity and increased volatility in the fixed income markets. Periods of rising interest rates may result in decreased liquidity and increased volatility in the fixed income markets.
Foreign Securities. The Fund may invest in securities of foreign issuers that are traded or denominated in U.S. dollars (including equity securities of foreign issuers trading in U.S. markets) through American Depositary Receipts ("ADRs"), Global Depositary Receipts ("GDRs"), European Depositary Receipts ("EDRs") or International
11
Depositary Receipts ("IDRs"). Depositary receipts may be available through "sponsored" or "unsponsored" facilities. A sponsored facility is established jointly by the issuer of the security underlying the receipt and the depository, whereas an unsponsored facility is established by the depository without participation by the issuer of the underlying security. Holders of unsponsored depositary receipts generally bear all of the costs of the unsponsored facility. The depository of an unsponsored facility is frequently under no obligation to distribute shareholder communications received from the issuer of the deposited security or to pass through, to the holders of the receipts, voting rights with respect to the deposited securities. The depository of unsponsored depositary receipts may provide less information to receipt holders.
In addition, the Fund may invest in securities traded or denominated in foreign currencies and in multinational currencies such as the Euro. The Fund will value its securities and other assets in U.S. dollars. Investments in securities of foreign entities and securities denominated or traded in foreign currencies involve special risks. These include possible political and economic instability and the possible imposition of exchange controls or other restrictions on investments. Changes in foreign currency rates relative to the U.S. dollar will affect the U.S. dollar value of the Fund's assets denominated or quoted in currencies other than the U.S. dollar. Emerging market investments offer the potential for significant gains but also involve greater risks than investing in more developed countries. Political or economic instability, lack of market liquidity and government actions such as currency controls or seizure of private business or property may be more likely in emerging markets.
Interest Rate Risk. During periods of rising interest rates, the market value of the Fund's fixed-income securities will tend to be lower than prevailing market interest rates. In periods of falling interest rates, the market value of the Fund's fixed-income securities generally will tend to be higher than prevailing market interest rates. Prices of longer-term fixed income securities are typically more sensitive to changes in interest rates than prices of shorter-term fixed-income securities. Significant upward pressure on domestic interest rates and a corresponding widening of credit spreads could negatively impact the market price of emerging debt markets.
Interest Rate Swaps, Total Return Swaps, Credit Default Swaps, Options on Swaps and Interest Rate Caps, Floors and Collars.
• Interest rate swaps involve the exchange by the Fund with another party of their respective commitments to pay or receive interest, such as an exchange of fixed-rate payments for floating rate payments.
• Total return swaps are contracts that obligate one party to pay the other party an amount equal to the total return on a defined underlying asset or a non-asset reference during a specified period of time. The underlying asset might be a security or basket of securities or a non-asset reference such as a securities index. In return, the other party would make periodic payments based on a fixed or variable interest rate or on the total return from a different underlying asset or non-asset reference.
• Credit default swaps are contracts whereby one party makes periodic payments to a counterparty in exchange for the right to receive from the counterparty a payment equal to the par (or other agreed-upon) value of a referenced debt obligation in the event of a default by the issuer of the debt obligation.
• Options on swaps ("swaptions") are options to enter into a swap agreement. The Fund may also purchase and write (sell) swaptions. Like other types of options, the buyer of a swaption pays a non-refundable premium for the option and obtains the right, but not the obligation, to enter into an underlying swap on agreed-upon terms. The seller of a swaption, in exchange for the premium, becomes obligated (if the option is exercised) to enter into an underlying swap on agreed-upon terms.
• Interest rate caps entitle the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payment of interest on a notional principal amount from the party selling such interest rate cap.
12
• Interest rate floors entitle the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling the interest rate floor.
• Interest rate collars combine a cap and a floor that are designed to preserve a certain return within a predetermined range of interest rates.
The Fund may enter into the transactions described above for hedging purposes or to seek to increase total return (which is considered a speculative activity). The use of swaps, swaptions, and interest rate caps, floors and collars is a highly specialized activity which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. If the Adviser or a Trading Adviser is incorrect in its forecasts of market values and interest rates, the investment performance of the Fund would be less favorable than it would have been if these investment techniques were not used.
Leveraging Risk. The Fund's use of futures, forward contracts, swaps, other derivative instruments and selling securities short will have the economic effect of financial leverage. The use of leverage by the Adviser and Trading Advisers may increase the volatility of the Fund. These leveraged instruments may result in losses to the Fund or may adversely affect the Fund's NAV or total return, because instruments that contain leverage are more sensitive to changes in interest rates. The Fund may also use borrowed funds to create leverage. Although the use of leverage by the Fund may create an opportunity for increased return, it also results in additional risks and can magnify the effect of any losses. If the income and gains earned on the securities and instruments purchased with leverage proceeds are greater than the cost of the leverage, the Fund's return will be greater than if leverage had not been used. Conversely, if the income and gains from the securities and instruments purchased with such proceeds does not cover the cost of leverage, the Fund's return will be less than if leverage had not been used. In the event of a sudden, precipitous drop in value of the Fund's assets, the Fund may not be able to liquidate assets quickly enough to pay off its borrowing. Short sales of securities also involve the use of leverage. Using this investment technique may adversely affect the Fund's NAV or total return.
To limit leverage risk, the Fund will segregate assets determined by the Adviser to be liquid in accordance with procedures established by the Board of Directors, or, when permissible, enter into offsetting transactions, to cover its obligations resulting from its use of derivative instruments. Securities held in a segregated account cannot be sold while the futures contract, option or other derivative is outstanding, unless they are replaced with other suitable assets. As a result, it is possible that segregating a large percentage of the Fund's assets could impede portfolio management or its ability to meet redemption requests or other current obligations.
Short Sales. The Fund engages in short sales including those that are not "against the box," which means that the Fund may make short sales where the Fund does not currently own or have the right to acquire, at no added cost, securities identical to those sold short in accordance with the provisions of the 1940 Act. In a typical short sale, the Fund borrows from a broker a security in order to sell the security to a third party. The Fund is then obligated to return a security of the same issuer and quantity at some future date. The Fund realizes a loss to the extent the security increases in value or a profit to the extent the security declines in value (after taking into account any associated costs). Short sales "against the box" may protect the Fund against the risk of losses in the value of a portfolio security because any decline in value of the security should be wholly or partially offset by a corresponding gain in the short position. Any potential gains in the security, however, would be wholly or partially offset by a corresponding loss in the short position. Short sales that are not "against the box" involve a form of investment leverage, and the amount of the Fund's loss on a short sale is potentially unlimited. The Fund will not make a short sale if, immediately before the transaction, the market value of all securities sold short exceeds 95% of the value of the Fund's assets.
Until the Fund closes its short position, the Fund will: (a) maintain a segregated account containing cash or liquid securities at such a level that (i) the amount deposited in the account plus the amount deposited with the broker as collateral will equal the current value of the security sold short; and (ii) the amount deposited in the
13
segregated account plus the amount deposited with the broker as collateral will not be less than the market value of the security at the time the security was sold short; or (b) otherwise cover the Fund's short position.
Subsidiary Risk. The Fund will make investments through a wholly-owned Subsidiary organized under the laws of the Cayman Islands. By investing in the Subsidiary, the Fund is indirectly exposed to the risks associated with the Subsidiary's investments. The derivatives and other investments held by a Subsidiary are generally similar to those that are permitted to be held by the Fund and are subject to the same risks that apply to similar investments if held directly by the Fund. These risks are described elsewhere in this Prospectus. There can be no assurance that the investment objective of the Subsidiary will be achieved.
The Subsidiary is not registered under the 1940 Act, and, unless otherwise noted in this Prospectus, is not subject to all the investor protections of the 1940 Act. However, the Fund wholly owns and controls the Subsidiary, making it unlikely that the Subsidiary will take action contrary to the interests of the Fund and its shareholders. The Board of Directors has oversight responsibility for the investment activities of the Fund, including its investment in the Subsidiary, and the Fund's role as sole shareholder of the Subsidiary. The Subsidiary will be subject to the same investment restrictions and limitations, and follow the same compliance policies and procedures, as the Fund.
Changes in the laws of the United States and/or the Cayman Islands could result in the inability of a fund and/or its Subsidiary to operate as described in this Prospectus and in the SAI and could adversely affect the Fund. For example, the Cayman Islands does not currently impose any income, corporate or capital gains tax or withholding tax on the Subsidiary. If Cayman Islands law changes such that the Subsidiary must pay Cayman Islands taxes, Fund shareholders would likely suffer decreased investment returns.
Tax Risk. The Treasury and the IRS have issued proposed regulations that provide that the income from a foreign subsidiary is qualifying income for purposes of a fund remaining qualified as a RIC for U.S. federal income tax purposes only to the extent such income is actually distributed by the foreign subsidiary to the RIC each year. In a number of prior private rulings, the IRS had ruled that the income of such a foreign subsidiary would be qualified income each year even if it is not actually distributed to the RIC each year. The new proposed regulations, if adopted as proposed, will apply for taxable years of RICs that begin on or after 90 days after the date of publication of the final regulations. If the proposed regulations are adopted as proposed the Subsidiary would have to distribute its income currently in order for such income to be treated as qualifying income of the Fund. In addition, the IRS has issued private letter rulings to registered investment companies concluding that income derived from their investment in certain commodity-linked structured notes would constitute qualifying income to the fund. The IRS has indicated that the granting of these types of private letter rulings is currently suspended, pending further internal discussion. As a result, the Fund has not received such a private letter ruling. Therefore, there is a risk that the IRS could assert that the income derived from the Fund's investment in certain commodity-linked structured notes will not be considered qualifying income for purposes of the Fund remaining qualified as a RIC for U.S. federal income tax purposes. If the Fund were to fail to qualify as a RIC and became subject to federal income tax, shareholders of the Fund would be subject to diminished returns.
Non-Principal Risks
Equity and Equity-Related Securities. The Fund may invest in equity securities, including exchange-traded and over-the-counter common and preferred stocks, warrants, rights, convertible securities, depositary receipts and shares, trust certificates, limited partnership interests, shares of other investment companies and real estate investment trusts ("REITs"), and equity participations. Investments in equity securities and equity derivatives in general are subject to market risks that may cause their prices to fluctuate over time. The value of a convertible security may not increase or decrease as rapidly as the underlying common stock. Common stocks may decline over short or even extended periods of time. The purchase of rights or warrants involves the risk that the Fund could lose the purchase value of a right or warrant if the right to subscribe to additional shares is not executed prior to the right's or warrant's expiration. The value of securities convertible into equity securities, such as warrants or convertible debt, is also affected by prevailing interest rates, the credit quality of the issuer and any call provision.
14
Investing in REITs may involve risks similar to those associated with investing in small capitalization companies. REITs may have limited financial resources, may trade less frequently and in a limited volume and may be subject to more abrupt or erratic price movements than larger company securities. State law governing partnerships is often less restrictive than state law governing corporations. Accordingly, there may be fewer protections afforded to investors in a limited partnership than investors in a corporation. Fluctuations in the value of equity securities in which a mutual fund invests will cause the Fund's NAV to fluctuate. The number of issuers in the Fund's portfolio will vary over time.
Exchange-Traded Funds ("ETFs"). The Fund may invest in ETFs to the extent permitted by the 1940 Act and applicable SEC orders. ETFs are registered investment companies whose shares are listed and traded on U.S. stock exchanges or otherwise traded in the over-the-counter market. As a shareholder in an ETF, the Fund will bear its pro rata portion of an ETF's expenses, including advisory fees, in addition to its own expenses. The Fund may incur brokerage fees in connection with its purchase of ETF shares.
Illiquid Securities Risk. Investing in illiquid securities is subject to certain risks, such as limitations on resale and uncertainty in determining valuation. Limitations on resale may adversely affect the marketability of portfolio securities and the Fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions within seven days. The Fund might, in order to dispose of restricted securities, have to register securities resulting in additional expense and delay. Adverse market conditions could impede such a public offering of such securities.
Other Investment Companies. The Fund may invest up to 10% of its total assets in the securities of other investment companies (including issues that would be investment companies but for sections 3(c)(1) or 3(c)(7) of the 1940 Act), but may not invest more than 5% of its total assets in the securities of any one investment company or acquire more than 3% of the voting securities of any other investment company. Among other things, the Fund may invest in money market mutual funds for cash management purposes by "sweeping" excess cash balances into such funds until the cash is invested or otherwise utilized. The Fund will indirectly bear its proportionate share of any management fees and other expenses paid by investment companies in which it invests in addition to the advisory and administration fees paid by the Fund. Investments in issues that would be investment companies but for sections 3(c)(1) or 3(c)(7) of the 1940 Act will generally be considered illiquid investments and would be subject to the Fund's 15% limitation on investments in illiquid securities.
Redemptions. The Fund may need to sell its holdings in order to meet shareholder redemption requests. The Fund could experience a loss when selling securities to meet redemption requests if the redemption requests are unusually large or frequent, occur in times of overall market turmoil or declining prices for the securities sold, or when the securities the Fund wishes to or is required to sell are illiquid. The Fund may be unable to sell illiquid securities at its desired time or price. Illiquidity can be caused by a drop in overall market trading volume, an inability to find a ready buyer, or legal restrictions on the securities' resale. Certain securities that were liquid when purchased may later become illiquid, particularly in times of overall economic distress. Liquidity issues may also make it difficult to value the Fund's investments.
Temporary Investments. The Fund may depart from its principal investment strategy in response to adverse market, economic, political or other conditions by taking temporary defensive positions (up to 100% of its assets) in all types of money market and short-term debt securities. If the Fund were to take a temporary defensive position, it may be unable for a time to achieve its investment objective.
DISCLOSURE OF PORTFOLIO HOLDINGS
A description of the Company's policies and procedures with respect to the disclosure of the Fund's portfolio securities is available in the Fund's SAI. The SAI is incorporated herein.
15
MORE INFORMATION ABOUT MANAGEMENT OF THE FUND
Investment Adviser
Abbey Capital Limited, an Irish limited company founded in 2000, serves as the investment adviser to the Fund. The Adviser's principal place of business is located at 1-2 Cavendish Row, Dublin 1, Ireland. As of March 31, 2017, the Adviser had over $3.4 billion in assets under management. The Adviser is registered as an Investment Adviser with the SEC and as a Commodity Trading Advisor (or "CTA") and a Commodity Pool Operator (or "CPO") with the CFTC, and is a member of the National Futures Association (the "NFA").
The Fund is managed by the Adviser and one or more Trading Advisers unaffiliated with the Adviser. The Adviser also has the ultimate responsibility to oversee the Trading Advisers, and to recommend their hiring, termination, and replacement, subject to approval by the Board of Directors. The Fund compensates the Adviser for its services at the annual rate of 1.77% of its average annual net assets, payable on a monthly basis in arrears. Prior to February 28, 2017, the Fund compensated the Adviser for its services at the annual rate of 1.97% of its average daily net assets. The Adviser compensates the Trading Advisers out of the advisory fee that it receives from the Fund.
The Adviser has contractually agreed to waive its advisory fee and/or reimburse expenses in order to limit Total Annual Fund Operating Expenses (excluding certain items discussed below) to 1.79%, 2.04%, 2.79% and 2.04% of the Fund's average daily net assets attributable to Class I Shares, Class A Shares, Class C Shares and Class T Shares, respectively. In determining the Adviser's obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account and could cause net Total Annual Fund Operating Expenses to exceed 1.79%, 2.04%, 2.79% or 2.04% as applicable: acquired fund fees and expenses, brokerage commissions, extraordinary items, interest or taxes. This contractual limitation is in effect until April 30, 2018 for Class I Shares, Class A Shares, Class C Shares and Class T Shares and may not be terminated without the approval of the Board of Directors. If at any time the Fund's Total Annual Fund Operating Expenses for a year are less than 1.79%, 2.04%, 2.79% or 2.04%, as applicable, the Adviser may recoup any waived amount from the Fund within three years from the date on which such waiver or reimbursement was made by the Adviser if such reimbursement does not cause the Fund to exceed existing expense limitations. Prior to February 28, 2017, the Adviser had agreed to waive its advisory fee and/or reimburse expenses in order to limit Total Annual Fund Operating Expenses (excluding those items discussed above) to 1.99%, 2.24% and 2.99% of the Fund's average daily net assets attributable to Class I Shares, Class A Shares and Class C Shares, respectively. For the fiscal year ended August 31, 2016, after waivers, the Adviser received 1.81% of the Fund's average net assets in investment advisory fees from the Fund. Had fee waivers not been in place, the Adviser would have received 1.97% of the Fund's average net assets in investment advisory fees from the Fund.
Anthony Gannon and Mick Swift are the portfolio managers primarily responsible for the day-to-day management of the Fund.
Anthony Gannon (CEO) founded the Adviser in 2000 with a vision to create an alternative investment business providing multi-manager funds in the managed futures, foreign exchange and global market sectors of the hedge fund industry. Over its seventeen year history, Mr. Gannon has overseen the Adviser's growth from a start-up to a global business managing in excess of USD 3.4 billion as at March 31, 2017. The Adviser is currently one of the largest independent allocators in the CTA industry globally. Prior to founding the Adviser, Mr. Gannon was a co-founder of Allied Irish Capital Management (AICM), a multi-manager CTA, in conjunction with Allied Irish Banks. He helped to grow the company to become one of the largest European CTAs, with funds under management growing from an initial $50 million to in excess of $1.4 billion. Mr. Gannon has more than 25 years' investment experience in the managed futures industry. He is recognized and acknowledged as a leader in the industry globally. He is a regular guest speaker at alternative investment industry conferences. Mr. Gannon graduated with a Bachelor of Commerce degree and a Masters in Business Studies with Finance from University College Dublin, Ireland.
Mick Swift is the Deputy Chief Executive Officer and Research Director at the Adviser. Mr. Swift is a member of the Adviser's Board of Directors and Investment Committee, and is a Principal of the firm. As Research Director,
16
he manages and oversees the Adviser's research and risk management processes as well as portfolio construction. Mr. Swift joined the Adviser in May 2002 after fifteen years as a trader and manager of trading teams. Prior to joining the Adviser, Mr. Swift was a Director at AICM, a Dublin-based CTA from 1998 to 2002. While at AICM, he worked in a trading capacity and also on product research and risk management. Previously, Mr. Swift was the Head of Foreign Exchange and European Interest Rate Trading at Bank of Ireland in Dublin from 1997 to 2002. Previously, Mr. Swift was Treasurer and EVP at Bank of Ireland's New York branch, where he ran the trading and sales operation from 1994 to 1997. He initially joined the Treasury Division of Bank of Ireland in 1984 where he traded foreign exchange and interest rate markets on a proprietary basis. In 1992, he became Head of Interest Rate trading at the bank. A frequent guest speaker and presenter at conferences throughout Europe, Asia and the U.S., Mr. Swift has addressed topics including alternative investment policy development, risk management and the managed futures industry. Mr. Swift graduated with a Bachelors Degree in Commerce from University College Galway and holds an ACMA qualification.
The SAI provides additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers and the portfolio managers' ownership of shares of the Fund.
Trading Advisers
The Adviser has entered into a trading advisory agreement with each Trading Adviser to manage a portion of the Subsidiary's assets. Each Trading Adviser makes investment decisions for the assets it has been allocated to manage. The Adviser oversees the Trading Advisers for compliance with the Fund's investment objective, policies, strategies and restrictions, and monitors each Trading Adviser's adherence to its investment style. The Board of Directors supervises the Adviser and the Trading Advisers, establishes policies that they must follow in their management activities, and oversees the hiring, termination and replacement of Trading Advisers recommended by the Adviser.
The Fund and the Adviser have received an exemptive order from the SEC that permits the Adviser, without shareholder approval and subject to certain conditions, to terminate existing Trading Advisers or hire new Trading Advisers for the Fund, to materially amend the terms of particular agreements with Trading Advisers or to continue the employment of existing Trading Advisers after events that would otherwise cause an automatic termination of a trading advisory agreement. This arrangement has been approved by the Board of Directors and the Fund's initial shareholder. Consequently, under the exemptive order, the Adviser has the right to hire, terminate and replace Trading Advisers when the Board of Directors and the Adviser feel that a change would benefit the Fund. The exemptive order enables the Fund to operate with greater efficiency and without incurring the expense and delays associated with obtaining shareholder approval of trading advisory agreements.
Not all of the Trading Advisers listed for the Subsidiary may be actively managing assets for the Subsidiary at all times. Subject to the oversight of the Board of Directors, the Adviser may temporarily allocate Subsidiary assets away from a Trading Adviser. Situations in which the Adviser may make such a determination include changes in the level of assets in the Fund, changes to the Adviser's view of the Trading Adviser's current opportunities, changes in a Trading Adviser's personnel or a Trading Adviser's adherence to an investment strategy.
The following provides additional information about each Trading Adviser and the Trading Adviser's investment teams.
Altis Partners (Jersey) Limited
The Adviser has entered into a trading advisory agreement with Altis Partners (Jersey) Limited ("Altis") to manage a portion of the Fund's assets using the Altis Emerald Futures Program. Altis is a Limited Company formed in 2000 and based in the States of Jersey, Channel Islands. Altis' main office is located at 2 Hill Street, St Helier, Jersey, Channel Islands. Altis is registered as a CTA and CPO with the CFTC, is a member of the NFA and has been trading since July 2001. Altis focuses on systematic and quantitative trading, applying rigorous research into markets combining established scientific principles and advanced technology.
17
Zbigniew Hermaszewski Partner: Mr. Hermaszewski's primary focus is on the development of research and technology. Mr. Hermaszewski received his Bachelor of Science degree in Physics from Imperial College London. Mr. Hermaszewski has over 30 years' experience including stock broking, market making, investment research and the development and implementation of trading systems. Previously, Mr. Hermaszewski was senior researcher at AHL and head of research at Sabre Fund Management before creating the Altis Portfolio Management platform.
Alex Brunwin Partner: Mr. Brunwin's primary focus is on technology and research. Mr. Brunwin's background is in physics where he received a Bachelor of Science Honours degree from Bristol University. Mr. Brunwin has over 21 years' experience within the technology sector, specialising in front and middle office trading. Previous to Altis, Mr. Brunwin was an analyst programmer at Sabre Fund Management and Director of Information Technology at Quality Capital Management Limited where he managed all IT projects and developed and implemented their system and trading infrastructure.
Stephen Hedgecock Partner: Mr. Hedgecock task consists of business development and marketing of Altis' business. Mr. Hedgecock has a background in trading, previously working as a trader with Citibank, Moore Capital and Nederlandse Varia Maatschappij. From 1991 to 1995, Mr. Hedgecock was Executive Director of Sabre Funds Management before becoming Executive Director at Quality Capital Management where he was responsible for the day to day management of the company and involved in developing, and maintaining client relationships.
Aspect Capital Limited
The Adviser has entered into a trading advisory agreement with Aspect Capital Limited ("Aspect") to manage a portion of the Fund's assets using the Aspect Core Diversified Program. Aspect is a private limited company formed in 1998 and based in London, United Kingdom. Aspect's main office is located at 10 Portman Square, London W1H 6AZ, United Kingdom. Aspect is registered with the Commodity Futures Trading Commission as both a Commodity Trading Advisor and a Commodity Pool Operator and is a member of the National Futures Association in such capacities. Aspect's philosophy is predominantly focused on capturing medium-term trend opportunities across a broad spectrum of diversified market sectors, applying a systematic and research driven approach.
All portfolio and investment procedures for the Aspect Core Diversified Program are overseen by Aspect's Risk Management Committee ("RMC"). Aspect's RMC has overall responsibility for the operation of the Aspect Core Diversified Program. The members of Aspect's RMC in respect of the Aspect Core Diversified Program are Anthony Todd, Martin Lueck, Anna Hull and Simon Brown.
Anthony Todd Co-Founder and Chief Executive Officer: Mr. Todd co-founded Aspect in September 1997 and is the Chief Executive Officer of Aspect. He has been a CFTC listed principal, as an Associated Member and as an Associated Person of Aspect from October 13, 1999 to the present. Mr. Todd has also been listed with the CFTC as a principal of ACI since April 14, 2005 as he indirectly owns more than 10% of the share capital of ACI. Mr. Todd has been approved as a swaps Associated Person of Aspect since 27 December 2012. Mr. Todd's responsibilities include taking Board level responsibility for both the oversight of market, model and operational risks and business development. Mr. Todd chairs Aspect's Risk Management Committee, which assumes overall responsibility for the operation of Aspect's investment programs, and is a member of Aspect's Investment Management Committee which is responsible for setting and overseeing the broad strategic agenda for the Aspect Diversified Program and its modified implementations. Before establishing Aspect, Mr. Todd worked for five years (from March 1992 to October 1997) at Adam, Harding and Lueck Limited ("AHL") initially as Director of Financial Engineering and Product Development, before moving to Switzerland as Director of Marketing and Institutional Sales. Prior to this role, Mr. Todd was a strategy consultant at Mars & Co., a Paris based consultancy, from September 1990 to March 1992. From July 1989 to July 1990, Mr. Todd studied at INSEAD in France, and from September 1982 to June 1989 he was with UBS, an international investment bank, in London as
18
Assistant Director in the International Government Bond Group. Mr. Todd holds a B.A. in Physics from Oxford University and an M.B.A. from INSEAD in France.
Martin Lueck Co-Founder and Research Director: Mr. Lueck co-founded Aspect in September 1997, and has been listed with the CFTC as a principal, as an Associated Member and as an Associated Person of Aspect from October 13, 1999 to the present. As President of ACI, Mr. Lueck has also been listed with the CFTC as a principal of ACI since October 2004 and as an associated person of ACI since December 2004. Mr. Lueck has been approved as a swaps Associated Person of each of Aspect and ACI since 27 December 2012. His duties as a principal of ACI are to assist and supervise the sales team of ACI. As Research Director, he oversees the Research team which is responsible for generating and analyzing fundamental research hypotheses for development of all Aspect's investment programs. Mr. Lueck is a member of the Risk Management Committee, which assumes overall responsibility for the operation of Aspect's investment programs, and also chairs Aspect's Investment Management Committee, which is responsible for setting and overseeing the broad strategic agenda for the Aspect Diversified Program and its modified implementations. Prior to founding Aspect, Mr. Lueck was with AHL, which he co-founded in February 1987 with Michael Adam and David Harding. Man Group plc (a leading global provider of alternative investment products and solutions) completed the purchase of AHL in 1994 and Mr. Lueck left in 1996. At AHL, Mr. Lueck initially focused on trading system research before taking on responsibility for the further development of the proprietary software language which provided the platform for all of AHL's product engineering and implementation. During the period from May 1989 to April 1996, Mr. Lueck was listed with the CFTC as a principal and associated person of AHL. From May 1996 through August 1997, Mr. Lueck was on gardening leave from AHL during which time he helped establish his wife's publishing business Barefoot Books. Mr. Lueck was a Director of Research at Brockham Securities Limited, a London based commodity trading advisor, from October 1984 to February 1987 and an executive in the Japanese Equity Sales department of Nomura International, a provider of financial services for individual, institutional, corporate, and government clients, from January to October 1984. Mr. Lueck holds an M.A. in Physics from Oxford University.
Anna Hull Director of Risk: Mrs. Hull, who joined Aspect in June 2008, is Aspect's Director of Risk. Mrs. Hull has been listed with the CFTC as a principal of Aspect effective 24 July 2014. Appointed Director of Risk in February 2014, Mrs. Hull is in charge of Aspect's Risk team, which is responsible for the oversight of all market, model and operational risks across Aspect. Additionally, Mrs. Hull is a member of the Risk Management Committee, which assumes overall responsibility for the operation of Aspect's investment programs. Prior to becoming Director of Risk, Mrs. Hull was Aspect's Director of Product Management. In this capacity, Mrs. Hull led the Product Management team in its role of providing transparency and quantitative expertise to Aspect's clients. Before joining Aspect, Mrs. Hull was a Senior Portfolio Manager at Old Mutual Asset Managers (UK), an asset management firm owned by the international financial services company Old Mutual. Mrs. Hull joined Old Mutual Asset Managers (UK) in August 2004 and left in May 2008, and was responsible for managing a range of quantitative hedge fund strategies and long-only portfolios. In January 2003, Mrs. Hull joined Northern Trust Global Investments (the asset management division of Northern Trust, a global financial services company) as part of its acquisition of the quantitative investment divisions of Deutsche Asset Management. Mrs. Hull was a Senior Portfolio Manager there, and left in July 2004. Mrs. Hull joined Deutsche Asset Management, then known as Morgan Grenfell, in August 1998. Deutsche Asset Management was the global asset management division of Deutsche Bank, the global banking firm. Mrs. Hull worked as a Quantitative Portfolio Manager at Deutsche Asset Management until January 2003, transferring to Northern Trust as part of the acquisition. Mrs. Hull holds an MA in Mathematical Sciences from Oxford University. She is also a Certified FRM and a CFA charterholder.
Simon Brown Director of Research: Dr. Brown joined Aspect in May 2004 and is Director of Research. Dr. Brown has been listed with the CFTC as a principal of Aspect effective October 13, 2014. He is responsible for the management of the Research team, subject to the oversight of Mr. Lueck. In respect of the Aspect Diversified Program, and its modified implementations, Dr. Brown is a member of Aspect's Risk Management Committee, which assumes overall responsibility for the operation of Aspect's investment programs, and the Investment Management Committee which is responsible for setting and overseeing the broad strategic agenda
19
for the Aspect Diversified Program and its modified implementations. Prior to joining the Research Team in December 2006, Dr. Brown worked in the Technology Team at Aspect, developing the middle and back office systems that are in use at Aspect. Between June 2002 and May 2004, Dr. Brown worked as a technologist in Equity Risk at UBS (an international investment bank), focusing on the development of the system that was used to manage UBS's global equity risk portfolio. From September 1999 to May 2002, Dr. Brown began his career as a consultant for Oracle Corporation (a multinational computer technology corporation), providing technology solutions to clients within finance and other industries. He holds a PhD in Computer Science from Sheffield University after gaining a 1st class degree in Computer Science and Artificial Intelligence from Birmingham University.
Cantab Capital Partners, LLP
The Adviser has entered into a trading advisory agreement with Cantab Capital Partners, LLP ("Cantab"), to manage a portion of the Fund's assets using the Core Macro Program. Cantab is a Cambridge UK-based Limited Liability Partnership (LLP) formed in 2006. Cantab's main office is located at City House, 126-130 Hills Road, Cambridge, CB2 1RE, UK. Cantab is registered with the CFTC as a CTA and CPO, is a member of the NFA and is regulated by the Financial Conduct Authority in the United Kingdom. Cantab was acquired by GAM in October 2016 and is a wholly-owned subsidiary of GAM Holdings, AG. Cantab now forms the cornerstone of GAM's new entity "GAM Systematic". Cantab retains full responsibilities for managing its funds, research and development and hiring into the investment team. Cantab's investment philosophy is based on a multi-strategy, multi-asset approach looking to identify several distinct sources of return from persistent statistical relationships between assets.
Dr. Ewan Kirk Chief Investment Officer and co-founder of Cantab. Dr. Ewan Kirk is Chief Investment Officer of Cantab. He co-founded Cantab Capital Partners in 2006, which became part of GAM Systematic in October 2016. His daily focus is research and development, risk management and managing the Cantab quantitative team. Prior to founding Cantab, Ewan Kirk ran the 120-strong Goldman Sachs Strategies Group in Europe, where he was responsible for all of Goldman Sachs' quantitative technology. Ewan Kirk holds a PhD in Mathematics (General Relativity) from the University of Southampton, a Certificate in Advanced Study in Applied Mathematics from the University of Cambridge and achieved a First Class degree in Natural Philosophy and Astronomy at the University of Glasgow.
Dr. Tom Howat Chief Technology Officer. Dr. Tom Howat is Chief Technology Officer at Cantab Capital Partners, which became part of GAM Systematic in October 2016. He heads up the team of scientists responsible for Cantab's ongoing infrastructure development. Much of the framework underpinning all of Cantab's critically important functions has been designed by Tom Howat and his team. This includes the back-testing systems; trading and automated execution; real-time risk management and signal computation; and trade allocations between different managed accounts. Prior to joining Cantab, Tom Howat spent seven years at Trinity College, Cambridge, where he obtained degrees in Mathematics and a PhD in Mathematical Biology.
Dr. Matthew Killeya Head of Research. Dr. Matthew Killeya is Head of Research at Cantab Capital Partners, which became part of GAM Systematic in October 2016. His primary focus is on strategy development and he has driven ideas in all areas of the portfolio. His current interests include the application of Bayesian analysis to the investment problem, the use of information from options markets for strategy signalling, and short term prediction and optimization for execution algorithms. Matt Killeya has spent over ten years in the industry implementing and managing systematic strategy research and was previously a senior managing researcher at Winton Capital Management. Matt Killeya holds a PhD in Bayesian statistics and a first class Master of Mathematics degree from Durham University.
Dr. Genia Diamond Head of Business Development. Dr. Genia Diamond is Head of Business Development at GAM Systematic, with responsibility for investor-focused activities. She was previously Head of Business Development at Cantab Capital Partners, which became part of GAM Systematic in October 2016. Prior to joining Cantab in 2011, she was at OMAM UK, Solent Capital and BlueCrest Capital. She started her career
20
in asset management as a senior researcher at PAAMCO fund of hedge funds. Genia Diamond is a frequent speaker at asset management industry forums. She co-chairs the London Chapter of Senior Practitioners for 100 Women in Hedge Funds and was included in the "50 Leading Women in Hedge Funds 2013" list published by Hedge Fund Journal and Ernst & Young LLP. Genia Diamond holds a PhD in linguistics from Moscow State University, an MBA from Erasmus University in the Netherlands and an MA (Honours) in Linguistics & Culture Studies from Moscow State University. She is a CAIA charterholder.
Adam Glinsman Co-Head of GAM Systematic. Adam Glinsman is Co-Head of GAM Systematic and focuses on the management and evolution of all non-investment aspects of the business. He was CEO of Cantab Capital Partners, which became part of GAM Systematic in October 2016. Before joining Cantab, Adam Glinsman was COO and a Partner of Lansdowne Partners between 2003 and 2009. He is a founding board member of Cambridge Innovation Capital, a leading institutional investor in high-growth, intellectual property rich technology companies across the Cambridge eco-system, and the only preferred investor for the University of Cambridge. Adam Glinsman holds a BSc (Econ.) with First Class Honours from the London School of Economics and an MPhil in International Relations from Cambridge University.
Anthony Lawler Co-Head of GAM Systematic. Anthony Lawler is Co-Head of GAM Systematic. Prior to joining GAM in November 2011, he spent eight years with Man Group based in London and Chicago, recently as head of portfolio management, leading a global team covering all of Man Investments' multi-manager mandates. Prior to this, Anthony Lawler was head of hedge fund research at Man Glenwood, a US alternative investment firm. Before that, he was an equity research analyst at Prudential Securities. Prior to this, he was a manager at venture capital firm, Castling Group. He began his career as an M&A analyst at Merrill Lynch in San Francisco. Anthony Lawler holds an MBA in Finance and Economics from the University of Chicago Booth School of Business, and a BS (highest honors) in Finance from the University of Illinois.
Fraser McIntyre Chief Operating Officer. Fraser McIntyre is Chief Operating Officer of GAM Systematic, overseeing all operational areas of the business, including finance, operations, legal and compliance. He was previously COO at Cantab Capital Partners, which became part of GAM Systematic in October 2016. He is a qualified Chartered Accountant with 15 years of experience in the hedge fund industry. Fraser McIntyre started his career in the Prime Broking divisions at Goldman Sachs and UBS, followed by a series of COO/CFO roles at single managers, including Meditor Capital Management in London. He joined Cantab in 2013. Fraser McIntyre holds a degree in Business Studies and Accounting from the University of Edinburgh.
Conquest Capital LLC
The Adviser has entered into a trading advisory agreement with Conquest Capital LLC ("Conquest") to manage a portion of the Fund's assets using the Conquest Emerald Futures Program. Conquest is a Delaware Limited Liability Company formed in 2001 and based in New York. Conquest's main office is located at 540 Madison Avenue, 14th Fl, New York, NY 10022. Conquest is registered with the CFTC as both a CTA and a CPO and is a member of the NFA in such capacities. Conquest's philosophy is predominantly focused on capturing short-term directional moves.
Marc H. Malek Founder and Portfolio Manager: Mr. Malek is the primary decision-maker at Conquest, setting the strategic and investment direction of the firm. Mr. Malek graduated with Honors from the California Institute of Technology with a Bachelor of Science in Engineering and Applied Science, and holds a Bachelor of Arts in Mathematics from Reed College. He began his career in 1992 at Salomon Brothers as a financial analyst in the Financial Strategy Group. Following his time at Salomon Brothers, he worked at a $400 million hedge fund and financial advisory firm designing trading systems and trading currency options. After joining UBS in 1995, Mr. Malek held various senior level positions, up to worldwide head of the Exotic FX Derivatives Group and Executive Director in charge of FX Proprietary Trading in Europe. Following UBS, he was a principal in Avalon Asset Management where he was the Co-Portfolio Manager of The Enterprise Fund, a CTA. In 2001, Mr. Malek founded Conquest Capital Group LLC, the parent entity of Conquest, where he continued his role as Portfolio Manager and launched Conquest Macro, a systematic short-term trading CTA.
21
Jason Ruspini Portfolio Manager, Research: Mr. Ruspini holds a Bachelor of Science in Engineering in Computer Science from the University of Pennsylvania, where he graduated in 1997. In early 1999, he left his internet start-up to join Goldman Sachs where he served as a senior analyst in firm-wide and fixed income technology for over three years. After departing Goldman Sachs, Mr. Ruspini worked as a floor trader on the New York Mercantile Exchange, at which time he began developing systematic strategies. Mr. Ruspini joined Conquest in July 2003.
Harold Feder Chief Financial Officer & Compliance Officer: Mr. Feder graduated Summa Cum Laude from Touro College with a Bachelor of Science in Accounting. He worked in public accounting for seven years, most recently as an audit manager at Grant Thornton's Financial Services Industry Group. While at Grant Thornton, Mr. Feder was in charge of auditing various hedge funds, private equity partnerships and broker-dealers. He was also an instructor in Grant Thornton's Continuing Professional Education Center, where he gave courses on Audit Planning and on Auditing Broker-Dealers. Mr. Feder has also worked as an accountant at Tudor Investment Corp. Mr. Feder is licensed as a CPA in the state of New York. He is a member of the American Institute of Certified Public Accountants as well as the New York State Society of Certified Public Accountants, where he has served on the Stock Brokerage committee. Mr. Feder joined Conquest in August 2004.
Eclipse Capital Management, Inc.
The Adviser has entered into a trading advisory agreement with Eclipse Capital Management, Inc ("Eclipse") to manage a portion of the Fund's assets using the Eclipse Emerald Futures Program. Eclipse is a Missouri-based corporation formed in 1983. Eclipse's main office is located at 7700 Bonhomme Ave, Suite 500, St. Louis, MO. Eclipse is registered with CFTC as a CTA and is a member of the NFA. Eclipse Fund Management, Inc. (an affiliate) is registered as a CPO with the CFTC. Eclipse focuses on a systematic approach designed to profit primarily from intermediate- and long-term price trends in multiple market sectors.
Thomas W. Moller CEO and CIO: Mr. Moller serves as CEO and head of Eclipse's Business Management Group driving the firm's investment management and product development activities. Mr. Moller holds a Bachelor's degree in Economics and Business Administration from Vanderbilt University and a Master's in Accounting from the University of Kentucky. Prior to founding Eclipse, Mr. Moller fulfilled a number of roles including Associated Person of Geldermann & Company, principal of Interest Rate Management Inc. and Associated Person of Man International Inc.
Fran Olszweski Managing Director and Chief Portfolio Manager: Mr. Olszweski's primary responsibility is the research and development, implementation, and maintenance of Eclipse's trading strategies. Mr. Olszweski's background is in Economics where he holds a Bachelor's degree from Washington University. Previously, Mr. Olszweski served as trading manager for Hollingsworth Trading Company before moving to the Capital Markets Group of Nippon Credit Bank where he worked as a proprietary trader. Mr. Olszweski then held the role of Assistant Vice President and proprietary trader within the Derivatives Dealing Team of UFJ Group before joining Eclipse in 2001.
Graham Capital Management, LP
The Adviser has entered into a trading advisory agreement with Graham Capital Management, L.P. ("GCM") to manage a portion of the Fund's assets using the Graham Tactical Trend Program. GCM is a Connecticut based company formed in 1994. GCM's main offices are located at Rock Ledge Financial Centre, 40 Highland Avenue, Rowayton, CT 06853. GCM is registered with the CFTC as a CTA and CPO and is a member of the NFA. GCM is also registered with the Securities and Exchange Commission as an Investment Adviser. GCM offers clients a broad array of quantitative and discretionary global macro trading programs. GCM's quantitative trading programs or models produce trading signals on a largely automated basis when applied to market data. In GCM's discretionary trading programs, trades are determined subjectively on the basis of its traders' assessment of market conditions rather than through application of an automated system.
22
Kenneth G. Tropin Chairman: Mr. Tropin founded GCM in May 1994. Mr. Tropin developed the firm's original trading programs and is responsible for the overall management of the organization, including the investment of its proprietary trading capital.
Pablo Calderini President and Chief Investment Officer: Mr. Calderini is responsible for the management and oversight of the discretionary and systematic trading businesses at GCM. He joined GCM in August 2010 and became an Associated Person and Principal of GCM effective August 13, 2010. Prior to joining GCM, Mr. Calderini worked at Deutsche Bank from June 1997 to July 2010 where he held positions of increasing responsibility, most recently the Global Head of Equity Proprietary Trading. Mr. Calderini commenced his career at Deutsche Bank as Global Head of Emerging Markets. During his tenure at Deutsche Bank, Mr. Calderini also helped manage several groups across the fixed income and equity platforms, including the Global Credit Derivatives Team. Mr. Calderini received a BA in Economics from Universidad Nacional de Rosario in 1987 and a Masters in Economics from Universidad del Cema in 1988, each in Argentina.
Harmonic Capital Partners LLP
The Adviser has entered into a trading advisory agreement with Harmonic Capital Partners LLP ("HCP") to manage a portion of the Fund's assets using the Harmonic Emerald Futures Program. HCP is a limited liability partnership formed in 2002. HCP's main office is located at 3 Lombard Street, London, EC3V 9AA, UK. HCP is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is registered with the CFTC as a CTA and CPO and is a member of the NFA. HCP is also registered with the SEC as an Investment Adviser. HCP uses a systematic multi-strategy approach aiming to capture alpha from futures and currency markets through macro-economic understanding.
Dr. Patrik Säfvenblad CIO and Investment Partner: As chair of the Harmonic Investment Committee, he is responsible for setting the firm's research agenda, delivering investment research and oversight of portfolio risk management. Prior to joining HCP in 2009, Dr. Säfvenblad worked for DnB NOR Asset Management as Head of Hedge Fund Research. Before joining DnB NOR in 2007, he was Head of Portfolio Management at RPM Risk and Portfolio Management in Stockholm. In this role he managed the firm's investment team and had overall responsibility for research, due diligence and investment analysis. Before joining RPM in 2000, he was Assistant Professor of Finance at the Stockholm School of Economics. His academic research focused on price formation, in particular the information flow in complex markets. He holds a PhD in Finance from the Stockholm School of Economics.
Romael Karam CEO: Mr. Karam's primary focus is the management and leadership of HCP's overall business. He was previously Head of Dealing at Harmonic before assuming his current role. Prior to joining HCP in 2003, Mr. Karam was a Multi-Asset Execution Trader at MAN-Fidex from 2000-2003. Before joining MAN-Fidex, Romael worked at Marshall, French and Lucas as a Futures and Options Trader from 1998-2000. Mr. Karam holds a degree in Economics from Kingston University.
Samir Sheldenkar Investment Partner: As an Investment Partner, he is responsible for researching, implementing and managing systematic trading strategies at Harmonic, and is a member of the Harmonic Investment Committee. Prior to joining HCP in 2006, Mr. Sheldenkar worked at Application Networks/Thomson Reuters as a Risk and Valuation software engineer, developing and delivering a suite of sophisticated risk analytics to financial services clients. Mr. Sheldenkar holds a degree in Mathematics from Cambridge University and a Masters Degree in Computer Science from Oxford University.
Per Ivarsson Investment Partner: As an Investment Partner, he is responsible for researching, implementing and managing systematic trading strategies at Harmonic, and is a member of the Harmonic Investment Committee. Prior to joining HCP in 2007, Mr. Ivarsson worked at Ocado where he developed software to increase the efficiency of delivering customer orders across the UK. He has a first class honours degree in Engineering Physics from the Royal Institute of Technology in Stockholm.
23
P/E Global, LLC
The Adviser has entered into a trading advisory agreement with P/E Global, LLC ("P/E") to manage a portion of the Fund's assets using the P/E Emerald Futures Program. P/E is a Boston-based Limited Liability Company (LLC) formed in 2000. P/E's main office is located at 75 State Street, 31st Floor, Boston, MA. P/E is registered with the CFTC as a CTA and CPO, is a member of the NFA and is registered with the SEC as an Investment Adviser. P/E uses fundamental macroeconomic and financial factors in all aspects of its research in order to develop adaptive quantitative processes.
Warren Naphtal CIO: CIO: Mr. Naphtal has extensive experience in the portfolio management and securities trading fields. He is the co-founder of P/E Investments, and serves as Chief Investment Officer. From 1993 to 1995, Mr. Naphtal was a Senior Vice President and Head of Derivative Strategies at Putnam Investments, managing $3.5 Billion. He was also responsible for Putnam's commodity investments and foreign exchange overlay areas working extensively with core clients in the U.S. and Japan. Mr. Naphtal served on Putnam's Capital Market Committee, setting the firm's overall investment strategy and was a founding member of Putnam's Risk Management Committee. From 1989 to 1993, Mr. Naphtal was a Managing Director of Continental Bank, where his responsibilities included Head of Global Risk Management, Head of Proprietary Trading and Managing Partner of Cardinal Capital Management. From 1987 to 1989, Mr. Naphtal was a Vice President of Continental Bank, where he was responsible for Derivatives Trading. From 1985 to 1986, Mr. Naphtal traded equity options for O'Connor & Associates, a leading options trading concern that was subsequently acquired by Swiss Bank. Mr. Naphtal is a graduate of both the Sloan School of Management at M.I.T., where he was a COGME Scholar, and received a S.M. in Management in 1985, and the University of California, Berkeley where he received a B.S. in Civil Engineering in 1983.
Mary Stephens Naphtal COO: Ms. Naphtal contributes expertise in the areas of strategic analysis, operations, and macroeconomic research. Ms. Naphtal Co-Founded P/E Investments in 1995, and currently serves as Chief Operating Officer. From 1991 to 1994, Ms. Naphtal was a Strategic Consultant advising major corporations. From 1986 to 1991, Ms. Naphtal was a management consultant for McKinsey & Co. in the areas of corporate strategy and organizational effectiveness. At McKinsey, she advised a diverse set of U.S. and European clients in multiple industries including Financial Institutions, Electronics, Telecommunications, Media, Consumer Goods and Industrial Manufacturing. Previously, Ms. Naphtal worked for Morgan Stanley & Co., where she participated in corporate finance and mergers & acquisitions transactions. From 1981 to 1984, Ms. Naphtal was a Client Manager at Harper and Schuman, a financial software concern. Ms. Naphtal is a graduate of Sloan School of Management at M.I.T., where she received a S.M. in Management in 1986, and the Colorado College, where she received a B.A. in Economics, magna cum laude in 1981. Ms. Naphtal is a member of Phi Beta Kappa, and a recipient of a full Boettcher Scholarship.
Revolution Capital Management, LLC
The Adviser has entered into a trading advisory agreement with Revolution Capital Management, LLC ("RCM") to manage a portion of the Fund's assets using the Revolution Emerald Futures Program. RCM is a Colorado-based Limited Liability Company (LLC) formed in 2004. RCM's main office is located at 1400 16th Street, Suite 510, Denver, Colorado. RCM is registered with the CFTC as a CTA and CPO and is a member of the NFA. RCM has been trading proprietary capital since January 2005. RCM focuses on short-term, systematic and quantitative trading, applying rigorous statistical analysis to all aspects of research, development, and operations.
Michael Mundt Principal: Dr. Mundt's tasks primarily consist of model development, business/marketing, and coordinating RCM's overall business and trading strategy. Dr. Mundt's background is in engineering and applied science. He received his Bachelor of Science degree in Aerospace Engineering from the University of Colorado in 1989. He was awarded a PhD in Aerospace Engineering in 1993, also from the University of Colorado; his thesis involved the exploration of chaos and turbulence in simple weather/climate models. After the completion of his academic studies, Dr. Mundt transitioned into the technology industry. He was employed by Seagate Technology, a hard-disk drive company, as an engineer specializing in computational fluid mechanics between March 1998 and July 2007.
24
T. Robert Olson Principal: Dr. Olson oversees the architecture and development of the hardware and software computing infrastructure at RCM. Dr. Olson received his Bachelor of Science degree in Aerospace Engineering at the University of Arizona in 1989. He received his Master's and Doctorate degrees in Aerospace Engineering at the University of Colorado in 1992 and 1996, respectively. Dr. Olson was employed at Raytheon Technology, an aerospace defence contractor, from June 1996 through June 2006. His primary job duties included code/software development, data analysis, and the development of statistical algorithms to process high-frequency real-time data.
Trigon Investment Advisors, LLC
The Adviser has entered into a trading advisory agreement with Trigon Investment Advisors, LLC ("Trigon") to manage a portion of the Fund's assets using the Trigon Emerald Futures Program. Trigon is a New York based company founded in 2002. Trigon's main office is located in Wall Street Plaza, 88 Pine Street, New York. Trigon is registered with the CFTC as a CTA and CPO and is a member of the NFA. Trigon manages both discretionary and systematic investment programs with a focus on top-down analysis of fundamentals.
Paul D. Mastroddi Principal and Co-Founder: Mr. Mastroddi co-manages Trigon's discretionary portfolios in addition to overseeing their systematic programs. Mr. Mastroddi worked at JPMorgan (1985-96), where he was Managing Director and chief US economist. He was ranked one of the top economists on Wall Street in the mid-1990s in polls conducted by Institutional Investor and Greenwich Associates. Mr. Mastroddi became an investment manager in 1996. He began his career as an investment manager at Lattanzio Group, where he ran the macro overlay for that equity-oriented hedge fund start-up (1996-97). In 1998, the Lattanzio partners joined Omega Advisors as a group and Mr. Mastroddi briefly advised and traded for Omega Advisors (1998). Mr. Mastroddi had sole responsibility for managing up to $100 million in capital at Moore Capital Management (1999-2000). He joined the MLC family of funds in early 2001 to team with Mr. Basic. Mr. Mastroddi graduated from Fordham University in 1981 with a BA in Economics and Philosophy and holds a PhD in Economics from Yale University (1985).
Ante Basic Principal and Co-Founder: Mr. Basic co-manages Trigon's discretionary portfolios in addition to overseeing their systematic programs. Mr. Basic started his career at the Chase Manhattan Bank (1990-96), where he was the head trader of a quantitative trading group responsible for portfolio management, research and development of systematic and quantitative trading strategies. Mr. Basic was co-founder, President and head trader of Global Capital Markets Strategies, Inc., a fund consultant and Commodity Trading Advisory company (1996-99). From 1999 to 2000, he was Senior Vice President of Refco Fund Holdings, where he traded proprietary capital and oversaw the firm's alternative asset division. Mr. Basic joined the MLC family of funds in 2000 as Managing Director. He graduated from Brooklyn College of City University of New York with a BS in Business Management and Finance and is a Candidate for MS in Global Affairs from New York University.
A discussion regarding the basis for the Board of Directors' approval of the Fund's investment advisory agreement with the Adviser and trading advisory agreements with the Trading Advisers is available in the Fund's annual report to shareholders for the fiscal period ended August 31, 2016, and the Fund's Semi-Annual Report to Shareholders for the fiscal period ended February 28, 2017, in relation to the approval of Aspect Capital Limited, and both may be obtained by calling 1-844-261-6484 or visiting the SEC's website at www.sec.gov.
25
SHAREHOLDER INFORMATION
Pricing of Fund Shares
Class I Shares and Class C Shares of the Fund are sold at their net asset value ("NAV"). Class A Shares and Class T Shares of the Fund are sold at their NAV, plus a front-end sales charge, if applicable. The NAV of a class of the Fund is calculated as follows:
The Fund's NAV is calculated once daily at the close of regular trading hours on the NYSE (generally 4:00 p.m. Eastern time) on each day the NYSE is open. The NYSE is generally open Monday through Friday, except national holidays. The NYSE also may be closed on national days of mourning or due to natural disaster or other extraordinary events or emergency. Due to the fact that different expenses are charged to the Class I Shares, Class A Shares, Class C Shares and Class T Shares of the Fund, the NAV of the four classes of the Fund may vary. The Fund will effect purchases of Shares at the NAV next determined after receipt by the Transfer Agent of your purchase order in good order as described below. The Fund will effect redemptions of Shares at the NAV next calculated after receipt by the Transfer Agent of your redemption request in good order as described below. If the Fund holds securities that are primarily listed on non-U.S. exchanges, the NAV of the Fund's shares may change on days when shareholders will not be able to purchase or redeem the Fund's shares.
The Fund's equity securities listed on any national or foreign exchange market system will be valued at the last sale price, except for the National Association of Securities Dealers Automatic Quotation System ("NASDAQ"). Equity securities listed on NASDAQ will be valued at the official closing price. Equity securities traded in the over-the-counter market are valued at their closing prices. If there were no transactions on that day, securities traded principally on an exchange or on NASDAQ will be valued at the mean of the last bid and ask prices prior to the market close. Fixed income securities having a remaining maturity of 60 days or less are valued at market value. Fixed income securities having a remaining maturity of greater than 60 days are valued using an independent pricing service. When prices are not available from such service or are deemed to be unreliable, securities may be valued by dealers who make markets in such securities. Forward exchange contracts are valued by interpolating between spot and forward currency rates as quoted by an independent pricing service. Futures contracts are generally valued using the settlement price determined by the relevant exchange. Options for which the primary market is a national securities exchange are valued at the last sale price on the exchange on which they are traded, or, in the absence of any sale, will be valued at the mean of the last bid and ask prices prior to the market close. Options not traded on a national securities exchange are valued at the last quoted bid price for long option positions and the closing ask price for short option positions.
If market quotations are unavailable or deemed unreliable by the Fund's administrator, in consultation with the Adviser and Trading Advisers, securities will be valued by the Adviser and Trading Advisers in accordance with procedures adopted by the Company's Board of Directors and under the Board of Directors' ultimate supervision. Relying on prices supplied by pricing services or dealers or using fair valuation involves the risk that the values used by the Fund to price its investments may be higher or lower than the values used by other investment companies and investors to price the same investments.
Investments in other open-end investment companies are valued based on the NAV of those investment companies (which may use fair value pricing as discussed in their prospectuses). Investments in exchange-traded funds, REITs and closed-end funds will be valued at their market price.
26
Sales Charges
Different Service Organizations may impose different sales charge waivers and these variations are described in Appendix A to this Prospectus.
Class A Shares Sales Charges. Purchases of Class A Shares of the Fund are subject to a front-end sales charge of up to 5.75% of the total purchase price; however, sales charges may be reduced for large purchases as indicated below. For Class A Shares sold by the Distributor, the Distributor will receive the sales charge imposed on purchases of Class A Shares (or any contingent deferred sales charge paid on redemptions) and may retain the full amount of such sales charge. The sales charges or underwriter concessions (the difference between the sales charge and the dealer reallowance) received by the Distributor may be made available to the Fund for pre-approved marketing expenses or may be used to offset the compensation owed by the Adviser to the Distributor for its services. Sales charges are not imposed on Shares that are purchased with reinvested dividends or other distributions. The table below indicates the front-end sales charge as a percentage of both the offering price and the net amount invested. The term "offering price" includes the front-end sales charge.
Amount of Purchase of
Class A Shares |
Sales Charge as a
% of Offering Price |
Sales Charge as a
% of Net Amount Invested |
Dealer Compensation
as a Percentage of Offering Price |
||||||||||||
Less than $25,000 |
5.75 |
% |
6.10 |
% |
5.00 |
% |
|||||||||
At least $25,000 but less than $49,999 |
5.00 |
% |
5.26 |
% |
4.25 |
% |
|||||||||
At least $50,000 but less than $99,999 |
4.75 |
% |
4.99 |
% |
4.00 |
% |
|||||||||
At least $100,000 but less than $249,999 |
3.75 |
% |
3.83 |
% |
3.25 |
% |
|||||||||
At least $250,000 but less than $499,999 |
2.50 |
% |
2.56 |
% |
2.00 |
% |
|||||||||
At least $500,000 but less than $1,000,000 |
2.00 |
% |
2.04 |
% |
1.75 |
% |
|||||||||
$ 1,000,000 or greater |
None |
None |
**see below |
** No sales charge is payable at the time of purchase on investments of $1,000,000 or more; however, a 1% contingent deferred sales charge is imposed in the event of redemption within 12 months following any such purchase. The Fund's Distributor will pay a commission at the rate of 1% to certain brokerage firms, financial institutions and other industry professionals, including affiliates of the Adviser who initiate and are responsible for purchases of $1,000,000 or more. Contingent deferred sale charges may be waived or varied by certain Service Organizations as described in Appendix A to this Prospectus.
Class T Shares Sales Charges. Purchases of Class T Shares of the Fund are subject to a front-end sales charge of up to 2.50% of the total purchase price; however, sales charges may be reduced for large purchases as indicated below. Sales charges are not imposed on Shares that are purchased with reinvested dividends or other distributions, and the Fund does not impose a deferred sales charge on Class T Shares. The table below indicates the front-end sales charge as a percentage of both the offering price and the net amount invested. The term "offering price" includes the front-end sales charge.
Amount of Purchase of
Class T Shares |
Sales Charge as a
% of Offering Price |
Sales Charge as a
% of Net Amount Invested |
Dealer Compensation
as a Percentage of Offering Price |
||||||||||||
Less than $250,000 |
2.50 |
% |
2.56 |
% |
2.50 |
% |
|||||||||
At least $250,000 but less than $500,000 |
2.00 |
% |
2.04 |
% |
2.00 |
% |
|||||||||
At least $500,000 but less than $1,000,000 |
1.50 |
% |
1.52 |
% |
1.50 |
% |
|||||||||
$ 1,000,000 or greater |
1.00 |
% |
1.01 |
% |
1.00 |
% |
Rights of Accumulation. You may combine your new purchase of Class A Shares with Class A Shares and/or Class C Shares currently owned for the purpose of qualifying for the lower initial sales charge rates that apply to larger purchases. The applicable sales charge for the new purchase is based on the total of your current purchase and the current Net Asset Value of all other shares you own. You may combine your account, your spouse's account, and the account(s) of your children under age 25.
27
This privilege is also extended to certain employee benefit plans and trust estates. The following purchases may be combined for purposes of determining the "Amount of Purchase:" (a) individual purchases, if made at the same time, by a single purchaser, the purchaser's spouse and children under the age of 25 purchasing Class A Shares for their own accounts, including shares purchased by a qualified retirement plan(s) exclusively for the benefit of such individual(s) (such as an IRA, individual-type section 403(b) plan or single-participant Keogh-type plan) or by a "Company," as defined in Section 2(a)(8) of the 1940 Act, solely controlled as defined in the 1940 Act, by such individual(s), or (b) individual purchases by trustees or other fiduciaries purchasing Class A Shares (i) for a single trust estate or a single fiduciary account, including an employee benefit plan, or (ii) concurrently by two or more employee benefit plans for a single employer or of employers affiliated with each other in accordance with Section 2(a)(3)(c) of the 1940 Act (excluding in either case an employee benefit plan described in (a) above), provided such trustees or other fiduciaries purchase shares in a single payment. Purchases made for nominee or street name accounts may not be combined with purchases made for such other accounts. You may also further discuss the combined purchase privilege with your investment broker, brokerage firm, financial institution, or other industry professional, including affiliates of the Adviser.
You will need to provide written instruction with respect to the other accounts whose purchases should be considered in Rights of Accumulation.
Rights of Accumulation do not apply to Class T Shares.
Letter of Intent. If you anticipate purchasing a specific dollar amount of Class A Shares within a 13-month period, the shares may be purchased at a reduced sales charge by completing and returning a Letter of Intent (the "Letter"), which can be provided to you by your investment broker or other Service Organization. The reduced sales charge may also be obtained on Class A Shares purchased within the 90 days prior to the date of receipt of the Letter. Shares purchased under the Letter are eligible for the same reduced sales charge that would have been available had all the shares been purchased at the same time. There is no obligation to purchase the full amount of shares indicated in the Letter. Should you invest more or less than indicated in the Letter during the 13-month period, the sales charge will be recalculated based on the actual amount purchased. A portion of the amount of the intended purchase normally will be held in escrow in the form of Shares pending completion of the intended purchase. If you do not purchase the full amount of Class A Shares indicated in the Letter, the appropriate amount of shares held in escrow will be redeemed by the Transfer Agent to pay the sales charge that was not applied to your purchase.
Letters of Intent do not apply to Class T Shares.
Class T Shares Eligibility. Class T Shares are available only through certain Service Organizations that make the Shares available to their clients. Not all Service Organizations make Class T Shares available to their clients. Certain Service Organizations, through whom you may invest in Class T Shares, may impose their own investment fees, policies and procedures for purchasing and selling Class T Shares, which are not described in this Prospectus or the SAI, and which will depend on the policies, procedures and trading platforms of the Service Organization. Consult Appendix A and a representative of your Service Organization about the availability of Class T Shares of the Fund and the Service Organization's policies, procedures and other information. Rights of accumulation, letters of intent, rights of reinstatement and exchange privileges are not available on purchases of Class T Shares.
Class A Sales Charge Waivers. The sales charge on purchases of Class A Shares is waived for certain types of investors, including:
• Current and retired directors and officers of the Fund sponsored by the Adviser or any of its subsidiaries, their families (e.g., spouse, children, mother or father) and any purchases referred through the Adviser.
• Employees of the Adviser and their families, or any full-time employee or registered representative of the Distributor or of broker-dealers having selling agreements with the Distributor (a "Selling Broker") and their immediate families (or any trust, pension, profit sharing or other benefit plan for the benefit of such persons).
28
• Any full-time employee of a bank, savings and loan, credit union or other financial institution that utilizes a Selling Broker to clear purchases of the fund's shares and their immediate families.
• Participants in certain "wrap-fee" or asset allocation programs or other fee-based arrangements sponsored by broker-dealers and other financial institutions that have entered into agreements with the Distributor.
• Clients of financial intermediaries that have entered into arrangements with the Distributor providing for the shares to be used in particular investment products made available to such clients and for which such registered investment advisors may charge a separate fee.
• Institutional investors (which may include bank trust departments and registered investment advisers).
• Any accounts established on behalf of registered investment advisers or their clients by broker dealers that charge a transaction fee and that have entered into agreements with the Distributor.
• Separate accounts used to fund certain unregistered variable annuity contracts or Section 403(b) or 401(a) or (k) accounts.
• Whether a sales charge waiver is available for your retirement plan or charitable account depends upon the policies and procedures of your Service Organization and if your Service Organization has entered into an agreement with the Company or the Distributor. Please consult your financial adviser for further information.
In order to take advantage of a sales charge waiver, a purchaser must certify to the Service Organization eligibility for a waiver and must notify the Service Organization whenever eligibility for a waiver ceases to exist. A Service Organization reserves the right to request additional information from a purchaser in order to verify that such purchaser is so eligible. Such information may include account statements or other records regarding Shares of the Fund held by you or your immediate family household members.
Appendix A of this Prospectus provides more information about special sales charge arrangements through Service Organizations, and the circumstances in which sales charges may be reduced or waived for certain investors and certain types of purchases or redemptions.
Class T Sales Charge Waivers. Class T Shares may be available for purchase by certain Service Organization clients with the front-end load waived as described in Appendix A to this Prospectus.
Appendix A of this Prospectus provides more information about special sales charge arrangements through Service Organizations, and the circumstances in which sales charges may be reduced or waived for certain investors and certain types of purchases or redemptions.
Contingent Deferred Sales Charge on Certain Redemptions. Purchases of $1,000,000 or more in Class A Shares are not subject to an initial sales charge; however, a contingent deferred sales charge is payable on these investments in the event of a share redemption within 12 months following the share purchase, at the rate of 1% of the lesser of the value of the shares redeemed (exclusive of reinvested dividends and capital gain distributions) or the total cost of such shares. In determining whether a contingent deferred sales charge is payable, and the amount of the charge, it is assumed that shares purchased with reinvested dividends and capital gain distributions and then other shares held the longest are the first redeemed. Contingent Deferred Sales Charges may be waived or reduced by certain Service Organizations as described in Appendix A to this Prospectus.
Contingent Deferred Sales Charges do not apply to redemptions of Class T Shares.
Purchase of Fund Shares
Shares representing interests in the Fund are offered continuously for sale by Quasar Distributors, LLC (the "Distributor").
29
General. You may purchase Shares of the Fund at the NAV per Share, plus any applicable sales charge, next calculated after your order is received by the Transfer Agent in good order as described below. The Fund's NAV is calculated once daily at the close of regular trading hours on the NYSE (generally 4:00 p.m. Eastern time) on each day the NYSE is open. After an initial purchase is made, the Transfer Agent will set up an account for you on the Company records. The minimum initial investment in Class A Shares, Class C Shares and Class T Shares is $2,500, and the minimum initial investment for Class I Shares is $1,000,000. There is a minimum amount of $100 for subsequent investment in Class A Shares, Class C Shares and Class T Shares and of $1,000 in Class I Shares. The Fund may accept initial investments of smaller amounts in its sole discretion. You can only purchase Shares of the Fund on days the NYSE is open and through the means described below. Class T Shares are not currently available for sale.
Purchases Through Intermediaries. Shares of the Fund may also be available through certain Service Organizations. Certain features of the Shares, such as the initial and subsequent investment minimums and certain trading restrictions, may be modified or waived by Service Organizations. Service Organizations may impose minimum investment requirements. Service Organizations may also impose transaction or administrative charges or other direct fees, which charges and fees would not be imposed if Shares are purchased directly from the Company. Therefore, you should contact the Service Organization acting on your behalf concerning the fees (if any) charged in connection with a purchase or redemption of Shares and should read this Prospectus in light of the terms governing your accounts with the Service Organization. Service Organizations will be responsible for promptly transmitting client or customer purchase and redemption orders to the Company in accordance with their agreements with the Company or its agent and with clients or customers. Service Organizations or, if applicable, their designees that have entered into agreements with the Company or its agent may enter confirmed purchase orders on behalf of clients and customers, with payment to follow no later than the Company's pricing on the following business day. If payment is not received by such time, the Service Organization could be held liable for resulting fees or losses. The Company will be deemed to have received a purchase or redemption order when a Service Organization, or, if applicable, its authorized designee, accepts a purchase or redemption order in good order if the order is actually received by the Company in good order not later than the next business morning. If a purchase order is not received by the Fund in good order, the Transfer Agent will contact the financial intermediary to determine the status of the purchase order. Orders received by the Company in good order will be priced at the Fund's NAV, plus any applicable sales charges, next computed after such orders are deemed to have been received by the Service Organization or its authorized designee.
For administration, sub-accounting, transfer agency and/or other services, the Adviser or its affiliates may pay Service Organizations and certain recordkeeping organizations a fee (the "Service Fee") based on the average annual NAV of accounts with the Company maintained by such Service Organizations or recordkeepers. The Service Fee payable to any one Service Organization is determined based upon a number of factors, including the nature and quality of services provided, the operations processing requirements of the relationship and the standardized fee schedule of the Service Organization or recordkeeper.
Purchases By Telephone. Investors may purchase additional Class I, Class A and Class C Shares of the Fund by calling 1-844-261-6484. If you elected this option on your account application, and your account has been open for at least 15 calendar days, telephone orders, in amounts of $100 or more for Class A Shares and Class C Shares, and $1,000 or more for Class I Shares, will be accepted via electronic funds transfer from your bank account through the Automated Clearing House (ACH) network. You must have banking information established on your account prior to making a purchase. If your order is received prior to 4 p.m. Eastern time, your shares will be purchased at the net asset value calculated on the day your order is placed.
Telephone trades must be received by or prior to market close. During periods of high market activity, shareholders may encounter higher than usual call waits. Please allow sufficient time to place your telephone transaction.
Initial Investment By Mail. Class I, Class A and Class C Shares of the Fund may be purchased by mail. Subject to acceptance by the Fund, an account may be opened by completing and signing an Account Application and mailing it to the Fund at the address noted below, together with a check payable to Abbey Capital Futures Strategy Fund. All
30
checks must be in U.S. Dollars drawn on a domestic bank. The Fund will not accept payment in cash or money orders. The Fund does not accept post-dated checks or any conditional order or payment. To prevent check fraud, the Fund will not accept third party checks, Treasury checks, credit card checks, traveler's checks or starter checks for the purchase of Shares.
Abbey Capital Futures Strategy Fund
c/o U.S. Bancorp Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
or overnight to:
Abbey Capital Futures Strategy Fund
c/o U.S. Bancorp Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
The Transfer Agent will charge a $25 fee against a shareholder's account, in addition to any loss sustained by the Fund, for any payment that is returned. It is the policy of the Fund not to accept applications under certain circumstances or in amounts considered disadvantageous to shareholders. The Fund reserves the right to reject any application.
The Fund does not consider the U.S. Postal Service or other independent delivery services to be its agents. Therefore, deposit in the mail or with such services, or receipt at U.S. Bancorp Fund Services, LLC's post office box, of purchase orders or redemption requests does not constitute receipt by the transfer agent of the Fund. Receipt of purchase orders or redemption requests is based on when the order is received at the Transfer Agent's offices.
Shares will be purchased at the NAV plus any applicable sales charge next computed after the time the application and funds are received in proper order and accepted by the Fund.
Initial Investment By Wire. Class I, Class A and Class C Shares may also be purchased by wire. If you are making your first investment in the Fund, before you wire funds, the Transfer Agent must have a completed account application. You may mail or overnight deliver your account application to the Transfer Agent. Upon receipt of your completed account application, the Transfer Agent will establish an account for you. The account number assigned will be required as part of the instruction that should be provided to your bank to send the wire. Your bank must include both the name of the Fund you are purchasing, the account number, and your name so that monies can be correctly applied. Your bank should transmit funds by wire to:
Wire Instructions:
U.S. Bank National Association
777 East Wisconsin Ave
Milwaukee WI 53202
ABA 075000022
Credit:
U.S. Bancorp Fund Services, LLC
Account #112-952-137
For Further Credit to:
Abbey Capital Futures Strategy Fund
(shareholder registration)
(shareholder account number)
31
Wired funds must be received prior to 4:00 p.m. Eastern time to be eligible for same day pricing. The Fund and U.S. Bank, N.A. are not responsible for the consequences of delays resulting from the banking or Federal Reserve wire system, or from incomplete wiring instructions.
Subsequent Investments By Wire. Before sending your wire, please contact the Transfer Agent to advise them of your intent to wire funds. This will ensure prompt and accurate credit upon receipt of your wire.
Additional Investments. Additional investments may be made at any time by purchasing Shares at the NAV per Share, plus any applicable sales charge of the Fund by mailing a check to the Transfer Agent at the address noted above under "Investment by Mail" or by wiring as outlined above under "Investment by Wire". Initial and additional purchases made by check cannot be redeemed until payment of the purchase has been collected. This may take up to 15 calendar days from the purchase date. There is a minimum amount of $100 for subsequent investments in Class A Shares, Class C Shares and Class T Shares, and of $1,000 in Class I Shares.
Retirement Plans/IRA Accounts. The Fund offers prototype documents for a variety of retirement accounts for individuals and small businesses. Please call 1-844-261-6484 for information.
There may be special distribution requirements for a retirement account, such as required distributions or mandatory Federal income tax withholding. For more information, call the number listed above. You may be charged a $15 annual account maintenance fee for each retirement account up to a maximum of $30 annually and a $25 fee for transferring assets to another custodian or for closing a retirement account.
Purchases in Kind. In certain circumstances, Shares of the Fund may be purchased "in kind" (i.e. in exchange for securities, rather than cash). The securities rendered in connection with an in-kind purchase must be liquid securities that are not restricted as to transfer and have a value that is readily ascertainable in accordance with the Company's valuation procedures. Securities accepted by the Fund will be valued, as set forth in this Prospectus, as of the time of the next determination of net asset value after such acceptance. The Shares of the Fund that are issued to the investor in exchange for the securities will be determined as of the same time. All dividend, subscription, or other rights that are reflected in the market price of accepted securities at the time of valuation become the property of the Fund and must be delivered to the Fund by the investor upon receipt from the issuer. The Fund will not accept securities in exchange for its Shares unless such securities are, at the time of the exchange, eligible to be held by the Fund and satisfy such other conditions as may be imposed by the Adviser or the Company. Purchases in-kind may result in the recognition of gain or loss for federal income tax purposes on the securities transferred to the Fund.
Other Purchase Information. The Company reserves the right, in its sole discretion, to suspend the offering of Shares or to reject purchase orders when, in the judgment of management, such suspension or rejection is in the best interests of the Fund. The Adviser will monitor the Fund's total assets and may, subject to Board of Director's approval, decide to close the Fund at any time to new investments or to new accounts due to concerns that a significant increase in the size of the Fund may adversely affect the implementation of the Fund's strategy. The Adviser, subject to Board of Director's approval, may also choose to reopen the Fund to new investments at any time, and may subsequently close the Fund again should concerns regarding the Fund's size recur. If the Fund closes to new investments, the Fund may be offered only to certain existing shareholders of the Fund and certain other persons who may be subject to cumulative, maximum purchase amounts, as follows:
a. persons who already hold Shares of the closed Fund directly or through accounts maintained by brokers by arrangement with the Adviser;
b. existing and future clients of financial advisers and planners whose clients already hold Shares of the Fund;
c. employees of the Adviser and their spouses, parents and children; and
d. directors of the Company.
32
Distributions to all shareholders of the closed Fund will continue to be reinvested unless a shareholder elects otherwise. The Adviser, subject to the Board of Director's discretion, reserves the right to implement other purchase limitations at the time of closing, including limitations on current shareholders.
Purchases of the Fund's Shares will be made in full and fractional Shares of the Fund calculated to three decimal places. Certificates for Shares will not be issued.
Shares may be purchased and subsequent investments may be made by principals and employees of the Adviser and their family members, either directly or through their IRAs, and by any pension and profit-sharing plan of the Adviser, without being subject to the minimum investment limitation. The Adviser is authorized to waive the minimum initial investment requirement.
Good Order. A purchase request is considered to be in good order when all necessary information is provided and all required documents are properly completed, signed and delivered. Purchase requests not in good order may be rejected.
Customer Identification Program. Federal law requires the Company to obtain, verify and record identifying information, which may include the name, residential or business street address, date of birth (for an individual), social security or taxpayer identification number or other identifying information for each investor who opens or reopens an account with the Company. Applications without the required information, or without any indication that a social security or taxpayer identification number has been applied for, may not be accepted. After acceptance, to the extent permitted by applicable law or its customer identification program, the Company reserves the right (a) to place limits on transactions in any account until the identity of the investor is verified; or (b) to refuse an investment in a Company portfolio or to involuntarily redeem an investor's shares and close an account in the event that an investor's identity is not verified. The Company and its agents will not be responsible for any loss in an investor's account resulting from the investor's delay in providing all required identifying information or from closing an account and redeeming an investor's Shares when an investor's identity cannot be verified.
Redemption of Fund Shares
You may redeem Fund Shares at the next NAV calculated after a redemption request is received by the Transfer Agent in good order. The Fund's NAV is calculated once daily at the close of regular trading hours on the NYSE (generally 4:00 p.m. Eastern time) on each day the NYSE is open. You can only redeem Shares of the Fund on days the NYSE is open and through the means described below. You may redeem Fund Shares by mail, or, if you are authorized, by telephone. The value of Shares redeemed may be more or less than the purchase price, depending on the market value of the investment securities held by the Fund.
Redemption By Mail. Your redemption request should be sent to:
Abbey Capital Futures Strategy Fund
c/o U.S. Bancorp Fund Services, LLC
P. O. Box 701
Milwaukee, WI 53201-0701
If sent by overnight mail to:
Abbey Capital Futures Strategy Fund
c/o U.S. Bancorp Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
The Fund does not consider the U.S. Postal Service or other independent delivery services to be its agents. Therefore, deposit in the mail or with such services, or receipt at U.S. Bancorp Fund Services, LLC's post office
33
box, of purchase orders or redemption requests does not constitute receipt by the transfer agent of the Fund. Receipt of purchase orders or redemption requests is based on when the order is received at the Transfer Agent's offices.
A signature guarantee, from either a Medallion program member or a non-Medallion program member (as described below), is required to redeem shares in the following situations:
• If ownership is being changed on your account;
• When redemption proceeds are payable or sent to any person, address or bank account not on record;
• If a change of address or change of bank details was received by the Transfer Agent within the last 15 calendar days; and
• For all redemptions in excess of $25,000 from any shareholder account.
The Fund may waive any of the above requirements in certain instances. In addition to the situations described above, the Fund and /or the Transfer Agent reserve the right to require a signature guarantee in other instances based on the circumstances relative to the particular situation.
Non-financial transactions, including establishing or modifying certain services on an account, may require a signature guarantee, signature verification from a Signature Validation Program member, or other acceptable form of authentication from a financial institution source.
Signature guarantees will generally be accepted from non-Medallion program members who are domestic banks, brokers, dealers, credit unions, national securities exchanges, registered securities associations, clearing agencies and savings associations, as well as from participants in the New York Stock Exchange Medallion Signature Program and the Securities Transfer Agents Medallion Program ("STAMP"). A notary public is not an acceptable signature guarantor.
Redemption By Telephone. In order to utilize the telephone redemption option, you must indicate that option on your Account Application. You may then initiate a redemption of Shares in an amount not exceeding $25,000 by calling the Transfer Agent at 1-844-261-6484.
Investors may have a check sent to the address of record, proceeds may be wired to a shareholder's bank account of record, or funds may be sent via electronic funds transfer through the Automated Clearing House (ACH) network, also to the bank account of record. Wires are subject to a $15 fee paid by the investor, but the investor does not incur any charge when proceeds are sent via the ACH system.
Once a telephone transaction has been placed, it cannot be canceled or modified.
Telephone trades must be received by or prior to market close. During periods of high market activity, shareholders may encounter higher than usual call waits. Please allow sufficient time to place your telephone transaction.
Before executing an instruction received by telephone, the Transfer Agent will use reasonable procedures to confirm that the telephone instructions are genuine. The telephone call may be recorded and the caller may be asked to verify certain personal identification information. If the Fund or its agents follow these procedures, they cannot be held liable for any loss, expense or cost arising out of any telephone redemption request that is reasonably believed to be genuine. This includes fraudulent or unauthorized requests. If an account has more than one owner or authorized person, the Fund will accept telephone instructions from any one owner or authorized person.
IRA and Other Retirement Plan Redemptions. If you have an IRA, you must indicate on your written redemption request whether or not to withhold federal income tax. Redemption requests failing to indicate an election to have tax withheld will be subject to 10% withholding.
34
Shares held in IRA accounts may be redeemed by telephone at 1-844-261-6484. Investors will be asked whether or not to withhold taxes from any distribution.
Involuntary Redemption. The Fund reserves the right to redeem a shareholder's account in the Fund at any time the value of the account falls below $500 as a result of a redemption or an exchange request. Shareholders will be notified in writing that the value of their account in the Fund is less than $500 and will be allowed 30 days to make additional investments before the redemption is processed. The Fund may assert the right to redeem your Shares at current NAV at any time and without prior notice if, and to the extent that, such redemption is necessary to reimburse the Fund for any loss sustained by reason of your failure to make full payment for Shares of the Fund you previously purchased or subscribed for.
Other Redemption Information. Redemption proceeds for Shares of the Fund recently purchased by check may not be distributed until payment for the purchase has been collected, which may take up to fifteen calendar days from the purchase date. Shareholders can avoid this delay by utilizing the wire purchase option. Other than as described above, payment of the redemption proceeds will be made within seven days after receipt of an order for a redemption. The Company may suspend the right of redemption or postpone the date at times when the NYSE is closed or under any emergency circumstances as determined by the SEC.
If the Board of Directors determines that it would be detrimental to the best interests of the remaining shareholders of the Fund to make payment wholly or partly in cash, redemption proceeds may be paid in whole or in part by an in-kind distribution of readily marketable securities held by the Fund instead of cash in conformity with applicable rules of the SEC. Investors generally will incur brokerage charges on the sale of portfolio securities so received in the payment of redemptions. If a shareholder receives redemption proceeds in-kind, the shareholder will bear the market risk of the securities received until their disposition and should expect to incur transaction costs upon the disposition of the securities. The Company has elected, however, to be governed by Rule 18f-1 under the 1940 Act, so that the Fund is obligated to redeem its Shares solely in cash up to the lesser of $250,000 or 1% of its NAV during any 90-day period for any one shareholder of the Fund.
Good Order. A redemption request is considered to be in good order when all necessary information is provided and all required documents are properly completed, signed and delivered. Redemption requests not in good order may be delayed.
Market Timing
In accordance with the policy adopted by the Board of Directors, the Company discourages and does not accommodate market timing and other excessive trading practices. Purchases should be made with a view to longer-term investment only. Excessive short-term (market timing) trading practices may disrupt portfolio management strategies, increase brokerage and administrative costs, harm Fund performance and result in dilution in the value of Fund Shares held by long-term shareholders. The Company and the Adviser reserve the right to (i) reject a purchase or exchange order, (ii) delay payment of immediate cash redemption proceeds for up to seven calendar days, (iii) revoke a shareholder's privilege to purchase Fund Shares (including exchanges), or (iv) limit the amount of any exchange involving the purchase of Fund Shares. An investor may receive notice that their purchase order or exchange has been rejected after the day the order is placed or after acceptance by a financial intermediary. It is currently expected that a shareholder would receive notice that its purchase order or exchange has been rejected within 48 hours after such purchase order or exchange has been received by the Company in good order. The Company and the Adviser will not be liable for any loss resulting from rejected purchase orders. To minimize harm to the Company and its shareholders (or the Adviser), the Company (or the Adviser) will exercise its right if, in the Company's (or the Adviser's) judgment, an investor has a history of excessive trading or if an investor's trading, in the judgment of the Company (or the Adviser), has been or may be disruptive to the Fund. No waivers of the provisions of the policy established to detect and deter market timing and other excessive trading activity are permitted that would harm the Fund and its shareholders or would subordinate the interests of the Fund and its shareholders to those of the Adviser or any affiliated person or associated person of the Adviser.
35
Pursuant to the policy adopted by the Board of Directors, the Adviser has developed criteria that it uses to identify trading activity that may be excessive. The Adviser reviews on a regular, periodic basis available information related to the trading activity in the Fund in order to assess the likelihood that the Fund may be the target of excessive trading. As part of its excessive trading surveillance process, the Adviser, on a periodic basis, examines transactions that exceed certain monetary thresholds or numerical limits within a period of time. If, in its judgment, the Adviser detects excessive, short-term trading, it may reject or restrict a purchase request and may further seek to close an investor's account with the Fund. The Adviser may modify its surveillance procedures and criteria from time to time without prior notice regarding the detection of excessive trading or to address specific circumstances. The Adviser will apply the criteria in a manner that, in its judgment, will be uniform.
There is no assurance that the Fund will be able to identify market timers, particularly if they are investing through intermediaries.
If necessary, the Company may prohibit additional purchases of Shares by a financial intermediary or by certain customers of the financial intermediary. Financial intermediaries may also monitor their customers' trading activities in the Fund. The criteria used by intermediaries to monitor for excessive trading may differ from the criteria used by the Company. If a financial intermediary fails to enforce the Company's excessive trading policies, the Company may take certain actions, including terminating the relationship.
Exchange Privilege
Beneficial holders with financial intermediary sponsored fee-based programs are eligible to exchange their Shares in a particular share class of the Fund for Shares in a different share class of the Fund if the shareholder meets the eligibility requirements for that class of Shares or the shareholder is otherwise eligible to purchase that class of Shares. Such an exchange will be effected at the NAV of the Shares next calculated after the exchange request is received by the Transfer Agent in good order. Shares of each class of the Fund represent equal pro rata interests in the Fund and accrue dividends and calculate NAV and performance quotations in the same manner. The performance of each class is quoted separately due to different actual expenses. Total return can be expected to differ among classes of the Fund. Shareholders who exercise the exchange privilege will generally not recognize a taxable gain or loss for federal income tax purposes. The Fund reserves the right, at its sole discretion, to change or discontinue the exchange privilege, or to temporarily suspend the privilege during unusual market conditions when, in the judgment of management, such change or discontinuance is in the best interests of the Fund.
Exchange Privileges do not apply to Class T Shares.
Dividends and Distributions
The Fund will distribute substantially all of its net investment income and net realized capital gains, if any, to its shareholders. All distributions are reinvested in the form of additional full and fractional Shares of the Fund unless a shareholder elects otherwise. The Fund will declare and pay dividends from net investment income annually. Net realized capital gains (including net short-term capital gains), if any, will be distributed by the Fund at least annually.
The Fund may pay additional distributions and dividends at other times if necessary for the Fund to avoid U.S. federal tax. The Fund's distributions and dividends, whether received in cash or reinvested in additional Shares, are subject to U.S. federal income tax.
All distributions will be reinvested in Fund shares unless you elect to receive cash. If you elect to receive distributions and/or capital gains paid in cash, and the U.S. Postal Service cannot deliver the check, or if a check remains outstanding for six months, the Fund reserves the right to reinvest the distribution check in your account, at the Fund's current net asset value, and to reinvest all subsequent distributions. You may change the distribution option on your account at any time. You should notify the Transfer Agent in writing or by telephone at least five (5) days prior to the next distribution.
36
More Information About Taxes
The following is a summary of certain U.S. tax considerations relevant under current law, which may be subject to change in the future. Except where otherwise indicated, the discussion relates to investors who are individual U.S. citizens or residents. You should consult your tax adviser for further information regarding federal, state, local and/or foreign tax consequences relevant to your specific situation.
Distributions. The Fund contemplates distributing as dividends each year all or substantially all of its taxable income, including its net capital gain (the excess of net long-term capital gain over net short-term capital loss).
Except as otherwise discussed below, you will be subject to federal income tax on Fund distributions regardless of whether they are paid in cash or reinvested in additional shares. Fund distributions attributable to short-term capital gains and net investment income will generally be taxable to you as ordinary income, except as discussed below.
Distributions attributable to the net capital gain of the Fund will be taxable to you as long-term capital gain, no matter how long you have owned your Fund shares. The maximum long-term capital gain rate applicable to individuals, estates, and trusts is currently 23.8% (which includes a 3.8% Medicare tax). You will be notified annually of the tax status of distributions to you.
Distributions from the Fund will generally be taxable to you in the taxable year in which they are paid, with one exception. Distributions declared by the Fund in October, November or December and paid in January of the following year are taxed as though they were paid on December 31.
A portion of distributions paid by the Fund to shareholders that are corporations may also qualify for the dividends-received deduction for corporations, subject to certain holding period requirements and debt financing limitations. The amount of the dividends qualifying for this deduction may, however, be reduced as the result of the Fund's securities lending activities (if any), by a high portfolio turnover rate or by investments in debt securities or foreign corporations.
The Fund may be subject to foreign withholding or other foreign taxes on income or gain from certain foreign securities. If more than 50% of the value of the total assets of the Fund consists of stocks and securities (including debt securities) of foreign corporations at the close of a taxable year, the Fund may elect, for federal income tax purposes, to treat certain foreign taxes paid by it, including generally any withholding and other foreign income taxes, as paid by its shareholders. If the Fund makes this election, the amount of those foreign taxes paid by the Fund will be included in its shareholders' income pro rata (in addition to taxable distributions actually received by them), and each such shareholder will be entitled either (1) to credit that proportionate amount of taxes against U.S. federal income tax liability as a foreign tax credit or (2) to take that amount as an itemized deduction. If the Fund is not eligible or chooses not to make this election the Fund will be entitled to deduct any such foreign taxes in computing the amounts it is required to distribute.
If you purchase shares just before a distribution, the purchase price will reflect the amount of the upcoming distribution, but you will be taxed on the entire amount of the distribution received, even though, as an economic matter, the distribution simply constitutes a return of capital. This is known as "buying into a dividend."
Sales of Shares. You will generally recognize taxable gain or loss for federal income tax purposes on a sale or redemption of your shares based on the difference between your tax basis in the shares and the amount you receive for them. Generally, you will recognize long-term capital gain or loss if you have held your Fund shares for over twelve months at the time you dispose of them.
Any loss realized on shares held for six months or less will be treated as a long-term capital loss to the extent of any capital gain dividends that were received on the shares. Additionally, any loss realized on a disposition of shares of the Fund may be disallowed under "wash sale" rules to the extent the shares disposed of are replaced with other shares of the Fund within a period of 61 days beginning 30 days before and ending 30 days after the shares
37
are disposed of, such as pursuant to a dividend reinvestment in shares of the Fund. If disallowed, the loss will be reflected in an upward adjustment to the basis of the shares acquired.
The Fund (or relevant broker or financial adviser) is required to compute and report to the IRS and furnish to Fund shareholders cost basis information when such shares are sold. The Fund has elected to use the average cost method, unless you instruct the Fund to use a different IRS-accepted cost basis method, or choose to specifically identify your shares at the time of each sale. If your account is held by your broker or other financial adviser, they may select a different cost basis method. In these cases, please contact your broker or other financial adviser to obtain information with respect to the available methods and elections for your account. You should carefully review the cost basis information provided by the Fund and make any additional basis, holding period or other adjustments that are required when reporting these amounts on your federal and state income tax returns. Fund shareholders should consult with their tax advisers to determine the best IRS-accepted cost basis method for their tax situation and to obtain more information about how the cost basis reporting requirements apply to them.
IRAs and Other Tax-Qualified Plans. The one major exception to the preceding tax principles is that distributions on, and sales and redemptions of, shares held in an IRA (or other tax-qualified plan) will not be currently taxable unless such shares were acquired with borrowed funds.
Backup Withholding. The Fund may be required in certain cases to withhold and remit to the IRS a percentage of taxable dividends or gross proceeds realized upon sale payable to shareholders who have failed to provide a correct tax identification number in the manner required, or who are subject to withholding by the IRS for failure to properly include on their return payments of taxable interest or dividends, or who have failed to certify to the Fund that they are not subject to backup withholding when required to do so or that they are "exempt recipients." The current backup withholding rate is 28%.
U.S. Tax Treatment of Foreign Shareholders. Generally, nonresident aliens, foreign corporations and other foreign investors are subject to a 30% withholding tax on dividends paid by a U.S. corporation, although the rate may be reduced for an investor that is a qualified resident of a foreign country with an applicable tax treaty with the United States. In the case of a RIC such as the Fund, however, certain categories of dividends are exempt from the 30% withholding tax. These generally include dividends attributable to the Fund's net capital gains (the excess of net long-term capital gains over net short-term capital loss) and dividends attributable to the Fund's interest income from U.S. obligors and dividends attributable to net short-term capital gains of the Fund.
Foreign shareholders will generally not be subject to U.S. tax on gains realized on the sale or redemption of shares of the Fund, except that a nonresident alien individual who is present in the United States for 183 days or more in a calendar year will be taxable on such gains and on capital gain dividends from the Fund.
In contrast, if a foreign investor conducts a trade or business in the United States and the investment in the Fund is effectively connected with that trade or business, then the foreign investor's income from the Fund will generally be subject to U.S. federal income tax at graduated rates in a manner similar to the income of a U.S. citizen or resident.
The Fund will also generally be required to withhold 30% tax on certain payments to foreign entities that do not provide a Form W-8BEN-E that evidences their compliance with, or exemption from, specified information reporting requirements under the Foreign Account Tax Compliance Act.
All foreign investors should consult their own tax advisers regarding the tax consequences in their country of residence of an investment in the Fund.
Shares of the Fund have not been registered for sale outside of the United States and certain United States territories.
38
State and Local Taxes. You may also be subject to state and local taxes on income and gain from Fund shares. State income taxes may not apply, however, to the portions of the Fund's distributions, if any, that are attributable to interest on U.S. government securities. You should consult your tax adviser regarding the tax status of distributions in your state and locality.
More information about taxes is contained in the SAI.
Distribution Arrangements
The Board of Directors has adopted a Plan of Distribution for the Class A Shares, the Class C Shares and the Class T Shares (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Fund's Distributor is entitled to receive from the Fund a distribution fee with respect to the Shares, which is accrued daily and paid monthly, of up to 0.25% on an annualized basis of the average daily net assets of the Class A Shares and Class T Shares and up to 1.00% of the Class C Shares. The actual amount of such compensation under the Plan is agreed upon by the Company's Board of Directors and by the Distributor. Because these fees are paid out of the Fund's assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.
Amounts paid to the Distributor under the Plan may be used by the Distributor to cover expenses that are related to (i) the sale of the Shares, (ii) ongoing servicing and/or maintenance of the accounts of shareholders, and (iii) sub-transfer agency services, subaccounting services or administrative services related to the sale of the Shares, all as set forth in the Fund's 12b-1 Plan. Ongoing servicing and/or maintenance of the accounts of shareholders may include updating and mailing prospectuses and shareholder reports, responding to inquiries regarding shareholder accounts and acting as agent or intermediary between shareholders and the Fund or its service providers. The Distributor may delegate some or all of these functions to Service Organizations. See "Purchases Through Intermediaries" above.
The Plan obligates the Fund, during the period it is in effect, to accrue and pay to the Distributor on behalf of the Shares the fee agreed to under the Distribution Agreement. Payments under the Plan are not tied exclusively to expenses actually incurred by the Distributor, and the payments may exceed distribution expenses actually incurred.
Additional Information
Lost Shareholder. It is important that the Fund maintain a correct address for each investor. An incorrect address may cause an investor's account statements and other mailings to be returned to the Fund. Based upon statutory requirements for returned mail, the Fund will attempt to locate the investor or rightful owner of the account. If the Fund is unable to locate the investor, then they will determine whether the investor's account can legally be considered abandoned. The Fund is legally obligated to escheat (or transfer) abandoned property to the appropriate state's unclaimed property administrator in accordance with statutory requirements. The investor's last known address of record determines which state has jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE FUND'S SAI INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE COMPANY OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
39
FINANCIAL HIGHLIGHTS
The table below sets forth certain financial information for the periods indicated, including per share information results for a single share of the Fund. The term "Total investment return" indicates how much your investment would have increased or decreased during this period of time and assumes that you have reinvested all dividends and distributions. This information has been derived from the Fund's financial statements and has been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm. This information should be read in conjunction with the Fund's financial statements which, together with the report of the independent registered public accounting firm, are included in the Fund's annual report, which is available upon request (see back cover for ordering instructions). Class T Shares had not commenced operations prior to the date of this Prospectus and financial highlights are not yet available for Class T Shares.
ABBEY CAPITAL FUTURES STRATEGY FUND CLASS I SHARES
For the
Year Ended August 31, 2016 |
For the
Year Ended August 31, 2015 |
For the
Period Ended August 31, 2014 (1) |
|||||||||||||
Per Share Operating Performance |
|||||||||||||||
Net asset value, beginning of period |
$ |
12.03 |
$ |
10.36 |
$ |
10.00 |
|||||||||
Net investment loss (2) |
(0.21 |
) |
(0.24 |
) |
(0.03 |
) |
|||||||||
Net realized and unrealized gain from investments |
0.01 |
2.14 |
0.39 |
||||||||||||
Net increase/(decrease) in net assets resulting
from operations |
(0.20 |
) |
1.90 |
0.36 |
|||||||||||
Dividends and distributions to shareholders from: |
|||||||||||||||
Net investment income |
(0.03 |
) |
(0.22 |
) |
|
||||||||||
Net realized gains |
|
(0.01 |
) |
|
|||||||||||
Total dividends and distributions to shareholders |
(0.03 |
) |
(0.23 |
) |
|
||||||||||
Net asset value, end of period |
$ |
11.80 |
$ |
12.03 |
$ |
10.36 |
|||||||||
Total investment return (3) |
(1.68 |
)% |
18.46 |
% |
3.60 |
% (4) |
|||||||||
Ratios/Supplemental Data |
|||||||||||||||
Net assets, end of period (000's omitted) |
$ |
739,842 |
$ |
220,441 |
$ |
24,349 |
|||||||||
Ratio of expenses to average net assets with
waivers and reimbursements (including interest expense) |
2.01 |
% |
2.03 |
% |
2.01 |
% (5) |
|||||||||
Ratio of expenses to average net assets with
waivers and reimbursements (excluding interest expense) |
1.99 |
% |
1.99 |
% |
1.99 |
% (5) |
|||||||||
Ratio of expenses to average net assets without
waivers and reimbursements (including interest expense) |
2.17 |
% |
2.46 |
% |
4.71 |
% (5) |
|||||||||
Ratio of net investment loss to average net assets |
(1.76 |
)% |
(1.98 |
)% |
(1.99 |
)% (5) |
|||||||||
Portfolio turnover rate |
0.00 |
% |
0.00 |
% |
0.00 |
% (4) |
(1) Inception date of Class I Shares of the Fund was July 1, 2014.
(2) Calculated based on average shares outstanding for the period.
(3) Total investment return is calculated assuming a purchase of shares on the first day and a sale of shares on the last day of each period reported and includes reinvestments of dividends and distributions, if any.
(4) Not annualized.
(5) Annualized.
40
FINANCIAL HIGHLIGHTS
ABBEY CAPITAL FUTURES STRATEGY FUND CLASS A SHARES
For the
Year Ended August 31, 2016 |
For the
Year Ended August 31, 2015 (1) |
||||||||||
Per Share Operating Performance |
|||||||||||
Net asset value, beginning of year |
$ |
12.01 |
$ |
10.36 |
|||||||
Net investment loss (2) |
(0.24 |
) |
(0.27 |
) |
|||||||
Net realized and unrealized gain from investments |
0.01 |
2.14 |
|||||||||
Net increase/(decrease) in net assets resulting from operations |
(0.23 |
) |
1.87 |
||||||||
Dividends and distributions to shareholders from: |
|||||||||||
Net investment income |
(0.01 |
) |
(0.21 |
) |
|||||||
Net realized gains |
|
(0.01 |
) |
||||||||
Total dividends and distributions to shareholders |
(0.01 |
) |
(0.22 |
) |
|||||||
Net asset value, end of year |
$ |
11.77 |
$ |
12.01 |
|||||||
Total investment return (3) |
(1.94 |
)% |
18.17 |
% |
|||||||
Ratios/Supplemental Data |
|||||||||||
Net assets, end of period (000's omitted) |
$ |
17,125 |
$ |
11,013 |
|||||||
Ratio of expenses to average net assets with waivers
and reimbursements (including interest expense) |
2.26 |
% |
2.28 |
% |
|||||||
Ratio of expenses to average net assets with waivers
and reimbursements (excluding interest expense) |
2.24 |
% |
2.24 |
% |
|||||||
Ratio of expenses to average net assets without waivers
and reimbursements (including interest expense) |
2.42 |
% |
2.71 |
% |
|||||||
Ratio of net investment loss to average net assets |
(2.01 |
)% |
(2.23 |
)% |
|||||||
Portfolio turnover rate |
0.00 |
% |
0.00 |
% |
(1) Inception date of Class A Shares of the Fund was August 29, 2014.
(2) Calculated based on average shares outstanding for the year.
(3) Total investment return is calculated assuming a purchase of shares on the first day and a sale of shares on the last day of each period reported and includes reinvestments of dividends and distributions, if any. Total return does not reflect any applicable sales charge.
41
FINANCIAL HIGHLIGHTS
ABBEY CAPITAL FUTURES STRATEGY FUND CLASS C SHARES
For the
Period Ended August 31, 2016 (1) |
|||||||
Per Share Operating Performance |
|||||||
Net asset value, beginning of year |
$ |
11.99 |
|||||
Net investment loss (2) |
(0.30 |
) |
|||||
Net realized and unrealized gain from investments |
0.03 |
||||||
Net decrease in net assets resulting from operations |
(0.27 |
) |
|||||
Net investment income |
(0.01 |
) |
|||||
Net realized gains |
|
||||||
Total dividends and distributions to shareholders |
(0.01 |
) |
|||||
Net asset value, end of period |
$ |
11.71 |
|||||
Total investment return (3) |
(2.22 |
)% (4) |
|||||
Ratios/Supplemental Data |
|||||||
Net assets, end of period (000's omitted) |
$ |
8,380 |
|||||
Ratio of expenses to average net assets with waivers
and reimbursements (including interest expense) |
3.01 |
% (5) |
|||||
Ratio of expenses to average net assets with waivers
and reimbursements (excluding interest expense) |
2.99 |
% (5) |
|||||
Ratio of expenses to average net assets without waivers
and reimbursements (including interest expense) |
3.17 |
% (5) |
|||||
Ratio of net investment loss to average net assets |
(2.76 |
)% (5) |
|||||
Portfolio turnover rate |
0.00 |
% (6) |
(1) Inception date of Class C Shares of the Fund was October 6, 2015.
(2) Calculated based on average shares outstanding for the period.
(3) Total investment return is calculated assuming a purchase of shares on the first day and a sale of shares on the last day of the period reported and includes reinvestments of dividends and distributions, if any.
(4) Not annualized.
(5) Annualized.
(6) Portfolio Turnover Rate is calculated for the Fund, as a whole, for the entire year.
42
APPENDIX A
THE INFORMATION ENCLOSED IN THIS APPENDIX IS PART OF, AND INCORPORATED IN, THE ABBEY CAPITAL FUTURES STRATEGY FUND'S PROSPECTUS DATED APRIL 10, 2017.
Waivers and Discounts Available from Service Organizations
The availability of certain sales charge waivers and discounts will depend on whether you purchase your shares directly from the Fund or through a Service Organization. Service Organizations may have different policies and procedures regarding the availability of front-end sales charge waivers or contingent deferred (back-end) sales charge ("CDSC") waivers, which are discussed below.
In all instances, it is the purchaser's responsibility to notify the Fund or the purchaser's Service Organization at the time of purchase of any relationship or other facts qualifying the purchaser for sales charge waivers or discounts. Some waivers and discounts may not be made available through a particular Service Organization, and shareholders will have to purchase Shares directly from the Fund or through another Service Organization to receive these waivers or discounts.
Merrill Lynch
Effective April 10, 2017, shareholders purchasing Class A Shares through a Merrill Lynch platform or account will be eligible only for the following waivers (front-end sales charge waivers and contingent deferred, or back-end, sales charge waivers) and discounts, which may differ from those disclosed elsewhere in the Fund's Prospectus or SAI.
Front-end Sales Charge Waivers on Class A Shares available at Merrill Lynch
Employer-sponsored retirement, deferred compensation and employee benefit plans (including health savings accounts) and trusts used to fund those plans, provided that the shares are not held in a commission-based brokerage account and shares are held for the benefit of the plan
Class A Shares purchased by or through a 529 Plan
Class A Shares purchased through a Merrill Lynch affiliated investment advisory program
Class A Shares purchased by third party investment advisors on behalf of their advisory clients through Merrill Lynch's platform
Class A Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the same fund (but not any other fund within the fund family)
Class A Shares exchanged from Class C Shares ( i.e. level-load) shares of the same fund in the month of or following the 10-year anniversary of the purchase date
Employees and registered representatives of Merrill Lynch or its affiliates and their family members
Directors of the Fund, and employees of the Adviser or any of its affiliates, as described in this Prospectus
Class A Shares purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 90 days following the redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred sales charge (known as Rights of Reinstatement)
A-1
CDSC Waivers on Class A Shares available at Merrill Lynch
Death or disability of the shareholder
Shares sold as part of a systematic withdrawal plan as described in the Fund's Prospectus
Return of excess contributions from an IRA Account
Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching age 70 1 / 2
Shares sold to pay Merrill Lynch fees but only if the transaction is initiated by Merrill Lynch
Shares acquired through a right of reinstatement
Shares held in retirement brokerage accounts that are exchanged for a lower cost share class due to transfer to certain fee based accounts or platforms (applicable to Class A Shares only)
Front-end load Discounts Available at Merrill Lynch:
Breakpoints, Rights of Accumulation & Letters of Intent
Breakpoints as described in this Prospectus
Rights of Accumulation (ROA) which entitle shareholders to breakpoint discounts will be automatically calculated based on the aggregated holding of fund family assets held by accounts within the purchaser's household at Merrill Lynch. Eligible Abbey Capital Futures Strategy Fund assets not held at Merrill Lynch may be included in the ROA calculation only if the shareholder notifies his or her financial advisor about such assets
Letters of Intent (LOI) which allow for breakpoint discounts based on anticipated purchases within the Abbey Capital Futures Strategy Fund, through Merrill Lynch, over a 13-month period of time
Morgan Stanley Wealth Management
Share Class Eligibility
Class T Shares are available to Morgan Stanley Wealth Management ("Morgan Stanley") clients who purchase Class T Shares through a transactional brokerage account. Other share classes offered through this Prospectus will not be available to Morgan Stanley clients through a Morgan Stanley account. Rights of accumulation, letters of intent, rights of reinstatement and exchange privileges are not available on purchases of Class T Shares.
Front-End Sales Charge Waivers for Class T Shares
Purchases of Class T Shares are subject to a front-end sales charge of up to 2.50% of the total purchase price. Sales charges are not imposed on Class T Shares that are purchased with reinvested dividends or other distributions. Sales charges for Morgan Stanley clients may be reduced for large purchases as indicated below:
Amount of Purchase of
Class T Shares |
Sales Charge as a
% of Offering Price |
Sales Charge as a
% of Net Amount Invested |
Dealer Compensation as
a Percentage of Offering Price |
||||||||||||
Less than $250,000 |
2.50 |
% |
2.56 |
% |
2.50 |
% |
|||||||||
At least $250,000 but less than $500,000 |
2.00 |
% |
2.04 |
% |
2.00 |
% |
|||||||||
At least $500,000 but less than $1,000,000 |
1.50 |
% |
1.52 |
% |
1.50 |
% |
|||||||||
$ 1,000,000 or greater |
1.00 |
% |
1.01 |
% |
1.00 |
% |
Rights of Accumulation. Class T Shares offered to Morgan Stanley clients are not eligible for any waivers or reductions of the sales charges through Rights of Accumulation.
A-2
Letter of Intent. Morgan Stanley clients are not eligible for any waivers or reductions of the Class T Shares sales charges through Letters of Intent.
Sales Charge Waivers. Morgan Stanley clients may purchase Class T Shares with the sales charge waived as follows:
• Employer-sponsored retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money purchase pension plans and defined benefit plans). For purposes of this provision, employer-sponsored retirement plans does not include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh plans; however these plans are eligible to purchase Class T Shares through a Morgan Stanley transactional brokerage account.
• Morgan Stanley employee and employee-related accounts according to Morgan Stanley's account linking rules.
• Abbey Capital Futures Strategy Fund shares exchanged from an existing position in the Fund as part of a share class conversion instituted by Morgan Stanley.
Unless specifically described above, no other front-end load waivers are available to Abbey Capital Futures Strategy Fund purchases by Morgan Stanley clients in transactional brokerage accounts.
A-3
FOR MORE INFORMATION ABOUT THE FUND
This Prospectus contains important information you should know before you invest. Read it carefully and keep it for future reference. Information about different sales charge variations is provided in Appendix A, which is incorporated into this Prospectus by reference. More information about the Fund is available free of charge, upon request, including:
Annual/Semi-annual Reports: These reports contain additional information about the Fund's investments, describe the Fund's performance, list portfolio holdings and discuss recent market conditions and economic trends. The annual report includes Fund strategies that significantly affected the Fund's performance during its last fiscal year. The Fund's annual and semi-annual reports to shareholders are available on the Adviser's website at www.abbeycapital.com or by calling 1-844-261-6484.
Statement of Additional Information ("SAI"): The Fund's SAI, dated April 10, 2017, has been filed with the SEC. The SAI, which includes additional information about the Fund, and the Fund's Annual and Semi-Annual reports, may be obtained free of charge by calling 1-844-261-6484. The SAI, as supplemented from time to time, is incorporated by reference into this Prospectus and is legally considered a part of this Prospectus. The SAI is available on the Adviser's website at www.abbeycapital.com.
Shareholder Inquiries: Representatives are available to discuss account balance information, mutual fund prospectuses, literature, programs and services available. Hours: 8 a.m. to 6 p.m. (Eastern time) Monday-Friday. Call: 1-844-261-6484.
Purchases and Redemptions: Call your registered representative or 1-844-261-6484.
Written Correspondence:
P.O. Box Address:
Abbey Capital Futures Strategy Fund
c/o U.S. Bancorp Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
Street Address:
Abbey Capital Futures Strategy Fund
c/o U.S. Bancorp Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
Securities and Exchange Commission: You may view and copy information about the Company and the Fund, including the SAI, by visiting the SEC's Public Reference Room in Washington, D.C. or the EDGAR Database on the SEC's Internet site at www.sec.gov. You may also obtain copies of Fund documents by paying a duplicating fee and sending an electronic request to the following e-mail address: publicinfo@sec.gov, or by sending your written request and a duplicating fee to the SEC's Public Reference Section, Washington, D.C. 20549-1520. You may obtain information on the operation of the Public Reference Room by calling the SEC at (202) 551-8090.
Investment Company Act File No. 811-05518
RBBABB
STATEMENT OF ADDITIONAL INFORMATION
ABBEY CAPITAL FUTURES STRATEGY FUND
a series of THE RBB FUND, INC.
Class I Shares Ticker Symbol: ABYIX
Class A Shares Ticker Symbol: ABYAX
Class C Shares Ticker Symbol: ABYCX
Class T Shares (Not Currently Available for Sale)
April 10, 2017
Investment Adviser:
ABBEY CAPITAL LIMITED
This Statement of Additional Information (SAI) provides supplementary information pertaining to shares of four classes, Class I Shares, Class A Shares, Class C Shares and Class T Shares (collectively, the Shares), representing interests in the Abbey Capital Futures Strategy Fund (the Fund) of The RBB Fund, Inc. (the Company). This SAI is not a prospectus and should be read only in conjunction with the Funds Prospectus dated April 10, 2017 (the Prospectus) and the Funds Annual Report dated August 31, 2016 (the Annual Report). Copies of the prospectus and Annual and Semi-Annual Reports may be obtained free of charge by calling toll-free 1-844-261-6484. The financial statements and notes contained in the Annual Report are incorporated by reference into this SAI. No other part of the Annual Report is incorporated by reference herein.
TABLE OF CONTENTS |
|
|
|
GENERAL INFORMATION |
1 |
|
|
INVESTMENT OBJECTIVE |
1 |
|
|
PRINCIPAL INVESTMENT POLICIES AND RISKS |
1 |
|
|
NON-PRINCIPAL INVESTMENT POLICIES AND RISKS |
17 |
|
|
INVESTMENT LIMITATIONS |
23 |
|
|
DISCLOSURE OF PORTFOLIO HOLDINGS |
25 |
|
|
PORTFOLIO TURNOVER |
26 |
|
|
MANAGEMENT OF THE COMPANY |
26 |
|
|
CODE OF ETHICS |
35 |
|
|
PROXY VOTING |
35 |
|
|
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES |
36 |
|
|
INVESTMENT ADVISORY AND OTHER SERVICES |
37 |
|
|
INVESTMENT ADVISER |
37 |
|
|
INVESTMENT TRADING ADVISERS |
39 |
|
|
THE PORTFOLIO MANAGERS |
41 |
|
|
ADMINISTRATION AND ACCOUNTING AGREEMENT |
41 |
|
|
CUSTODIAN AGREEMENT |
42 |
|
|
TRANSFER AGENCY AGREEMENT |
42 |
|
|
DISTRIBUTION AGREEMENT AND PLAN OF DISTRIBUTION |
43 |
|
|
PAYMENTS TO FINANCIAL INTERMEDIARIES |
45 |
|
|
FUND TRANSACTIONS |
45 |
|
|
PURCHASE AND REDEMPTION INFORMATION |
47 |
|
|
TELEPHONE TRANSACTION PROCEDURES |
50 |
|
|
VALUATION OF SHARES |
50 |
|
|
TAXES |
51 |
|
|
ADDITIONAL INFORMATION CONCERNING COMPANY SHARES |
52 |
|
|
MISCELLANEOUS |
53 |
|
|
FINANCIAL STATEMENTS |
53 |
|
|
APPENDIX A |
A-1 |
GENERAL INFORMATION
The Company is an open-end management investment company currently operating twenty-seven separate portfolios. The Company is registered under the Investment Company Act of 1940, as amended, (the 1940 Act) and was organized as a Maryland corporation on February 29, 1988. This SAI pertains to the Abbey Capital Futures Strategy Fund, a non-diversified portfolio. Abbey Capital Limited (Abbey Capital or the Adviser), serves as the investment adviser to the Fund.
INVESTMENT OBJECTIVE
The following supplements the information contained in the Prospectus concerning the investment objective and policies of the Fund.
The Fund seeks long-term capital appreciation. Current income is a secondary objective. There can be no guarantee that the Fund will achieve its investment objectives. The Fund may not necessarily invest in all of the instruments or use all of the investment techniques permitted by the Funds Prospectus and this SAI, or invest in such instruments or engage in such techniques to the full extent permitted by the Funds investment policies and limitations.
PRINCIPAL INVESTMENT POLICIES AND RISKS
Multi-Manager Structure. The Fund and Abbey Capital Offshore Fund Limited, a wholly owned and controlled subsidiary of the Fund organized under the laws of the Cayman Islands, (the Subsidiary) are managed by the Adviser and one or more asset managers who are unaffiliated with the Adviser (each a Trading Adviser and together, the Trading Advisers). Subject to review by the Funds Board of Directors (the Board), the Adviser is responsible for selecting the Funds investment strategies and for allocating and reallocating assets among the Trading Advisers consistent with the Funds investment objective and strategies. The Adviser is also responsible for recommending to the Board whether an agreement with a Trading Adviser should be approved, renewed, modified or terminated and for monitoring and evaluating the Trading Advisers. The Adviser is also responsible for implementing procedures to ensure that each Trading Adviser complies with the Funds investment objective, strategies and restrictions.
Portfolio Turnover Rate. Portfolio turnover rate is defined under U.S. Securities and Exchange Commission (the SEC) rules as the greater of the value of the securities purchased or securities sold, excluding all securities whose maturities at the time of acquisition were one-year or less, divided by the average monthly value of such securities owned during the year. Based on this definition, instruments with remaining maturities of less than one-year are excluded from the calculation of the portfolio turnover rate. Instruments excluded from the calculation of portfolio turnover generally would include the futures contracts in which the Fund may invest since such contracts generally have remaining maturities of less than one-year. The Fund may at times hold investments in other short-term instruments, such as repurchase agreements, which are excluded for purposes of computing portfolio turnover.
Asset-Backed Securities. The Fund may invest in asset-backed securities, which represent participations in, or are secured by and payable from, pools of assets such as motor vehicle installment sale contracts, installment loan contracts, leases of various types of real and personal property, receivables from revolving credit (credit card) agreements and other categories of receivables. Asset-backed securities may also be collateralized by a portfolio of U.S. government securities but are not direct obligations of the U.S. government, its agencies or instrumentalities. Such asset pools are securitized through the use of privately-formed trusts or special purpose corporations. Payments or distributions of principal and interest on asset-backed securities may be guaranteed up to certain amounts and for a certain time period by a letter of credit or a pool insurance policy issued by a financial institution unaffiliated with the trust or corporation, or other credit enhancements may be present, although privately issued obligations collateralized by a portfolio of privately issued asset-backed securities do not involve any government-related guarantee or insurance. In addition to the risks that are presented by mortgage-backed securities, asset-backed securities generally do not have the benefit of a security interest in collateral that is comparable to mortgage assets. See Mortgage-Backed Securities below for additional information.
Asset-backed securities acquired by the Fund may also include collateralized debt obligations (CDOs). CDOs include collateralized bond obligations (CBOs) and collateralized loan obligations (CLOs) and other similarly structured securities.
A CBO is a trust or other special purpose entity (SPE) that is typically backed by a diversified pool of fixed-income securities (which may include high risk, below investment grade securities). A CLO is a trust or other SPE that is typically collateralized by a pool of loans, which may include, among others, domestic and non-U.S. senior secured loans, senior unsecured loans, and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans. Although certain CDOs may receive credit enhancement in the form of a senior-subordinate structure, over-collateralization or bond insurance, such enhancement may not always be present and may fail to protect the Fund against the risk of loss on default of the collateral. Certain CDOs may use derivatives contracts to create synthetic exposure to assets rather than holding such assets directly, which entails the risks of derivative instruments described elsewhere in this SAI. CDOs may charge management fees and administrative expenses, which are in addition to those of the Fund.
For both CBOs and CLOs, the cashflows from the SPE are split into two or more portions, called tranches, varying in risk and yield. The riskiest portion is the equity tranche, which bears the first loss from defaults from the bonds or loans in the SPE and serves to protect the other, more senior tranches from default (though such protection is not complete). Since it is partially protected from defaults, a senior tranche from a CBO or CLO typically has higher ratings and lower yields than its underlying securities, and may be rated investment grade. Despite the protection from the equity tranche, CBO or CLO tranches can experience substantial losses due to actual defaults, increased sensitivity to defaults due to collateral default and disappearance of protecting tranches, market anticipation of defaults, as well as investor aversion to CBO or CLO securities as a class. Interest on certain tranches of a CDO may be paid in kind (paid in the form of obligations of the same type rather than cash), which involves continued exposure to default risk with respect to such payments.
The risks of an investment in a CDO depend largely on the type of the collateral securities and the class of the CDO in which the Fund invests. Normally, CBOs, CLOs and other CDOs are privately offered and sold, and thus are not registered under the securities laws. As a result, investments in CDOs may be characterized by the Fund as illiquid securities. However, an active dealer market may exist for CDOs, allowing a CDO to qualify for Rule 144A transactions. In addition to the normal risks associated with fixed-income securities and asset-backed securities generally discussed elsewhere in this SAI, CDOs carry additional risks including, but not limited to: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments; (ii) the quality of the collateral may decline in value or default; (iii) the Fund may invest in tranches of CDOs that are subordinate to other tranches; (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment results; and (v) the CDOs manager may perform poorly or default.
Commodity-Linked Investments. The Fund may attempt to provide exposure to the returns of real assets that trade in the commodity markets without direct investment in physical commodities. Real assets include oil, gas, industrial and precious metals, livestock, and agricultural or meat products, or other items that have tangible properties. Commodity-linked derivative instruments include commodity index-linked securities and other derivative instruments that provide exposure to the investment returns of the commodities markets. Commodity-linked investments may be more volatile and less liquid than the underlying instruments and their value may be affected by the performance of commodities as well as weather, tax, and other regulatory or political developments, overall market movements and other factors affecting the value of particular industries or commodities, such as disease, embargoes, acts of war or terrorism.
The Fund may invest in commodity-linked derivative instruments such as commodity-linked structured notes. The Fund may invest in commodity-linked notes that pay a return linked to the performance of a commodities index or basket of futures contracts with respect to all of the commodities in an index. In some cases, the return will be based on some multiple of the performance of the index, and this embedded leverage will magnify the positive and negative return the Fund earns from these notes as compared to the index. The principal and/or interest payments of commodity-linked derivatives are tied to the value of a real asset or commodity index. Structured notes may be structured by the issuer and the purchaser of the note. The notes are derivative debt instruments with principal payments generally linked to the value of commodities, commodity futures contracts or the performance of
commodity indices and interest and coupon payments pegged to a market-based interest rate, such as LIBOR or a banks prime rate. The value of these notes will rise or fall in response to changes in the underlying commodity or related index or investment. These notes expose the Fund economically to movements in commodity prices.
Corporate Obligations. The Fund may invest in debt obligations, such as bonds and debentures, issued by corporations and other business organizations without limit on credit quality or maturity of debt securities. See Appendix A to this SAI for a description of corporate debt ratings. An issuer of debt obligations may default on its obligation to pay interest and repay principal. Also, changes in the financial strength of an issuer or changes in the credit rating of a security may affect its value.
Cyber Security Risk. The Fund and its service providers may be prone to operational and information security risks resulting from breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause the Fund to lose proprietary information, suffer data corruption, or lose operational capacity. Breaches in cyber security include, among other behaviors, stealing or corrupting data maintained online or digitally, denial of service attacks on websites, the unauthorized release of confidential information or various other forms of cyber-attacks. Cyber security breaches affecting the Fund or its Adviser, custodian, transfer agent, intermediaries and other third-party service providers may adversely impact the Fund. For instance, cyber security breaches may interfere with the processing of shareholder transactions, impact the Funds ability to calculate its NAVs, cause the release of private shareholder information or confidential business information, impede trading, subject the Fund to regulatory fines or financial losses and/or cause reputational damage. The Fund may also incur additional costs for cyber security risk management purposes. Similar types of cyber security risks are also present for issuers of securities in which the Fund may invest, which could result in material adverse consequences for such issuers and may cause the Funds investment in such companies to lose value.
Foreign Securities. The Fund may invest in securities of foreign issuers that are denominated or traded in foreign currencies. The Fund may also invest in securities of foreign issuers that are traded or denominated in U.S. dollars (including equity securities of foreign issuers trading in U.S. markets) through American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs), European Depositary Receipts (EDRs) or International Depositary Receipts (IDRs). ADRs are securities, typically issued by a U.S. financial institution (a depository), that evidence ownership interests in a security or pool of securities issued by a foreign issuer and deposited with the depository. ADRs may be listed on a national securities exchange or may trade in the over-the-counter market. ADR prices are denominated in U.S. dollars; the underlying security may be denominated in a foreign currency. GDRs, EDRs and IDRs are securities that represent ownership interests in a security or pool of securities issued by a non-U.S. or U.S. corporation. Depositary receipts may be available through sponsored or unsponsored facilities. A sponsored facility is established jointly by the issuer of the security underlying the receipt and the depository, whereas an unsponsored facility is established by the depository without participation by the issuer of the underlying security. Holders of unsponsored depositary receipts generally bear all of the costs of the unsponsored facility. The depository of an unsponsored facility is frequently under no obligation to distribute shareholder communications received from the issuer of the deposited security or to pass through, to the holders of the receipts, voting rights with respect to the deposited securities. The depository of unsponsored depositary receipts may provide less information to receipt holders. Investments in depositary receipts do not eliminate the risks in investing in foreign issuers. The underlying security may be subject to foreign government taxes, which would reduce the yield on such securities.
Investments in foreign securities involve higher costs than investments in U.S. securities, including higher transaction costs as well as the imposition of additional taxes by foreign governments. In addition, foreign investments may include additional risks associated with currency exchange rates, less complete financial information about the issuers, less market liquidity and political stability. Volume and liquidity in most foreign bond markets are less than in the United States and, at times, volatility or price can be greater than in the United States. Future political and economic information, the possible imposition of withholding taxes on interest income, the possible seizure or nationalization of foreign holdings, the possible establishment of exchange controls, or the adoption of other governmental restrictions, might adversely affect the payment of principal and interest on foreign obligations. Inability to dispose of Fund securities due to settlement problems could result either in losses to the Fund due to subsequent declines in value of the securities, or, if the Fund has entered into a contract to sell the securities, could result in possible liability to the purchaser. Individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth or gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position.
Fixed commissions on foreign securities exchanges are generally higher than negotiated commissions on U.S. exchanges, although the Fund endeavors to achieve the most favorable net results on their portfolio transactions. There is generally less government supervision and regulation of securities exchanges, brokers, dealers and listed companies than in the United States.
Settlement mechanics ( e.g. , mail service between the United States and foreign countries) may be slower or less reliable than within the United States, thus increasing the risk of delayed settlements of portfolio transactions or loss of certificates for portfolio securities. Foreign markets also have different clearance and settlement procedures, and in certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Such delays in settlement could result in temporary periods when a portion of the assets of the Fund is uninvested and no return is earned thereon. The inability of the Fund to make intended security purchases due to settlement problems could cause the Fund to miss attractive investment opportunities.
Although the Fund may invest in securities denominated in foreign currencies, the Fund values its securities and other assets in U.S. dollars. As a result, the NAV of the Funds shares may fluctuate with U.S. dollar exchange rates as well as the price changes of the Funds securities in the various local markets and currencies. Thus, an increase in the value of the U.S. dollar compared to the currencies in which the Fund makes its investments could reduce the effect of increases and magnify the effect of decreases in the price of the Funds securities in their local markets. Conversely, a decrease in the value of the U.S. dollar may have the opposite effect of magnifying the effect of increases and reducing the effect of decreases in the prices of the Funds securities in its foreign markets. In addition to favorable and unfavorable currency exchange rate developments, the Fund is subject to the possible imposition of exchange control regulations or freezes on convertibility of currency. The Fund may invest in obligations of foreign branches of U.S. banks (Eurodollars) and U.S. branches of foreign banks (Yankee dollars) as well as foreign branches of foreign banks. These investments involve risks that are different from investments in securities of U.S. banks, including potential unfavorable political and economic developments, different tax provisions, seizure of foreign deposits, currency controls, interest limitations or other governmental restrictions which might affect payment of principal or interest. The Fund may also invest in Yankee bonds, which are issued by foreign governments and their agencies and foreign corporations but pay interest in U.S. dollars and are typically issued in the United States.
European countries can be significantly affected by the tight fiscal and monetary controls that the European Economic and Monetary Union (EMU) imposes for membership. Europes economies are diverse, its governments are decentralized, and its cultures vary widely. Several EU countries have faced budget issues, some of which may have negative long-term effects for the economies of those countries and other EU countries. There is continued concern about national-level support for the euro and the accompanying coordination of fiscal and wage policy among EMU member countries. Member countries are required to maintain tight control over inflation, public debt, and budget deficit to qualify for membership in the EMU. These requirements can severely limit the ability of EMU member countries to implement monetary policy to address regional economic conditions.
Recently, the United Kingdom (UK) held a referendum election and voters elected to withdraw from the EU. The Fund may be exposed to risks related to the UKs withdrawal from the EU, including volatile trading markets and significant and unpredictable currency fluctuations. Securities issued by companies domiciled in the UK could be subject to changing regulatory and tax regimes. Banking and financial services companies that operate in the UK or EU could be disproportionately impacted by these actions. Greece has recently experienced political pressure to hold a similar referendum election. Further insecurity in EU membership or the abandonment of the euro could exacerbate market and currency volatility and negatively impact investments in securities issued by companies located in EU countries. The potential impact of these actions, especially if they occur in a disorderly fashion, is not clear but could be significant and far-reaching.
Forward Foreign Currency Transactions. The Fund may enter into forward foreign currency exchange contracts in order to protect against uncertainty in the level of future foreign currency exchange rates or to seek to increase total return. The Fund will conduct its foreign currency exchange transactions either on a spot ( i.e. , cash) basis at the spot rate prevailing in the foreign currency exchange market, or through entering into forward contracts to purchase or sell foreign currencies. A forward foreign currency exchange contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days (usually less than one year) from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are traded in the interbank market conducted directly between traders (usually large commercial banks) and their customers. A forward contract generally has no deposit requirement, and no commissions are charged at any stage for trades. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit based on the difference (the spread) between the price at which they are buying and selling various currencies.
The Fund may engage in cross-hedging by using forward contracts in one currency to hedge against fluctuations in the value in securities denominated or quoted in a different currency or to seek to increase total return. Cross-hedging may also include entering into a forward transaction involving two foreign currencies, using one foreign currency as a proxy for the U.S. dollar to hedge against variations in the other foreign currency.
At the consummation of the forward contract, the Fund may terminate its contractual obligation by purchasing an offsetting contract obligating it to purchase at the same maturity date, the same amount of such foreign currency. If the Fund engages in an offsetting transaction, the Fund will realize a gain or a loss to the extent that there has been a change in forward contract prices. Closing purchase transactions with respect to forward contracts are usually effected with the currency trader who is a party to the original forward contract.
The Funds transactions in forward contracts will be limited to those described above. Of course, the Fund is not required to enter into such transactions with regard to its foreign currency quoted or denominated securities, and the Fund will not do so unless deemed appropriate by the Adviser or Trading Adviser, as applicable.
When the Fund enters into forward contracts the Fund is required to cover its position in order to limit leveraging and related risks. To cover its position, the Fund may segregate (and mark-to-market on a daily basis) cash or liquid securities that, when added to any amounts deposited with a futures commission merchant as margin, are equal to the market value of the forward contract or otherwise cover its position in a manner consistent with the 1940 Act or the rules and SEC interpretations thereunder. The segregated account functions as a practical limit on the amount of leverage which the Fund may undertake and on the potential increase in the speculative character of the Funds outstanding portfolio securities. Additionally, such segregated accounts will generally assure the availability of adequate funds to meet the obligations of the Fund arising from such investment activities.
The Fund or the Subsidiary may enter into agreements with a futures commission merchant (FCM) which require the FCM to accept physical settlement for certain financial instruments. If this occurs, the Fund would treat the financial instrument as being cash-settled for purposes of determining the Funds coverage requirements.
If the Fund uses forward contracts as a method of protecting the value of the Funds portfolio securities against a decline in the value of a currency, this does not eliminate fluctuations in the underlying prices of the securities. It simply establishes a rate of exchange which can be achieved at some future point in time. The precise projection of short-term currency market movements is not possible, and short-term hedging provides a means of fixing the U.S. dollar value of only a portion of the Funds foreign assets. It also reduces any potential gain which may have otherwise occurred had the currency value increased above the settlement price of the contract.
While the Fund may enter into forward contracts to seek to reduce currency exchange rate risks or to seek to increase total return, transactions in such contracts involve certain other risks. Thus, while the Fund may benefit from such transactions, unanticipated changes in currency prices may result in a poorer overall performance for the Fund than if it had not engaged in any such transactions. Moreover, there may be imperfect correlation between the Funds portfolio holdings or securities quoted or denominated in a particular currency and forward contracts entered into by the Fund. Such imperfect correlation may cause the Fund to sustain losses, which will prevent the Fund from achieving a complete hedge, or expose the Fund to the risk of foreign exchange loss.
Forward contracts are subject to the risks that the counterparty to such contract will default on its obligations. Since a forward foreign currency exchange contract is not guaranteed by an exchange or clearing house, a default on the contract would deprive the Fund of unrealized profits, transaction costs or the benefits of a currency hedge or force the Fund to cover its purchase or sale commitments, if any, at the current market price.
The Funds foreign currency transactions (including related options, futures and forward contracts) may be limited by the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Code), for qualification as a regulated investment company.
Futures And Options On Futures. Futures contracts provide for the future sale by one party and purchase by another party of a specified amount of a specific security at a specified future time and at a specified price. An option on a futures contract gives the purchaser the right, in exchange for a premium, to assume a position in a futures contract at a specified exercise price during the term of the option. The Fund may use futures contracts and related options for: bona fide hedging; attempting to offset changes in the value of securities held or expected to be acquired or be disposed of; attempting to minimize fluctuations in foreign currencies; attempting to gain exposure to a particular market, index or instrument; or other risk management purposes.
The Fund and the Subsidiary, through which it invests, are subject to regulation by the CFTC as commodity pools and the Adviser is subject to regulation by the CFTC as a commodity pool operator (CPO) with respect to the Fund under the Commodity Exchange Act (CEA). The Adviser does not currently rely on an exclusion from the definition of CPO in CFTC Rule 4.5 with respect to the Fund.
Transactions in futures and options by the Fund are subject to limitations established by futures and option exchanges governing the maximum number of futures and options that may be written or held by a single investor or group of investors acting in concert, regardless of whether the futures or options were written or purchased on the same or different exchanges or are held in one or more accounts or through one or more different exchanges or through one or more brokers. Thus the number of futures or options which the Fund may write or hold may be affected by futures or options written or held by other entities, including other investment companies advised by the Adviser or a Trading Adviser. An exchange may order the liquidation of positions found to be in violation of those limits and may impose certain other sanctions.
An index futures contract is a bilateral agreement pursuant to which two parties agree to take or make delivery of an amount of cash equal to a specified currency amount times the difference between the index value at the close of trading of the contract and the price at which the futures contract is originally struck. No physical delivery of the securities comprising the index is made; generally contracts are closed out prior to the expiration date of the contract.
When the Fund purchases or sells a futures contract, or sells an option thereon, the Fund is required to cover its position in order to limit leveraging and related risks. To cover its position, the Fund may segregate (and mark-to-market on a daily basis) cash or liquid securities that, when added to any amounts deposited with a futures commission merchant as margin, are equal to the market value of the futures contract or otherwise cover its position in a manner consistent with the 1940 Act or the rules and SEC interpretations thereunder. The segregated account functions as a practical limit on the amount of leverage which the Fund may undertake and on the potential increase in the speculative character of the Funds outstanding portfolio securities. Additionally, such segregated accounts will generally assure the availability of adequate funds to meet the obligations of the Fund arising from such investment activities.
The Fund or the Subsidiary may enter into agreements with a futures commission merchant (FCM) which require the FCM to accept physical settlement for certain financial instruments. If this occurs, the Fund would treat the financial instrument as being cash-settled for purposes of determining the Funds coverage requirements.
The Fund may also cover its long position in a futures contract by purchasing a put option on the same futures contract with a strike price (i.e., an exercise price) as high or higher than the price of the futures contract. In the alternative, if the strike price of the put is less than the price of the futures contract, the Fund will segregate cash or liquid securities equal in value to the difference between the strike price of the put and the price of the futures contract. The Fund may also cover its long position in a futures contract by taking a short position in the instruments underlying the futures contract, or by taking positions in instruments with prices which are expected to move relatively consistently with the futures contract. The Fund may cover its short position in a futures contract by taking a long position in the instruments underlying the futures contracts, or by taking positions in instruments with prices which are expected to move relatively consistently with the futures contract.
The Fund may cover its sale of a call option on a futures contract by taking a long position in the underlying futures contract at a price less than or equal to the strike price of the call option. In the alternative, if the long position in the underlying futures contract is established at a price greater than the strike price of the written (sold) call, the Fund will maintain in a segregated account cash or liquid securities equal in value to the difference between the strike price of the call and the price of the futures contract. The Fund may also cover its sale of a call option by taking positions in instruments with prices which are expected to move relatively consistently with the call option. The Fund may cover its sale of a put option on a futures contract by taking a short position in the underlying futures contract at a price greater than or equal to the strike price of the put option, or, if the short position in the underlying futures contract is established at a price less than the strike price of the written put, the Fund will maintain in a segregated account cash or liquid securities equal in value to the difference between the strike price of the put and the price of the futures contract. The Fund may also cover its sale of a put option by taking positions in instruments with prices which are expected to move relatively consistently with the put option.
There are significant risks associated with the Funds use of futures contracts and related options, including the following: (1) the success of a hedging strategy may depend on the Advisers or Trading Advisers ability to predict movements in the prices of individual securities, fluctuations in markets and movements in interest rates; (2) there may be an imperfect or no correlation between the changes in market value of the securities held by the Fund and the prices of futures and options on futures; (3) there may not be a liquid secondary market for a futures contract or option; (4) trading restrictions or limitations may be imposed by an exchange; and (5) government regulations may restrict trading in futures contracts and options on futures. In addition, some strategies reduce the Funds exposure to price fluctuations, while others tend to increase its market exposure.
Credit Default Swaps, Interest Rate Swaps, Mortgage Swaps, Currency Swaps, Total Return Swaps, Options on Swaps and Interest Rate Caps, Floors and Collars. The Fund may enter into credit default, interest rate and total return swaps. The Fund may also enter into interest rate caps, floors and collars. In addition, the Fund may enter into mortgage swaps and currency swaps.
The Fund may enter into swap transactions for hedging purposes or to seek to increase total return. As examples, the Fund may enter into swap transactions for the purpose of attempting to obtain or preserve a particular return or spread at a lower cost than obtaining a return or spread through purchases and/or sales of instruments in other markets, to protect against currency fluctuations, as a duration management technique, to protect against any increase in the price of securities the Fund anticipates purchasing at a later date, or to gain exposure to certain markets in an economical way.
Swap agreements are two party contracts entered into primarily by institutional investors. In a standard swap transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments, which may be adjusted for an interest factor. The gross returns to be exchanged or swapped between the parties are generally calculated with respect to a notional amount, i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular foreign currency or security, or in a basket of securities representing a particular index. As examples, credit default swaps involve the receipt of floating or fixed rate payments in exchange for assuming potential credit losses of an underlying security. Credit default swaps give one party to a transaction the right to dispose of or acquire an asset (or group of assets), or the right to receive from or make a payment to the other party, upon the occurrence of specified credit events. Interest rate swaps involve the exchange by the Fund with another party of their respective commitments to pay or receive interest, such as an exchange of fixed-rate payments for floating rate payments. Mortgage swaps are similar to interest rate swaps in that they represent commitments to pay and receive interest. The notional principal amount, however, is tied to a reference pool or pools of mortgages. Currency swaps involve the exchange of the parties respective rights to make or receive payments in specified currencies. Total return swaps are contracts that obligate a party to pay or receive interest in exchange for payment by the other party of the total return generated by a security, a basket of securities, an index, or an index component.
The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payment of interest on a notional principal amount from the party selling such interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on a notional principal amount from the party
selling the interest rate floor. An interest rate collar is the combination of a cap and a floor that preserves a certain return within a predetermined range of interest rates.
A great deal of flexibility is possible in the way swap transactions are structured. However, generally the Fund will enter into credit default, interest rate, total return and mortgage swaps on a net basis, which means that the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments. Credit default, interest rate, total return and mortgage swaps do not normally involve the delivery of securities, other underlying assets or principal. Accordingly, the risk of loss with respect to credit default, interest rate, total return and mortgage swaps is normally limited to the net amount of payments that the Fund is contractually obligated to make. If the other party to a credit default, interest rate, total return or mortgage swap defaults, the Funds risk of loss consists of the net amount of payments that the Fund is contractually entitled to receive, if any. In contrast, currency swaps may involve the delivery of the entire principal amount of one designated currency in exchange for the other designated currency. Therefore, the entire principal value of a currency swap is subject to the risk that the other party to the swap will default on its contractual delivery obligations.
A credit default swap may have as reference obligations one or more securities that may, or may not, be currently held by the Fund. The protection buyer in a credit default swap is generally obligated to pay the protection seller an upfront or a periodic stream of payments over the term of the swap provided that no credit event, such as a default, on a reference obligation has occurred. If a credit event occurs, the seller generally must pay the buyer the par value (full notional value) of the swap in exchange for an equal face amount of deliverable obligations of the reference entity described in the swap, or the seller may be required to deliver the related net cash amount, if the swap is cash settled. The Fund may be either the buyer or seller in the transaction. If the Fund is a buyer and no credit event occurs, the Fund may recover nothing if the swap is held through its termination date. However, if a credit event occurs, the buyer generally may elect to receive the full notional value of the swap in exchange for an equal face amount of deliverable obligations of the reference entity whose value may have significantly decreased. As a seller, the Fund generally receives an upfront payment or a rate of income throughout the term of the swap provided that there is no credit event. As the seller, the Fund would effectively add leverage to its portfolio because, in addition to its total net assets, the Fund would be subject to investment exposure on the notional amount of the swap. If a credit event occurs, the value of any deliverable obligation received by the Fund as seller, coupled with the upfront or periodic payments previously received, may be less than the full notional value it pays to the buyer, resulting in a loss of value to the Fund.
To the extent that the Funds exposure in a transaction involving a swap or an interest rate floor, cap or collar is covered by the segregation of cash or liquid assets, or is covered by other means in accordance with SEC guidance, the Fund and the Adviser believe that the transactions do not constitute senior securities under the Act and, accordingly, will not treat them as being subject to the Funds borrowing restrictions. The SEC has recently issued the concept release Use of Derivatives by Investment Companies under the Investment Company Act of 1940, which discusses, among other matters, whether current market practices involving derivatives are consistent with the leverage provisions of the Act. Accordingly, investors should be aware that the SEC may offer additional guidance in the future that may impact the manner in which the Fund operates.
The Fund will not enter into any credit default, interest rate, total return or mortgage swap transactions unless the unsecured commercial paper, senior debt or claims-paying ability of the other party thereto is rated investment grade by S&P Global Ratings (S&P) or Moodys Investors Service, Inc. (Moodys), or, if unrated by such rating organization, determined to be of comparable quality by the Adviser or applicable Trading Adviser. If there is a default by the other party to such a transaction, the Fund will have contractual remedies pursuant to the agreements related to the transaction.
The use of credit default, interest rate, mortgage, total return and currency swaps, as well as interest rate caps, floors and collars, is a highly specialized activity which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. The use of a swap requires an understanding not only of the referenced asset, reference rate, or index but also of the swap itself, without the benefit of observing the performance of the swap under all possible market conditions. If the Adviser or applicable Trading Adviser is incorrect in its forecasts of market values, credit quality, interest rates and currency exchange rates, the investment performance of the Fund would be less favorable than it would have been if these investment instruments were not used.
Investing in Emerging Countries, including Asia and Eastern Europe. The Fund may invest in securities of issuers located in emerging countries. The securities markets of emerging countries are less liquid and subject to greater price volatility, and have a smaller market capitalization, than the U.S. securities markets. In certain countries, there may be fewer publicly traded securities and the market may be dominated by a few issues or sectors. Issuers and securities markets in such countries are not subject to as extensive and frequent accounting, financial and other reporting requirements or as comprehensive government regulations as are issuers and securities markets in the U.S. In particular, the assets and profits appearing on the financial statements of emerging country issuers may not reflect their financial position or results of operations in the same manner as financial statements for U.S. issuers. Substantially less information may be publicly available about emerging country issuers than is available about issuers in the United States.
Emerging country securities markets are typically marked by a high concentration of market capitalization and trading volume in a small number of issuers representing a limited number of industries, as well as a high concentration of ownership of such securities by a limited number of investors. The markets for securities in certain emerging countries are in the earliest stages of their development. Even the markets for relatively widely traded securities in emerging countries may not be able to absorb, without price disruptions, a significant increase in trading volume or trades of a size customarily undertaken by institutional investors in the securities markets of developed countries. The limited size of many of these securities markets can cause prices to be erratic for reasons apart from factors that affect the soundness and competitiveness of the securities issuers. For example, prices may be unduly influenced by traders who control large positions in these markets. Additionally, market making and arbitrage activities are generally less extensive in such markets, which may contribute to increased volatility and reduced liquidity of such markets. The limited liquidity of emerging country securities may also affect the Funds ability to accurately value its portfolio securities or to acquire or dispose of securities at the price and time it wishes to do so or in order to meet redemption requests.
With respect to investments in certain emerging market countries, antiquated legal systems may have an adverse impact on the Fund. For example, while the potential liability of a shareholder in a U.S. corporation with respect to acts of the corporation is generally limited to the amount of the shareholders investment, the notion of limited liability is less clear in certain emerging market countries. Similarly, the rights of investors in emerging market companies may be more limited than those of shareholders in U.S. corporations.
Transaction costs, including brokerage commissions or dealer mark-ups, in emerging countries may be higher than in the United States and other developed securities markets. In addition, existing laws and regulations are often inconsistently applied. As legal systems in emerging countries develop, foreign investors may be adversely affected by new or amended laws and regulations. In circumstances where adequate laws exist, it may not be possible to obtain swift and equitable enforcement of the law.
Foreign investment in the securities markets of certain emerging countries is restricted or controlled to varying degrees. These restrictions may limit the Funds investment in certain emerging countries and may increase the expenses of the Fund. Certain emerging countries require governmental approval prior to investments by foreign persons or limit investment by foreign persons to only a specified percentage of an issuers outstanding securities or a specific class of securities which may have less advantageous terms (including price) than securities of the company available for purchase by nationals. In addition, the repatriation of both investment income and capital from emerging countries may be subject to restrictions which require governmental consents or prohibit repatriation entirely for a period of time. Even where there is no outright restriction on repatriation of capital, the mechanics of repatriation may affect certain aspects of the operation of the Fund. The Fund may be required to establish special custodial or other arrangements before investing in certain emerging countries.
Emerging countries may be subject to a substantially greater degree of economic, political and social instability and disruption than is the case in the United States, Japan and most Western European countries. This instability may result from, among other things, the following: (i) authoritarian governments or military involvement in political and economic decision making, including changes or attempted changes in governments through extra-constitutional means; (ii) popular unrest associated with demands for improved political, economic or social conditions; (iii) internal insurgencies; (iv) hostile relations with neighboring countries; (v) ethnic, religious and racial disaffection or conflict; and (vi) the absence of developed legal structures governing foreign private investments and
private property. Such economic, political and social instability could disrupt the principal financial markets in which the Fund may invest and adversely affect the value of the Funds assets. The Funds investments can also be adversely affected by any increase in taxes or by political, economic or diplomatic developments.
The Fund may seek investment opportunities within former east bloc countries in Eastern Europe. Most Eastern European countries had a centrally planned, socialist economy for a substantial period of time. The governments of many Eastern European countries have more recently been implementing reforms directed at political and economic liberalization, including efforts to decentralize the economic decision-making process and move towards a market economy. However, business entities in many Eastern European countries do not have an extended history of operating in a market-oriented economy, and the ultimate impact of Eastern European countries attempts to move toward more market-oriented economies is currently unclear. In addition, any change in the leadership or policies of Eastern European countries may halt the expansion of or reverse the liberalization of foreign investment policies now occurring and adversely affect existing investment opportunities. As a result of recent events involving Ukraine and the Russian Federation, the United States and the European Union have imposed sanctions on certain Russian individuals and Russian corporations. Additional broader sanctions may be imposed in the future. These sanctions, or even the threat of further sanctions, may result in the decline of the value and liquidity of Russian securities, a weakening of the ruble or other adverse consequences to the Russian economy. These sanctions could also result in the immediate freeze of Russian securities, impairing the ability of a Fund to buy, sell, receive or deliver those securities. Sanctions could also result in Russia taking counter measures or retaliatory actions which may further impair the value and liquidity of Russian and/or Ukrainian securities.
The economies of emerging countries may differ unfavorably from the U.S. economy in such respects as growth of gross domestic product, rate of inflation, capital reinvestment, resources, self-sufficiency and balance of payments. Many emerging countries have experienced in the past, and continue to experience, high rates of inflation. In certain countries inflation has at times accelerated rapidly to hyperinflationary levels, creating a negative interest rate environment and sharply eroding the value of outstanding financial assets in those countries. Other emerging countries, on the other hand, have recently experienced deflationary pressures and are in economic recessions. The economies of many emerging countries are heavily dependent upon international trade and are accordingly affected by protective trade barriers and the economic conditions of their trading partners. In addition, the economies of some emerging countries are vulnerable to weakness in world prices for their commodity exports. The Funds income and, in some cases, capital gains from foreign stocks and securities will be subject to applicable taxation in certain of the countries in which it invests, and treaties between the U.S. and such countries may not be available in some cases to reduce the otherwise applicable tax rates. Foreign markets also have different clearance and settlement procedures, and in certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Such delays in settlement could result in temporary periods when a portion of the assets of the Fund remain uninvested and no return is earned on such assets. The inability of the Fund to make intended security purchases or sales due to settlement problems could result either in losses to the Fund due to subsequent declines in value of the portfolio securities or, if the Fund has entered into a contract to sell the securities, could result in possible liability to the purchaser.
Margin Deposits and Cover Requirements. Unlike the purchase or sale of portfolio securities, no price is paid or received by the Fund upon the purchase or sale of a futures contract. Initially, the Subsidiary will be required to deposit with the broker an amount of cash or cash equivalents, known as initial margin, based on the value of the contract. The nature of initial margin in futures transactions is different from that of margin in securities transactions in that futures contract margin does not involve the borrowing of funds by the customer to finance the transactions. Rather, the initial margin is in the nature of a performance bond or good faith deposit on the contract which is returned to the Fund upon termination of the futures contract, assuming all contractual obligations have been satisfied. Subsequent payments, called variation margin, to and from the broker, will be made on a daily basis as the price of the underlying instruments fluctuates, making the long and short positions in the futures contract more or less valuable, a process known as marking to the market. For example, when the Fund has purchased a futures contract and the price of the contract has risen in response to a rise in the price of the underlying instruments, that position will have increased in value and the Fund will be entitled to receive from the broker a variation margin payment equal to that increase in value. Conversely, where the Fund has purchased a futures contract and the price of the futures contract has declined in response to a decrease in the underlying instruments, the position would be less valuable and the Fund would be required to make a variation margin payment to the broker. At any time prior to expiration of the futures contract, the Adviser or Trading Adviser may elect to close the position by taking an
opposite position, subject to the availability of a secondary market, which will operate to terminate the Funds position in the futures contract. A final determination of variation margin is then made, additional cash is required to be paid by or released to the Fund, and the Fund realizes a loss or gain.
The Fund will comply with guidelines established by the SEC with respect to coverage of forwards, futures, swaps and options. For example, when entering into a contract that must be cash settled, the Fund will cover (and mark-to-market on a daily basis) its position in an amount that, when added to the amounts deposited with a futures commission merchant as margin, is equal to the daily mark-to-market obligation, rather than the notional value of the contract.
When entering into a contract that does not need to be settled in cash, the Fund is also required to cover its position in order to limit leveraging and related risks. To cover its position, the Fund may segregate (and mark-to-market on a daily basis) cash or liquid securities that, when added to any amounts deposited with a futures commission merchant as margin, are equal to the market value of the contract or otherwise cover its position in a manner consistent with the 1940 Act or the rules and SEC interpretations thereunder. The segregated account functions as a practical limit on the amount of leverage which the Fund may undertake and on the potential increase in the speculative character of the Funds outstanding portfolio securities. Additionally, such segregated accounts will generally assure the availability of adequate funds to meet the obligations of the Fund arising from such investment activities. Segregated assets cannot be sold or transferred unless equivalent assets are substituted in their place or it is no longer necessary to segregate them. As a result, there is a possibility that segregation of a large percentage of the Funds assets could impede portfolio management or the Funds ability to meet redemption requests or other current obligations. Each Subsidiary (as defined below) will comply with these coverage requirements to the same extent as the Fund that holds the Subsidiarys securities.
The Fund or the Subsidiary may enter into agreements with a futures commission merchant (FCM) which require the FCM to accept physical settlement for certain financial instruments. If this occurs, the Fund would treat the financial instrument as being cash-settled for purposes of determining the Funds coverage requirements.
The Fund may also cover its position in relation to forwards, futures, swaps and options through ownership of the underlying security, financial instrument or currency or by other portfolio positions or by other means consistent with applicable regulatory policies.
Options. The Fund may purchase and write put and call options on indices and enter into related closing transactions. A put option on a security gives the purchaser of the option the right to sell, and the writer of the option the obligation to buy, the underlying security at any time during the option period. A call option on a security gives the purchaser of the option the right to buy, and the writer of the option the obligation to sell, the underlying security at any time during the option period. The premium paid to the writer is the consideration for undertaking the obligations under the option contract.
The Fund may purchase and write put and call options on foreign currencies (traded on U.S. and foreign exchanges or over-the-counter markets) to manage its exposure to exchange rates or to seek and increase in total return. Call options on foreign currency written by the Fund will be covered as set out below.
Put and call options on indices are similar to options on securities except that options on an index give the holder the right to receive, upon exercise of the option, an amount of cash if the closing level of the underlying index is greater than (or less than, in the case of puts) the exercise price of the option. This amount of cash is equal to the difference between the closing price of the index and the exercise price of the option, expressed in dollars multiplied by a specified number. Thus, unlike options on individual securities, all settlements are in cash, and gain or loss depends on price movements in the particular market represented by the index generally, rather than the price movements in individual securities.
All options written on indices or securities must be covered. When the Fund writes an option on a security, an index or a foreign currency, the Fund is required to cover its position in order to limit leveraging and related risks. To cover its position, the Fund may segregate (and mark-to-market on a daily basis) cash or liquid securities that, when added to any amounts deposited with a futures commission merchant as margin, are equal to the market value of the option or otherwise cover its position in a manner consistent with the 1940 Act or the rules and SEC
interpretations thereunder. The segregated account functions as a practical limit on the amount of leverage which the Fund may undertake and on the potential increase in the speculative character of the Funds outstanding portfolio securities. Additionally, such segregated accounts will generally assure the availability of adequate funds to meet the obligations of the Fund arising from such investment activities.
The Fund or the Subsidiary may enter into agreements with a futures commission merchant (FCM) which require the FCM to accept physical settlement for certain financial instruments. If this occurs, the Fund would treat the financial instrument as being cash-settled for purposes of determining the Funds coverage requirements.
The Fund may trade put and call options on securities, securities indices and currencies, as the Adviser or applicable Trading Adviser determines is appropriate in seeking the Funds investment objective, and except as restricted by the Funds investment limitations. See Investment Limitations.
The initial purchase (sale) of an option contract is an opening transaction. In order to close out an option position, the Fund may enter into a closing transaction, which is simply the sale (purchase) of an option contract on the same security with the same exercise price and expiration date as the option contract originally opened. If the Fund is unable to effect a closing purchase transaction with respect to an option it has written, it will not be able to sell the underlying security until the option expires or the Fund delivers the security upon exercise.
The Fund may purchase put and call options on securities to protect against a decline in the market value of the securities in its portfolio, to anticipate an increase in the market value of securities that the Fund may seek to purchase in the future or to seek to increase total return. The Fund purchasing put and call options pays a premium therefore. If price movements in the underlying securities are such that exercise of the options would not be profitable for the Fund, loss of the premium paid may be offset by an increase in the value of the Funds securities or by a decrease in the cost of acquisition of securities by the Fund.
The Fund may write covered call options on securities as a means of increasing the yield on its assets and as a means of providing limited protection against decreases in its market value. When the Fund writes an option, if the underlying securities do not increase or decrease to a price level that would make the exercise of the option profitable to the holder thereof, the option generally will expire without being exercised and the Fund will realize as profit the premium received for such option. When a call option of which the Fund is the writer is exercised, the Fund will be required to sell the underlying securities to the option holder at the strike price, and will not participate in any increase in the price of such securities above the strike price. When a put option of which the Fund is the writer is exercised, the Fund will be required to purchase the underlying securities at a price in excess of the market value of such securities.
The Fund may purchase and write options on an exchange or over-the-counter. Over-the-counter options (OTC options) differ from exchange-traded options in several respects. They are transacted directly with dealers and not with a clearing corporation, and therefore entail the risk of non-performance by the dealer. OTC options are available for a greater variety of securities and for a wider range of expiration dates and exercise prices than are available for exchange-traded options. Because OTC options are not traded on an exchange, pricing is done normally by reference to information from a market maker. It is the SECs position that OTC options are generally illiquid.
The market value of an option generally reflects the market price of an underlying security. Other principal factors affecting market value include supply and demand, interest rates, the pricing volatility of the underlying security and the time remaining until the expiration date.
Risks associated with options transactions include: (1) the success of a hedging strategy may depend on an ability to predict movements in the prices of individual securities, fluctuations in markets and movements in interest rates; (2) there may be an imperfect correlation between the movement in prices of options and the securities underlying them; (3) there may not be a liquid secondary market for options; and (4) while the Fund will receive a premium when it writes covered call options, it may not participate fully in a rise in the market value of the underlying security.
Restricted and Illiquid Securities. The Fund may not invest more than 15% of its net assets in illiquid securities, including securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Illiquid securities include: repurchase agreements and time deposits with a notice or demand period of more than seven days; interest rate; currency and mortgage swaps; interest rate caps; floors and collars; municipal leases; certain restricted securities, such as those purchased in a private placement of securities, unless it is determined, based upon a review of the trading markets for a specific restricted security, that such restricted security is liquid; and certain over-the-counter options. Securities that have legal or contractual restrictions on resale but have a readily available market are not considered illiquid for purposes of this limitation.
Mutual funds do not typically hold a significant amount of restricted or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities and a mutual fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty in satisfying redemptions within seven days. A mutual fund might also have to register such restricted securities in order to dispose of them resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities.
The Fund may purchase securities which are not registered under the Securities Act but which may be sold to qualified institutional buyers in accordance with Rule 144A under the Securities Act (Restricted Securities). These securities will not be considered illiquid so long as it is determined by the Adviser or applicable Trading Adviser that an adequate trading market exists for the securities. This investment practice could have the effect of increasing the level of illiquidity in an underlying investment company during any period that qualified institutional buyers become uninterested in purchasing restricted securities.
The Adviser or applicable Trading Adviser will monitor the liquidity of Restricted Securities held by the portion of the assets of the Fund it manages. In reaching liquidity decisions, the Adviser or Trading Adviser may consider, among others, the following factors: (1) the unregistered nature of the security; (2) the frequency of trades and quotes for the security; (3) the number of dealers wishing to purchase or sell the security and the number of other potential purchasers; (4) dealer undertakings to make a market in the security; and (5) the nature of the security and the nature of the marketplace trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of the transfer).
The purchase price and subsequent valuation of Restricted Securities normally reflect a discount from the price at which such securities trade when they are not restricted, since the restriction makes them less liquid. The amount of the discount from the prevailing market price is expected to vary depending upon the type of security, the character of the issuer, the party who will bear the expenses of registering the Restricted Securities and prevailing supply and demand conditions.
As consistent with the Funds investment objectives, the Fund may also invest in Section 4(2) commercial paper. Section 4(2) commercial paper is issued in reliance on an exemption from registration under Section 4(2) of the Act and is generally sold to institutional investors who purchase for investment. Any resale of such commercial paper must be in an exempt transaction, usually to an institutional investor through the issuer or investment dealers who make a market in such commercial paper. The Company believes that Section 4(2) commercial paper is liquid to the extent it meets the criteria established by the Board. The Company intends to treat such commercial paper as liquid and not subject to the investment limitations applicable to illiquid securities or restricted securities.
Rights Offerings and Purchase Warrants. Rights offerings and purchase warrants are privileges issued by a corporation which enable the owner to subscribe to and purchase a specified number of shares of the corporation at a specified price during a specified period of time. Subscription rights normally have a short lifespan to expiration. The purchase of rights or warrants involves the risk that the Fund could lose the purchase value of a right or warrant if the right to subscribe to additional shares is not executed prior to the rights or warrants expiration. Also, the purchase of rights and/or warrants involves the risk that the effective price paid for the right and/or warrant added to the subscription price of the related security may exceed the value of the subscribed securitys market price such as when there is no movement in the level of the underlying security.
Risk Considerations of Medium Grade Securities. Obligations in the lowest investment grade ( i.e. , BBB or Baa), referred to as medium grade obligations, have speculative characteristics, and changes in economic conditions and
other factors are more likely to lead to weakened capacity to make interest payments and repay principal on these obligations than is the case for higher rated securities. In the event that a security purchased by the Fund is subsequently downgraded below investment grade, the Adviser and Trading Advisers will consider such event in its determination of whether the Fund should continue to hold the security.
Short Sales. As consistent with the Funds investment objectives, the Fund may engage in short sales that are either uncovered or against the box. A short sale is against the box if at all times during which the short position is open, the Fund owns at least an equal amount of the securities or securities convertible into, or exchangeable without further consideration for, securities of the same issue as the securities that are sold short. A short sale against the box is generally a taxable transaction to the Fund with respect to the securities that are sold short.
Uncovered short sales are transactions under which the Fund sells a security it does not own. To complete such a transaction, the Fund must borrow the security to make delivery to the buyer. The Fund then is obligated to replace the security borrowed by purchasing the security at the market price at the time of the replacement. The price at such time may be more or less than the price at which the security was sold by the Fund. Until the security is replaced, the Fund is required to pay the lender amounts equal to any dividends or interest that accrue during the period of the loan. To borrow the security, the Fund also may be required to pay a premium, which would increase the cost of the security sold. The proceeds of the short sale will be retained by the broker, to the extent necessary to meet margin requirements, until the short position is closed out.
Until the Fund closes its short position or replaces the borrowed security, the Fund will: (a) maintain a segregated account containing cash or liquid securities at such a level that (i) the amount deposited in the account plus the amount deposited with the broker as collateral will equal the current value of the security sold short; and (ii) the amount deposited in the segregated account plus the amount deposited with the broker as collateral will not be less than the market value of the security at the time the security was sold short; or (b) otherwise cover the Funds short position.
Special Note Regarding Market Events. Events in the financial sector over the past several years have resulted in reduced liquidity in credit and fixed income markets and in an unusually high degree of volatility in the financial markets, both domestically and internationally. While entire markets have been impacted, issuers that have exposure to the real estate, mortgage and credit markets have been particularly affected. These events and the potential for continuing market turbulence may have an adverse effect on the underlying investment companies investments. It is uncertain how long these conditions will continue.
The instability in the financial markets has led the U.S. government to take a number of unprecedented actions designed to support certain financial institutions and certain segments of the financial markets. Federal, state and foreign governments, regulatory agencies, and self-regulatory organizations may take actions that affect the regulation of the instruments in which the Fund invests, or the issuers of such instruments, in ways that are unforeseeable. Such legislation or regulation could limit or preclude an underlying investment companys, and thus the Funds, ability to achieve its investment objective.
Governments or their agencies may also acquire distressed assets from financial institutions and acquire ownership interests in those institutions. The implications of government ownership and disposition of these assets are unclear, and such ownership or disposition may have positive or negative effects on the liquidity, valuation and performance of the underlying investment companies holdings.
Structured Securities. The Fund may invest in structured securities to the extent consistent with its investment objective. The value of the principal of and/or interest on structured securities is determined by reference to changes in the value of specific currencies, commodities, securities, indices or other financial indicators (the Reference) or the relative change in two or more References. The interest rate or the principal amount payable upon maturity or redemption may be increased or decreased depending upon changes in the applicable Reference. Examples of structured securities include, but are not limited to, notes where the principal repayment at maturity is determined by the value of the relative change in two or more specified securities or securities indices.
The terms of some structured securities may provide that in certain circumstances no principal is due at maturity and, therefore, the Fund could suffer a total loss of its investment. Structured securities may be positively or
negatively indexed, so that appreciation of the Reference may produce an increase or decrease in the interest rate or value of the security at maturity. In addition, changes in the interest rate or the value of the security at maturity may be a multiple of the changes in the value of the Reference. Consequently, structured securities may entail a greater degree of market risk than other types of securities. Structured securities may also be more volatile, less liquid and more difficult to accurately price than less complex securities due to their derivative nature.
Subsidiary Risk. The Fund makes investments through a wholly-owned and controlled Subsidiary of the Fund (Abbey Capital Offshore Fund Limited). Investment in the Subsidiary provides the Fund with exposure to the commodity markets within the limitations of Subchapter M of the Internal Revenue Code and recent Internal Revenue Service revenue rulings. The Subsidiary is organized under the laws of the Cayman Islands. The Fund is the sole shareholder of the Subsidiary, and it is not currently expected that shares of the Subsidiary will be sold or offered to other investors.
The Subsidiary will invest primarily in derivative instruments, such as, commodity futures contracts, non-commodity futures contracts, such as equity index, government bond, fixed income and foreign exchange futures contracts, commodity and non-commodity swap agreements. The Subsidiary may also invest in fixed income securities and money market instruments, cash and cash equivalents with two years or less term to maturity, and other investments intended to serve as margin or collateral for the Subsidiarys derivative positions. Although the Fund may enter into these commodity-linked derivative instruments directly, the Fund will likely gain exposure to these derivative instruments indirectly by investing in the Subsidiary. The Funds investment in the Subsidiary may vary depending on the types of instruments selected by the Adviser or Trading Advisers to gain exposure to the commodities markets. To the extent that the Fund invests in the Subsidiary, the Fund may be subject to the risks associated with the abovementioned derivative instruments and other securities, which are discussed elsewhere in the Prospectus and this SAI.
The Fund intends to treat physically settled futures contracts in the same manner as cash settled futures contracts through the use of a swap and/or letter agreement with the Subsidiarys futures commission merchant for the purposes of complying with Section 18 of 1940 Act. The SEC has not declared whether or not the use of such a letter agreement is sufficient for the purpose of compliance with Section 18 of the 1940 Act. There is a risk, therefore, that the SEC may deem the use of the letter agreement as insufficient and that the Fund may not be permitted to continue to gain exposure to these contracts through the use of the letter agreement.
The Fund intends to treat physically settled fx forward transactions in the same manner as cash settled fx forward transactions through the use of a letter agreement (the Letter) with the Subsidiarys FX Prime Broker (FXPB) for the purposes of complying with Section 18 of 1940 Act. The Letter provides that the Subsidiary will ensure the liquidation of any deliverable transactions by entering into offsetting FX spot, forward or swap transactions or by rolling forward the net currency positions under such transactions. Failing that, where the transaction is not liquidated prior to the settlement date of such transaction, the FXPB will liquidate the position prior to the settlement date at the applicable prevailing market rate. Therefore, the Letter provides that the Fund and/or the Subsidiary will never be left with an obligation to purchase or deliver the currency underlying the forward transaction.
While the Subsidiary may be considered similar to an investment company, it is not registered under the 1940 Act and, unless otherwise noted in the Prospectus and this SAI, is not subject to all of the investor protections of the 1940 Act and other U.S. regulations. Changes in the laws of the United States and/or the Cayman Islands could result in the inability of the Fund and/or the Subsidiary to operate as described in the Prospectuses and this SAI and could negatively affect the Fund and its shareholders.
Swap Agreements. The Fund may enter into equity index or interest rate swap agreements for purposes of attempting to gain exposure to the stocks making up an index of securities in a market without actually purchasing those stocks, or to hedge a position. Swap agreements are two-party contracts entered into primarily by institutional investors for periods ranging from a day to more than one-year. In a standard swap transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or swapped between the parties are calculated with respect to a notional amount, i.e. , the return on or increase in value of a particular dollar amount invested in a basket of securities representing a particular index. Forms of swap agreements include interest rate caps, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates
exceed a specified rate, or cap, interest rate floors, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates fall below a specified level, or floor, and interest rate dollars, under which a party sells a cap and purchases a floor or vice versa in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels.
Most swap agreements entered into by the Fund calculate the obligations of the parties to the agreement on a net basis. Consequently, the Funds current obligations (or rights) under a swap agreement will generally be equal only to the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement (the net amount). The Funds current obligations under a swap agreement will be accrued daily (offset against any amounts owing to the Fund) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by segregating assets determined to be liquid.
Obligations under swap agreements so covered will not be construed to be senior securities for purposes of the Funds investment restriction concerning senior securities. Because they are two party contracts and because they may have terms of greater than seven days, swap agreements may be considered to be illiquid for the Funds illiquid investment limitation. The Fund will not enter into any swap agreement unless the Adviser or applicable Trading Adviser believes that the other party to the transaction is creditworthy. The Fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty.
The Fund may enter into swap agreements to invest in a market without owning or taking physical custody of securities in circumstances in which direct investment is restricted for legal reasons or is otherwise impracticable. The counterparty to any swap agreement will typically be a bank, investment banking firm or broker/dealer. The counter-party will generally agree to pay the Fund the amount, if any, by which the notional amount of the swap agreement would have increased in value had it been invested in the particular stocks, plus the dividends that would have been received on those stocks. The Fund will agree to pay to the counter-party a floating rate of interest on the notional amount of the swap agreement plus the amount, if any, by which the notional amount would have decreased in value had it been invested in such stocks. Therefore, the return to the Fund on any swap agreement should be the gain or loss on the notional amount plus dividends on the stocks less the interest paid by the Fund on the notional amount.
Swap agreements typically are settled on a net basis, which means that the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments. Payments may be made at the conclusion of a swap agreement or periodically during its term. Swap agreements do not involve the delivery of securities or other underlying assets. Accordingly, the risk of loss with respect to swap agreements is limited to the net amount of payments that the Fund is contractually obligated to make. If the other party to a swap agreement defaults, the Funds risk of loss consists of the net amount of payments that the Fund is contractually entitled to receive, if any. The net amount of the excess, if any, of the Funds obligations over its entitlements with respect to each equity swap will be accrued on a daily basis and an amount of cash or liquid assets, having an aggregate net asset value at least equal to such accrued excess will be maintained in a segregated account by the Funds custodian. Inasmuch as these transactions are entered into for hedging purposes or are offset by segregated cash of liquid assets, as permitted by applicable law, the Fund and the Adviser believe that these transactions do not constitute senior securities under the 1940 Act and, accordingly, will not treat them as being subject to the Funds borrowing restrictions.
The Adviser and Trading Advisers, under the supervision of the Board, are responsible for determining and monitoring the liquidity of Fund transactions in swap agreements. The use of equity swaps is a highly specialized activity, which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions.
U.S. Government Securities. The Fund may invest in U.S. government securities. Securities issued or guaranteed by the U.S. government or its agencies or instrumentalities include U.S. Treasury securities, which are backed by the full faith and credit of the U.S. Treasury and which differ only in their interest rates, maturities, and times of issuance. U.S. Treasury bills have initial maturities of one-year or less; U.S. Treasury notes have initial maturities of one to ten years; and U.S. Treasury bonds generally have initial maturities of greater than ten years. Certain U.S. government securities are issued or guaranteed by agencies or instrumentalities of the U.S. government including,
but not limited to, obligations of U.S. government agencies or instrumentalities such as Fannie Mae, Freddie Mac, Ginnie Mae, the Small Business Administration, the Federal Farm Credit Administration, the Federal Home Loan Banks, Banks for Cooperatives (including the Central Bank for Cooperatives), the Federal Land Banks, the Federal Intermediate Credit Banks, the Tennessee Valley Authority, the Export-Import Bank of the United States, the Commodity Credit Corporation, the Federal Financing Bank, the Student Loan Marketing Association, the National Credit Union Administration and the Federal Agricultural Mortgage Corporation (Farmer Mac).
Some obligations issued or guaranteed by U.S. government agencies and instrumentalities, including, for example, Ginnie Mae pass-through certificates, are supported by the full faith and credit of the U.S. Treasury. Other obligations issued by or guaranteed by federal agencies, such as those securities issued by Fannie Mae, are supported by the discretionary authority of the U.S. government to purchase certain obligations of the federal agency, while other obligations issued by or guaranteed by federal agencies, such as those of the Federal Home Loan Banks, are supported by the right of the issuer to borrow from the U.S. Treasury, while the U.S. government provides financial support to such U.S. government-sponsored federal agencies, no assurance can be given that the U.S. government will always do so, since the U.S. government is not so obligated by law. U.S. Treasury notes and bonds typically pay coupon interest semi-annually and repay the principal at maturity.
See Mortgage-Backed Securities above for additional information about the September 7, 2008 federal takeover of Fannie Mae and Freddie Mac.
· U.S. Treasury Obligations. U.S. Treasury obligations consist of bills, notes and bonds issued by the U.S. Treasury and separately traded interest and principal component parts of such obligations that are transferable through the federal book-entry system known as Separately Traded Registered Interest and Principal Securities (STRIPS) and Treasury Receipts (TRs).
· Receipts. Interests in separately traded interest and principal component parts of U.S. government obligations that are issued by banks or brokerage firms and are created by depositing U.S. government obligations into a special account at a custodian bank. The custodian holds the interest and principal payments for the benefit of the registered owners of the certificates or receipts. The custodian arranges for the issuance of the certificates or receipts evidencing ownership and maintains the register. TRs and STRIPS are interests in accounts sponsored by the U.S. Treasury. Receipts are sold as zero coupon securities.
· U.S. Government Zero Coupon Securities. STRIPS and receipts are sold as zero coupon securities, that is, fixed income securities that have been stripped of their unmatured interest coupons. Zero coupon securities are sold at a (usually substantial) discount and redeemed at face value at their maturity date without interim cash payments of interest or principal. The amount of this discount is accreted over the life of the security, and the accretion constitutes the income earned on the security for both accounting and tax purposes. Because of these features, the market prices of zero coupon securities are generally more volatile than the market prices of securities that have similar maturity but that pay interest periodically. Zero coupon securities are likely to respond to a greater degree to interest rate changes than are non-zero coupon securities with similar maturity and credit qualities.
· U.S. Government Agencies. Some obligations issued or guaranteed by agencies of the U.S. government are supported by the full faith and credit of the U.S. Treasury, others are supported by the right of the issuer to borrow from the Treasury, while still others are supported only by the credit of the instrumentality. Guarantees of principal by agencies or instrumentalities of the U.S. government may be a guarantee of payment at the maturity of the obligation so that in the event of a default prior to maturity there might not be a market and thus no means of realizing on the obligation prior to maturity. Guarantees as to the timely payment of principal and interest do not extend to the value or yield of these securities nor to the value of the Funds shares.
NON-PRINCIPAL INVESTMENT POLICIES AND RISKS
Equity Securities. Equity securities represent ownership interests in a company and consist of common stocks, preferred stocks, warrants to acquire common stock, and securities convertible into common stock. Investments in equity securities in general are subject to market risks that may cause their prices to fluctuate over time. Fluctuations in the value of equity securities in which the Fund invests will cause the net asset value of the Fund to fluctuate. The
Fund purchases equity securities traded in the U.S. on registered exchanges or the over-the-counter market. Equity securities are described in more detail below:
· Common Stock. Common stock represents an equity or ownership interest in an issuer. In the event an issuer is liquidated or declares bankruptcy, the claims of owners of bonds and preferred stock take precedence over the claims of those who own common stock.
· Preferred Stock. Preferred stock represents an equity or ownership interest in an issuer that pays dividends at a specified rate and that has precedence over common stock in the payment of dividends. In the event an issuer is liquidated or declares bankruptcy, the claims of owners of bonds take precedence over the claims of those who own preferred and common stock.
· Warrants. Warrants are instruments that entitle the holder to buy an equity security at a specific price for a specific period of time. Changes in the value of a warrant do not necessarily correspond to changes in the value of its underlying security. The price of a warrant may be more volatile than the price of its underlying security, and a warrant may offer greater potential for capital appreciation as well as capital loss. Warrants do not entitle a holder to dividends or voting rights with respect to the underlying security and do not represent any rights in the assets of the issuing company. A warrant ceases to have value if it is not exercised prior to its expiration date. These factors can make warrants more speculative than other types of investments.
· Convertible Securities. Convertible securities are bonds, debentures, notes, preferred stocks or other securities that may be converted or exchanged (by the holder or by the issuer) into shares of the underlying common stock (or cash or securities of equivalent value) at a stated exchange ratio. A convertible security may also be called for redemption or conversion by the issuer after a particular date and under certain circumstances (including a specified price) established upon issue. If a convertible security held by the Fund is called for redemption or conversion, the Fund could be required to tender it for redemption, convert it into the underlying common stock, or sell it to a third party.
Convertible securities generally have less potential for gain or loss than common stocks. Convertible securities generally provide yields higher than the underlying common stocks, but generally lower than comparable non-convertible securities. Because of this higher yield, convertible securities generally sell at a price above their conversion value, which is the current market value of the stock to be received upon conversion. The difference between this conversion value and the price of convertible securities will vary over time depending on changes in the value of the underlying common stocks and interest rates. When the underlying common stocks decline in value, convertible securities will tend not to decline to the same extent because of the interest or dividend payments and the repayment of principal at maturity for certain types of convertible securities. However, securities that are convertible other than at the option of the holder generally do not limit the potential for loss to the same extent as securities convertible at the option of the holder. When the underlying common stocks rise in value, the value of convertible securities may also be expected to increase. At the same time, however, the difference between the market value of convertible securities and their conversion value will narrow, which means that the value of convertible securities will generally not increase to the same extent as the value of the underlying common stocks. Because convertible securities may also be interest-rate sensitive, their value may increase as interest rates fall and decrease as interest rates rise. Convertible securities are also subject to credit risk, and are often lower-quality securities.
· Small and Medium Capitalization Issuers. Investing in equity securities of small and medium capitalization companies often involves greater risk than is customarily associated with investments in larger capitalization companies. This increased risk may be due to the greater business risks of smaller size, limited markets and financial resources, narrow product lines and frequent lack of depth of management. The securities of smaller companies are often traded in the over-the-counter market and even if listed on a national securities exchange may not be traded in volumes typical for that exchange. Consequently, the securities of smaller companies are less likely to be liquid, may have limited market stability, and may be subject to more abrupt or erratic market movements than securities of larger, more established growth companies or the market averages in general.
Investment Company Shares. The Fund may invest in shares of other investment companies to the extent permitted by applicable law and subject to certain restrictions. These investment companies typically incur fees that
are separate from those fees incurred directly by the Fund. The Funds purchase of such investment company securities results in the layering of expenses, such that shareholders would indirectly bear a proportionate share of the operating expenses of such investment companies, including advisory fees, in addition to paying the Funds expenses. Unless an exception is available, Section 12(d)(1)(A) of the 1940 Act prohibits a fund from (i) acquiring more than 3% of the voting shares of any one investment company, (ii) investing more than 5% of its total assets in any one investment company, and (iii) investing more than 10% of its total assets in all investment companies combined, including its ETF investments.
For hedging or other purposes, the Fund may invest in investment companies that seek to track the composition and/or performance of specific indexes or portions of specific indexes. Certain of these investment companies, known as exchange-traded funds, are traded on a securities exchange. The market prices of index-based investments will fluctuate in accordance with changes in the underlying portfolio securities of the investment company and also due to supply and demand of the investment companys shares on the exchange upon which the shares are traded. Index-based investments may not replicate or otherwise match the composition or performance of their specified index due to transaction costs, among other things.
Pursuant to orders issued by the SEC to each of certain exchange-traded funds (collectively, the ETFs) and procedures approved by the Board, the Fund may invest in the ETFs in excess of the limits described above, provided that the Fund has described the ETF investments in its prospectus and otherwise complies with the conditions of the SEC, as it may be amended, and any other applicable investment limitations. Neither the ETFs nor their investment advisers make any representations regarding the advisability of investing in the ETFs.
Large Shareholder Purchase and Redemption Risk. The Fund may experience adverse effects when certain large shareholders purchase or redeem large amounts of shares of the Fund. Such large shareholder redemptions may cause the Fund to sell its securities at times when it would not otherwise do so, which may negatively impact the Funds NAV and liquidity. Similarly, large share purchases may adversely affect the Funds performance to the extent that the Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would. In addition, a large redemption could result in the Funds current expenses being allocated over a smaller asset base, leading to an increase in the Funds expense ratio. However, this risk may be limited to the extent that the Adviser and the Fund have entered into a fee waiver and/or expense reimbursement arrangement.
Mortgage-Backed Securities. The Fund may invest in mortgage pass-through certificates and multiple-class pass-through securities, such as real estate mortgage investment conduits (REMIC), pass-through certificates and collateralized mortgage obligations (CMOs).
Guaranteed mortgage pass-through securities represent participation interests in pools of residential mortgage loans and are issued by U.S. governmental or private lenders and guaranteed by the U.S. government or one of its agencies or instrumentalities, including but not limited to the Government National Mortgage Association (Ginnie Mae), the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac). Ginnie Mae certificates are guaranteed by the full faith and credit of the U.S. government for timely payment of principal and interest on the certificates. Fannie Mae and Freddie Mac certificates are not backed by the full faith and credit of the U.S. government. Fannie Mae certificates are guaranteed by Fannie Mae, a federally chartered and privately owned corporation, for full and timely payment of principal and interest on the certificates. Fannie Mae is authorized to borrow from the U.S. Treasury to meet its obligations. Freddie Mac certificates are guaranteed by Freddie Mac, a corporate instrumentality of the U.S. government, for timely payment of interest and the ultimate collection of all principal of the related mortgage loans.
In September 2008, the U.S. Treasury Department and the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac would be placed in conservatorship under the FHFA. On June 16, 2010, FHFA ordered Fannie Maes and Freddie Macs stock de-listed from the New York Stock Exchange after the price of common stock in Fannie Mae fell below the New York Stock Exchanges minimum average closing price of $1 for more than 30 days. The future status and role of Fannie Mae and Freddie Mac could be impacted by (among other things) the actions taken and restrictions placed on Fannie Mae and Freddie Mac by the FHFA in its role as conservator, the restrictions placed on Fannie Maes and Freddie Macs operations and activities as a result of the senior preferred stock investment made by the U.S. Treasury, market responses to developments at Fannie Mae and Freddie Mac, and future legislative and regulatory action that alters the operations, ownership, structure and/or
mission of these institutions, each of which may, in turn, impact the value of, and cash flows on, any Mortgage-Backed Securities guaranteed by Fannie Mae and Freddie Mac, including any such Mortgage-Backed Securities held by the Fund.
There is risk that the U.S. Government will not provide financial support to its agencies, authorities, instrumentalities or sponsored enterprises. The Fund may purchase U.S. Government securities that are not backed by the full faith and credit of the United States, such as those issued by Fannie Mae and Freddie Mac. The maximum potential liability of the issuers of some U.S. Government securities held by the Fund may greatly exceed their current resources, including their legal right to support from the U.S. Treasury. It is possible that these issuers will not have the funds to meet their payment obligations in the future.
CMOs and REMIC pass-through or participation certificates may be issued by, among others, U.S. government agencies and instrumentalities as well as private lenders. CMOs and REMIC certificates are issued in multiple classes and the principal of and interest on the mortgage assets may be allocated among the several classes of CMOs or REMIC certificates in various ways. Each class of CMOs or REMIC certificates, often referred to as a tranche, is issued at a specific adjustable or fixed interest rate and must be fully retired no later than its final distribution date. Generally, interest is paid or accrues on all classes of CMOs or REMIC certificates on a monthly basis.
Typically, CMOs are collateralized by Ginnie Mae, Fannie Mae or Freddie Mac certificates but also may be collateralized by other mortgage assets such as whole loans or private mortgage pass-through securities. Debt service on CMOs is provided from payments of principal and interest on collateral of mortgaged assets and any reinvestment income thereon.
A REMIC is a CMO that qualifies for special tax treatment under the Code and invests in certain mortgages primarily secured by interests in real property and other permitted investments. Investors may purchase regular and residual interest shares of beneficial interest in REMIC trusts, although the Fund does not intend to invest in residual interests.
The Fund may invest in mortgage-backed securities issued by trusts or other entities formed or sponsored by private originators of and institutional investors in mortgage loans and other non-governmental entities (or representing custodial arrangements administered by such institutions). These private originators and institutions include savings and loan associations, mortgage bankers, commercial banks, insurance companies, investment banks and special purpose subsidiaries of the foregoing.
Privately issued mortgage-backed securities are generally backed by pools of conventional ( i.e. , non-government guaranteed or insured) mortgage loans. Since such mortgage-backed securities normally are not guaranteed by an entity having the credit standing of Ginnie Mae, Fannie Mae or Freddie Mac, in order to receive a high quality rating from the rating organizations ( e.g. , S&Ps or Moodys), they often are structured with one or more types of credit enhancement. Such credit enhancement falls into two categories: (1) liquidity protection and (2) protection against losses resulting after default by a borrower and liquidation of the collateral ( e.g. , sale of a house after foreclosure). Liquidity protection refers to the payment of cash advances to holders of mortgage-backed securities when a borrower on an underlying mortgage fails to make its monthly payment on time. Protection against losses resulting after default and liquidation is designed to cover losses resulting when, for example, the proceeds of a foreclosure sale are insufficient to cover the outstanding amount on the mortgage. Such protection may be provided through guarantees, insurance policies or letters of credit, through various means of structuring the securities or through a combination of such approaches.
Examples of credit enhancement arising out of the structure of the transaction include senior-subordinated securities (multiple class securities with one or more classes entitled to receive payment before other classes, with the result that defaults on the underlying mortgages are borne first by the holders of the subordinated class), creation of spread accounts or reserve funds (where cash or investments are held in reserve against future losses) and over-collateralization (where the scheduled payments on the underlying mortgages in a pool exceed the amount required to be paid on the mortgage-backed securities). The degree of credit enhancement for a particular issue of mortgage-backed securities is based on the level of credit risk associated with the particular mortgages in the related pool. Losses on a pool in excess of anticipated levels could nevertheless result in losses to security holders since credit enhancement rarely covers every dollar owed on a pool.
Investing in mortgage-backed securities (such as those described above) involves certain risks, including the failure of a counter-party to meet its commitments, adverse interest rate changes and the effects of prepayments on mortgage cash flows. Further, the yield characteristics of mortgage-backed securities differ from those of traditional fixed income securities. The major differences typically include more frequent interest and principal payments (usually monthly), the adjustability of interest rates, and the possibility that prepayments of principal may be made substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a variety of economic, geographic, social and other factors and cannot be predicted with certainty. Both adjustable rate mortgage loans and fixed rate mortgage loans may be subject to a greater rate of principal prepayments in a declining interest rate environment and to a lesser rate of principal prepayments in an increasing interest rate environment. Under certain interest rate and prepayment rate scenarios, the Fund may fail to recoup fully its investment in mortgage-backed securities notwithstanding any direct or indirect governmental or agency guarantee. When the Fund reinvests amounts representing payments and unscheduled prepayments of principal, it may receive a rate of interest that is lower than the rate on existing adjustable rate mortgage pass-through securities. Thus, mortgage-backed securities, and adjustable rate mortgage pass-through securities in particular, may be less effective than other types of U.S. government securities as a means of locking in interest rates.
Conversely, in a rising interest rate environment, a declining prepayment rate will extend the average life of many mortgage-backed securities. This possibility is often referred to as extension risk. Extending the average life of a mortgage-backed security increases the risk of depreciation due to future increases in market interest rates. The market for certain types of mortgage-backed securities ( i.e. , certain CMOs) may not be liquid under all interest rate scenarios, which may prevent the Fund from selling such securities held in its portfolio at times or prices that it desires.
Different types of derivative debt securities are subject to different combinations of prepayment, extension and/or interest rate risk. Conventional mortgage pass-through securities and sequential pay CMOs are subject to all of these risks, but are typically not leveraged. Thus, the magnitude of exposure may be less than for more leveraged mortgage-backed securities.
Planned amortization class (PAC) and target amortization class (TAC) CMO bonds involve less exposure to prepayment, extension and interest rate risk than other mortgage-backed securities, provided that prepayment rates remain within expected prepayment ranges or collars. To the extent that prepayment rates remain within these prepayment ranges, the residual or support tranches of PAC and TAC CMOs assume the extra prepayment extension and interest rate risk associated with the underlying mortgage assets.
The Fund may invest in floating rate securities based on the Cost of Funds Index (COFI floaters), other lagging rate floating rate securities, floating rate securities that are subject to a maximum interest rate (capped floaters), and mortgage-backed securities purchased at a discount. The primary risks associated with these derivative debt securities are the potential extension of average life and/or depreciation due to rising interest rates.
Recently, rating agencies have placed on credit watch or downgraded the ratings previously assigned to a large number of mortgage-related securities (which may include certain of the mortgage-related securities in which the Fund may have invested or may in the future be invested), and may continue to do so in the future. In the event that any mortgage-related security held by the Fund is placed on credit watch or downgraded, the value of such mortgage-related security may decline and the Fund may consequently experience losses in respect of such mortgage-related security.
Risk Considerations of Lower Rated Securities. The Fund may invest in fixed income securities that are not investment grade but are rated as low as B by Moodys or B by S&P ® (or their equivalents or, if unrated, determined by the Adviser or applicable Trading Adviser to be of comparable credit quality). In the case of a security that is rated differently by two or more rating services, the higher rating is used in connection with the foregoing limitation. In the event that the rating on a security held in the Funds portfolio is downgraded by a rating service, such action will be considered by the Adviser or applicable Trading Adviser in its evaluation of the overall investment merits of that security, but will not necessarily result in the sale of the security. The widespread expansion of government,
consumer and corporate debt within the U.S. economy has made the corporate sector, especially cyclically sensitive industries, more vulnerable to economic downturns or increased interest rates. An economic downturn could severely disrupt the market for high yield fixed income securities and adversely affect the value of outstanding fixed income securities and the ability of the issuers to repay principal and interest.
The Fund may invest in high yield debt obligations, such as bonds and debentures, issued by corporations and other business organizations. The Fund may invest in high yield debt instruments when the Fund believes that such instruments offer a better risk/reward profile than comparable equity opportunities. High yield fixed income securities (commonly known as junk bonds) are considered speculative investments while generally providing greater income than investments in higher rated securities, involve greater risk of loss of principal and income (including the possibility of default or bankruptcy of the issuers of such securities) and may involve greater volatility of price (especially during periods of economic uncertainty or change) than securities in the higher rating categories. Since yields vary over time, no specific level of income can ever be assured.
The prices of high yield fixed income securities have been found to be less sensitive to interest rate changes than higher-rated investments but more sensitive to adverse economic changes or individual corporate developments. Also, during an economic downturn or substantial period of rising interest rates, highly leveraged issuers may experience financial stress, which would adversely affect their ability to service their principal and interest payment obligations, to meet projected business goals and to obtain additional financing. If the issuer of a fixed income security owned by the Fund defaulted, the Fund could incur additional expenses in attempting to obtain a recovery. In addition, periods of economic uncertainty and changes can be expected to result in increased volatility of market prices of high yield fixed income securities and the Funds NAV to the extent it holds such securities.
High yield fixed income securities also present risks based on payment expectations. For example, high yield fixed income securities may contain redemption or call provisions. If an issuer exercises these provisions in a declining interest rate market, the Fund may, to the extent it holds such fixed income securities, have to replace the securities with a lower yielding security, which may result in a decreased return for investors. Conversely, a high yield fixed income securitys value will decrease in a rising interest rate market, as will the value of the Funds assets, to the extent it holds such fixed income securities. In addition, to the extent that there is no established retail secondary market, there may be thin trading of high yield fixed income securities, and this may have an impact on the Advisers and Trading Advisers ability to accurately value such securities and the Funds assets and on the Funds ability to dispose of such securities. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity of high yield fixed income securities, especially in a thinly traded market.
New laws proposed or adopted from time to time may have an impact on the market for high yield securities.
Finally, there are risks involved in applying credit or dividend ratings as a method for evaluating high yield securities. For example, ratings evaluate the safety of principal and interest or dividend payments, not market value risk of high yield securities. Also, since rating agencies may fail to timely change the credit ratings to reflect subsequent events, the Fund will continuously monitor the issuers of high yield securities in its portfolio, if any, to determine if the issuers will have sufficient cash flow and profits to meet required principal and interest payments, and to assure the securitys liquidity so the Fund can meet redemption requests.
Securities Lending. The Fund may lend portfolio securities to brokers, dealers and other financial organizations that meet capital and other credit requirements or other criteria established by the Board. These loans, if and when made, may not exceed 33 1/3% of the total asset value of the Fund (including the loan collateral). The Fund will not lend portfolio securities to the Adviser or their affiliates unless permissible under the 1940 Act and the rules and promulgations thereunder. Loans of portfolio securities will be fully collateralized by cash, letters of credit or U.S. government securities, and the collateral will be maintained in an amount equal to at least 102% of the current market value of the loaned domestic securities (105% of loaned foreign securities) by marking to market daily. Any gain or loss in the market price of the securities loaned that might occur during the term of the loan would be for the account of the Fund.
The Fund may pay a part of the interest earned from the investment of collateral, or other fee, to an unaffiliated or, to the extent consistent with the 1940 Act or the rules and SEC interpretations thereunder, affiliated third party for acting as the Funds securities lending agent.
By lending its securities, the Fund may increase its income by receiving payments from the borrower that reflect the amount of any interest or any dividends payable on the loaned securities as well as by either investing cash collateral received from the borrower in short-term instruments or obtaining a fee from the borrower when U.S. government securities or letters of credit are used as collateral. The Fund does not have the right to vote loaned securities. The Fund will attempt to call all loaned securities back to permit the exercise of voting rights on material matters, if time and jurisdictional restrictions permit. There is no guarantee that all loans can be recalled.
Temporary Defensive Positions . In anticipation of or in response to adverse market, economic, political or other conditions, the Fund may take temporary defensive positions (up to 100% of its assets) in cash, cash equivalents and short-term U.S. government securities. If the Fund were to take a temporary defensive position, it may be unable for a time to achieve its investment objective.
INVESTMENT LIMITATIONS
The Fund has adopted the following fundamental investment limitations which may not be changed with respect to the Fund without the affirmative vote of the holders of a majority of the Funds outstanding shares (as defined in Section 2(a) (42) of the 1940 Act). As used in this SAI and in the Prospectus, shareholder approval and a majority of the outstanding shares of the Fund means, with respect to the approval of an investment advisory agreement, a distribution plan or a change in a fundamental investment limitation, the lesser of (1) 67% of the shares of the Fund represented at a meeting at which the holders of more than 50% of the outstanding shares of the Fund are present in person or by proxy, or (2) more than 50% of the outstanding shares of the Fund. Unless otherwise noted, the Funds investment goals and strategies described in the Prospectus may be changed by the Board without the approval of the Funds shareholders.
The Fund may not:
1. Borrow money or issue senior securities, except that the Fund may borrow from banks and enter into reverse repurchase agreements provided that there is at least 300% asset coverage for the borrowings of the Fund. The Fund may not mortgage, pledge or hypothecate any assets, except in connection with any such borrowing and then in amounts not in excess of one-third of the value of the Funds total assets at the time of such borrowing. However, the amount shall not be in excess of lesser of the dollar amounts borrowed or 33 1/3% of the value of the Funds total assets at the time of such borrowing, provided that: (a) short sales and related borrowings of securities are not subject to this restriction; and (b) for the purposes of this restriction, collateral arrangements with respect to options, short sales, futures contracts, options on futures contracts, collateral arrangements with respect to initial and variation margin and collateral arrangements with respect to derivatives instruments are not deemed to be a pledge or other encumbrance of assets. Securities held in escrow or separate accounts in connection with the Funds investment practices are not considered to be borrowings or deemed to be pledged for purposes of this limitation;
2. Act as an underwriter of securities within the meaning of the 1933 Act, except insofar as it might be deemed to be an underwriter upon disposition of certain portfolio securities acquired within the limitation on purchases of restricted securities;
3. Purchase or sell real estate (including real estate limited partnership interests), provided that the Fund may invest: (a) in securities secured by real estate or interests therein or issued by companies that invest in real estate or interests therein; or (b) in real estate investment trusts;
4. Purchase or sell commodities, except as permitted by the 1940 Act, as amended, and as interpreted or modified by the regulatory authority having jurisdiction from time to time;
5. Make loans, except through loans of portfolio securities and repurchase agreements, provided that for purposes of this restriction the acquisition of bonds, debentures or other debt instruments or interests therein and investment in government obligations, loan participations and assignments, short-term commercial paper, certificates of deposit and bankers acceptances shall not be deemed to be the making of a loan;
6. Invest 25% or more of its total assets, taken at market value at the time of each investment, in the securities of one or more issuers conducting their principal business activities in the same industry, provided that (a) there is no limitation with respect to (i) instruments issued or guaranteed by the United States, any state, territory or possession of the United States, the District of Columbia or any of their authorities, agencies, instrumentalities or political subdivisions, and (ii) repurchase agreements secured by the instruments described in clause (i); (b) wholly-owned finance companies will be considered to be in the industries of their parents if their activities are primarily related to financing the activities of the parents; and (c) utilities will be divided according to their services, for example, gas, gas transmission, electric and gas, electric and telephone will each be considered a separate industry; or
7. Purchase the securities of any one issuer, other than securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, if immediately after and as a result of such purchase, more than 5% of the value of the Funds total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Fund, except that up to 25% of the value of the Funds total assets may be invested without regard to such limitations.
In addition to the fundamental investment limitations specified above, the Fund is subject to the following non-fundamental limitations, which may be changed without shareholder approval, in compliance with applicable law and regulatory policy. The Fund may not:
1. Make investments for the purpose of exercising control or management, but investments by the Fund in wholly-owned investment entities created under the laws of certain countries will not be deemed the making of investments for the purpose of exercising control or management; or
2. Purchase securities on margin, except that the Fund may use margin to the extent necessary to engage in short sales and may obtain such short-term credits as are necessary for the clearance of portfolio transactions; and provided that margin deposits in connection with options, futures contracts, options on futures contracts or other derivative instruments, including foreign exchange forward contracts, shall not constitute purchasing securities on margin.
The Fund may invest in securities issued by other investment companies within the limits prescribed by the 1940 Act. Pursuant to orders issued by the SEC to ETFs and procedures approved by the Board, the Fund may invest in ETFs in excess of the limits of the 1940 Act. As a shareholder of another investment company, the Fund would bear, along with other shareholders, its pro rata portion of the other investment companys expenses, including advisory fees. These expenses would be in addition to the advisory and other expenses that the Fund bears directly in connection with its own operations.
Securities held by the Fund generally may not be purchased from, sold or loaned to the Adviser, any Trading Adviser or their affiliates or any of their directors, officers or employees, acting as principal, unless pursuant to a rule or exemptive order under the 1940 Act. None of the Fund, the Adviser, or any Trading Adviser has obtained such an exemptive order as of the date of this SAI.
Under the 1940 Act, the Fund will be required to maintain asset coverage of at least 300% for borrowings from a bank. In the event that such asset coverage is below 300%, the Fund will be required to reduce the amount of its borrowings to obtain 300% asset coverage within three business days (not including Sundays and holidays).
The 1940 Act does not directly restrict an investment companys ability to invest in commodities, but does require that every investment company have a fundamental investment policy governing such investments. The Fund has adopted fundamental policies that would permit direct investment in commodities.
Any collateral arrangements with respect to, if applicable, the writing of options and futures contracts, options on futures contracts, short sales and other similar instruments, and collateral arrangements with respect to initial and variation margin are not deemed to be a pledge of assets. The Fund may pledge, mortgage or hypothecate assets to secure borrowings permitted by the Funds fundamental limitation on borrowing.
Senior securities may include any obligation or instrument issued by a fund evidencing indebtedness. The 1940 Act generally prohibits funds from issuing senior securities, although it does not treat certain transactions as senior securities, such as certain borrowings, short sales, reverse repurchase agreements, firm commitment agreements and standby commitments, with appropriate earmarking or segregation of assets to cover such obligation.
If a percentage restriction under one of the Funds investment policies or limitations or the use of assets is adhered to at the time a transaction is effected, later changes in percentages resulting from changing values will not be considered a violation (except with respect to any restrictions that may apply to borrowings or senior securities issued by the Fund).
DISCLOSURE OF PORTFOLIO HOLDINGS
The Company has adopted, on behalf of the Fund, a policy relating to the selective disclosure of the Funds portfolio holdings by the Adviser, director, officer or third party service provider, in accordance with regulations that seek to ensure that disclosure of information about portfolio holdings is in the best interest of Fund shareholders and to address the conflicts of interests of the Fund shareholders and its service providers. The policies relating to the disclosure of the Funds portfolio holdings are designed to allow disclosure of portfolio holdings information where necessary to the Funds operation without compromising the integrity or performance of the Fund. It is the policy of the Company that disclosure of the Funds portfolio holdings to a select person or persons prior to the release of such holdings to the public (selective disclosure) is prohibited, unless there are legitimate business purposes for selective disclosure.
The Company discloses portfolio holdings information as required in regulatory filings and shareholder reports, discloses portfolio holdings information as required by federal and state securities laws and may disclose portfolio holdings information in response to requests by governmental authorities. As required by the federal securities laws, including the 1940 Act, the Company will disclose the Funds portfolio holdings in applicable regulatory filings, including shareholder reports, reports on Form N-CSR and Form N-Q or such other filings, reports or disclosure documents as the applicable regulatory authorities may require.
The Company may distribute or authorize the distribution of information about the Funds portfolio holdings that is not publicly available to third-party service providers of the Company, which include U.S. Bank, N.A., the custodian; U.S. Bancorp Fund Services, LLC, (USBFS) the administrator, accounting agent and transfer agent; Ernst & Young LLP, the Funds independent registered public accounting firm; Drinker Biddle & Reath LLP, legal counsel; and Merrill Corporation, the financial printer. These service providers are required to keep such information confidential, and are prohibited from trading based on the information or otherwise using the information except as necessary in providing services to the Fund. Such holdings are released on conditions of confidentiality, which include appropriate trading prohibitions. Conditions of confidentiality include confidentiality terms included in written agreements, implied by the nature of the relationship (e.g. attorney-client relationship), or required by fiduciary or regulatory principles (e.g., custody services provided by financial institutions). Portfolio holdings may also be provided earlier to shareholders and their agents who receive redemptions in kind that reflect a pro rata allocation of all securities held in the Funds portfolio.
Portfolio holdings may also be disclosed, upon authorization by a designated officer of the Adviser, to certain independent reporting agencies recognized by the SEC as acceptable agencies for the reporting of industry statistical information. Disclosures to financial consultants are also subject to a confidentiality agreement and/or trading restrictions as well as a 15 - day time lag. The foregoing disclosures are made pursuant to the Companys policy on selective disclosure of portfolio holdings. The Board or a committee thereof may, in limited circumstances, permit other selective disclosure of portfolio holdings subject to a confidentiality agreement and/or trading restrictions. Portfolio holdings may also be provided earlier to shareholders and their agents who receive redemptions in kind that reflect a pro rata allocation of all securities held in the Funds portfolio.
The Adviser reserves the right to refuse to fulfill any request for portfolio holdings information from a shareholder or non-shareholder if it believes that providing such information will be contrary to the best interests of the Fund.
The Board provides ongoing oversight of the Companys policies and procedures and compliance with such policies and procedures. As part of this oversight function, the Board receives from the Trusts Chief Compliance Officer (CCO) as necessary, reports on compliance with these policies and procedures. In addition, the Board receives an annual assessment of the adequacy and effectiveness of the policies and procedures with respect to the Fund, and any changes thereto, and an annual review of the operation of the policies and procedures. Any violation of the policy set forth above as well as any corrective action undertaken to address such violation must be reported by the Adviser, director, officer or third party service provider to the Companys CCO, who will determine whether the violation should be reported immediately to the Board or at its next quarterly Board meeting.
PORTFOLIO TURNOVER
Portfolio turnover measures the percentage of the Funds total portfolio market value that was purchased or sold during the period. The Funds turnover rate provides an indication of how transaction costs (which are not included in the Funds expenses) may affect the Funds performance. Also, funds with a high turnover may be more likely to distribute capital gains that may be taxable to shareholders. The Funds portfolio turnover rate is calculated by the value of the investment securities purchased or sold, excluding all instruments whose maturities at the time of acquisition were one year or less, divided by the average monthly value of such securities owned during the year. Based on this calculation, instruments, including options and futures contracts, with remaining maturities of less than one year are excluded from the portfolio turnover rate. If such instruments were included, the Funds portfolio turnover rate would be higher.
The Funds portfolio turnover rates for the two most recent fiscal years are stated below. Portfolio turnover rates could change significantly in response to turbulent market conditions.
Portfolio Turnover |
|
||
Fiscal Year Ended August 31,
|
|
Fiscal Year Ended August 31,
|
|
0 |
% |
0 |
% |
MANAGEMENT OF THE COMPANY
The business and affairs of the Company are managed under the oversight of the Board, subject to the laws of the State of Maryland and the Companys Charter. The Directors are responsible for deciding matters of overall policy and overseeing the actions of the Companys service providers. The officers of the Company conduct and supervise the Companys daily business operations.
Directors who are not deemed to be interested persons of the Company (as defined in the 1940 Act) are referred to as Independent Directors. Directors who are deemed to be interested persons of the Company are referred to as Interested Directors. The Board is currently composed of seven Independent Directors and one Interested Director. The Board has selected Arnold M. Reichman, an Independent Director, to act as Chairman. Mr. Reichmans duties include presiding at meetings of the Board and interfacing with management to address significant issues that may arise between regularly scheduled Board and Committee meetings. In the performance of his duties, Mr. Reichman will consult with the other Independent Directors and the Companys officers and legal counsel, as appropriate. The Chairman may perform other functions as requested by the Board from time to time.
The Board meets as often as necessary to discharge its responsibilities. Currently, the Board conducts regular, in-person meetings at least four times a year, and holds special in-person or telephonic meetings as necessary to address specific issues that require attention prior to the next regularly scheduled meeting. The Board also relies on professionals, such as the Companys independent registered public accounting firms and legal counsel, to assist the Directors in performing their oversight responsibilities.
The Board has established eight standing committees Audit, Contract, Executive, Investment Risk, Nominating and Governance, Regulatory Oversight, Strategic Oversight and Product Planning, and Valuation Committees. The Board may establish other committees, or nominate one or more Directors to examine particular issues related to the Boards oversight responsibilities, from time to time. Each Committee meets periodically to perform its delegated oversight functions and reports its findings and recommendations to the Board. For more information on the Committees, see the section Standing Board Committees, below.
The Board has determined that the Companys leadership structure is appropriate because it allows the Board to effectively perform its oversight responsibilities.
Directors and Executive Officers
The Directors and executive officers of the Company as of December 31, 2016, their ages, business addresses and principal occupations during the past five years are set forth below.
Name, Address,
|
|
Position(s)
|
|
Term of Office
|
|
Principal Occupation(s)
|
|
Number of
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
OFFICERS |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
Salvatore Faia, JD,
|
|
President
|
|
2009 to present
|
|
Since 2004, President, Vigilant Compliance, LLC (investment management services company); since 2005, Independent Trustee of EIP Investment Trust (registered investment company). |
|
N/A |
|
N/A |
James G. Shaw
|
|
Treasurer and Secretary |
|
2016 to present |
|
Since 2016, Treasurer and Secretary of The RBB Fund, Inc.; from 1995 to 2016, Senior Director and Vice President of BNY Mellon Investment Servicing (US) Inc. (financial services company). |
|
N/A |
|
N/A |
Robert Amweg
|
|
Assistant Treasurer |
|
2016 to present |
|
Since 2013, Compliance Director, Vigilant Compliance, LLC (investment management services company); since 2012, Consultant to the financial services industry; from 2007 to 2012, Chief Financial Officer and Chief Accounting Officer, Turner Investments, LP (registered investment company). |
|
N/A |
|
N/A |
Jesse Schmitting
|
|
Assistant Treasurer |
|
2016 to present |
|
Since 2008, Assistant Vice President, U.S. Bancorp Fund Services, LLC (fund administrative services firm). |
|
N/A |
|
N/A |
Name, Address,
|
|
Position(s)
|
|
Term of Office
|
|
Principal Occupation(s)
|
|
Number of
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
Edward Paz
|
|
Assistant Secretary |
|
2016 to present |
|
Since 2007, Vice President and Counsel, U.S. Bancorp Fund Services, LLC (fund administrative services firm). |
|
N/A |
|
N/A |
Michael P. Malloy
|
|
Assistant Secretary |
|
1999 to present |
|
Since 1993, Partner, Drinker Biddle & Reath LLP (law firm). |
|
N/A |
|
N/A |
* Each Director oversees twenty-seven portfolios of the Company that are currently offered for sale.
(1) Subject to the Companys Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. The Board has approved waivers of the policy with respect to Messrs. Brodsky, Carnall, Sablowsky and Straniere. Each officer holds office at the pleasure of the Board until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed.
(2) Mr. Sablowsky is considered an interested person of the Company as that term is defined in the 1940 Act and is referred to as an Interested Director. Mr. Sablowsky is considered an Interested Director of the Company by virtue of his position as an employee of Oppenheimer & Co., Inc., a registered broker-dealer.
Director Experience, Qualifications, Attributes and/or Skills
The information above includes each Directors principal occupations during the last five years. Each Director possesses extensive additional experience, skills and attributes relevant to his qualifications to serve as a Director. The cumulative background of each Director led to the conclusion that each Director should serve as a Director of the Company. Mr. Giordano has years of experience as a consultant to financial services organizations and also serves on the boards of other registered investment companies. Mr. Reichman brings decades of investment management experience to the Board, in addition to senior executive-level management experience. Mr. Straniere has been a practicing attorney for over 30 years and has served on the boards of an asset management company and another registered investment company. Mr. Brodsky has over 40 years of senior executive-level management experience in the cable television and communications industry. Mr. Sablowsky has demonstrated leadership and management abilities as evidenced by his senior executive-level positions in the financial services industry. Mr. Carnall has decades of senior executive-level management experience in the banking and financial services industry and also serves on the boards of various corporations and a bank. Mr. Chandler has demonstrated leadership and management abilities as evidenced by his senior executive-level positions in the investment technology consulting/services and investment banking/brokerage industries, and also serves on various boards. Mr. Lambroza has decades of experience and executive level leadership in the energy trading industry in addition to his experience in academia.
Standing Committees
The responsibilities of each Committee of the Board and its members are described below.
Audit Committee. The Board has an Audit Committee comprised of three Independent Directors. The current members of the Audit Committee are Messrs. Brodsky, Chandler and Giordano. The Audit Committee, among other things, reviews results of the annual audit and approves the firm(s) to serve as independent auditors. The Audit Committee convened four times during the fiscal year ended August 31, 2016.
Contract Committee. The Board has a Contract Committee comprised of the Interested Director and three Independent Directors. The current members of the Contract Committee are Messrs. Brodsky, Chandler, Sablowsky and Straniere. The Contract Committee reviews and makes recommendations to the Board regarding the approval and continuation of agreements and plans of the Company. The Contract Committee convened three times during the fiscal year ended August 31, 2016.
Executive Committee. The Board has an Executive Committee comprised of the Interested Director and three Independent Directors. The current members of the Executive Committee are Messrs. Chandler, Giordano, Reichman and Sablowsky. The Executive Committee may generally carry on and manage the business of the Company when the Board is not in session. The Executive Committee did not meet during the fiscal year ended August 31, 2016.
Investment Risk Committee. The Board has an Investment Risk Committee comprised of the Interested Director and two Independent Directors. The current members of the Investment Risk Committee are Messrs. Lambroza, Reichman and Sablowsky. The Investment Risk Committee ensures that the Companys investment advisers have adopted investment risk management policies and procedures. The Investment Risk Committee is newly formed and did not meet during the fiscal year ended August 31, 2016.
Nominating and Governance Committee. The Board has a Nominating and Governance Committee comprised only of Independent Directors. The current members of the Nominating and Governance Committee are Messrs. Carnall, Giordano and Reichman. The Nominating and Governance Committee recommends to the Board all persons to be nominated as Directors of the Company. The Nominating and Governance Committee will consider nominees recommended by shareholders. Recommendations should be submitted to the Committee care of the Companys Secretary. The Nominating and Governance Committee convened twice during the fiscal year ended August 31, 2016.
Regulatory Oversight Committee . The Board has a Regulatory Oversight Committee comprised of the Interested Director and four Independent Directors. The current members of the Regulatory Oversight Committee are Messrs. Carnall, Lambroza, Reichman, Sablowsky and Straniere. The Regulatory Oversight Committee monitors regulatory developments in the mutual fund industry and focuses on various regulatory aspects of the operation of the Company. The Regulatory Oversight Committee convened four times during the fiscal year ended August 31, 2016.
Strategic Oversight and Product Planning Committee (formerly, the Product Development Committee). The Board has a Strategic Oversight and Product Planning Committee comprised of the Interested Director and three Independent Directors. The current members of the Strategic Oversight and Product Planning Committee are Messrs. Carnall, Chandler, Reichman and Sablowsky. The Strategic Oversight and Product Planning Committee assists the Board in its oversight and review of the Companys strategic plan and operations, including overseeing the process regarding the addition of new investment advisers and investment products to the Company. The Strategic Oversight and Product Planning Committee convened three times during the fiscal year ended August 31, 2016.
Valuation Committee. The Board has a Valuation Committee comprised of the Interested Director and three officers of the Company. The members of the Valuation Committee are Messrs. Amweg, Faia, Sablowsky and Shaw. The Valuation Committee is responsible for reviewing fair value determinations. The Valuation Committee convened four times during the fiscal year ended August 31, 2016.
Risk Oversight
The Board performs its risk oversight function for the Company through a combination of (1) direct oversight by the Board as a whole and Board committees and (2) indirect oversight through the Companys investment advisers and other service providers, Company officers and the Companys Chief Compliance Officer. The Company is subject
to a number of risks, including but not limited to investment risk, compliance risk, operational risk, reputational risk, credit risk and counterparty risk. Day-to-day risk management with respect to the Company is the responsibility of the Companys investment advisers or other service providers (depending on the nature of the risk) that carry out the Companys investment management and business affairs. Each of the investment advisers and the other service providers have their own independent interest in risk management and their policies and methods of risk management will depend on their functions and business models and may differ from the Companys and each others in the setting of priorities, the resources available or the effectiveness of relevant controls.
The Board provides risk oversight by receiving and reviewing on a regular basis reports from the Companys investment advisers or other service providers, receiving and approving compliance policies and procedures, periodic meetings with the Companys portfolio managers to review investment policies, strategies and risks, and meeting regularly with the Companys Chief Compliance Officer to discuss compliance reports, findings and issues. The Board also relies on the Companys investment advisers and other service providers, with respect to the day-to-day activities of the Company, to create and maintain procedures and controls to minimize risk and the likelihood of adverse effects on the Companys business and reputation.
Board oversight of risk management is also provided by various Board Committees. For example, the Audit Committee meets with the Companys independent registered public accounting firms to ensure that the Companys respective audit scopes include risk-based considerations as to the Companys financial position and operations.
The Board may, at any time and in its discretion, change the manner in which it conducts risk oversight. The Boards oversight role does not make the Board a guarantor of the Companys investments or activities.
Director Ownership of Shares of the Company
The following table sets forth the dollar range of equity securities beneficially owned by each Director in the Fund and in all of the portfolios of the Company (which for each Director comprise all registered investment companies within the Companys family of investment companies overseen by him), as of December 31, 2016:
Name of Director |
|
Dollar Range of
|
|
Aggregate Dollar Range of
|
|
|
INDEPENDENT DIRECTORS |
|
|
|
|
|
|
|
Julian A. Brodsky |
|
None |
|
Over $100,000 |
J. Richard Carnall |
|
None |
|
$10,001-$50,000 |
Gregory P. Chandler |
|
None |
|
$1-$10,000 |
Nicholas A. Giordano |
|
None |
|
$10,001-$50,000 |
Sam Lambroza |
|
None |
|
Over $100,000 |
Arnold M. Reichman |
|
None |
|
Over $100,000 |
Robert A. Straniere |
|
None |
|
$1-$10,000 |
|
|
INTERESTED DIRECTOR |
|
|
Robert Sablowsky |
|
None |
|
Over $100,000 |
Directors and Officers Compensation
Effective January 1, 2017, the Company pays each Director a retainer at the rate of $100,000 annually, $5,000 for each regular meeting of the Board, $2,500 for each committee meeting attended in-person, and $2,000 for each committee meeting attended telephonically or special meeting of the Board attended in-person or telephonically. The Chairman of the Audit Committee and Chairman of the Regulatory Oversight Committee each receive an additional fee of $15,000 for his services. The Chairman of the Contract Committee receives an additional fee of $10,000 per year for his services and the Chairman of the Nominating and Governance Committee receives an additional fee of $7,500 per year for his services. The Vice Chairman of the Board receives an additional fee of $25,000 per year for
his services in this capacity and the Chairman of the Board receives an additional fee of $50,000 per year for his services in this capacity.
From January 1, 2016, to December 31, 2016, the Company paid each Director a retainer at the rate of $85,000 annually, $3,500 for each regular meeting of the Board, and $2,000 for each committee meeting or special meeting of the Board attended in-person or telephonically. The Chairman of the Audit Committee and Chairman of the Regulatory Oversight Committee each received an additional fee of $10,000 for his services. The Chairman of the Nominating and Governance Committee and the Chairman of the Contract Committee each received an additional fee of $6,000 per year for his services. The Chairman of the Board received an additional fee of $25,000 per year for his services in this capacity.
From January 1, 2015 to December 31, 2015, the Company paid each Director a retainer at the rate of $50,000 annually, $3,500 for each regular meeting of the Board, and $2,000 for each committee meeting or special meeting of the Board attended in-person or telephonically. The Chairman of the Audit Committee and Chairman of the Regulatory Oversight Committee received an additional fee of $7,500 for his services. The Chairman of the Nominating and Governance Committee received an additional fee of $4,000 per year for his services. The Chairman of the Board received an additional fee of $17,500 per year for his services in this capacity.
Directors are reimbursed for any reasonable out-of-pocket expenses incurred in attending meetings of the Board or any committee thereof. Employees of Vigilant Compliance, LLC serve as President, Chief Compliance Officer, and Assistant Treasurer of the Company. Effective August 16, 2016, the Company hired a Treasurer and Secretary who is compensated for services provided. Vigilant Compliance, LLC is compensated for the services provided to the Company, and such compensation is determined by the Board. For the fiscal year ended August 31, 2016, Vigilant Compliance LLC received $17,030 from the Fund and $463,752 from the company for services provided. For the fiscal year ended August 31, 2016, each of the following members of the Board and the Treasurer and Secretary received compensation from the Company in the following amounts:
Name of
|
|
Aggregate
|
|
Pension or
|
|
Estimated
|
|
Total
|
|
||
|
|
|
|
|
|
|
|
|
|
||
Independent Directors: |
|
|
|
|
|
|
|
|
|
||
Julian A. Brodsky, Director |
|
$ |
3,096 |
|
N/A |
|
N/A |
|
$ |
106,250 |
|
J. Richard Carnall, Director |
|
$ |
3,127 |
|
N/A |
|
N/A |
|
$ |
108,250 |
|
Gregory P. Chandler, Director |
|
$ |
3,609 |
|
N/A |
|
N/A |
|
$ |
123,125 |
|
Nicholas A. Giordano, Director |
|
$ |
3,312 |
|
N/A |
|
N/A |
|
$ |
113,750 |
|
Sam Lambroza, Director* |
|
$ |
1,603 |
|
N/A |
|
N/A |
|
$ |
46,000 |
|
Arnold M. Reichman, Director and Chairman |
|
$ |
3,993 |
|
N/A |
|
N/A |
|
$ |
136,875 |
|
Robert A. Straniere, Director |
|
$ |
2,977 |
|
N/A |
|
N/A |
|
$ |
102,250 |
|
Interested Director: |
|
|
|
|
|
|
|
|
|
||
Robert Sablowsky, Director |
|
$ |
3,664 |
|
N/A |
|
N/A |
|
$ |
125,625 |
|
Officer: |
|
|
|
|
|
|
|
|
|
||
James G. Shaw, Treasurer and Secretary |
|
$ |
721 |
|
N/A |
|
N/A |
|
$ |
20,000 |
|
*Mr. Lambroza joined the Board effective April 1, 2016.
Each compensated Director is entitled to participate in the Companys deferred compensation plan (the DC Plan). Under the DC Plan, a compensated Director may elect to defer all or a portion of his compensation and have the deferred compensation treated as if it had been invested by the Company in shares of one or more of the portfolios of the Company. The amount paid to the Directors under the DC Plan will be determined based upon the performance of such investments.
As of December 31, 2016, the Independent Directors and their respective immediate family members (spouse or dependent children) did not own beneficially or of record any securities of the Companys investment advisers or distributor, or of any person directly or indirectly controlling, controlled by, or under common control with the investment advisers or distributor.
CODE OF ETHICS
The Company and the Adviser have each adopted a code of ethics under Rule 17j-1 of the 1940 Act that permits personnel subject to the codes to invest in securities, including securities that may be purchased or held by the Company, subject to certain restrictions.
PROXY VOTING
The Board has delegated the responsibility of voting proxies with respect to the portfolio securities purchased and/or held by the Fund to the Funds Adviser, subject to the Boards continuing oversight. In exercising its voting obligations, the Adviser is guided by its general fiduciary duty to act prudently and in the interest of the Fund. The Adviser will consider factors affecting the value of the Funds investments and the rights of shareholders in its determination on voting portfolio securities.
The Adviser will vote proxies in accordance with its proxy policies and procedures, which provide the Advisers Chief Compliance Officer is responsible for seeing that proxies required to be voted are voted on behalf of the Fund and in the Funds best interests. The Chief Compliance Officer may choose to appoint one or both of the Portfolio Managers to consider options and propose decisions.
The Company is required to disclose annually the Funds complete proxy voting record on Form N-PX. The Funds proxy voting record for the most recent 12 month period ended June 30th is available upon request by calling 855-744-8500 or by writing to the Fund at: Abbey Capital Futures Strategy Fund, c/o U.S. Bancorp Fund Services, LLC, P.O. Box 701, Milwaukee, Wisconsin, 53201-0701. The Funds Form N-PX is also available on the SECs website at www.sec.gov.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 31, 2017 to the Companys knowledge, the following named persons at the addresses shown below were owners of record of approximately 5% or more of the total outstanding shares of the Fund as indicated below. See Additional Information Concerning Company Shares below. Any shareholder that owns 25% or more of the outstanding shares of a portfolio or class may be presumed to control (as that term is defined in the 1940 Act) the portfolio or class. Shareholders controlling a portfolio or class could have the ability to vote a majority of the shares of the portfolio or class on any matter requiring approval of the shareholders of the portfolio or class.
Name of Fund |
|
Shareholder Name and Address |
|
Number and Percentage of
|
|
||
Abbey Capital Futures Strategy Fund Class I |
|
Charles Schwab & Co., Inc.
|
|
16,915,619.878 |
|
24.40 |
% |
|
|
|
|
|
|
|
|
Abbey Capital Futures Strategy Fund Class I |
|
Morgan Stanley Smith Barney LLC
|
|
12,993,847.566 |
|
18.74 |
% |
|
|
|
|
|
|
|
|
Abbey Capital Futures Strategy Fund Class I |
|
Merrill Lynch Pierce Fenner & Smith,
|
|
11,279,621.998 |
|
16.27 |
% |
|
|
|
|
|
|
|
|
Abbey Capital Futures Strategy Fund Class I |
|
National Financial Services LLC
|
|
7,096,628.675 |
|
10.24 |
% |
|
|
|
|
|
|
|
|
Abbey Capital Futures Strategy Fund Class I |
|
Well Fargo Bank NA
|
|
6,663,900.937 |
|
9.61 |
% |
|
|
|
|
|
|
|
|
Abbey Capital Futures Strategy Fund Class I |
|
UBS WM USA
|
|
4,296,638.301 |
|
6.20 |
% |
|
|
|
|
|
|
|
|
Abbey Capital Futures Strategy Fund Class A |
|
Morgan Stanley Smith Barney LLC
|
|
727,031.847 |
|
48.69 |
% |
Abbey Capital Futures Strategy Fund Class A |
|
UBS WM USA
|
|
323,368.249 |
|
21.66 |
% |
|
|
|
|
|
|
|
|
Abbey Capital Futures Strategy Fund Class A |
|
National Financial Services LLC
|
|
239,368.411 |
|
16.03 |
% |
|
|
|
|
|
|
|
|
Abbey Capital Futures Strategy Fund Class A |
|
Charles Schwab & Co., Inc.
|
|
103,448.619 |
|
6.93 |
% |
|
|
|
|
|
|
|
|
Abbey Capital Futures Strategy Fund Class C |
|
Morgan Stanley Smith Barney LLC
|
|
581,467.954 |
|
74.79 |
% |
|
|
|
|
|
|
|
|
Abbey Capital Futures Strategy Fund Class C |
|
UBS WM USA
|
|
137,003.676 |
|
17.62 |
% |
|
|
|
|
|
|
|
|
Abbey Capital Futures Strategy Fund Class C |
|
National Financial Services LLC
|
|
49,434.315 |
|
6.36 |
% |
As of March 31, 2017, the Directors and Officers as a group owned less than 1% of the outstanding shares of each Portfolio of the Company.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
Abbey Capital Limited (Abbey Capital or the Adviser), 1-2 Cavendish Row, Dublin 1, Ireland, is an Irish limited company founded in 2000. Cavendish Capital Limited owns 100% of Abbey Capital.
The Adviser also serves as the investment adviser to the Subsidiary, Abbey Capital Offshore Fund Limited, a wholly-owned and controlled subsidiary of the Fund organized under the laws of the Cayman Islands as an exempted company, pursuant to an investment advisory agreement with the Subsidiary. The Adviser does not receive additional compensation for its management of the Subsidiary.
Advisory Agreement with the Company. The Adviser renders advisory services to the Fund pursuant to an Investment Advisory Agreement (Advisory Agreement) dated as of June 30, 2014.
Subject to the supervision of the Board, the Adviser will provide for the overall management of the Fund including (i) the provision of a continuous investment program for the Fund, including investment research and management with respect to all securities, investments, cash and cash equivalents, (ii) the determination from time to time of the securities and other investments to be purchased, retained, or sold by the Fund, and (iii) the placement from time to time of orders for all purchases and sales of securities and other investments made for the Fund. The Adviser will provide the services rendered by it in accordance with the Funds investment objective, restrictions and policies as stated in the Prospectus and in this SAI. The Adviser will not be liable for any error of judgment, mistake of law, or for any loss suffered by the Fund in connection with the performance of the Advisory Agreement, except a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services or a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Adviser in the performance of its duties, or from reckless disregard of its obligations and duties under the Advisory Agreement.
For its services to the Fund, the Adviser is entitled to an advisory fee computed daily and payable monthly at the annual rate of 1.77% of the Funds average daily net assets. Prior to February 28, 2017, the advisory fee was 1.97% of the Funds average daily net assets. The Adviser compensates the Trading Advisers out of the advisory fee that it receives from the Fund. There are no performance fees charged by the Adviser or Trading Advisers either at the Fund or at the Funds wholly-owned Subsidiary. The Adviser has contractually agreed to waive its advisory fee and/or reimburse expenses through April 30, 2018 for Class I Shares, Class A Shares, Class C Shares and Class T Shares in order to limit Total Annual Fund Operating Expenses (excluding certain items discussed below) to 1.79%, 2.04%, 2.79% and 2.04%, respectively, of the Funds average daily net assets.
For the fiscal period July 1, 2014 (commenced operations) through August 31, 2014, the fiscal year ended August 31, 2015, and the fiscal year ended August 31, 2016, the Fund paid the Adviser the following advisory fees and the Adviser waived/reimbursed the following advisory fees as follows:
|
|
Advisory Fees Paid
|
|
Waivers |
|
Reimbursements |
|
|||
For the fiscal year ended August 31, 2016 |
|
$ |
9,008,900 |
|
$ |
801,204 |
|
$ |
0 |
|
For the fiscal year ended August 31, 2015 |
|
$ |
1,577,554 |
|
$ |
434,343 |
|
$ |
0 |
|
For the fiscal period July 1, 2014 through August 31, 2014 |
|
$ |
(25,458 |
) |
$ |
68,803 |
|
$ |
25,458 |
|
The Adviser will pay all expenses incurred by it in connection with its activities under the Advisory Agreement. The Fund bears all of its own expenses not specifically assumed by the Adviser. General expenses of the Company not readily identifiable as belonging to a portfolio of the Company are allocated among all investment portfolios by or under the direction of the Board in such manner as it deems to be fair and equitable. Expenses borne by the Fund include, but are not limited to the following (or the Funds share of the following): (a) the cost (including brokerage commissions) of securities and other investments, including futures contracts, forward contracts, swaps, and options, purchased or sold by the Fund and any losses incurred in connection therewith; (b) fees payable to and expenses incurred on behalf of the Fund by the Adviser; (c) filing fees and expenses relating to the registration and qualification of the Company and the Funds shares under federal and/or state securities laws and maintaining such registrations and qualifications; (d) fees and salaries payable to the Companys Directors and officers; (e) taxes (including any income or franchise taxes) and governmental fees; (f) costs of any liability and other insurance or fidelity bonds; (g) any costs, expenses or losses arising out of a liability of or claim for damages or other relief asserted against the Company or the Fund for violation of any law; (h) legal, accounting and auditing expenses, including legal fees of special counsel for the independent Directors; (i) charges of custodians and other agents; (j) expenses of setting in type and printing prospectuses, statements of additional information and supplements thereto for existing shareholders, reports, statements, and confirmations to shareholders and proxy materials that are not attributable to a class; (k) costs of mailing prospectuses, statements of additional information and supplements thereto to existing shareholders, as well as reports to shareholders and proxy materials that are not attributable to a class; (1) any extraordinary expenses; (m) fees, voluntary assessments and other expenses incurred in connection with membership in investment company organizations; (n) costs of mailing and tabulating proxies and costs of shareholders and Directors meetings; (o) costs of independent pricing services to value the Funds securities; and (p) the costs of investment company literature and other publications provided by the Company to its Directors and
officers. Distribution expenses, transfer agency expenses, expenses of preparation, printing and mailing prospectuses, statements of additional information, proxy statements and reports to shareholders, and organizational expenses and registration fees, identified as belonging to a particular class of the Company, are allocated to such class.
The Advisory Agreement provides that the Adviser shall at all times have all rights in and to the Funds name and all investment models used by or on behalf of the Fund. The Adviser may use the Funds name or any portion thereof in connection with any other mutual fund or business activity without the consent of any shareholder, and the Company has agreed to execute and deliver any and all documents required to indicate its consent to such use.
INVESTMENT TRADING ADVISERS
Each Trading Adviser shall, subject to the supervision and oversight of the Adviser, manage the investment and reinvestment of such portion of the assets of the Subsidiary, as the Adviser may from time to time allocate to such Trading Adviser for management. The Adviser pays the Trading Advisers out of its advisory fees.
The Fund and the Adviser have received an exemptive order from the SEC that permits the Adviser, without shareholder approval and subject to certain conditions, to terminate existing Trading Advisers or hire new Trading Advisers for the Fund, to materially amend the terms of particular agreements with Trading Advisers or to continue the employment of existing Trading Advisers after events that would otherwise cause an automatic termination of a trading advisory agreement. This arrangement has been approved by the Board and the Funds initial shareholder. Consequently, under the exemptive order, the Adviser has the right to hire, terminate and replace Trading Advisers when the Board and the Adviser feel that a change would benefit the Fund. The exemptive order enables the Fund to operate with greater efficiency and without incurring the expense and delays associated with obtaining shareholder approval of trading advisory agreements.
The Adviser does not determine what investments will be purchased or sold for the Fund with respect to the portions of the Fund managed by the Trading Advisers. Because each Trading Adviser manages its portion of the Fund independently from the others, the same security may be held in two or more different portions of the Fund or may be acquired for one portion at a time when a Trading Adviser of another portion deems it appropriate to dispose of the security from that other portion. Similarly, under some market conditions, one or more of the Trading Advisers may believe that temporary, defensive investments in short-term instruments or cash are appropriate when another Trading Adviser or Trading Advisers believe continued exposure to the broader securities market is appropriate. Because each Trading Adviser directs the trading for its portion of the Fund and does not aggregate its transactions with those of the other Trading Advisers, the Fund may incur higher brokerage costs than would be the case if a single adviser or Trading Adviser were managing the Fund.
The current Trading Advisers to the Fund are set forth below.
Trading Advisers |
|
|
Altis Partners (Jersey) Limited
(Altis)
|
|
Altis is an employee-owned limited company. Altis focuses on systematic and quantitative trading, applying rigorous research into markets combining established scientific principles and advanced technology. |
Aspect Capital Limited
(Aspect)
|
|
Aspect is a majority employee owned investment manager which is primarily controlled by founders Anthony Todd and Martin Lueck. Aspect seeks to capture medium-term trend opportunities across a broad spectrum of diversified market sectors, applying a systematic and research driven approach |
Cantab Capital Partners, LLP
(Cantab)
|
|
Cantab is a wholly-owned subsidiary of GAM Holdings, AG, forming part of GAM Systematic. Cantabs investment philosophy is based on a multi-strategy, multi-asset approach looking to identify several distinct sources of return from persistent statistical relationships between assets. |
Conquest Capital LLC
(Conquest)
|
|
Conquest Capital LLC is a wholly owned subsidiary of Conquest Capital Group LLC (CCG) which is controlled by its founder, Marc Malek. Conquest implement systematic short-term trading models using price and macro inputs. |
Eclipse Capital Management, Inc.
(Eclipse)
|
|
Eclipse is controlled by its founder, Thomas W. Moller. Eclipse focuses on a systematic approach designed to profit primarily from intermediate- and long-term price trends in multiple market sectors. |
Graham Capital Management, LP
(GCM)
|
|
KGT, Inc. is the General Partners of GCM. GCMs quantitative trading programs or models produce trading signals on a largely automated basis when applied to market data. In GCMs discretionary trading programs, trades are determined subjectively on the basis of its traders assessment of market conditions rather than through application of an automated system. |
Harmonic Capital Partners LLP
(HCP)
|
|
Harmonic Capital Limited, a United Kingdom private limited company, has a controlling interest in HCP. HCPs investment approach focuses on spread based trading strategies in a broad range of liquid futures and currency markets. |
P/E Global, LLC
(P/E)
|
|
Warren Naphtal and Mary Stephens Naphtal are managing members of P/E. P/E uses fundamental macroeconomic and financial factors in all aspects of its research in order to develop adaptive quantitative processes. |
Revolution Capital Management, LLC
(RCM)
|
|
Michael Mundt and T. Robert Olson are managing members of RCM. RCM focuses on short-term, systematic and quantitative trading, applying rigorous statistical analysis to all aspects of research, development, and operations. |
Trigon Investment Advisors, LLC
(Trigon)
|
|
Trigon is jointly owned by Ante Basic and Paul D. Mastroddi. Trigon manages with a focus on top-down analysis of fundamentals. |
Trading Advisory Agreements with the Adviser. Each of the Trading Advisory Agreements provides that the Trading Adviser will manage the investment and reinvestment of such portion of the assets of the Fund or the Subsidiary as the Adviser may from time to time allocate to the Trading Adviser in accordance with the Funds objective, policies and restrictions and any investment guidelines established by the Adviser. Each Trading Adviser will, subject to the supervision and control of the Adviser, determine in its discretion which issuers and securities will be purchased, held, sold or exchanged by the Fund and/or the Subsidiary, and will place orders with and give instruction to brokers and dealers to cause the execution of such transactions. The Trading Advisers are required to furnish at their own expense all investment facilities necessary to perform its obligations under the Trading Advisory Agreements.
Generally, each Trading Advisory Agreement may be terminated without penalty by vote of the Board or by vote of a majority of the outstanding voting securities of the Fund, upon 60 days written notice, or by the Adviser immediately upon notice to the Trading Adviser, and each such agreement terminates automatically in the event of an assignment (as defined in the 1940 Act). Each Trading Advisory Agreement also may be terminated by a Trading Adviser upon 30 days written notice and automatically terminates upon termination of the Advisory Agreement.
THE PORTFOLIO MANAGERS
This section includes information about the Funds portfolio managers, including information about other accounts they manage, the dollar range of Shares they own and how they are compensated.
Abbey Capital
Other Accounts. In addition to the Fund, the portfolio managers are responsible for the day-to-day management of certain other accounts, as listed below. The information below is provided as of August 31, 2016.
Name of Portfolio Manager
|
|
Type of Accounts |
|
Total
|
|
Total Assets |
|
# of Accounts
|
|
Total Assets
|
|
||
1. Anthony Gannon |
|
Other Registered Investment Companies: |
|
0 |
|
$ |
0 |
|
0 |
|
$ |
0 |
|
|
|
Other Pooled Investment Vehicles: |
|
7 |
|
$ |
2.9 billion |
|
2 |
|
$ |
2.9 billion |
|
|
|
Other Accounts: |
|
0 |
|
$ |
0 |
|
0 |
|
$ |
0 |
|
2. Mick Swift |
|
Other Registered Investment Companies: |
|
0 |
|
$ |
0 |
|
0 |
|
$ |
0 |
|
|
|
Other Pooled Investment Vehicles: |
|
7 |
|
$ |
2.9 billion |
|
2 |
|
$ |
2.9 billion |
|
|
|
Other Accounts: |
|
0 |
|
$ |
0 |
|
0 |
|
$ |
0 |
|
Compensation. As of the date of this SAI, Abbey Capital compensates the Funds portfolio managers for their management of the Fund. The portfolio managers compensation consists of a cash base salary and a discretionary bonus that is based on the individual performance of the portfolio manager and overall profitability of Abbey Capital, which is, in part, dependent on the performance of the Fund, and therefore in part based on the value of the Funds net assets and other client accounts they are managing.
Conflicts of Interests. The portfolio managers management of other accounts may give rise to potential conflicts of interest in connection with their management of the Funds investments, on the one hand, and the investments of the other accounts, on the other. The other accounts may have the same investment objective as the Fund. Therefore, a potential conflict of interest may arise as a result of the identical investment objectives, whereby a portfolio manager could favor one account over another. Another potential conflict could include the portfolio managers knowledge about the size, timing and possible market impact of Fund trades, whereby a portfolio manager could use this information to the advantage of other accounts and to the disadvantage of the Fund. However, Abbey Capital has established policies and procedures to ensure that the purchase and sale of securities and other investments among all accounts it manages are fairly and equitably allocated.
As of August 31, 2016, the Funds portfolio managers did not own any shares of the Fund.
ADMINISTRATION AND ACCOUNTING AGREEMENT
USBFS, located at 615 East Michigan Street, Milwaukee, Wisconsin, 53202, serves as fund administrator to the Fund pursuant to a fund administration servicing agreement and serves as fund accountant pursuant to a fund accounting servicing agreement (the Administration Agreements). Under the fund accounting servicing agreement, USBFS has agreed to furnish to the Fund statistical and research data, clerical, accounting and bookkeeping services, and certain other services required by the Fund. Under the fund administration servicing agreement, USBFS has agreed to provide fund administration services to the Company. These services include the preparation and coordination of the Companys annual post-effective amendment filing and supplements to the
Funds registration statement, the preparation and assembly of board meeting materials, and certain other services necessary to the Companys fund administration. In addition, USBFS has agreed to prepare and file various reports with the appropriate regulatory agencies and prepare materials required by the SEC or any state securities commission having jurisdiction over the Fund.
The Administration Agreements provide that USBFS shall be obligated to exercise reasonable care in the performance of its duties and that USFBS shall not be liable for any error of judgment or mistake of law or any loss suffered by the Company in connection with its duties under the Administration Agreements, except a loss resulting from USBSFs refusal or failure to comply with the terms of the applicable Administration Agreement or from its bad faith, negligence or willful misconduct in the performance of its duties thereunder.
USBFS receives a fee under the Administration Agreements based on the average daily net assets of the Company.
For the fiscal period July 1, 2014 (commenced operations) through August 31, 2014, the fiscal year ended August 31, 2015, and the fiscal year ended August 31, 2016, the Fund paid the Funds prior administrator certain administration, accounting and regulatory administration fees and related out-of- pocket expenses as follows:
|
|
Administration, Accounting and
|
|
Waivers |
|
Reimbursements |
|
|||
For the fiscal year ended August 31, 2016 |
|
$ |
394,600 |
|
$ |
0 |
|
$ |
0 |
|
For the fiscal year ended August 31, 2015 |
|
$ |
164,611 |
|
$ |
0 |
|
$ |
0 |
|
For the fiscal period July 1, 2014 through August 31, 2014 |
|
$ |
24,985 |
|
$ |
0 |
|
$ |
0 |
|
CUSTODIAN AGREEMENT
U.S. Bank, N.A., (the Custodian) 1555 North RiverCenter Drive, Suite 302, Milwaukee, Wisconsin 53212, is custodian of the Funds assets pursuant to a custodian agreement (the Custodian Agreement). Under the Custodian Agreement, the Custodian: (a) maintains a separate account or accounts in the name of the Fund; (b) holds and transfers portfolio investments on account of the Fund; (c) accepts receipts and makes disbursements of money on behalf of the Fund; (d) collects and receives all income and other payments and distributions on account of the Funds portfolio investments; and (e) makes periodic reports to the Board concerning the Funds operations. The Custodian is authorized to select one or more banks or trust companies to serve as sub-custodian on behalf of the Fund, provided that the Custodian remains responsible for the performance of all of its duties under the Custodian Agreement and holds the Fund harmless from the acts and omissions of any affiliate, sub-custodian or domestic sub-custodian. For its services to the Fund under the Custodian Agreement, the Custodian receives a fee based on the Funds average gross assets calculated daily and payable monthly. Transaction charges and out-of-pocket expenses are also charged to the Fund.
TRANSFER AGENCY AGREEMENT
U.S. Bancorp Fund Services, LLC 615 East Michigan Street, Milwaukee Wisconsin, 53202, serves as the transfer agent and dividend disbursing agent for the Fund pursuant to a transfer agency and servicing agreement (the Transfer Agency Agreement), under which USBFS: (a) issues and redeems shares of the Fund; (b) addresses and mails all communications by the Fund to record owners of the shares, including reports to shareholders, dividend and distribution notices and proxy materials for its meetings of shareholders; (c) maintains shareholder accounts and, if requested, sub-accounts; and (d) makes periodic reports to the Board concerning the operations of the Fund. USBFS may, subject to the Boards approval, assign its duties as transfer and dividend disbursing agent to any affiliate. For its services to the Fund under the Transfer Agency Agreement, USBFS receives an annual fee based on the number of accounts in the Fund and the Funds average gross assets calculated daily and payable monthly. Transaction charges and out-of-pocket expenses are also charged to the Fund.
USBFS also provides services relating to the implementation of the Companys Anti-Money Laundering Program. In addition, USBFS provides services relating to the implementation of the Funds Customer Identification
Program, including verification of required customer information and the maintenance of records with respect to such verification.
DISTRIBUTION AGREEMENT AND PLAN OF DISTRIBUTION
Quasar Distributors LLC (the Distributor), whose principal business address is 615 East Michigan Street, Milwaukee, Wisconsin 53202, serves as the underwriter to the Fund pursuant to the terms of a distribution agreement (the Distribution Agreement). The Distributor is a registered broker-dealer and is a member of the Financial Industry Regulatory Authority (FINRA). The Distributor is not affiliated with the Company, the Adviser, or any other service provider for the Fund.
Under the Distribution Agreement with the Fund, the Distributor acts as the agent of the Company in connection with the continuous offering of shares of the Fund. The Distributor continually distributes shares of the Fund on a best efforts basis. The Distributor has no obligation to sell any specific quantity of Fund shares. The Distributor and its officers have no role in determining the investment policies or which securities are to be purchased or sold by the Company.
The Distributor may enter into agreements with selected broker-dealers, banks or other financial intermediaries for distribution of shares of the Fund. With respect to certain financial intermediaries and related fund supermarket platform arrangements, the Fund and/or the Adviser, rather than the Distributor, typically enter into such agreements. These financial intermediaries may charge a fee for their services and may receive shareholder service or other fees from parties other than the Distributor. These financial intermediaries may otherwise act as processing agents and are responsible for promptly transmitting purchase, redemption and other requests to the Fund.
Investors who purchase shares through financial intermediaries will be subject to the procedures of those intermediaries through which they purchase shares, which may include charges, investment minimums, cutoff times and other restrictions in addition to, or different from, those listed herein. Information concerning any charges or services will be provided to customers by the financial intermediary through which they purchase shares. Investors purchasing shares of the Fund through financial intermediaries should acquaint themselves with their financial intermediarys procedures and should read the Prospectus in conjunction with any materials and information provided by their financial intermediary. The financial intermediary, and not its customers, will be the shareholder of record, although customers may have the right to vote shares depending upon their arrangement with the financial intermediary. The Distributor does not receive compensation from the Fund for its distribution services except the distribution/service fees with respect to the shares of those classes for which a Rule 12b-1 distribution plan is effective. The Adviser pays the Distributor a fee for certain distribution-related services.
The Distribution Agreement has an initial term of up to two years and will continue in effect only if such continuance is specifically approved at least annually by the Board or by vote of a majority of the Funds outstanding voting securities in accordance with the 1940 Act. The Distribution Agreement is terminable without penalty by the Company on behalf of the Fund on no less than 60 days written notice when authorized either by a vote of a majority of the outstanding voting securities of the Fund or by vote of a majority of the members of the Board who are not interested persons (as defined in the 1940 Act) of the Company and have no direct or indirect financial interest in the operation of the Distribution Agreement, or by the Distributor, and will automatically terminate in the event of its assignment (as defined in the 1940 Act). The Distribution Agreement provides that the Distributor shall not be liable for any loss suffered by the Company in connection with the performance of the Distributors obligations and duties under the Distribution Agreement, except a loss resulting from the Distributors willful misfeasance, bad faith or negligence in the performance of such duties and obligations, or by reason of its reckless disregard thereof.
Class I Shares . Pursuant to the Distribution Agreement, the Distributor acts as the agent of the Company in connection with the continuous offering of the Funds shares. The Distributor continually distributes shares of the Fund on a best efforts basis. The Distributor has no obligation to sell any specific quantity of Fund shares. The Distributor and its officers have no role in determining the investment policies or which securities are to be purchased or sold by the Company. The Distributor does not receive compensation from the Company for the distribution of the Funds Class I Shares; however, the Adviser pays an annual fee to the Distributor as compensation for underwriting services rendered to the Fund pursuant to the Distribution Agreement.
Class A Shares, Class C Shares and Class T Shares . Pursuant to the Distribution Agreement and the related Plans of Distribution for Class A Shares, Class C Shares and Class T Shares (together, the Plans), which were adopted by the Company in the manner prescribed by Rule 12b-1 under the 1940 Act, the Distributor will act as the agent of the Company in connection with the continuous offering for the sale of the Funds Class A Shares, Class C Shares and Class T Shares, respectively. The Distributor continually distributes shares of the Fund on a best efforts basis. The Distributor has no obligation to sell any specific quantity of Fund shares. The Distributor and its officers have no role in determining the investment policies or which securities are to be purchased or sold by the Company. Payments to the Distributor under the Plans are to compensate it for distribution assistance and expenses assumed and activities intended to result in the sale of Class A Shares, Class C Shares and Class T Shares, including advertising, printing and mailing of prospectuses to others than current shareholders, compensation of underwriters, compensation to broker-dealers, compensation to sales personnel, and interest, carrying or other financing changes. As compensation for its distribution services, the Distributor receives, pursuant to the terms of the Distribution Agreement, a distribution fee under the Plans, to be calculated daily and paid monthly by the Class A Shares, Class C Shares and Class T Shares of the Fund at the annual rates set forth in the Prospectus.
Among other things, the Plans provide that: (1) the Distributor shall be required to submit quarterly reports to the Directors of the Company regarding all amounts expended under the Plans and the purposes for which such expenditures were made, including commissions, advertising, printing, interest, carrying charges and any allocated overhead expenses; (2) the Plans will continue in effect only so long as they are approved at least annually, and any material amendment thereto is approved, by the Companys Directors, including a majority of those Directors who are not interested persons (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of the Plans or any agreements related to the Plans, acting in person at a meeting called for said purpose; (3) the aggregate amount to be spent by the Fund on the distribution of the Funds Class A Shares and Class C Shares under the respective Plans shall not be materially increased without shareholder approval; and (4) while the Plans remain in effect, the selection and nomination of the Companys Directors who are not interested persons of the Company (as defined in the 1940 Act) shall be committed to the discretion of such Directors who are not interested persons of the Company.
Mr. Sablowsky, a Director of the Company, has an indirect interest in the operation of the Plans by virtue of his position with Oppenheimer Co., Inc., a broker-dealer.
For the fiscal year ended August 31, 2016, the Funds Plan expenses were spent for the following purposes:
|
|
Class A Shares |
|
Class C Shares* |
|
||
Compensation to broker/dealers |
|
$ |
41,281 |
|
$ |
38,531 |
|
Compensation to sales personnel |
|
$ |
0 |
|
$ |
0 |
|
Advertising |
|
$ |
0 |
|
$ |
0 |
|
Printing and mailing of prospectuses to other than current shareholders |
|
$ |
0 |
|
$ |
0 |
|
Compensation to underwriters |
|
$ |
0 |
|
$ |
0 |
|
Interest, financing charges |
|
$ |
0 |
|
$ |
0 |
|
Other |
|
$ |
0 |
|
$ |
0 |
|
* Class C Shares commenced operations on October 6, 2015.
12b-1 Plan expenses for Class T Shares are not provided because Class T Shares were not available for sale prior to the date of this SAI.
PAYMENTS TO FINANCIAL INTERMEDIARIES
The Adviser and/or its affiliates, at their discretion, may make payments from their own resources and not from Fund assets to affiliated or unaffiliated brokers, dealers, banks (including bank trust departments), trust companies, registered investment advisers, financial planners, retirement plan administrators, insurance companies, and any other institution having a service, administration, or any similar arrangement with the Fund, its service providers or their respective affiliates, as incentives to help market and promote the Fund and/or in recognition of their distribution, marketing, administrative services, and/or processing support.
These additional payments may be made to financial intermediaries that sell Fund shares or provide services to the Fund, the Distributor or shareholders of the Fund through the financial intermediarys retail distribution channel and/or fund supermarkets. Payments may also be made through the financial intermediarys retirement, qualified tuition, fee-based advisory, wrap fee bank trust, or insurance (e.g., individual or group annuity) programs. These payments may include, but are not limited to, placing the Fund in a financial intermediarys retail distribution channel or on a preferred or recommended fund list; providing business or shareholder financial planning assistance; educating financial intermediary personnel about the Fund; providing access to sales and management representatives of the financial intermediary; promoting sales of Fund shares; providing marketing and educational support; maintaining share balances and/or for sub-accounting, administrative or shareholder transaction processing services. A financial intermediary may perform the services itself or may arrange with a third party to perform the services.
The Adviser and/or its affiliates may also make payments from their own resources to financial intermediaries for costs associated with the purchase of products or services used in connection with sales and marketing, participation in and/or presentation at conferences or seminars, sales or training programs, client and investor entertainment and other sponsored events. The costs and expenses associated with these efforts may include travel, lodging, sponsorship at educational seminars and conferences, entertainment and meals to the extent permitted by law.
Revenue sharing payments may be negotiated based on a variety of factors, including the level of sales, the amount of Fund assets attributable to investments in the Fund by financial intermediaries customers, a flat fee or other measures as determined from time to time by the Adviser and/or its affiliates. A significant purpose of these payments is to increase the sales of Fund shares, which in turn may benefit the Adviser through increased fees as Fund assets grow.
FUND TRANSACTIONS
Subject to policies established by the Board and applicable rules, the Adviser and Trading Advisers are responsible for the execution of portfolio transactions and the allocation of brokerage transactions for the Fund. In executing portfolio transactions, the Adviser and Trading Advisers seek to obtain the best price and most favorable execution
for the Fund, taking into account such factors as the price (including the applicable brokerage commission or dealer spread), size of the order, difficulty of execution and operational facilities of the firm involved. While the Adviser and Trading Advisers generally seek reasonably competitive commission rates, payment of the lowest commission or spread is not necessarily consistent with obtaining the best price and execution in particular transactions.
Brokerage Transactions
Generally, equity securities, both listed and over-the-counter, are bought and sold through brokerage transactions for which commissions are payable. Purchases from underwriters will include the underwriting commission or concession, and purchases from dealers serving as market makers will include a dealers mark-up or reflect a dealers mark-down. Money market securities and other debt securities are usually bought and sold directly from the issuer or an underwriter or market maker for the securities. Generally, the Fund will not pay brokerage commissions for such purchases. When a debt security is bought from an underwriter, the purchase price will usually include an underwriting commission or concession. The purchase price for securities bought from dealers serving as market makers will similarly include the dealers mark up or reflect a dealers mark down. When the Fund executes transactions in the over-the-counter market, it will generally deal with primary market makers unless prices that are more favorable are otherwise obtainable.
In addition, the Adviser and Trading Advisers may place a combined order for two or more accounts they manage, including the Fund, engaged in the purchase or sale of the same security if, in its judgment, joint execution is in the best interest of each participant and will result in best price and execution. Transactions involving commingled orders are allocated in a manner deemed equitable to each account or fund. Although it is recognized that, in some cases, the joint execution of orders could adversely affect the price or volume of the security that a particular account or the Fund may obtain, it is the opinion of the Adviser, the Trading Advisers and the Board that the advantages of combined orders outweigh the possible disadvantages of separate transactions. Nonetheless, the Adviser and Trading Advisers believe that the ability of the Fund to participate in higher volume transactions will generally be beneficial to the Fund.
For the fiscal period July 1, 2014 (commenced operations) through August 31, 2014, the fiscal year ended August 31, 2015, and the fiscal year ended August 31, 2016, the Fund paid commissions to brokers on account of research services as follows:
For the fiscal year ended August 31, 2016 |
|
$ |
0 |
|
For the fiscal year ended August 31, 2015 |
|
$ |
0 |
|
For the fiscal period July 1, 2014 through August 31, 2014 |
|
$ |
0 |
|
For the fiscal period July 1, 2014 (commenced operations) through August 31, 2014, the fiscal year ended August 31, 2015, and the fiscal year ended August 31, 2016, the Fund paid the aggregated brokerage commissions as follows:
For the fiscal year ended August 31, 2016 |
|
$ |
0 |
|
For the fiscal year ended August 31, 2015 |
|
$ |
0 |
|
For the fiscal period July 1, 2014 through August 31, 2014 |
|
$ |
0 |
|
The Fund is required to identify any securities of the Companys regular broker-dealers (as defined in Rule 10b-1 under the 1940 Act) or their parents held by the Fund as of the end of the most recent fiscal year. As of August 31, 2016, there were no securities held by the Fund of its regular broker-dealers.
Brokerage Selection
The Company does not expect to use one particular broker or dealer, and when one or more brokers is believed capable of providing the best combination of price and execution, the Funds Adviser and Trading Advisers may select a broker based upon brokerage or research services provided to the Adviser or applicable Trading Adviser. The Adviser and Trading Advisers may pay a higher commission than otherwise obtainable from other brokers in return for such services only if a good faith determination is made that the commission is reasonable in relation to the services provided.
Section 28(e) of the 1934 Act permits an investment adviser or sub-adviser, under certain circumstances, to cause a fund to pay a broker or dealer a commission for effecting a transaction in excess of the amount of commission another broker or dealer would have charged for effecting the transaction in recognition of the value of brokerage and research services provided by the broker or dealer. In addition to agency transactions, certain Trading Advisers may receive brokerage and research services in connection with certain riskless principal transactions, in accordance with applicable SEC guidance. Brokerage and research services include: (1) furnishing advice as to the value of securities, the advisability of investing in, purchasing or selling securities, and the availability of securities or purchasers or sellers of securities; (2) furnishing analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy, and the performance of accounts; and (3) effecting securities transactions and performing functions incidental thereto (such as clearance, settlement, and custody). In the case of research services, the applicable Trading Advisers believe that access to independent investment research is beneficial to their investment decision-making processes and, therefore, to the Fund.
To the extent research services may be a factor in selecting brokers, such services may be in written form or through direct contact with individuals and may include information as to particular companies and securities as well as market, economic, or institutional areas and information which assists in the valuation and pricing of investments. Examples of research-oriented services for which the applicable Trading Advisers might utilize Fund commissions include research reports and other information on the economy, industries, sectors, groups of securities, individual companies, statistical information, political developments, technical market action, pricing and appraisal services, credit analysis, risk measurement analysis, performance and other analysis. The Trading Advisers may use research services furnished by brokers in servicing all client accounts and not all services may necessarily be used in connection with the account that paid commissions to the broker providing such services. Information so received by the Trading Advisers will be in addition to and not in lieu of the services required to be performed by the Trading Adviser under its Trading Advisory Agreement. Any advisory or other fees paid to the Trading Advisers are not reduced as a result of the receipt of research services.
In some cases a Trading Adviser may receive a service from a broker that has both a research and a non-research use. When this occurs, the applicable Trading Adviser makes a good faith allocation, under all the circumstances, between the research and non-research uses of the service. The percentage of the service that is used for research purposes may be paid for with client commissions, while the applicable Trading Adviser will use its own funds to pay for the percentage of the service that is used for non-research purposes. In making this good faith allocation, the Trading Adviser faces a potential conflict of interest, but each applicable Trading Adviser believes that its allocation procedures are reasonably designed to ensure that it appropriately allocates the anticipated use of such services to their research and non-research uses.
From time to time, the Fund may purchase new issues of securities for clients in a fixed price offering. In these situations, the seller may be a member of the selling group that will, in addition to selling securities, provide the Adviser and Trading Advisers with research services. The FINRA has adopted rules expressly permitting these types of arrangements under certain circumstances. Generally, the seller will provide research credits in these situations at a rate that is higher than that which is available for typical secondary market transactions. These arrangements may not fall within the safe harbor of Section 28(e).
PURCHASE AND REDEMPTION INFORMATION
Read the Funds Prospectus for information regarding the purchase and redemption of Fund shares, including, in the case of Class A Shares and Class T Shares, any applicable sales charges. The following information supplements information in the Funds Prospectus.
You may purchase shares through an account maintained by certain brokerage firms, financial institutions and other industry professionals that have entered into a distribution agreement with the Distributor (Service Organizations) and you may also purchase shares directly by mail or wire. The Company reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of the Funds shares by making payment in whole or in part in securities chosen by the Company and valued in the same way as they would be valued for purposes of computing the Funds NAV. If payment is made in securities, a shareholder may incur transaction costs in converting these securities into cash. A shareholder will also bear any market risk or tax
consequences as a result of a payment in securities. The Company has elected, however, to be governed by Rule 18f-1 under the 1940 Act so that the Fund is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its NAV during any 90-day period for any one shareholder of the Fund. A shareholder will bear the risk of a decline in market value and any tax consequences associated with a redemption in securities.
Under the 1940 Act, the Company may suspend the right to redemption or postpone the date of payment upon redemption for any period during which the New York Stock Exchange, Inc. (the NYSE) is closed (other than customary weekend and holiday closings), or during which the SEC restricts trading on the NYSE or determines an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (The Company may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions).
Shares of the Company are subject to redemption by the Company, at the redemption price of such shares as in effect from time to time, including, without limitation: (1) to reimburse the Fund for any loss sustained by reason of the failure of a shareholder to make full payment for shares purchased by the shareholder or to collect any charge relating to a transaction effected for the benefit of a shareholder as provided in the Prospectus from time to time; (2) if such redemption is, in the opinion of the Board, desirable in order to prevent the Company or the Fund from being deemed a personal holding company within the meaning of the Code; (3) or if the net income with respect to any particular class of common stock should be negative or it should otherwise be appropriate to carry out the Companys responsibilities under the 1940 Act.
The Fund has the right to redeem your shares at current NAV at any time and without prior notice if, and to the extent that, such redemption is necessary to reimburse the Fund for any loss sustained by reason of your failure to make full payment for shares of the Fund you previously purchased or subscribed for.
Class A Shares and Class T Shares of the Fund may be subject to sales charge waivers as described below.
Reducing or Eliminating the Front-End Sales Charge
Different Service Organizations may impose different sales charges and these variations are described in Appendix A of the Funds Prospectus.
Class A Shares
The Funds Class A Shares are offered to the public at NAV plus a front-end sales charge. You can reduce or eliminate the front-end sales charge on Class A Shares of the Fund as follows:
Quantity Discounts . Purchases of at least $25,000 can reduce the sales charges you pay, and purchases of at least $1,000,000 can eliminate the sales charges you pay.
Rights of Accumulation . You may combine your new purchase of Class A Shares with Class A Shares and/or Class C Shares currently owned for the purpose of qualifying for the lower initial sales charge rates that apply to larger purchases. The applicable sales charge for the new purchase is based on the total of your current purchase and the current Net Asset Value of all other shares you own. You may combine your account, your spouses account, and the account(s) of your children under age 25.
This privilege is also extended to certain employee benefit plans and trust estates. The following purchases may be combined for purposes of determining the Amount of Purchase: (a) individual purchases, if made at the same time, by a single purchaser, the purchasers spouse and children under the age of 25 purchasing Class A Shares for their own accounts, including shares purchased by a qualified retirement plan(s) exclusively for the benefit of such individual(s) (such as an IRA, individual-type section 403(b) plan or single-participant Keogh-type plan) or by a Company, as defined in Section 2(a)(8) of the 1940 Act, solely controlled as defined in the 1940 Act, by such individual(s), or (b) individual purchases by trustees or other fiduciaries purchasing Class A Shares (i) for a single trust estate or a single fiduciary account, including an employee benefit plan, or (ii) concurrently by two or more employee benefit plans for a single employer or of employers affiliated with each other in accordance with Section 2(a)(3)(c) of the 1940 Act (excluding in either case an employee benefit plan described in (a) above), provided such
trustees or other fiduciaries purchase shares in a single payment. Purchases made for nominee or street name accounts may not be combined with purchases made for such other accounts. You may also further discuss the combined purchase privilege with your investment broker, brokerage firm, financial institution, or other industry professional, including affiliates of the Adviser.
You will need to provide written instruction with respect to the other accounts whose purchases should be considered in Rights of Accumulation.
Letter of Intent . You can sign a Letter of Intent committing to purchase of a specific dollar amount of Class A Shares of the Fund within a 13-month period to combine such purchases in calculating the sales charge. A portion of your Fund shares will be held in escrow. If you complete your purchase commitments as stated in the Letter of Intent, your Fund shares held in escrow will be released to your account. If you do not fulfill the Letter of Intent, the appropriate amount of Fund shares held in escrow will be redeemed to pay the sales charges that were not applied to your purchases. If you do not purchase the full amount of Class A Shares indicated in the Letter, the appropriate amount of shares held in escrow will be redeemed by the Transfer Agent to pay the sales charge that was not applied to your purchase
Dealer Reallowances
Different Service Organizations may impose different sales charge waivers and these variations are described in Appendix A of the Funds Prospectus.
As shown in the table below, the Distributor, may provide dealer reallowances up to the full sales charge for purchases of the Funds Class A Shares in which a front-end sales charge is applicable. Any residual allowance is retained by the Distributor to be used solely for distribution related expenses and not retained as profit.
Amount of Purchase of
|
|
Sales Charge as a
|
|
Sales Charge as a
|
|
Dealer Concession
|
|
Less than $25,000 |
|
5.75 |
% |
6.10 |
% |
5.00 |
% |
At least $25,000 but less than $49,999 |
|
5.00 |
% |
5.26 |
% |
4.75 |
% |
At least $50,000 but less than $99,999 |
|
4.75 |
% |
4.99 |
% |
4.00 |
% |
At least $100,000 but less than $249,999 |
|
3.75 |
% |
3.83 |
% |
3.25 |
% |
At least $250,000 but less than $499,999 |
|
2.50 |
% |
2.56 |
% |
2.00 |
% |
At least $500,000 but less than $1,000,000 |
|
2.00 |
% |
2.04 |
% |
1.75 |
% |
$1,000,000 or greater |
|
None |
|
None |
|
* see below |
|
* No sales charge is payable at the time of purchase on investments of $1,000,000 or more. The Funds distributor may pay a commission at the rate of 1% to certain brokerage firms, financial institutions and other industry professionals, including affiliates of the Adviser, who initiate and are responsible for purchases of $1,000,000 or more.
Class T Shares
Class T Shares of the Fund are offered to the clients of certain Service Organizations at NAV plus a front-end sales charge. No reductions or waivers of sales charges are available for Class T shares except as noted in the Prospectus.
Quantity Discounts . Quantity Discounts do not apply to Class T Shares.
Rights of Accumulation . Rights of Accumulation do not apply to Class T Shares.
Letter of Intent . Letters of Intent do not apply to Class T Shares.
Dealer Reallowances
Different Service Organizations may impose different sales charge waivers and these variations are described in Appendix A of the Funds Prospectus.
As shown in the table below, the Distributor, may provide dealer reallowances up to the full sales charge for purchases of the Funds Class T Shares in which a front-end sales charge is applicable. Any residual allowance is retained by the Distributor to be used solely for distribution related expenses and not retained as profit.
Amount of Purchase of
|
|
Sales Charge as a
|
|
Sales Charge as a %
|
|
Dealer Compensation
|
|
Less than $250,000 |
|
2.50 |
% |
2.56 |
% |
2.50 |
% |
At least $250,000 but less than $500,000 |
|
2.00 |
% |
2.04 |
% |
2.00 |
% |
At least $500,000 but less than $1,000,000 |
|
1.50 |
% |
1.52 |
% |
1.50 |
% |
$1,000,000 or greater |
|
1.00 |
% |
1.01 |
% |
1.00 |
% |
Other Purchase Information
If shares of the Fund are held in a street name account with an authorized dealer, all recordkeeping, transaction processing and payments of distributions relating to the beneficial owners account will be performed by the authorized dealer, and not by the Fund and its Transfer Agent. Since the Fund will have no record of the beneficial owners transactions, a beneficial owner should contact the authorized dealer to purchase, redeem or exchange shares, to make changes in or give instructions concerning the account or to obtain information about the account. The transfer of shares in a street name account to an account with another dealer or to an account directly with the Fund involves special procedures and will require the beneficial owner to obtain historical purchase information about the shares in the account from the authorized dealer.
TELEPHONE TRANSACTION PROCEDURES
The Companys telephone transaction procedures include the following measures: (1) requiring the appropriate telephone transaction privilege forms; (2) requiring the caller to provide the names of the account owners, the account social security number and name of the Fund, all of which must match the Companys records; (3) requiring the Companys service representative to complete a telephone transaction form, listing all of the above caller identification information; (4) permitting exchanges (if applicable) only if the two account registrations are identical; (5) requiring that redemption proceeds be sent only by check to the account owners of record at the address of record, or by wire only to the owners of record at the bank account of record; (6) sending a written confirmation for each telephone transaction to the owners of record at the address of record within five (5) business days of the call; and (7) maintaining tapes of telephone transactions for six months, if the Company elects to record shareholder telephone transactions. For accounts held of record by broker-dealers, financial institutions, securities dealers, financial planners and other industry professionals, additional documentation or information regarding the scope of a callers authority is required. Finally, for telephone transactions in accounts held jointly, additional information regarding other account holders is required.
VALUATION OF SHARES
In accordance with procedures adopted by the Board, the NAV per share of the Fund is calculated by determining the value of the net assets attributed to the Fund and dividing by the number of outstanding shares of the Fund. All securities are valued on each Business Day as of the close of regular trading on the NYSE (normally, but not always, 4:00 p.m. Eastern Time) or such other time as the New York Stock Exchange or National Association of Securities Dealers Automated Quotations System (NASDAQ) market may officially close. The term Business Day means any day the New York Stock Exchange is open for trading, which is Monday through Friday except for holidays. The New York Stock Exchange is generally closed on the following holidays: New Years Day (observed), Martin Luther King, Jr. Day, Washingtons Birthday (observed), Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The time at which transactions and shares are priced and the time by which orders must be received may be changed in case of an emergency or if regular trading on the NYSE is stopped at a time other than 4:00 p.m. Eastern Time. The Company reserves the right to reprocess purchase, redemption and exchange transactions that were initially processed at a NAV other than the Funds official closing NAV (as the same may be subsequently adjusted), and to recover amounts from (or distribute amounts to) shareholders based on the official closing NAV. The Company reserves the right to advance the time by which purchase and redemption orders must be received for same business day credit as otherwise permitted by the SEC. In addition, the Fund may compute its NAV as of any time permitted pursuant to any exemption, order or statement of the SEC or its staff.
The securities of the Fund are valued under the direction of the Funds administrator and under the general supervision of the Board. Prices are generally determined using readily available market prices. Subject to the approval of the Board, the Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments in determining the approximate market value of portfolio investments. This may result in the investments being valued at a price that differs from the price that would have been determined had the matrix or formula method not been used. All cash, receivables, and current payables are carried on the Funds books at their face value. Other assets, if any, are valued at fair value as determined in good faith by the Funds Valuation Committee under the direction of the Board.
The procedures used by any pricing service and its valuation results are reviewed by the officers of the Company under the general supervision of the Board.
The Fund may hold portfolio securities that are listed on foreign exchanges. These securities may trade on weekends or other days when the Fund does not calculate NAV. As a result, the value of these investments may change on days when you cannot purchase or sell Fund shares.
TAXES
General
The following summarizes certain additional tax considerations generally affecting the Fund and its shareholders that are not described in the Prospectus. No attempt is made to present a detailed explanation of the tax treatment of the Fund or its shareholders, and the discussions here and in the Prospectus are not intended as a substitute for careful tax planning. Potential investors should consult their tax advisers with specific reference to their own tax situations.
The discussions of the federal tax consequences in the Prospectus and this SAI are based on the Code and the regulations issued under it, and court decisions and administrative interpretations, as in effect on the date of this SAI. Future legislative or administrative changes or court decisions may significantly alter the statements included herein, and such changes or decisions may be retroactive.
The Fund qualified during its last taxable year and intends to continue to qualify as a regulated investment company under Subchapter M of Subtitle A, Chapter 1, of the Code. As such, the Fund generally will be exempt from federal income tax on its net investment income and realized capital gains that it distributes to shareholders. To qualify for treatment as a regulated investment company, it must meet three important tests each year.
First, the Fund must derive with respect to each taxable year at least 90% of its gross income from dividends, interest, certain payments with respect to securities loans, gains from the sale or other disposition of stock or securities or foreign currencies, other income derived with respect to the Funds business of investing in stock, securities or currencies, or net income derived from interests in qualified publicly traded partnerships.
Second, generally, at the close of each quarter of the Funds taxable year, at least 50% of the value of the Funds assets must consist of cash and cash items, U.S. government securities, securities of other regulated investment companies, and securities of other issuers as to which the Fund has not invested more than 5% of the value of its total assets in securities of the issuer and as to which the Fund does not hold more than 10% of the outstanding voting securities of the issuer, and no more than 25% of the value of the Funds total assets may be invested in the securities of (1) any one issuer (other than U.S. government securities and securities of other regulated investment
companies), (2) two or more issuers that the Fund controls and which are engaged in the same or similar trades or businesses or (3) one or more qualified publicly traded partnerships.
Third, the Fund must distribute an amount equal to at least the sum of 90% of its investment company taxable income (net investment income and the excess of net short-term capital gain over net long-term capital loss) before taking into account any deduction for dividends paid, and 90% of its tax-exempt income, if any, for the year.
The Fund intends to comply with these requirements. If the Fund were to fail to make sufficient distributions, it could be liable for corporate income tax and for excise tax in respect of the shortfall or, if the shortfall is large enough, the Fund could be disqualified as a regulated investment company. If for any taxable year the Fund were not to qualify as a regulated investment company, all its taxable income would be subject to tax at regular corporate rates without any deduction for distributions to shareholders. In that event, shareholders would recognize dividend income on distributions to the extent of the Funds current and accumulated earnings and profits, and corporate shareholders could be eligible for the dividends-received deduction.
The Code imposes a nondeductible 4% excise tax on regulated investment companies that fail to distribute each year an amount equal to specified percentages of their ordinary taxable income and capital gain net income (excess of capital gains over capital losses). The Fund intends to make sufficient distributions or deemed distributions each year to avoid liability for this excise tax.
State and Local Taxes
Although the Fund expects to qualify as a regulated investment company and to be relieved of all or substantially all federal income taxes, depending upon the extent of its activities in states and localities in which its offices are maintained, in which its agents or independent contractors are located or in which it is otherwise deemed to be conducting business, the Fund may be subject to the tax laws of such states or localities.
Taxation of Certain Investments
The tax principles applicable to transactions in financial instruments, such as futures contracts and options, that may be engaged in by the Fund, and investments in passive foreign investment companies (PFICs), are complex and, in some cases, uncertain. Such transactions and investments may cause the Fund to recognize taxable income prior to the receipt of cash, thereby requiring the Fund to liquidate other positions, or to borrow money, so as to make sufficient distributions to shareholders to avoid corporate-level tax. Moreover, some or all of the taxable income recognized may be ordinary income or short-term capital gain, so that the distributions may be taxable to shareholders as ordinary income.
In addition, in the case of any shares of a PFIC in which the Fund invests, the Fund may be liable for corporate-level tax on any ultimate gain or distributions on the shares if the Fund fails to make an election to recognize income annually during the period of its ownership of the shares.
Any annual net profit of the Subsidiary will be recognized as ordinary income by the Fund, but any annual net loss of the Subsidiary will not be recognized and will not carry forward.
ADDITIONAL INFORMATION CONCERNING COMPANY SHARES
The Company has authorized capital of 100 billion shares of common stock at a par value of $0.001 per share. Currently, 84.423 billion shares have been classified into 173 classes, however, the Company only has 41 active share classes that have begun investment operations. Under the Companys charter, the Board has the power to classify and reclassify any unissued shares of common stock from time to time.
The Fund has registered four classes of shares: Class I Shares, Class A Shares, Class C Shares and Class T Shares. Class T Shares are not currently available for sale. Each share that represents an interest in the Fund has an equal proportionate interest in the assets belonging to such Fund with each other share that represents an interest in such Fund, even where a share has a different class designation than another share representing an interest in that Fund.
Shares of the Company do not have preemptive or conversion rights. When issued for payment as described in the Prospectus, shares of the Company will be fully paid and non-assessable.
The Company does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The Companys amended By-Laws provide that shareholders owning at least ten percent of the outstanding shares of all classes of common stock of the Company have the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Company will assist in shareholder communication in such matters.
Holders of shares of each class of the Company will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of the Company will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio or class of shares. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of such Act or applicable state law, or otherwise, to the holders of the outstanding voting securities of an investment company such as the Company shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under Rule 18f-2 the approval of an investment advisory agreement or distribution agreement or any change in a fundamental investment objective or fundamental investment policy would be effectively acted upon with respect to a portfolio only if approved by the holders of a majority of the outstanding voting securities of such portfolio. However, the Rule also provides that the ratification of the selection of independent public accountants and the election of directors are not subject to the separate voting requirements and may be effectively acted upon by shareholders of an investment company voting without regard to a portfolio. Shareholders of the Company are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of common stock of the Company may elect all of the Directors.
Notwithstanding any provision of Maryland law requiring a greater vote of shares of the Companys common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law (for example by Rule 18f-2 discussed above), or by the Companys Articles of Incorporation and By-Laws, the Company may take or authorize such action upon the favorable vote of the holders of more than 50% of all of the outstanding shares of Common Stock voting without regard to class (or portfolio).
MISCELLANEOUS
Counsel
The law firm of Drinker Biddle & Reath LLP, One Logan Square, Ste. 2000, Philadelphia, Pennsylvania 19103-6996, serves as independent counsel to the Company and the Independent Directors.
Independent Registered Public Accounting Firm
Ernst & Young LLP, One Commerce Square, Suite 700, 2005 Market Street, Philadelphia, Pennsylvania 19103, serves as the Funds independent registered public accounting firm, and in that capacity audits the Funds financial statements.
FINANCIAL STATEMENTS
The audited financial statements and notes thereto in the Funds Annual Report to Shareholders for the fiscal year ended August 31, 2016 (the Annual Report) are incorporated by reference into this SAI. No other parts of the Annual Report are incorporated by reference herein. The financial statements included in the Annual Report have been audited by Ernst & Young LLP, the Funds independent registered public accounting firm, whose report thereon also appears in the Annual Report and is incorporated by reference into this SAI. Such financial statements have been incorporated by reference herein in reliance upon such report given upon their authority as experts in
APPENDIX A
DESCRIPTION OF SECURITIES RATINGS
Short-Term Credit Ratings
An S & P Global Ratings short-term issue credit rating is a forward-looking opinion about the creditworthiness of an obligor with respect to a specific financial obligation having an original maturity of no more than 365 days. The following summarizes the rating categories used by S & P Global Ratings for short-term issues:
A-1 A short-term obligation rated A-1 is rated in the highest category and indicates that the obligors capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligors capacity to meet its financial commitment on these obligations is extremely strong.
A-2 A short-term obligation rated A-2 is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligors capacity to meet its financial commitment on the obligation is satisfactory.
A-3 A short-term obligation rated A-3 exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
B A short-term obligation rated B is regarded as vulnerable and has significant speculative characteristics. The obligor currently has the capacity to meet its financial commitments; however, it faces major ongoing uncertainties which could lead to the obligors inadequate capacity to meet its financial commitments.
C A short-term obligation rated C is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
D A short-term obligation rated D is in default or in breach of an imputed promise. For non-hybrid capital instruments, the D rating category is used when payments on an obligation are not made on the date due, unless S & P Global Ratings believes that such payments will be made within any stated grace period. However, any stated grace period longer than five business days will be treated as five business days. The D rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. An obligations rating is lowered to D if it is subject to a distressed exchange offer.
Local Currency and Foreign Currency Risks S & P Global Ratings issuer credit ratings make a distinction between foreign currency ratings and local currency ratings. An issuers foreign currency rating will differ from its local currency rating when the obligor has a different capacity to meet its obligations denominated in its local currency, vs. obligations denominated in a foreign currency.
Moodys Investors Service (Moodys) short-term ratings are forward-looking opinions of the relative credit risks of financial obligations with an original maturity of thirteen months or less and reflect both on the likelihood of a default on contractually promised payments and the expected financial loss suffered in the event of default.
Moodys employs the following designations to indicate the relative repayment ability of rated issuers:
P-1 Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations.
P-2 Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations.
P-3 Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term obligations.
NP Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.
Fitch, Inc. / Fitch Ratings Ltd. (Fitch) short-term issuer or obligation rating is based in all cases on the short-term vulnerability to default of the rated entity or security stream and relates to the capacity to meet financial obligations in accordance with the documentation governing the relevant obligation. Short-term ratings are assigned to obligations whose initial maturity is viewed as short-term based on market convention. Typically, this means up to 13 months for corporate, sovereign and structured obligations, and up to 36 months for obligations in U.S. public finance markets. The following summarizes the rating categories used by Fitch for short-term obligations:
F1 Securities possess the highest short-term credit quality. This designation indicates the strongest intrinsic capacity for timely payment of financial commitments; may have an added + to denote any exceptionally strong credit feature.
F2 Securities possess good short-term credit quality. This designation indicates good intrinsic capacity for timely payment of financial commitments.
F3 Securities possess fair short-term credit quality. This designation indicates that the intrinsic capacity for timely payment of financial commitments is adequate.
B Securities possess speculative short-term credit quality. This designation indicates minimal capacity for timely payment of financial commitments, plus heightened vulnerability to near term adverse changes in financial and economic conditions.
C Securities possess high short-term default risk. Default is a real possibility.
RD Restricted default. Indicates an entity that has defaulted on one or more of its financial commitments, although it continues to meet other financial obligations. Typically applicable to entity ratings only.
D Default. Indicates a broad-based default event for an entity, or the default of a short-term obligation.
The DBRS® Ratings Limited (DBRS) short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner. Ratings are based on quantitative and qualitative considerations relevant to the issuer and the relative ranking of claims. The R-1 and R-2 rating categories are further denoted by the sub-categories (high), (middle), and (low).
The following summarizes the ratings used by DBRS for commercial paper and short-term debt:
R-1 (high) - Short-term debt rated R-1 (high) is of the highest credit quality. The capacity for the payment of short-term financial obligations as they fall due is exceptionally high. Unlikely to be adversely affected by future events.
R-1 (middle) Short-term debt rated R-1 (middle) is of superior credit quality. The capacity for the payment of short-term financial obligations as they fall due is very high. Differs from R-1 (high) by a relatively modest degree. Unlikely to be significantly vulnerable to future events.
R-1 (low) Short-term debt rated R-1 (low) is of good credit quality. The capacity for the payment of short-term financial obligations as they fall due is substantial. Overall strength is not as favorable as higher rating categories. May be vulnerable to future events, but qualifying negative factors are considered manageable.
R-2 (high) Short-term debt rated R-2 (high) is considered to be at the upper end of adequate credit quality. The capacity for the payment of short-term financial obligations as they fall due is acceptable. May be vulnerable to future events.
R-2 (middle) Short-term debt rated R-2 (middle) is considered to be of adequate credit quality. The capacity for the payment of short-term financial obligations as they fall due is acceptable. May be vulnerable to future events or may be exposed to other factors that could reduce credit quality.
R-2 (low) Short-term debt rated R-2 (low) is considered to be at the lower end of adequate credit quality. The capacity for the payment of short-term financial obligations as they fall due is acceptable. May be vulnerable to future events. A number of challenges are present that could affect the issuers ability to meet such obligations.
R-3 Short-term debt rated R-3 is considered to be at the lowest end of adequate credit quality. There is a capacity for the payment of short-term financial obligations as they fall due. May be vulnerable to future events and the certainty of meeting such obligations could be impacted by a variety of developments.
R-4 Short-term debt rated R-4 is considered to be of speculative credit quality. The capacity for the payment of short-term financial obligations as they fall due is uncertain.
R-5 Short-term debt rated R-5 is considered to be of highly speculative credit quality. There is a high level of uncertainty as to the capacity to meet short-term financial obligations as they fall due.
D Short-term debt rated D is assigned when the issuer has filed under any applicable bankruptcy, insolvency or winding up statute or there is a failure to satisfy an obligation after the exhaustion of grace periods, a downgrade to D may occur. DBRS may also use SD (Selective Default) in cases where only some securities are impacted, such as the case of a distressed exchange.
Long-Term Credit Ratings
The following summarizes the ratings used by S & P Global Ratings for long-term issues:
AAA An obligation rated AAA has the highest rating assigned by S & P Global Ratings. The obligors capacity to meet its financial commitment on the obligation is extremely strong.
AA An obligation rated AA differs from the highest-rated obligations only to a small degree. The obligors capacity to meet its financial commitment on the obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligors capacity to meet its financial commitment on the obligation is still strong.
BBB An obligation rated BBB exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
BB, B, CCC, CC and C Obligations rated BB, B, CCC, CC and C are regarded as having significant speculative characteristics. BB indicates the least degree of speculation and C the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
BB An obligation rated BB is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligors inadequate capacity to meet its financial commitment on the obligation.
B An obligation rated B is more vulnerable to nonpayment than obligations rated BB, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligors capacity or willingness to meet its financial commitment on the obligation.
CCC An obligation rated CCC is currently vulnerable to nonpayment, and is dependent upon favorable business, financial and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.
CC An obligation rated CC is currently highly vulnerable to nonpayment. The CC rating is used when a default has not yet occurred, but S & P Global Ratings expects default to be a virtual certainty, regardless of the anticipated time to default.
C An obligation rated C is currently highly vulnerable to nonpayment, and the obligation is expected to have lower relative seniority or lower ultimate recovery compared to obligations that are rated higher.
D An obligation rated D is in default or in breach of an imputed promise. For non-hybrid capital instruments, the D rating category is used when payments on an obligation are not made on the date due, unless S & P Global Ratings believes that such payments will be made within five business days in the absence of a stated grace period or within the earlier of the stated grace period or 30 calendar days. The D rating also will be used upon the filing of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. An obligations rating is lowered to D if it is subject to a distressed exchange offer.
Plus (+) or minus (-) The ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.
NR This indicates that no rating has been requested, or that there is insufficient information on which to base a rating, or that S & P Global Ratings does not rate a particular obligation as a matter of policy.
Local Currency and Foreign Currency Risks - S & P Global Ratings issuer credit ratings make a distinction between foreign currency ratings and local currency ratings. An issuers foreign currency rating will differ from its local currency rating when the obligor has a different capacity to meet its obligations denominated in its local currency, vs. obligations denominated in a foreign currency.
Moodys long-term ratings are forward-looking opinions of the relative credit risks of financial obligations with an original maturity of one year or more. Such ratings reflect both the likelihood of default on contractually promised payments and the expected financial loss suffered in the event of default. The following summarizes the ratings used by Moodys for long-term debt:
Aaa Obligations rated Aaa are judged to be of the highest quality, subject to the lowest level of credit risk.
Aa Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.
A Obligations rated A are judged to be upper-medium grade and are subject to low credit risk.
Baa Obligations rated Baa are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics.
Ba Obligations rated Ba are judged to be speculative and are subject to substantial credit risk.
B Obligations rated B are considered speculative and are subject to high credit risk.
Caa Obligations rated Caa are judged to be speculative of poor standing and are subject to very high credit risk.
Ca Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.
C Obligations rated C are the lowest rated and are typically in default, with little prospect for recovery of principal or interest.
Note: Moodys appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.
The following summarizes long-term ratings used by Fitch :
AAA Securities considered to be of the highest credit quality. AAA ratings denote the lowest expectation of credit risk. They are assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.
AA Securities considered to be of very high credit quality. AA ratings denote expectations of very low credit risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.
A Securities considered to be of high credit quality. A ratings denote expectations of low credit risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.
BBB Securities considered to be of good credit quality. BBB ratings indicate that expectations of credit risk are currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity.
BB Securities considered to be speculative. BB ratings indicate that there is an elevated vulnerability to credit risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial alternatives may be available to allow financial commitments to be met.
B Securities considered to be highly speculative. B ratings indicate that material credit risk is present.
CCC A CCC rating indicates that substantial credit risk is present.
CC A CC rating indicates very high levels of credit risk.
C A C rating indicates exceptionally high levels of credit risk.
Defaulted obligations typically are not assigned RD or D ratings, but are instead rated in the B to C rating categories, depending upon their recovery prospects and other relevant characteristics. Fitch believes that this approach better aligns obligations that have comparable overall expected loss but varying vulnerability to default and loss.
Plus (+) or minus (-) may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the AAA obligation rating category, or to corporate finance obligation ratings in the categories below CCC.
The DBRS long-term rating scale provides an opinion on the risk of default. That is, the risk that an issuer will fail to satisfy its financial obligations in accordance with the terms under which an obligation has been issued. Ratings are based on quantitative and qualitative considerations relevant to the issuer, and the relative ranking of claims. All rating categories other than AAA and D also contain subcategories (high) and (low). The absence of either a (high) or (low) designation indicates the rating is in the middle of the category. The following summarizes the ratings used by DBRS for long-term debt:
AAA - Long-term debt rated AAA is of the highest credit quality. The capacity for the payment of financial obligations is exceptionally high and unlikely to be adversely affected by future events.
AA Long-term debt rated AA is of superior credit quality. The capacity for the payment of financial obligations is considered high. Credit quality differs from AAA only to a small degree. Unlikely to be significantly vulnerable to future events.
A Long-term debt rated A is of good credit quality. The capacity for the payment of financial obligations is substantial, but of lesser credit quality than AA. May be vulnerable to future events, but qualifying negative factors are considered manageable.
BBB Long-term debt rated BBB is of adequate credit quality. The capacity for the payment of financial obligations is considered acceptable. May be vulnerable to future events.
BB Long-term debt rated BB is of speculative, non-investment grade credit quality. The capacity for the payment of financial obligations is uncertain. Vulnerable to future events.
B Long-term debt rated B is of highly speculative credit quality. There is a high level of uncertainty as to the capacity to meet financial obligations.
CCC, CC and C Long-term debt rated in any of these categories is of very highly speculative credit quality. In danger of defaulting on financial obligations. There is little difference between these three categories, although CC and C ratings are normally applied to obligations that are seen as highly likely to default, or subordinated to obligations rated in the CCC to B range. Obligations in respect of which default has not technically taken place but is considered inevitable may be rated in the C category.
D A security rated D is assigned when the issuer has filed under any applicable bankruptcy, insolvency or winding up statute or there is a failure to satisfy an obligation after the exhaustion of grace periods, a downgrade to D may occur. DBRS may also use SD (Selective Default) in cases where only some securities are impacted, such as the case of a distressed exchange.
Municipal Note Ratings
An S & P Global Ratings U.S. municipal note rating reflects S & P Global Ratings opinion about the liquidity factors and market access risks unique to the notes. Notes due in three years or less will likely receive a note rating. Notes with an original maturity of more than three years will most likely receive a long-term debt rating. In determining which type of rating, if any, to assign, S & P Global Ratings analysis will review the following considerations:
· Amortization schedule - the larger the final maturity relative to other maturities, the more likely it will be treated as a note; and
· Source of payment - the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note.
Municipal Short-Term Note rating symbols are as follows:
SP-1 A municipal note rated SP-1 exhibits a strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation.
SP-2 A municipal note rated SP-2 exhibits a satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.
SP-3 A municipal note rated SP-3 exhibits a speculative capacity to pay principal and interest.
Moodys uses the Municipal Investment Grade (MIG) scale to rate U.S. municipal bond anticipation notes of up to three years maturity. Municipal notes rated on the MIG scale may be secured by either pledged revenues or proceeds of a take-out financing received prior to note maturity. MIG ratings expire at the maturity of the obligation, and the issuers long-term rating is only one consideration in assigning the MIG rating. MIG ratings are divided into three levels MIG-1 through MIG-3 while speculative grade short-term obligations are designated SG. The following summarizes the ratings used by Moodys for short-term municipal obligations:
MIG-1 This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing.
MIG-2 This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group.
MIG-3 This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access for refinancing is likely to be less well-established.
SG This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection.
NR Is assigned to an unrated obligation.
In the case of variable rate demand obligations (VRDOs), a two-component rating is assigned: a long or short-term debt rating and a demand obligation rating. The first element represents Moodys evaluation of risk associated with scheduled principal and interest payments. The second element represents Moodys evaluation of risk associated with the ability to receive purchase price upon demand (demand feature). The second element uses a rating from a variation of the MIG rating scale called the Variable Municipal Investment Grade or VMIG scale/ the rating transitions on the VMIG scale differ from those on the Prime scale to reflect the risk that external liquidity support generally will terminate if the issuers long-term rating drops below investment grade.
VMIG rating expirations are a function of each issues specific structural or credit features.
VMIG-1 This designation denotes superior credit quality. Excellent protection is afforded by the superior short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.
VMIG-2 This designation denotes strong credit quality. Good protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.
VMIG-3 This designation denotes acceptable credit quality. Adequate protection is afforded by the satisfactory short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.
SG This designation denotes speculative-grade credit quality. Demand features rated in this category may be supported by a liquidity provider that does not have an investment grade short-term rating or may lack the structural and/or legal protections necessary to ensure the timely payment of purchase price upon demand.
NR Is assigned to an unrated obligation.
About Credit Ratings
An S & P Global Ratings issue credit rating is a forward-looking opinion about the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs). It takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated. The opinion reflects S & P Global Ratings view of
the obligors capacity and willingness to meet its financial commitments as they come due, and may assess terms, such as collateral security and subordination, which could affect ultimate payment in the event of default.
Moodys credit ratings must be construed solely as statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities.
Fitchs credit ratings provide an opinion on the relative ability of an entity to meet financial commitments, such as interest, preferred dividends, repayment of principal, insurance claims or counterparty obligations. Fitch credit ratings are used by investors as indications of the likelihood of receiving the money owed to them in accordance with the terms on which they invested. Fitchs credit ratings cover the global spectrum of corporate, sovereign (including supranational and sub-national), financial, bank, insurance, municipal and other public finance entities and the securities or other obligations they issue, as well as structured finance securities backed by receivables or other financial assets.
Credit ratings provided by DBRS are forward-looking opinions about credit risk which reflect the creditworthiness of an issuer, rated entity, and/or security. Credit ratings are not statements of fact. While historical statistics and performance can be important considerations, credit ratings are not based solely on such; they include subjective considerations and involve expectations for future performance that cannot be guaranteed. To the extent that future events and economic conditions do not match expectations, credit ratings assigned to issuers and/or securities can change. Credit ratings are also based on approved and applicable methodologies, models and criteria (Methodologies), which are periodically updated and when material changes are deemed necessary for a wide variety of potential reasons, this may also lead to rating changes.
Credit ratings typically provide an opinion on the risk that investors may not be repaid in accordance with the terms under which the obligation was issued. In some cases, credit ratings may also include consideration for the relative ranking of claims and recovery, should default occur. Credit ratings are meant to provide opinions on relative measures of risk and are not based on expectations of any specific default probability, nor are they meant to predict such.
The data and information on which DBRS bases its opinions is not audited or verified by DBRS, although DBRS conducts a reasonableness review of information received and relied upon in accordance with its Methodologies and policies.
DBRS uses rating symbols as a concise method of expressing its opinion to the market but there are a limited number of rating categories for the possible slight risk differentials that will exist across the rating spectrum and DBRS does not assert that credit ratings in the same category are of exactly the same quality.
THE RBB FUND, INC.
PEA 216
PART C: OTHER INFORMATION
Item 28 . EXHIBITS
(a) |
|
Articles of Incorporation. |
|
|
|
|
(1) |
Articles of Incorporation of Registrant are incorporated herein by reference to Registrants Registration Statement (No. 33-20827) filed on March 24, 1988, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
|
|
|
|
(2) |
Articles Supplementary of Registrant are incorporated herein by reference to Registrants Registration Statement (No. 33-20827) filed on March 24, 1988, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
|
|
|
|
(3) |
Articles of Amendment to Articles of Incorporation of Registrant are incorporated herein by reference to Pre-Effective Amendment No. 2 to Registrants Registration Statement (No. 33-20827) filed on July 12, 1988, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
|
|
|
|
(4) |
Articles Supplementary of Registrant are incorporated herein by reference to Pre-Effective Amendment No. 2 to Registrants Registration Statement (No. 33-20827) filed on July 12, 1988, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
|
|
|
|
(5) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 3 to the Registrants Registration Statement (No. 33-20827) filed on April 27, 1990, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
|
|
|
|
(6) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 4 to the Registrants Registration Statement (No. 33-20827) filed on May 1, 1990, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
|
|
|
|
(7) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 7 to the Registrants Registration Statement (No. 33-20827) filed on July 15, 1992, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
|
|
|
|
(8) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 8 to the Registrants Registration Statement (No. 33-20827) filed on October 22, 1992, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
|
|
|
|
(9) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 13 to the Registrants Registration Statement (No. 33-20827) filed on October 29, 1993, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
|
|
|
|
(10) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 13 to the Registrants Registration Statement (No. 33-20827) filed on October 29, 1993, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
|
|
|
|
(11) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 22 to the Registrants Registration Statement (No. 33-20827) filed on December 19, 1994, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
|
(12) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 22 to the Registrants Registration Statement (No. 33-20827) filed on December 19, 1994, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
|
|
|
|
(13) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 22 to the Registrants Registration Statement (No. 33-20827) filed on December 19, 1994, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
|
|
|
|
(14) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 22 to the Registrants Registration Statement (No. 33-20827) filed on December 19, 1994, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
|
|
|
|
(15) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 27 to the Registrants Registration Statement (No. 33-20827) filed on March 31, 1995. |
|
|
|
|
(16) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 34 to the Registrants Registration Statement (No. 33-20827) filed on May 16, 1996. |
|
|
|
|
(17) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 39 to the Registrants Registration Statement (No. 33-20827) filed on October 11, 1996. |
|
|
|
|
(18) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 45 to the Registrants Registration Statement (No. 33-20827) filed on May 9, 1997. |
|
|
|
|
(19) |
Articles of Amendment to Charter of the Registrant are incorporated herein by reference to Post-Effective Amendment No. 46 to the Registrants Registration Statement (No. 33-20827) filed on September 25, 1997. |
|
|
|
|
(20) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 46 to the Registrants Registration Statement (No. 33-20827) filed on September 25, 1997. |
|
|
|
|
(21) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrants Registration Statement (No. 33-20827) filed on October 29, 1998. |
|
|
|
|
(22) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrants Registration Statement (No. 33-20827) filed on October 29, 1998. |
|
|
|
|
(23) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 63 to the Registrants Registration Statement (No. 33-20827) filed on December 14, 1998. |
|
|
|
|
(24) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 63 to the Registrants Registration Statement (No. 33-20827) filed on December 14, 1998. |
|
|
|
|
(25) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 67 to the Registrants Registration Statement (No. 33-20827) filed on September 30, 1999. |
|
|
|
|
(26) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 69 to the Registrants Registration Statement (No. 33-20827) filed on November 29, 1999. |
|
|
|
|
(27) |
Articles of Amendment to Charter of the Registrant are incorporated herein by reference to Post-Effective Amendment No. 71 to the Registrants Registration Statement (No. 33-20827) filed on December 29, 2000. |
|
|
|
|
(28) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 71 to the Registrants Registration Statement (No. 33-20827) filed on December 29, 2000. |
|
|
|
|
(29) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 71 to the Registrants Registration Statement (No. 33-20827) filed on December 29, 2000. |
|
|
|
|
(30) |
Articles of Amendment to Charter of the Registrant are incorporated herein by reference to Post-Effective Amendment No. 71 to the Registrants Registration Statement (No. 33-20827) filed on December 29, 2000. |
|
(31) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 73 to the Registrants Registration Statement (No. 33-20827) filed on March 15, 2001. |
|
|
|
|
(32) |
Articles of Amendment to Charter of the Registrant ( Boston Partners Bond Fund Institutional Class and Boston Partners Bond Fund Investor Class ) are incorporated herein by reference to Post-Effective Amendment No. 77 to the Registrants Registration Statement (No. 33-20827) filed on May 15, 2002. |
|
|
|
|
(33) |
Articles Supplementary of Registrant ( Boston Partners All-Cap Value Fund Institutional Class and Boston Partners Bond Fund Institutional Class ) are incorporated herein by reference to Post-Effective Amendment No. 77 to the Registrants Registration Statement (No. 33-20827) filed on May 15, 2002. |
|
|
|
|
(34) |
Articles Supplementary of Registrant ( Schneider Value Fund ) are incorporated herein by reference to Post-Effective Amendment No. 78 to the Registrants Registration Statement (No. 33-20827) filed on May 16, 2002. |
|
|
|
|
(35) |
Articles Supplementary of Registrant ( Institutional Liquidity Fund for Credit Unions and Liquidity Fund for Credit Union Members ) are incorporated herein by reference to Post-Effective Amendment No. 84 to the Registrants Registration Statement (No. 33-20827) filed on December 29, 2003. |
|
|
|
|
(36) |
Articles of Amendment to Charter of the Registrant are incorporated herein by reference to Post-Effective Amendment No. 89 to the Registrants Registration Statement (No. 33-20827) filed on December 30, 2004. |
|
|
|
|
(37) |
Articles Supplementary of Registrant ( Robeco WPG Core Bond Fund Investor Class, Robeco WPG Core Bond Fund Institutional Class, Robeco WPG Tudor Fund Institutional Class, Robeco WPG Large Cap Growth Fund Institutional Class ) are incorporated herein by reference to Post-Effective Amendment No. 93 to the Registrants Registration Statement (No. 33-20827) filed on March 4, 2005. |
|
|
|
|
(38) |
Certificate of Correction of Registrant is incorporated herein by reference to Post-Effective Amendment No. 95 to the Registrants Registration Statement (No. 33-20827) filed on March 23, 2005. |
|
|
|
|
(39) |
Articles Supplementary of Registrant ( Robeco WPG Core Bond Fund Investor Class, Robeco WPG Core Bond Fund Institutional Class, Robeco WPG Tudor Fund Institutional Class, Robeco WPG 130/30 Large Cap Core Fund f/k/a Robeco WPG Large Cap Growth Fund Institutional Class ) are incorporated herein by reference to Post-Effective Amendment No. 95 to the Registrants Registration Statement (No. 33-20827) filed on March 23, 2005. |
|
|
|
|
(40) |
Articles Supplementary of Registrant ( Senbanc Fund) are incorporated herein by reference to Post-Effective Amendment No. 96 to the Registrants Registration Statement (No. 33-20827) filed on June 6, 2005. |
|
|
|
|
(41) |
Articles of Amendment of Registrant ( Robeco WPG Core Bond Fund Retirement Class) are incorporated herein by reference to Post-Effective Amendment No. 97 to the Registrants Registration Statement (No. 33-20827) filed on August 19, 2005. |
|
|
|
|
(42) |
Articles Supplementary of Registrant ( Robeco WPG Core Bond Fund Investor Class) are incorporated herein by reference to Post-Effective Amendment No. 99 to the Registrants Registration Statement (No. 33-20827) filed on September 27, 2005. |
|
|
|
|
(43) |
Articles Supplementary of Registrant (Bear Stearns CUFS MLP Mortgage Portfolio) are incorporated herein by reference to Post-Effective Amendment No. 104 to the Registrants Registration Statement (No. 33-20827) filed on July 18, 2006. |
|
|
|
|
(44) |
Articles of Amendment to Charter of the Registrant (Bear Stearns CUFS MLP Mortgage Portfolio) are incorporated herein by reference to Post-Effective Amendment No. 108 to the Registrants Registration Statement (No. 33-20827) filed on December 14, 2006. |
|
|
|
|
(45) |
Articles Supplementary of Registrant (Bear Stearns Ultra Short Income Fund f/k/a Bear Stearns Enhanced Income Fund) are incorporated herein by reference to Post-Effective Amendment No. 109 to Registrants Registration Statement (No. 33-20827) filed on December 15, 2006. |
|
|
|
|
(46) |
Articles Supplementary of Registrant (Marvin & Palmer Large Cap Growth Fund) are incorporated herein by reference to Post-Effective Amendment No. 109 to Registrants Registration Statement (No. 33-20827) filed on December 15, 2006. |
|
(47) |
Articles of Amendment to Charter of the Registrant (Bear Stearns Ultra Short Income Fund f/k/a Bear Stearns Enhanced Income Fund) are incorporated herein by reference to Post-Effective Amendment No. 111 to the Registrants Registration Statement (No. 33-20827) filed on February 28, 2007. |
|
|
|
|
(48) |
Articles Supplementary of Registrant (Bear Stearns Ultra Short Income Fund f/k/a Bear Stearns Enhanced Income Fund) are incorporated herein by reference to Post-Effective Amendment No. 111 to the Registrants Registration Statement (No. 33-20827) filed on February 28, 2007. |
|
|
|
|
(49) |
Articles Supplementary of Registrant (Free Market U.S. Equity Fund, Free Market International Equity Fund, Free Market Fixed Income Fund) incorporated herein by reference to Post-Effective Amendment No. 112 to the Registrants Registration Statement (No. 33-20827) filed on June 1, 2007. |
|
|
|
|
(50) |
Articles Supplementary of Registrant (Robeco WPG 130/30 Large Cap Core Fund Investor Class) are incorporated herein by reference to Post-Effective Amendment No. 113 to the Registrants Registration Statement (No. 33-20827) filed on July 13, 2007. |
|
|
|
|
(51) |
Articles Supplementary of Registrant ( SAM Sustainable Water Fund, SAM Sustainable Climate Fund ) are incorporated herein by reference to Post-Effective Amendment No. 114 to the Registrants Registration Statement (No. 33-20827) filed on July 17, 2007. |
|
|
|
|
(52) |
Articles of Amendment of Registrant (Robeco WPG 130/30 Large Cap Core Fund Institutional Class) are incorporated herein by reference to Post-Effective Amendment No. 116 to the Registrants Registration Statement (No. 33-20827) filed on September 4, 2007. |
|
|
|
|
(53) |
Articles Supplementary of Registrant ( Bear Stearns Multifactor 130/30 US Core Equity Fund ) are incorporated herein by reference to Post-Effective Amendment No. 123 to the Registrants Registration Statement (No. 33-20827) filed on December 17, 2007. |
|
|
|
|
(54) |
Articles of Amendment to Charter of the Registrant (Bear Stearns Ultra Short Income Fund f/k/a Bear Stearns Enhanced Income Fund) are incorporated herein by reference to Post-Effective Amendment No. 124 to the Registrants Registration Statement (No. 33-20827) filed on December 28, 2007. |
|
|
|
|
(55) |
Articles Supplementary of Registrant ( SAM Sustainable Global Active Fund, SAM Sustainable Themes Fund ) are incorporated herein by reference to Post-Effective Amendment No. 128 to the Registrants Registration Statement (No. 33-20827) filed on April 23, 2009. |
|
|
|
|
(56) |
Articles Supplementary of Registrant ( Perimeter Small Cap Growth Fund) are incorporated herein by reference to Post-Effective Amendment No. 129 to the Registrants Registration Statement (No. 33-20827) filed on July 2, 2009. |
|
|
|
|
(57) |
Articles Supplementary of Registrant ( S1 Fund) are incorporated herein by reference to Post-Effective Amendment No. 135 to Registrants Registration Statement (No. 33-20827) filed on July 19, 2010. |
|
|
|
|
(58) |
Articles Supplementary of Registrant ( Robeco Boston Partners Long/Short Research Fund ) are incorporated herein by reference to Post-Effective Amendment No. 136 to the Registrants Registration Statement (No. 33-20827) filed on August 4, 2010. |
|
|
|
|
(59) |
Articles of Amendment of Registrant (Robeco WPG Small/Micro Cap Value Fund f/k/a Robeco WPG Small Cap Value Fund) are incorporated herein by reference to Post-Effective Amendment No. 141 to the Registrants Registration Statement (No. 33-20827) filed on December 28, 2010. |
|
|
|
|
(60) |
Articles Supplementary of Registrant ( Robeco Boston Partners Global Equity Fund and Robeco Boston Partners International Equity Fund ) are incorporated herein by reference to Post-Effective Amendment No. 142 to the Registrants Registration Statement (No. 33-20827) filed on October 14, 2011. |
|
|
|
|
(61) |
Articles Supplementary of Registrant ( Summit Global Investments U.S. Low Volatility Equity Fund ) are incorporated herein by reference to Post-Effective Amendment No. 144 to the Registrants Registration Statement (No. 33-20827) filed on December 15, 2011. |
|
|
|
|
(62) |
Articles Supplementary of Registrant (Free Market U.S. Equity Fund, Free Market International Equity Fund, Free Market Fixed Income Fund) are incorporated herein by reference to Post-Effective Amendment No. 149 to the Registrants Registration Statement (No. 33-20827) filed on October 29, 2012. |
|
(63) |
Articles Supplementary of Registrant (Robeco Boston Partners Global Long/Short Fund) are incorporated herein by reference to Post-Effective Amendment No. 152 to the Registrants Registration Statement (No. 33-20827) filed on March 29, 2013. |
|
|
|
|
(64) |
Articles Supplementary of Registrant (Robeco Boston Partners Long/Short Research Fund Institutional Class) are incorporated herein by reference to Post-Effective Amendment No. 157 to the Registrants Registration Statement (No. 33-20827) filed on October 29, 2013. |
|
|
|
|
(65) |
Articles Supplementary of Registrant ( Matson Money U.S. Equity VI Portfolio, Matson Money International VI Equity Portfolio, Matson Money Fixed Income VI Portfolio ) are incorporated herein by reference to Post-Effective Amendment No. 159 to the Registrants Registration Statement (No. 33-20827) filed on December 20, 2013. |
|
|
|
|
(66) |
Articles Supplementary of Registrant ( Scotia Dynamic U.S. Growth Fund ) are incorporated herein by reference to Post-Effective Amendment No. 161 to the Registrants Registration Statement (No. 33-20827) filed on December 27, 2013. |
|
|
|
|
(67) |
Articles Supplementary of Registrant (Robeco Boston Partners Long/Short Research Fund Institutional Class) are incorporated herein by reference to Post-Effective Amendment No. 168 to the Registrants Registration Statement (No. 33-20827) filed on June 30, 2014. |
|
|
|
|
(68) |
Articles Supplementary of Registrant ( Abbey Capital Futures Strategy Fund and Altair Smaller Companies Fund ) are incorporated herein by reference to Post-Effective Amendment No. 168 to the Registrants Registration Statement (No. 33-20827) filed on June 30, 2014. |
|
|
|
|
(69) |
Articles Supplementary of Registrant ( Campbell Core Trend Fund ) are incorporated herein by reference to Post-Effective Amendment No. 171 to the Registrants Registration Statement (No. 33-20827) filed on October 16, 2014. |
|
|
|
|
(70) |
Articles Supplementary of Registrant (Free Market U.S. Equity Fund, Free Market International Equity Fund, Free Market Fixed Income Fund) are incorporated herein by reference to Post-Effective Amendment No. 174 to the Registrants Registration Statement (No. 33-20827) filed on December 23, 2014. |
|
|
|
|
(71) |
Articles Supplementary of Registrant ( Boston Partners Investment Funds ) are incorporated herein by reference to Post-Effective Amendment No. 174 to the Registrants Registration Statement (No. 33-20827) filed on December 23, 2014. |
|
|
|
|
(72) |
Articles Supplementary of Registrant ( Boston Partners Emerging Markets Long/Short Fund ) are incorporated herein by reference to Post-Effective Amendment No. 182 to the Registrants Registration Statement (No. 33-20827) filed on October 16, 2015 |
|
|
|
|
(73) |
Articles Supplementary of Registrant ( Campbell Core Carry Fund ) are incorporated herein by reference to Post-Effective Amendment No. 182 to the Registrants Registration Statement (No. 33-20827) filed on October 16, 2015. |
|
|
|
|
(74) |
Articles Supplementary of Registrant ( Boston Partners Alpha Blue Dynamic Equity Fund ) are incorporated herein by reference to Post-Effective Amendment No. 182 to the Registrants Registration Statement (No. 33-20827) filed on October 16, 2015. |
|
|
|
|
(75) |
Articles Supplementary of Registrant ( Summit Global Investments U.S. Low Volatility Equity Fund Class C ) are incorporated herein by reference to Post-Effective Amendment No. 184 to the Registrants Registration Statement (No. 33-20827) filed on October 30, 2015. |
|
|
|
|
(76) |
Articles Supplementary of Registrant (Boston Partners Long/Short Research Fund Institutional Class) are incorporated herein by reference to Post-Effective Amendment No. 187 to the Registrants Registration Statement (No. 33-20827) filed on December 29, 2015. |
|
|
|
|
(77) |
Articles Supplementary of Registrant (Summit Global Investments Small Cap Low Volatility Fund) are incorporated herein by reference to Post-Effective Amendment No. 195 to the Registrants Registration Statement (No. 33-20827) filed on March 30, 2016. |
|
(78) |
Articles Supplementary of Registrant (Fasanara Capital Absolute Return Multi-Asset Fund) are incorporated herein by reference to Post-Effective Amendment No. 198 to the Registrants Registration Statement (No. 33-20827) filed on April 29, 2016. |
|
|
|
|
(79) |
Articles of Amendment of Registrant (Campbell Dynamic Trend Fund f/k/a Campbell Core Trend Fund and Campbell Multi-Asset Carry Fund f/k/a Campbell Core Carry Fund) is incorporated herein by reference to Post-Effective Amendment No. 207 to the Registrants Registration Statement (No. 33-20827) filed on December 28, 2016. |
|
|
|
|
(80) |
Articles Supplementary of Registrant (Motley Fool Independence Fund, Motley Fool Great America Fund, and Motley Fool Epic Voyage Fund) are incorporated herein by reference to Post-Effective Amendment No. 206 to the Registrants Registration Statement (No. 33-20827) filed on December 21, 2016. |
|
|
|
|
(81) |
Articles of Amendment of Registrant (Motley Fool Emerging Markets Fund f/k/a Motley Fool Epic Voyage Fund) are incorporated herein by reference to Post-Effective Amendment No. 212 to the Registrants Registration Statement (No. 33-20827) filed on February 28, 2017. |
|
|
|
|
(82) |
Articles Supplementary of Registrant (Orinda Income Opportunities Fund) are filed herewith. |
|
|
|
|
(83) |
Articles Supplementary of Registrant (Abbey Capital Futures Strategy Fund Class T) are filed herewith. |
|
|
|
(b) |
|
By-Laws. |
|
|
|
|
(1) |
By-Laws, as amended, are incorporated herein by reference to Post-Effective Amendment No. 143 to the Registrants Registration Statement (No. 33-20827) filed on October 28, 2011. |
|
|
|
(c) |
|
Instruments Defining Rights of Security Holders. |
|
|
|
|
(1) |
See Articles VI, VII, VIII, IX and XI of Registrants Articles of Incorporation dated February 17, 1988 which are incorporated herein by reference to Registrants Registration Statement (No. 33-20827) filed on March 24, 1988, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
|
|
|
|
(2) |
See Articles II, III, VI, XIII, and XIV of Registrants By-Laws as amended through August 25, 2004, which are incorporated herein by reference to Post-Effective Amendment No. 89 to the Registrants Registration Statement (No. 33-20827) filed on December 30, 2004. |
|
|
|
(d) |
|
Investment Advisory Contracts. |
|
|
|
|
(1) |
Investment Advisory Agreement ( Abbey Capital Futures Strategy Fund ) between Registrant and Abbey Capital Limited is incorporated herein by reference to Post-Effective Amendment No. 168 to the Registrants Registration Statement (No. 33-20827) filed on June 30, 2014. |
|
|
|
|
(2) |
Investment Advisory Agreement ( Abbey Capital Futures Strategy Fund ) between Abbey Capital Offshore Fund Limited and Abbey Capital Limited is incorporated herein by reference to Post-Effective Amendment No. 168 to the Registrants Registration Statement (No. 33-20827) filed on June 30, 2014. |
|
|
|
|
(3) |
Form of Trading Advisory Agreement (Abbey Capital Futures Strategy Fund) among Abbey Capital Offshore Fund Limited, Abbey Capital Limited and Altis Partners (Jersey) Limited is incorporated herein by reference to Post-Effective Amendment No. 168 to the Registrants Registration Statement (No. 33-20827) filed on June 30, 2014. |
|
|
|
|
(4) |
Form of Trading Advisory Agreement (Abbey Capital Futures Strategy Fund) among Abbey Capital Offshore Fund Limited, Abbey Capital Limited and Cantab Capital Partners, LLP is incorporated herein by reference to Post-Effective Amendment No. 168 to the Registrants Registration Statement (No. 33-20827) filed on June 30, 2014. |
|
|
|
|
(5) |
Form of Trading Advisory Agreement (Abbey Capital Futures Strategy Fund) among Abbey Capital Offshore Fund Limited, Abbey Capital Limited and Eclipse Capital Management, Inc. is incorporated herein by reference to Post-Effective Amendment No. 168 to the Registrants Registration Statement (No. 33-20827) filed on June 30, 2014. |
|
(6) |
Form of Trading Advisory Agreement (Abbey Capital Futures Strategy Fund) among Abbey Capital Offshore Fund Limited, Abbey Capital Limited and Graham Capital Management, LP is incorporated herein by reference to Post-Effective Amendment No. 168 to the Registrants Registration Statement (No. 33-20827) filed on June 30, 2014. |
|
|
|
|
(7) |
Form of Trading Advisory Agreement (Abbey Capital Futures Strategy Fund) among Abbey Capital Offshore Fund Limited, Abbey Capital Limited and P/E Investments, LLC is incorporated herein by reference to Post-Effective Amendment No. 168 to the Registrants Registration Statement (No. 33-20827) filed on June 30, 2014. |
|
|
|
|
(8) |
Form of Trading Advisory Agreement (Abbey Capital Futures Strategy Fund) among Abbey Capital Offshore Fund Limited, Abbey Capital Limited and Revolution Capital Management, LLC is incorporated herein by reference to Post-Effective Amendment No. 168 to the Registrants Registration Statement (No. 33-20827) filed on June 30, 2014. |
|
|
|
|
(9) |
Form of Trading Advisory Agreement (Abbey Capital Futures Strategy Fund) among Abbey Capital Offshore Fund Limited, Abbey Capital Limited and Trigon Investment Advisors, LLC is incorporated herein by reference to Post-Effective Amendment No. 168 to the Registrants Registration Statement (No. 33-20827) filed on June 30, 2014. |
|
|
|
|
(10) |
Form of Trading Advisory Agreement (Abbey Capital Futures Strategy Fund) among Abbey Capital Offshore Fund Limited, Abbey Capital Limited and Harmonic Capital Partners LLP is incorporated herein by reference to Post-Effective Amendment No. 168 to the Registrants Registration Statement (No. 33-20827) filed on June 30, 2014. |
|
|
|
|
(11) |
First Amendment to Investment Advisory Agreement (Abbey Capital Futures Strategy Fund ) between Registrant and Abbey Capital Limited is filed herewith. |
|
|
|
|
(12) |
Form of Contractual Fee Waiver (Abbey Capital Futures Strategy Fund) between Registrant and Abbey Capital Limited is filed herewith. |
|
|
|
|
(13) |
Form of Trading Advisory Agreement (Abbey Capital Futures Strategy Fund) among Abbey Capital Offshore Fund Limited, Abbey Capital Limited and Aspect Capital Limited is filed herewith. |
|
|
|
(e) |
|
Underwriting Contracts. |
|
|
|
|
(1) |
Distribution Agreement between Registrant, Quasar Distributors, LLC, and Abbey Capital Limited dated June 30, 2016 is incorporated herein by reference to Post-Effective Amendment No. 207 to the Registrants Registration Statement (No. 33-20827) filed on December 28, 2016. |
|
|
|
(f) |
|
Bonus or Profit Sharing Contracts. |
|
|
|
|
(1) |
Form of Deferred Compensation Plan is incorporated herein by reference to Post-Effective Amendment No. 160 to the Registrants Registration Statement (No. 33-20827) filed on December 23, 2013. |
|
|
|
|
(2) |
Form of Deferred Compensation Agreement is incorporated herein by reference to Post-Effective Amendment No. 160 to the Registrants Registration Statement (No. 33-20827) filed on December 23, 2013. |
|
|
|
(g) |
|
Custodian Agreements. |
|
|
|
|
(1) |
Custody Agreement between Registrant and U.S. Bank National Association dated June 30, 2016i is incorporated herein by reference to Post-Effective Amendment No. 207 to the Registrants Registration Statement (No. 33-20827) filed on December 28, 2016. |
|
|
|
|
(2) |
First Amendment dated June 30, 2016 to the Custody Agreement between Registrant and U.S. Bank National Association is incorporated herein by reference to Post-Effective Amendment No. 207 to the Registrants Registration Statement (No. 33-20827) filed on December 28, 2016. |
|
|
|
|
(3) |
Addendum to Custody Agreement dated January 5, 2017 is filed herewith. |
(h) |
|
Other Material Contracts. |
|
|
|
|
(1) |
Fund Accounting Servicing Agreement between Registrant and U.S. Bancorp Fund Services, LLC dated June 30, 2016 is incorporated herein by reference to Post-Effective Amendment No. 207 to the Registrants Registration Statement (No. 33-20827) filed on December 28, 2016. |
|
|
|
|
(2) |
First Amendment to the Fund Accounting Servicing Agreement between Registrant and U.S. Bancorp Fund Services, LLC is incorporated herein by reference to Post-Effective Amendment No. 207 to the Registrants Registration Statement (No. 33-20827) filed on December 28, 2016. |
|
|
|
|
(3) |
Fund Administration Servicing Agreement between Registrant and U.S. Bancorp Fund Services, LLC dated June 30, 2016 is incorporated herein by reference to Post-Effective Amendment No. 207 to the Registrants Registration Statement (No. 33-20827) filed on December 28, 2016. |
|
|
|
|
(4) |
First Amendment to the Fund Administration Servicing Agreement between Registrant and U.S. Bancorp Fund Services, LLC is incorporated herein by reference to Post-Effective Amendment No. 207 to the Registrants Registration Statement (No. 33-20827) filed on December 28, 2016. |
|
|
|
|
(5) |
Transfer Agent Servicing Agreement between Registrant and U.S. Bancorp Fund Services, LLC dated June 30, 2016 is incorporated herein by reference to Post-Effective Amendment No. 207 to the Registrants Registration Statement (No. 33-20827) filed on December 28, 2016. |
|
|
|
|
(6) |
First Amendment to the Transfer Agent Servicing Agreement between Registrant and U.S. Bancorp Fund Services, LLC is incorporated herein by reference to Post-Effective Amendment No. 207 to the Registrants Registration Statement (No. 33-20827) filed on December 28, 2016. |
|
|
|
(i) |
(1) |
Opinion of Counsel is filed herewith. |
|
|
|
|
(2) |
Consent of Counsel is filed herewith. |
|
|
|
(j) |
|
Consent of Ernst & Young LLP is filed herewith. |
|
|
|
(k) |
|
None. |
|
|
|
(l) |
|
Initial Capital Agreements. |
|
|
|
|
(1) |
Form of Purchase Agreement (Abbey Capital Futures Strategy Fund) between Registrant and Abbey Capital Limited is incorporated herein by reference to Post-Effective Amendment No. 168 to the Registrants Registration Statement (No. 33-20827) filed on June 30, 2014. |
|
|
|
(m) |
|
Rule 12b-1 Plan. |
|
|
|
|
(1) |
Plan of Distribution pursuant to Rule 12b-1 ( Abbey Capital Futures Strategy Fund Class A) is incorporated herein by reference to Post-Effective Amendment No. 168 to the Registrants Registration Statement (No. 33-20827) filed on June 30, 2014. |
|
|
|
|
(2) |
Plan of Distribution pursuant to Rule 12b-1 ( Abbey Capital Futures Strategy Fund Class C) is incorporated herein by reference to Post-Effective Amendment No. 168 to the Registrants Registration Statement (No. 33-20827) filed on June 30, 2014. |
|
|
|
|
(3) |
Plan of Distribution pursuant to Rule 12b-1 ( Abbey Capital Futures Strategy Fund Class T) is filed herewith. |
|
|
|
(n) |
|
Rule 18f-3 Plan. |
|
|
|
|
|
Amended Rule 18f-3 Plan to be filed by amendment. |
|
|
|
(p) |
|
Code of Ethics. |
|
|
|
|
(1) |
Code of Ethics of the Registrant is incorporated herein by reference to Post-Effective Amendment No. 110 to Registrants Registration Statement (No. 33-20827) filed on December 29, 2006. |
|
|
|
|
(2) |
Code of Ethics of Abbey Capital Limited is incorporated herein by reference to Post-Effective Amendment No. 168 to the Registrants Registration Statement (No. 33-20827) filed on June 30, 2014. |
|
|
|
|
(3) |
Code of Ethics of Quasar Distributors, LLC is incorporated herein by reference to Post-Effective Amendment No. 210 to Registrants Registration Statement (No. 33-20827) filed on January 31, 2017. |
Item 29. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
Item 30. INDEMNIFICATION
Sections 1, 2, 3 and 4 of Article VIII of Registrants Articles of Incorporation, as amended, incorporated herein by reference as Exhibits (a)(1) and (a)(3), provide as follows:
Section 1. To the fullest extent that limitations on the liability of directors and officers are permitted by the Maryland General Corporation Law, no director or officer of the Corporation shall have any liability to the Corporation or its shareholders for damages. This limitation on liability applies to events occurring at the time a person serves as a director or officer of the Corporation whether or not such person is a director or officer at the time of any proceeding in which liability is asserted.
Section 2. The Corporation shall indemnify and advance expenses to its currently acting and its former directors to the fullest extent that indemnification of directors is permitted by the Maryland General Corporation Law. The Corporation shall indemnify and advance expenses to its officers to the same extent as its directors and to such further extent as is consistent with law. The Board of Directors may by law, resolution or agreement make further provision for indemnification of directors, officers, employees and agents to the fullest extent permitted by the Maryland General Corporation law.
Section 3. No provision of this Article shall be effective to protect or purport to protect any director or officer of the Corporation against any liability to the Corporation or its security holders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office.
Section 4. References to the Maryland General Corporation Law in this Article are to the law as from time to time amended. No further amendment to the Articles of Incorporation of the Corporation shall decrease, but may expand, any right of any person under this Article based on any event, omission or proceeding prior to such amendment. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of Registrant pursuant to the foregoing provisions, or otherwise, Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Registrant of expenses incurred or paid by a director, officer or controlling person of Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
Section 12 of the form of Investment Advisory Agreement between the Registrant and Abbey Capital Limited (Abbey Capital) incorporated herein by reference as exhibit (d)(1) provides for the indemnification of Abbey Capital against certain losses.
Sections 8 of the Distribution Agreement between Registrant and Quasar Distributors, LLC, dated June 30, 2016 and incorporated herein by reference to exhibit (e)(1) provides for the indemnification of Quasar Distributors, LLC against certain losses.
Item 31. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISERS.
1. Abbey Capital Limited :
The only employment of a substantial nature of each of Abbey Capital Limited directors and officers is with Abbey Capital Limited.
Item 32 . PRINCIPAL UNDERWRITER
(a) Quasar Distributors, LLC, the Registrants principal underwriter, acts as principal underwriter for the following investment companies registered under the Investment Company Act of 1940, as amended:
Academy Funds Trust |
|
Kirr Marbach Partners Funds, Inc. |
Advisors Series Trust |
|
LKCM Funds |
Aegis Funds |
|
LoCorr Investment Trust |
Allied Asset Advisors Funds |
|
Lord Asset Management Trust |
Alpha Architect ETF Trust |
|
MainGate Trust |
Alpine Equity Trust |
|
Managed Portfolio Series |
Alpine Income Trust |
|
Manager Directed Portfolios |
Alpine Series Trust |
|
Matrix Advisors Value Fund, Inc. |
Amplify ETF Trust |
|
Merger Fund |
Angel Oak Funds Trust |
|
Monetta Trust |
Appleton Funds |
|
Nicholas Equity Income Fund, Inc. |
Barrett Opportunity Fund, Inc. |
|
Nicholas Family of Funds, Inc. |
Bridge Builder Trust |
|
Oaktree Funds |
Bridges Investment Fund, Inc. |
|
Permanent Portfolio Family of Funds, Inc. |
Brookfield Investment Funds |
|
Perritt Funds, Inc. |
Brown Advisory Funds |
|
PRIMECAP Odyssey Funds |
Buffalo Funds |
|
Professionally Managed Portfolios |
CG Funds Trust |
|
Prospector Funds, Inc. |
Compass EMP Funds Trust |
|
Provident Mutual Funds, Inc. |
DoubleLine Funds Trust |
|
Rainier Investment Management Mutual Funds |
ETF Series Solutions |
|
RBB Fund, Inc. |
Evermore Funds Trust |
|
RBC Funds Trust |
FactorShares Trust |
|
Series Portfolio Trust |
First American Funds, Inc. |
|
Sims Total Return Fund, Inc. |
FundX Investment Trust |
|
Stone Ridge Trust |
Glenmede Fund, Inc. |
|
Stone Ridge Trust II |
Glenmede Portfolios |
|
Stone Ridge Trust III |
GoodHaven Funds Trust |
|
Stone Ridge Trust V |
Greenspring Fund, Inc. |
|
Thompson IM Funds, Inc. |
Guinness Atkinson Funds |
|
TrimTabs ETF Trust |
Harding Loevner Funds, Inc. |
|
Trust for Professional Managers |
Hennessy Funds Trust |
|
Trust for Advised Portfolios |
Horizon Funds |
|
USA Mutuals |
Hotchkis & Wiley Funds |
|
Victory Portfolios II |
Intrepid Capital Management Funds Trust |
|
Wall Street EWM Funds Trust |
IronBridge Funds, Inc. |
|
Westchester Capital Funds |
Jacob Funds, Inc. |
|
Wisconsin Capital Funds, Inc. |
Jensen Portfolio, Inc. |
|
YCG Funds |
(b) To the best of Registrants knowledge, the directors and executive officers of Quasar Distributors, LLC are as follows:
Name and Principal
|
|
Position and Offices with Quasar
|
|
Positions and Offices
|
James R. Schoenike(1) |
|
President, Board Member |
|
None |
Andrew M. Strnad(2) |
|
Vice President, Secretary |
|
None |
Joe Neuberger(1) |
|
Board Member |
|
None |
Robert Kern(1) |
|
Board Member |
|
None |
Susan LaFond(1) |
|
Vice President, Treasurer |
|
None |
Peter A. Hovel(1) |
|
Chief Financial Officer |
|
None |
Teresa Cowan(1) |
|
Senior Vice President, Assistant Secretary |
|
None |
Brett Scribner(3) |
|
Assistant Treasurer |
|
None |
(1) This individual is located at 615 East Michigan Street, Milwaukee, Wisconsin, 53202.
(2) This individual is located at 10 West Market Street, Indianapolis, Indiana, 46204.
(3) This individual is located at 800 Nicollet Mall, Minneapolis, Minnesota, 55402.
(c) Not Applicable
Item 33. LOCATION OF ACCOUNTS AND RECORDS
(1) Abbey Capital Limited, 1-2 Cavendish Row, Dublin 1, Ireland (records relating to its function as investment adviser).
(2) U.S. Bancorp Fund Services, LLC, 615 East Michigan Street, Milwaukee, Wisconsin 53202 (records relating to its function as administrator, transfer agent and dividend disbursing agent).
(3) U.S. Bank, N.A., 1555 North River Center Drive, Suite 302, Milwaukee, Wisconsin, 53212 (records relating to its function as custodian).
(4) Quasar Distributors, LLC, 777 East Wisconsin Avenue, Floor, 6, Milwaukee, Wisconsin 53202 (records relating to its function as underwriter).
Item 34. MANAGEMENT SERVICES
None.
Item 35. UNDERTAKINGS
(a) Registrant hereby undertakes to hold a meeting of shareholders for the purpose of considering the removal of directors in the event the requisite number of shareholders so request.
(b) Registrant hereby undertakes to furnish each person to whom a prospectus is delivered a copy of Registrants latest annual report to shareholders upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended (the 1933 Act), and the Investment Company Act of 1940, as amended, the Registrant certifies that it meets all of the requirements for effectiveness of this Post-Effective Amendment to its Registration Statement under Rule 485(b) under the 1933 Act and has duly caused this Post-Effective Amendment to its Registration Statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of Chadds Ford, and Commonwealth of Pennsylvania on April 10, 2017.
|
THE RBB FUND, INC. |
|
|
|
|
|
By: |
/s/ Salvatore Faia |
|
Salvatore Faia |
|
|
President |
Pursuant to the requirements of the 1933 Act, this Amendment to Registrants Registration Statement has been signed below by the following persons in the capacities and on the date indicated.
SIGNATURE |
|
TITLE |
|
DATE |
|
/s/ Salvatore Faia |
|
President (Principal Executive Officer) and Chief Compliance Officer |
|
April 10, 2017 |
|
Salvatore Faia |
|
||||
|
|
|
|
|
|
/s/ James G. Shaw |
|
Treasurer (Chief Financial Officer) and Secretary |
|
April 10, 2017 |
|
James G. Shaw |
|
|
|
|
|
|
|
|
|
|
|
*J. Richard Carnall |
|
Director |
|
April 10, 2017 |
|
J. Richard Carnall |
|
|
|
|
|
|
|
|
|
|
|
*Julian A. Brodsky |
|
Director |
|
April 10, 2017 |
|
Julian A. Brodsky |
|
|
|
|
|
|
|
|
|
|
|
*Arnold M. Reichman |
|
Director |
|
April 10, 2017 |
|
Arnold M. Reichman |
|
|
|
|
|
|
|
|
|
|
|
*Robert Sablowsky |
|
Director |
|
April 10, 2017 |
|
Robert Sablowsky |
|
|
|
|
|
|
|
|
|
|
|
*Robert Straniere |
|
Director |
|
April 10, 2017 |
|
Robert Straniere |
|
|
|
|
|
|
|
|
|
|
|
*Nicholas A. Giordano |
|
Director |
|
April 10, 2017 |
|
Nicholas A. Giordano |
|
|
|
|
|
|
|
|
|
|
|
*Gregory P. Chandler |
|
Director |
|
April 10, 2017 |
|
Gregory P. Chandler |
|
|
|
|
|
|
|
|
|
|
|
*Sam Lambroza |
|
Director |
|
April 10, 2017 |
|
Sam Lambroza |
|
|
|
|
|
|
|
|
|
|
|
*By: |
/s/ Salvatore Faia |
|
|
|
April 10, 2017 |
Salvatore Faia |
|
|
|
|
|
Attorney-in-Fact |
|
|
|
|
|
THE RBB FUND, INC.
(the Company)
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Julian A. Brodsky, hereby constitutes and appoints Salvatore Faia, Michael P. Malloy, James G. Shaw, Edward Paz, and Robert Amweg, his true and lawful attorneys, to execute in his name, place, and stead, in his capacity as Director or officer, or both, of the Company, the Registration Statement and any amendments thereto and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission; and said attorneys shall have full power and authority to do and perform in his name and on his behalf, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as he might or could do in person, said acts of said attorneys being hereby ratified and approved.
DATED: |
February 16, 2017 |
|
|
|
|
|
|
|
|
/s/ Julian A. Brodsky |
|
|
Julian A. Brodsky |
|
THE RBB FUND, INC.
(the Company)
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, J. Richard Carnall, hereby constitutes and appoints Salvatore Faia, Michael P. Malloy, James G. Shaw, Edward Paz, and Robert Amweg, his true and lawful attorneys, to execute in his name, place, and stead, in his capacity as Director or officer, or both, of the Company, the Registration Statement and any amendments thereto and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission; and said attorneys shall have full power and authority to do and perform in his name and on his behalf, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as he might or could do in person, said acts of said attorneys being hereby ratified and approved.
DATED: |
February 16, 2017 |
|
|
|
|
|
|
|
|
/s/ J. Richard Carnall |
|
|
J. Richard Carnall |
|
THE RBB FUND, INC.
(the Company)
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Nicholas A. Giordano, hereby constitutes and appoints Salvatore Faia, Michael P. Malloy, James G. Shaw, Edward Paz, and Robert Amweg, his true and lawful attorneys, to execute in his name, place, and stead, in his capacity as Director or officer, or both, of the Company, the Registration Statement and any amendments thereto and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission; and said attorneys shall have full power and authority to do and perform in his name and on his behalf, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as he might or could do in person, said acts of said attorneys being hereby ratified and approved.
DATED: |
February 16, 2017 |
|
|
|
|
|
|
|
|
/s/ Nicholas A. Giordano |
|
|
Nicholas A. Giordano |
|
THE RBB FUND, INC.
(the Company)
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Arnold M. Reichman, hereby constitutes and appoints Salvatore Faia, Michael P. Malloy, James G. Shaw, Edward Paz, and Robert Amweg, his true and lawful attorneys, to execute in his name, place, and stead, in his capacity as Director or officer, or both, of the Company, the Registration Statement and any amendments thereto and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission; and said attorneys shall have full power and authority to do and perform in his name and on his behalf, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as he might or could do in person, said acts of said attorneys being hereby ratified and approved.
DATED: |
February 16, 2017 |
|
|
|
|
|
|
|
|
/s/ Arnold M. Reichman |
|
|
Arnold M. Reichman |
|
THE RBB FUND, INC.
(the Company)
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Robert Sablowsky, hereby constitutes and appoints Salvatore Faia, Michael P. Malloy, James G. Shaw, Edward Paz, and Robert Amweg, his true and lawful attorneys, to execute in his name, place, and stead, in his capacity as Director or officer, or both, of the Company, the Registration Statement and any amendments thereto and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission; and said attorneys shall have full power and authority to do and perform in his name and on his behalf, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as he might or could do in person, said acts of said attorneys being hereby ratified and approved.
DATED: |
February 16, 2017 |
|
|
|
|
|
|
|
|
/s/ Robert Sablowsky |
|
|
Robert Sablowsky |
|
THE RBB FUND, INC.
(the Company)
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Robert A. Straniere, hereby constitutes and appoints Salvatore Faia, Michael P. Malloy, James G. Shaw, Edward Paz, and Robert Amweg, his true and lawful attorneys, to execute in his name, place, and stead, in his capacity as Director or officer, or both, of the Company, the Registration Statement and any amendments thereto and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission; and said attorneys shall have full power and authority to do and perform in his name and on his behalf, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as he might or could do in person, said acts of said attorneys being hereby ratified and approved.
DATED: |
February 16, 2017 |
|
|
|
|
|
|
|
|
/s/ Robert Straniere |
|
|
Robert Straniere |
|
THE RBB FUND, INC.
(the Company)
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Gregory P. Chandler, hereby constitutes and appoints Salvatore Faia, Michael P. Malloy, James G. Shaw, Edward Paz, and Robert Amweg, his true and lawful attorneys, to execute in his name, place, and stead, in his capacity as Director or officer, or both, of the Company, the Registration Statement and any amendments thereto and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission; and said attorneys shall have full power and authority to do and perform in his name and on his behalf, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as he might or could do in person, said acts of said attorneys being hereby ratified and approved.
DATED: |
February 17, 2017 |
|
|
|
|
|
|
|
|
/s/ Gregory P. Chandler |
|
|
Gregory P. Chandler |
|
THE RBB FUND, INC.
(the Company)
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Sam Lambroza, hereby constitutes and appoints Salvatore Faia, Michael P. Malloy, James G. Shaw, Edward Paz, and Robert Amweg, his true and lawful attorneys, to execute in his name, place, and stead, in his capacity as Director or officer, or both, of the Company, the Registration Statement and any amendments thereto and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission; and said attorneys shall have full power and authority to do and perform in his name and on his behalf, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as he might or could do in person, said acts of said attorneys being hereby ratified and approved.
DATED: |
February 16, 2017 |
|
|
|
|
|
|
|
|
/s/ Sam Lambroza |
|
|
Sam Lambroza |
|
PEA 216
EXHIBIT INDEX
EXHIBIT |
|
DESCRIPTION |
|
|
|
(a)(82) |
|
Articles Supplementary of Registrant (Orinda Income Opportunities Fund) |
|
|
|
(a)(83) |
|
Articles Supplementary of Registrant (Abbey Capital Futures Strategy Fund Class T) |
|
|
|
(d)(11) |
|
First Amendment to Investment Advisory Agreement (Abbey Capital Futures Strategy Fund ) between Registrant and Abbey Capital Limited |
|
|
|
(d)(12) |
|
Form of Contractual Fee Waiver (Abbey Capital Futures Strategy Fund) between Registrant and Abbey Capital Limited |
|
|
|
(d)(13) |
|
Form of Trading Advisory Agreement (Abbey Capital Futures Strategy Fund) among Abbey Capital Offshore Fund Limited, Abbey Capital Limited and Aspect Capital Limited |
|
|
|
(g)(3) |
|
Addendum to Custody Agreement dated January 5, 2017 |
|
|
|
(i)(1) |
|
Opinion of Counsel |
|
|
|
(i)(2) |
|
Consent of Counsel |
|
|
|
(j) |
|
Consent of Ernst & Young LLP |
|
|
|
(m)(3) |
|
Plan of Distribution pursuant to Rule 12b-1 ( Abbey Capital Futures Strategy Fund Class T) |
Exhibit (a)(82)
THE RBB FUND, INC.
ARTICLES SUPPLEMENTARY
THE RBB FUND, INC., a Maryland corporation (the Corporation), hereby certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: In accordance with the requirements of Section 2-208 of the Maryland General Corporation Law, and under a power contained in the charter of the Corporation (the Charter), the Board of Directors of the Corporation (the Board of Directors) adopted resolutions classifying an aggregate of 300,000,000 authorized but unclassified and unissued shares of common stock, par value $.001 per share (the Common Stock), of the Corporation as follows:
1. Class KKKKKK . 100,000,000 shares of authorized but unclassified and unissued shares of Common Stock (the Undesignated Common Stock) are hereby classified and designated as Class KKKKKK shares of Common Stock representing interests in the Orinda Income Opportunities Fund Class I Shares.
2. Class LLLLLL . 100,000,000 shares of Undesignated Common Stock are hereby classified and designated as Class LLLLLL shares of Common Stock representing interests in the Orinda Income Opportunities Fund Class A Shares.
3. Class MMMMMM . 100,000,000 shares of Undesignated Common Stock are hereby classified and designated as Class MMMMMM shares of Common Stock representing interests in the Orinda Income Opportunities Fund Class D Shares.
SECOND: A description of the shares so classified with the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption as set or changed by the Board of Directors is as set forth in Article VI, Section (6) of the Corporations Articles of Incorporation and as set forth elsewhere in the Charter with respect to stock of the Corporation generally, and as follows:
1. To the full extent permitted by applicable law, the Corporation may, without the vote of the shares of any class of capital stock of the Corporation then outstanding and if so determined by the Board of Directors:
(A)(1) sell and convey the assets belonging to Class KKKKKK, Class LLLLLL and Class MMMMMM Common Stock (each a Class) to another trust or corporation that is a management investment company (as defined in the Investment Company Act of 1940, as amended) and is organized under the laws of any state of the United States for consideration, which may include the assumption of all outstanding obligations, taxes and other liabilities, accrued or contingent, belonging to such Class and which may include securities issued by such trust or
corporation. Following such sale and conveyance, and after making provision for the payment of any liabilities belonging to such Class that are not assumed by the purchaser of the assets belonging to such Class, the Corporation may, at its option, redeem all outstanding shares of such Class at the net asset value thereof as determined by the Board of Directors in accordance with the provisions of applicable law, less such redemption fee or other charge, if any, as may be fixed by resolution of the Board of Directors. Notwithstanding any other provision of the Charter to the contrary, the redemption price may be paid in any combination of cash or other assets belonging to such Class, including but not limited to the distribution of the securities or other consideration received by the Corporation for the assets belonging to such Class upon such conditions as the Board of Directors deems, in its sole discretion, to be appropriate and consistent with applicable law and the Charter;
(2) sell and convert the assets belonging to a Class into money and, after making provision for the payment of all obligations, taxes and other liabilities, accrued or contingent, belonging to such Class, the Corporation may, at its option, redeem all outstanding shares of such Class at the net asset value thereof as determined by the Board of Directors in accordance with the provisions of applicable law, less such redemption fee or other charge, if any, as may be fixed by resolution of the Board of Directors upon such conditions as the Board of Directors deems, in its sole discretion, to be appropriate and consistent with applicable law and the Charter; or
(3) combine the assets belonging to a Class with the assets belonging to any one or more other classes of capital stock of the Corporation if the Board of Directors reasonably determines that such combination will not have a material adverse effect on the stockholders of any class of capital stock of the Corporation participating in such combination. In connection with any such combination of assets, the shares of the Class then outstanding may, if so determined by the Board of Directors, be converted into shares of any other class or classes of capital stock of the Corporation with respect to which conversion is permitted by applicable law, or may be redeemed, at the option of the Corporation, at the net asset value thereof as determined by the Board of Directors in accordance with the provisions of applicable law, less such redemption fee or other charge, or conversion cost, if any, as may be fixed by resolution of the Board of Directors upon such conditions as the Board of Directors deems, in its sole discretion, to be appropriate and consistent with applicable law and the Charter. Notwithstanding any other provision of these Articles Supplementary or the Charter to the contrary, any redemption price, or part thereof, paid pursuant to this section may be paid in shares of any other existing or future class or classes of capital stock of the Corporation; and
(B) without limiting the foregoing, at its option, redeem shares of the Classes for any other reason if the Board of Directors has determined that it is in the best interest of the Corporation to do so. Any such redemption shall be at the net asset value of such shares of such Class being redeemed less such redemption
fee or other charge, if any, as may be fixed by resolution of the Board of Directors and shall be made and effective upon such terms and in accordance with procedures approved by the Board of Directors at such time.
2. The shares of Class KKKKKK, Class LLLLLL, and Class MMMMMM Common Stock will be issued without stock certificates.
THIRD: The shares aforesaid have been duly classified by the Board of Directors under the authority contained in the Charter of the Corporation. The aggregate number of authorized shares of stock of the Corporation is not changed by the Articles Supplementary.
FOURTH: Immediately after the classification of shares of Undesignated Common Stock as shares of Class KKKKKK, Class LLLLLL and Class MMMMMM Common Stock:
(a) the Corporation has the authority to issue 100,000,000,000 shares of its Common Stock, par value $.001 per share, and the aggregate par value of all the shares of all classes is $100,000,000; and
(b) the number of authorized shares of each class of Common Stock is as follows:
Class A |
- |
100,000,000 |
|
Class B |
- |
100,000,000 |
|
Class C |
- |
100,000,000 |
|
Class D |
- |
100,000,000 |
|
Class E |
- |
500,000,000 |
|
Class F |
- |
500,000,000 |
|
Class G |
- |
500,000,000 |
|
Class H |
- |
500,000,000 |
|
Class I |
- |
1,500,000,000 |
|
Class J |
- |
500,000,000 |
|
Class K |
- |
500,000,000 |
|
Class L |
- |
1,500,000,000 |
|
Class M |
- |
500,000,000 |
|
Class N |
- |
500,000,000 |
|
Class O |
- |
500,000,000 |
|
Class P |
- |
100,000,000 |
|
Class Q |
- |
100,000,000 |
|
Class R |
- |
500,000,000 |
|
Class S |
- |
500,000,000 |
|
Class T |
- |
500,000,000 |
|
Class U |
- |
500,000,000 |
|
Class V |
- |
500,000,000 |
|
Class W |
- |
100,000,000 |
|
Class X |
- |
50,000,000 |
|
Class Y |
- |
50,000,000 |
|
Class Delta 4 |
- |
1,000,000 |
|
Class Epsilon 1 |
- |
1,000,000 |
|
Class Epsilon 2 |
- |
1,000,000 |
|
Class Epsilon 3 |
- |
1,000,000 |
|
Class Epsilon 4 |
- |
1,000,000 |
|
Class Zeta 1 |
- |
1,000,000 |
|
Class Zeta 2 |
- |
1,000,000 |
|
Class Zeta 3 |
- |
1,000,000 |
|
Class Zeta 4 |
- |
1,000,000 |
|
Class Eta 1 |
- |
1,000,000 |
|
Class Eta 2 |
- |
1,000,000 |
|
Class Eta 3 |
- |
1,000,000 |
|
Class Eta 4 |
- |
1,000,000 |
|
Class Theta 1 |
- |
1,000,000 |
|
Class Theta 2 |
- |
1,000,000 |
|
Class Theta 3 |
- |
1,000,000 |
|
Class Theta 4 |
- |
1,000,000 |
|
for a total of 84,323,000,000 shares classified into separate classes of Common Stock.
FIFTH: The undersigned President of the Corporation acknowledges these Articles Supplementary to be the corporate act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned President acknowledges that, to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, The RBB Fund, Inc. has caused these presents to be signed in its name and on its behalf by its President and attested by its Secretary on the 7 th day of April, 2017.
ATTEST: |
|
THE RBB FUND, INC. |
||
|
|
|
||
|
|
|
||
By: |
James G. Shaw |
|
By: |
/s/ Salvatore Faia |
|
James G. Shaw |
|
|
Salvatore Faia |
|
Secretary |
|
|
President |
Exhibit (a)(83)
THE RBB FUND, INC.
ARTICLES SUPPLEMENTARY
THE RBB FUND, INC., a Maryland corporation (the Corporation), hereby certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: In accordance with the requirements of Section 2-208 of the Maryland General Corporation Law, and under a power contained in the charter of the Corporation (the Charter), the Board of Directors of the Corporation (the Board of Directors) adopted resolutions classifying an aggregate of 100,000,000 authorized but unclassified and unissued shares of common stock, par value $.001 per share (the Common Stock), of the Corporation as follows:
1. Class NNNNNN . 100,000,000 shares of authorized but unclassified and unissued shares of Common Stock (the Undesignated Common Stock) are hereby classified and designated as Class NNNNNN shares of Common Stock representing interests in the Abbey Capital Futures Strategy Fund Class T Shares.
SECOND: A description of the shares so classified with the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption as set or changed by the Board of Directors is as set forth in Article VI, Section (6) of the Corporations Articles of Incorporation and as set forth elsewhere in the Charter with respect to stock of the Corporation generally, and as follows:
1. To the full extent permitted by applicable law, the Corporation may, without the vote of the shares of any class of capital stock of the Corporation then outstanding and if so determined by the Board of Directors:
(A)(1) sell and convey the assets belonging to Class NNNNNN Common Stock (each a Class) to another trust or corporation that is a management investment company (as defined in the Investment Company Act of 1940, as amended) and is organized under the laws of any state of the United States for consideration, which may include the assumption of all outstanding obligations, taxes and other liabilities, accrued or contingent, belonging to such Class and which may include securities issued by such trust or corporation. Following such sale and conveyance, and after making provision for the payment of any liabilities belonging to such Class that are not assumed by the purchaser of the assets belonging to such Class, the Corporation may, at its option, redeem all outstanding shares of such Class at the net asset value thereof as determined by the Board of Directors in accordance with the provisions of applicable law, less such redemption fee or other charge, if any, as may be fixed by resolution of the Board of Directors.
Notwithstanding any other provision of the Charter to the contrary, the redemption price may be paid in any combination of cash or other assets belonging to such Class, including but not limited to the distribution of the securities or other consideration received by the Corporation for the assets belonging to such Class upon such conditions as the Board of Directors deems, in its sole discretion, to be appropriate and consistent with applicable law and the Charter;
(2) sell and convert the assets belonging to a Class into money and, after making provision for the payment of all obligations, taxes and other liabilities, accrued or contingent, belonging to such Class, the Corporation may, at its option, redeem all outstanding shares of such Class at the net asset value thereof as determined by the Board of Directors in accordance with the provisions of applicable law, less such redemption fee or other charge, if any, as may be fixed by resolution of the Board of Directors upon such conditions as the Board of Directors deems, in its sole discretion, to be appropriate and consistent with applicable law and the Charter; or
(3) combine the assets belonging to a Class with the assets belonging to any one or more other classes of capital stock of the Corporation if the Board of Directors reasonably determines that such combination will not have a material adverse effect on the stockholders of any class of capital stock of the Corporation participating in such combination. In connection with any such combination of assets, the shares of the Class then outstanding may, if so determined by the Board of Directors, be converted into shares of any other class or classes of capital stock of the Corporation with respect to which conversion is permitted by applicable law, or may be redeemed, at the option of the Corporation, at the net asset value thereof as determined by the Board of Directors in accordance with the provisions of applicable law, less such redemption fee or other charge, or conversion cost, if any, as may be fixed by resolution of the Board of Directors upon such conditions as the Board of Directors deems, in its sole discretion, to be appropriate and consistent with applicable law and the Charter. Notwithstanding any other provision of these Articles Supplementary or the Charter to the contrary, any redemption price, or part thereof, paid pursuant to this section may be paid in shares of any other existing or future class or classes of capital stock of the Corporation; and
(B) without limiting the foregoing, at its option, redeem shares of the Classes for any other reason if the Board of Directors has determined that it is in the best interest of the Corporation to do so. Any such redemption shall be at the net asset value of such shares of such Class being redeemed less such redemption fee or other charge, if any, as may be fixed by resolution of the Board of Directors and shall be made and effective upon such terms and in accordance with procedures approved by the Board of Directors at such time.
2. The shares of Class NNNNNN Common Stock will be issued without stock certificates.
THIRD: The shares aforesaid have been duly classified by the Board of Directors under the authority contained in the Charter of the Corporation. The aggregate number of authorized shares of stock of the Corporation is not changed by the Articles Supplementary.
FOURTH: Immediately after the classification of shares of Undesignated Common Stock as shares of Class NNNNNN Common Stock:
(a) the Corporation has the authority to issue 100,000,000,000 shares of its Common Stock, par value $.001 per share, and the aggregate par value of all the shares of all classes is $100,000,000; and
(b) the number of authorized shares of each class of Common Stock is as follows:
Class XXXXX |
- |
100,000,000 |
|
Class YYYYY |
- |
100,000,000 |
|
Class ZZZZZ |
- |
100,000,000 |
|
|
|
|
|
Class AAAAAA |
- |
100,000,000 |
|
Class BBBBBB |
- |
100,000,000 |
|
Class CCCCCC |
- |
100,000,000 |
|
Class DDDDDD |
- |
100,000,000 |
|
Class EEEEEE |
- |
100,000,000 |
|
Class FFFFFF |
- |
100,000,000 |
|
Class GGGGGG |
- |
100,000,000 |
|
Class HHHHHH |
- |
100,000,000 |
|
Class IIIIII |
- |
100,000,000 |
|
Class JJJJJJ |
- |
100,000,000 |
|
Class KKKKKK |
- |
100,000,000 |
|
Class LLLLLL |
- |
100,000,000 |
|
Class MMMMMM |
- |
100,000,000 |
|
Class NNNNNN |
- |
100,000,000 |
|
|
|
|
|
Class Select |
- |
700,000,000 |
|
Class Beta 2 |
- |
1,000,000 |
|
Class Beta 3 |
- |
1,000,000 |
|
Class Beta 4 |
- |
1,000,000 |
|
Class Principal Money |
- |
700,000,000 |
|
Class Gamma 2 |
- |
1,000,000 |
|
Class Gamma 3 |
- |
1,000,000 |
|
Class Gamma 4 |
- |
1,000,000 |
|
|
|
|
|
Class Bear Stearns Money |
- |
2,500,000,000 |
|
Class Bear Stearns Municipal Money |
- |
1,500,000,000 |
|
Class Bear Stearns Government Money |
- |
1,000,000,000 |
|
|
|
|
|
Class Delta 4 |
- |
1,000,000 |
|
Class Epsilon 1 |
- |
1,000,000 |
|
Class Epsilon 2 |
- |
1,000,000 |
|
Class Epsilon 3 |
- |
1,000,000 |
|
Class Epsilon 4 |
- |
1,000,000 |
|
Class Zeta 1 |
- |
1,000,000 |
|
Class Zeta 2 |
- |
1,000,000 |
|
Class Zeta 3 |
- |
1,000,000 |
|
Class Zeta 4 |
- |
1,000,000 |
|
Class Eta 1 |
- |
1,000,000 |
|
Class Eta 2 |
- |
1,000,000 |
|
Class Eta 3 |
- |
1,000,000 |
|
Class Eta 4 |
- |
1,000,000 |
|
Class Theta 1 |
- |
1,000,000 |
|
Class Theta 2 |
- |
1,000,000 |
|
Class Theta 3 |
- |
1,000,000 |
|
Class Theta 4 |
- |
1,000,000 |
|
for a total of 84,423,000,000 shares classified into separate classes of Common Stock.
FIFTH: The undersigned President of the Corporation acknowledges these Articles Supplementary to be the corporate act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned President acknowledges that, to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, The RBB Fund, Inc. has caused these presents to be signed in its name and on its behalf by its President and attested by its Secretary on the 7 th day of April, 2017.
ATTEST: |
|
THE RBB FUND, INC. |
||
|
|
|
|
|
|
|
|
|
|
By: |
/s/ James G. Shaw |
|
By: |
/s/ Salvatore Faia |
|
James G. Shaw |
|
|
Salvatore Faia |
|
Secretary |
|
|
President |
Exhibit (d)(11)
FIRST AMENDMENT TO INVESTMENT ADVISORY AGREEMENT
THIS AMENDMENT is made on the 2 nd day of March 2017, by and between:
1. The RBB Fund, Inc. a Maryland corporation (the Fund ); and
2. Abbey Capital Limited, a company organized under the laws of Ireland with its principal office at 1-2 Cavendish Row, Dublin 1, Ireland (the Investment Adviser ).
WHEREAS , the Fund and the Investment Adviser have entered into an investment advisory agreement dated the 25th day of June, 2014, relating to the provision of investment advisory services to the Abbey Capital Futures Strategy Fund (the Portfolio ) (the Investment Advisory Agreement );
WHEREAS , in accordance with Section 14 of the Investment Advisory Agreement the Fund and the Investment Adviser now wish to amend Section 11 (a) of the Investment Advisory Agreement as set out in this amendment agreement (the Amendment ).
NOW THEREFORE , in consideration of the premises and mutual covenants herein contained, and intending to be legally bound hereby, it is agreed as follows:
1. Section 11 (a) of the Investment Advisory Agreement shall be deleted in its entirety and replaced with the following:
SECTION 11. COMPENSATION.
(a) For the services provided and the expenses assumed pursuant to this Agreement with respect to the Portfolio, the Fund will pay the Investment Adviser from the assets of the Portfolio and the Investment Adviser will accept as full compensation therefor a fee, computed daily and payable monthly, at the annual rate of 1.77% of the Portfolios average daily net assets. For any period less than a month during which this Agreement is in effect, the fee shall be prorated according to the proportion which such period bears to a full month.
2. Except where the context otherwise requires, terms and expressions described in this Amendment shall bear the same meaning as those given to them in the Investment Advisory Agreement.
3. This Amendment is subject to and shall be construed and enforced with the laws applicable to the Investment Advisory Agreement and the jurisdiction provisions of the Investment Advisory Agreement shall apply equally to this Amendment.
4. This Amendment may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. The Parties agree that this Amendment may be exchanged by electronic means and that any portable document format (pdf) file, facsimile or other reproduction of its signature on any counterpart of this Amendment shall be equal to and enforceable and shall have the same binding force and effect as its original
signature.
5. Except as expressly amended by the Amendment, the Parties hereby confirm that in all other respects the Investment Advisory Agreement and the rights and obligations therein remain in full force and effect.
6. This Amendment shall take effect on February 28, 2017.
IN WITNESS WHEREOF , the Parties hereto have caused this Amendment to be duly executed as of the day and year first above written.
For and on behalf of The RBB Fund, Inc. |
|
|
|
||
|
|
|
Signed: |
/s/ Salvatore Faia |
|
|
|
|
Name: |
Salvatore Faia |
|
|
|
|
Title: |
President |
|
|
|
|
|
|
|
For and on behalf of Abbey Capital Limited |
|
|
|
||
|
|
|
Signed: |
/s/ Mick Swift |
|
|
|
|
Name: |
Mick Swift |
|
|
|
|
Title: |
Deputy CEO and Research Director |
|
Exhibit (d)(12)
|
|
|
|
|
Abbey Capital Ltd., 1-2 Cavendish Row, Dublin1, Ireland Tel: +353 1 828 0400 Email: info@abbeycapital.com Fax: +353 1 828 0499 Web: www.abbeycapital.com |
April 10, 2017
Salvatore Faia
President
The RBB Fund, Inc.
103 Bellevue Parkway
Wilmington, DE 19809
Re: The RBB Fund, Inc. - Abbey Capital Futures Strategy Fund (the Fund)
Dear Mr. Faia:
By our execution of this letter agreement (this Agreement), Abbey Capital Limited (the Adviser) agrees that in order to improve the performance of the Fund, the Adviser shall, from April 10, 2017 through April 30, 2018, waive all or a portion of its investment advisory fees and/or reimburse expenses (other than acquired fund fees and expenses, brokerage commissions, extraordinary items, interest and taxes) in an aggregate amount equal to the amount by which the Funds total operating expenses (other than acquired fund fees and expenses, brokerage commissions, extraordinary items, interest and taxes) exceed a total operating expense ratio (other than brokerage commissions, extraordinary items, interest and taxes) of 1.79% of the Class I Shares average daily net assets, 2.04% of the Class A Shares average daily net assets, 2.79% of the Class C Shares average daily net assets and 2.04% of the Class T Shares average daily net assets.
If at any time the total annual fund operating expenses for a year are less than 1.79% of the Class I Shares average daily net assets, 2.04% of the Class A Shares average daily net assets, 2.79% of the Class C Shares average daily net assets, or 2.04% of the Class T Shares average daily net assets the Adviser shall be entitled to reimbursement by the Fund, in whole or in part as provided below, of the investment advisory fees waived or reduced and other payments remitted by the Adviser to the Fund pursuant to this Agreement within three years from the date on which such waiver or reimbursement was made by the Adviser if such reimbursement by the Fund does not cause the Fund to exceed expense limitations that were in effect at the time of the waiver or reimbursement. The total amount of reimbursement to which the Adviser may be entitled (the Reimbursement Amount) shall equal, at any time, the sum of all investment advisory fees previously waived or reduced by the Adviser and all other payments remitted by the Adviser to the Fund, pursuant to this Agreement, less any reimbursement previously paid by the Fund to the Adviser, with respect to such waivers, reductions, and payments. The Reimbursement Amount shall not include any additional charges or fees whatsoever, including, e.g., interest accruable on the Reimbursement Amount.
|
ABBEY CAPITAL LIMITED |
|
|
|
|
|
By: |
|
|
Name: |
|
|
Title: |
|
Your signature below acknowledges |
|
|
acceptance of this Agreement: |
|
|
|
|
|
By: |
|
|
|
Salvatore Faia |
|
|
President |
|
|
The RBB Fund, Inc. |
|
|
Directors: Tony Gannon, Tim Brosnan, Claire Gately, Mick Swift, David McCarthy (US) |
|
Limited liability company incorporated in Ireland. Registered Number 327102 |
|
Abbey Capital Limited is regulated by the Central Bank of Ireland |
Exhibit (d)(13)
TRADING ADVISORY AGREEMENT
Abbey Capital Futures Strategy Fund
Trading Advisory Agreement (this Agreement) entered into as of the 9th day of January, 2017, by and among ABBEY CAPITAL LIMITED, an Irish limited company (the Adviser), Abbey Capital Offshore Fund Limited, an exempted company incorporated under the laws of the Cayman Islands and a wholly-owned subsidiary of the Portfolio as defined below (the Subsidiary) and Aspect Capital Limited with its registered office at 10 Portman Square, London W1H 6AZ, United Kingdom (the Trader).
WHEREAS, the Adviser has entered into an Investment Advisory Agreement dated 25 th day of June 2014 (the Investment Advisory Agreement) with The RBB Fund, Inc. (the Fund), relating to the provision of investment advisory services to the Abbey Capital Futures Strategy Fund (the Portfolio);
WHEREAS, the Adviser has entered into an Investment Advisory Agreement dated 25 th day of June 2014 (together with the Investment Advisory Agreement, the Advisory Agreement) with the Subsidiary, relating to the provision of investment advisory services to the Subsidiary;
WHEREAS, the Adviser, on behalf of the Portfolio, may allocate a portion of the Portfolios assets not to exceed in the aggregate 25% of its assets to the Subsidiary;
WHEREAS, the Advisory Agreement provides that the Adviser may delegate any or all of its investment advisory responsibilities under the Advisory Agreement to one or more sub-advisers;
WHEREAS, the Adviser and the Board of Directors of the Fund desire to retain the Trader to render portfolio management services to the Subsidiary in the manner and on the terms set forth in this Agreement, and the Trader is willing to provide such services.
NOW, THEREFORE, in consideration of the premises and mutual covenants hereinafter set forth, the parties hereto agree as follows:
1. Trading Services .
(a) The Adviser hereby appoints the Trader to act as a commodity trading advisor (CTA) to the Subsidiary with respect to that portion of the Subsidiarys assets allocated from time to time to the Trader by the Adviser for the periods and on the terms herein set forth (the Allocated Assets). The Trader accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided.
(b) The Trader shall, subject to the supervision and oversight of the Adviser, trade the Allocated Assets on behalf of the Subsidiary in accordance with
the terms of this Agreement and the Supplemental Trading Agreement entered into by the Adviser and the Trader in relation to the Allocated Assets and, save as otherwise disclosed to the Adviser, in accordance with (i) the investment objective, policies and restrictions of the Subsidiary and the Portfolio in relation to the Subsidiary set forth in the Portfolios prospectus and statement of additional information, as they may be amended from time to time, any additional policies or guidelines, including without limitation compliance policies and procedures, established by the Adviser, the Funds Chief Compliance Officer, or by the Funds Board of Directors (Board) that have been furnished in writing to the Trader , (ii) the written instructions and directions received from the Adviser and the Fund as delivered; and (iii) all federal and state laws applicable to the Trader in performing its duties under this Agreement, all as may be in effect from time to time provided that the Trader shall bear no responsibility or liability for failure to comply with any objective, policy, restriction, guideline, procedures, instruction or direction referenced in this paragraph or any amendment or supplement thereto until the Trader has received and had a reasonable opportunity to review such objective, policy, restriction, guideline, procedures, instruction or direction. The foregoing are referred to below together as the Policies.
For purposes of compliance with the Policies, the Trader shall be entitled to treat the Allocated Assets as though the Allocated Assets constituted the entire Subsidiary, and the Trader shall not be responsible in any way for the compliance of any assets of the Subsidiary, other than the Allocated Assets, with the Policies. Subject to the foregoing, the Trader is authorized, in its discretion and without prior consultation with the Adviser, to buy, sell (including short sales), lend and otherwise trade in any commodity interests, including futures contracts, options on futures contracts (selling uncovered options is not permitted), spot or forward contracts or commodities and swaps (the Commodity Interests) on behalf of the Subsidiary, without regard to the length of time the Commodity Interests have been held and the resulting rate of portfolio turnover or any tax considerations; and the majority or the whole of the Allocated Assets may be invested in such proportions of Commodity Interests as the Trader shall determine. Notwithstanding the foregoing provisions of this Section 1(b), however, (i) the Trader shall, upon and in accordance with written instructions from the Adviser and subject to paragraph 7(g) of the Supplemental Trading Agreement, effect such portfolio transactions for the Allocated Assets as the Adviser shall determine are necessary in order for the Subsidiary to comply with the Policies, and (ii) upon notice to the Trader, the Adviser may effect in-kind redemptions with shareholders of the Portfolio with securities included within the Allocated Assets.
(c) Absent instructions from the Adviser or the officers of the Fund to the contrary, the Trader shall place orders pursuant to its determinations with any futures commission merchant the Trader so chooses, provided, however, the orders are settled with a futures commission merchant or Foreign Exchange clearing broker with which the Subsidiary has an account.
(d) The Trader hereby agrees that it shall not consult with any other investment adviser or Commodity Trading Advisor (CTA) to the Fund with respect to transactions in Commodity Interests for the Allocated Assets or any other transactions in the Funds assets, other than for the purposes of complying with the conditions of paragraphs (a) and (b) of Rule 12d3-1 under the Investment Company Act of 1940 (the 1940 Act) (for the avoidance of doubt, given the nature of the Commodity Interests to be traded by the Trader as at the date of this Agreement, Rule 12d3-1 does not apply).
(e) The Trader has provided the Adviser with a true and complete copy and/or accurate summary of its compliance policies and procedures pursuant to best practices for all CTAs registered with the Commodity Futures Trading Commission (CFTC) or, if applicable, Rule 206(4)-7 of the Investment Advisers Act of 1940 (the Advisers Act) (the Trader Compliance Policies). The Traders chief compliance officer (Trader CCO) shall provide to the Funds Chief Compliance Officer (Fund CCO) or his or her delegate using the following email address: Legal&compliance@abbeycapital.com (or any other email address provided in writing and expressed to be for this purpose) promptly (and in no event in more than 10 business days) the following reports and certifications to the extent that they relate to the services provided by the Trader to the Subsidiary with respect to the Allocated Assets:
(i) a report of any material changes to the Trader Compliance Policies;
(ii) a report of any material compliance matters, as defined by Rule 38a-1 under the 1940 Act, that have occurred in connection with the Trader Compliance Policies; and
(iii) an annual (or more frequently as the Fund CCO may reasonably request) certification regarding the Traders compliance with Rule 206(4)-7 under the Advisers Act, if applicable, and Section 38a-1 of the 1940 Act as well as the foregoing sub-paragraphs (i) (ii).
(f) The Trader may, on occasions when it deems the purchase or sale of a Commodity Interest to be in the best interests of the Subsidiary as well as other fiduciary or agency accounts managed by the Trader, aggregate, to the extent permitted by applicable laws and regulations, the Commodity
Interests to be sold or purchased in order to obtain the best overall terms available. In such event, allocation of the securities so purchased or sold, as well as the expenses incurred in the transaction, will be made by the Trader in the manner it considers to be most fair and equitable over time to the Subsidiary and to its other accounts. In that connection, however, the Trader agrees that: (i) in rendering consulting, advisory and management services to other Commodity Interest trading accounts and entities, it will take all reasonable steps to achieve an equitable treatment of all accounts utilizing the same investment programme as the Allocated Assets and will use a fair and reasonable system of order entry for all accounts utilizing the same trading strategy as the Allocated Assets; and (ii) it will not deliberately use any trading strategies for the Subsidiary which it or its principals know are inferior to those employed by other accounts using the same investment programme as the Allocated Assets. The Trader further agrees to be aware of the position limits imposed on certain Commodity Interest contracts by the CFTC or applicable contract market. If, at any time during the term of this Agreement, the Trader is required to aggregate the Subsidiarys Commodity Interest positions with the positions of any other person for purposes of applying the CFTC or exchange imposed speculative position limits, the Trader will promptly notify the Adviser if the Subsidiarys positions are included in an aggregate amount which exceeds the applicable speculative position limit. If the speculative positions limits are reached in any Commodity Interest contract, the Trader will modify the trading of the Subsidiary and its other accounts in a reasonable and good faith effort to achieve an equitable treatment of all accounts. The Trader currently believes and represents that such speculative limits will not materially affect its trading recommendations or strategy for the Subsidiary given the Traders current accounts and all proposed accounts for which the Trader has a contract to act as a CTA.
(g) The Trader, in connection with its rights and duties with respect to the Subsidiary shall use the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.
(h) The services of the Trader hereunder are not deemed exclusive and the Trader shall be free to render similar services to others (including other investment companies) so long as its services under this Agreement are not impaired thereby. Save any ordinary course employment restrictions, the Trader will waive enforcement of any non-compete agreement or other agreement or arrangement to which it is currently a party that restricts, limits, or otherwise interferes with the ability of the Adviser to employ or engage any person or entity to provide investment advisory or other services and will transmit to any person or entity notice of such waiver as may be required to give effect to this provision; and, save for any ordinary course employment restrictions, the Trader will not knowingly become a
party to any non-compete agreement or any other agreement, arrangement, or understanding that would restrict, limit, or otherwise interfere with the ability of the Adviser and the Fund or any of their affiliates to employ or engage any person or organization, now or in the future, to manage the Subsidiary, the Portfolio or any other assets managed by the Adviser.
(i) The Trader shall furnish the Adviser and the administrator of the Fund (the Administrator) daily, weekly, monthly, quarterly and annual reports concerning portfolio transactions and performance of the Allocated Assets as the Adviser may reasonably determine in such form as may be mutually agreed upon, and agrees to review the Allocated Assets with the Adviser and discuss the management of the Allocated Assets. The Trader shall promptly respond in a timely manner to reasonable requests by the Adviser, the Administrator, and the Fund CCO or their delegates for copies of the pertinent books and records maintained by the Trader relating directly to the Subsidiary. The Trader shall also provide the Adviser with such other information and reports, including information and reports related to compliance matters, as may reasonably be requested by it from time to time, including without limitation all material reasonably requested by or required to be delivered to the Board.
(j) Unless otherwise instructed by the Adviser, the Trader shall not have the power, discretion or responsibility to vote any proxies in connection with Commodity Interests in which the Allocated Assets may be invested, and the Adviser shall retain such responsibility.
(k) The Trader shall cooperate promptly and fully with the Adviser, the Subsidiary and/or the Fund in responding to any regulatory or compliance examinations or inspections (including any information requests) relating to the Fund, the Portfolio, the Subsidiary or the Adviser brought by any governmental or regulatory authorities. The Trader shall provide to the Fund CCO or his or her delegate notice of any deficiencies that are identified by the CFTC or the United States Securities and Exchange Commission (SEC) in written correspondence to the Trader and that specifically concern the services provided by the Trader to the Subsidiary pursuant to this Agreement. The Trader shall provide such notification within a reasonable period after receiving the correspondence. The Trader shall provide additional information with respect to such deficiencies as is reasonably requested by the Fund CCO or his or her delegate.
(l) The Trader shall maintain detailed records of matters pertaining to the Allocated Assets, including, without limitation, brokerage and other records of all securities transactions. Any records required to be maintained and preserved, pursuant to the provisions of Rule 31a-1 and Rule 31a-2 promulgated under the 1940 Act and/or by the CFTC, that are prepared or maintained by the Trader on behalf of the Subsidiary are the property of the Subsidiary and will be surrendered promptly to the
Subsidiary upon request and subject to the confidentiality obligations set out in paragraph 15 hereof. The Trader further agrees to preserve for the periods prescribed in Rule 31a-2 under the 1940 Act the records required to be maintained under Rule 31a-1 under the 1940 Act, and/or by the CFTC.
(m) The Trader shall promptly notify the Adviser of any financial condition that could materially impair the Traders ability to fulfill its commitments under this Agreement.
2. Representations and Warranties of the Parties
(a) The Trader represents and warrants to the Adviser as follows:
(i) The Trader is a registered CTA with the CFTC;
(ii) The Trader will carry at all times professional liability insurance with carriers approved by the Trader covering services provided hereunder by the Trader in an appropriate amount, as determined by the Trader in its discretion;
(iii) The Trader will furnish the Adviser with certificates of insurance in forms and substance reasonably acceptable to the Adviser evidencing the coverages specified in paragraph 2(a)(ii) hereof and provide notice of termination of such coverages, if any, to the Adviser and the Fund, all as promptly as reasonably possible. The Trader will notify the Adviser promptly, and in any event within 10 business days, when the Trader receives notice of any termination of the specified coverage; and
(iv) This Agreement has been duly authorized and executed by the Trader.
(b) The Adviser represents and warrants to the Trader as follows:
(i) The Adviser is registered under the Advisers Act; and
(ii) Each of the Adviser and the Fund has duly authorized the execution of this Agreement by the Adviser.
(c) The Subsidiary represents and warrants to the Trader as follows:
(i) The Subsidiary has duly authorized the execution of this Agreement;
(ii) The execution, delivery and performance of this Agreement by the Subsidiary do not violate the Subsidiarys governing documents
nor any obligation by which the Subsidiary or any of its property is bound, whether arising by contract, operation of law or otherwise;
(iii) The Subsidiary is a qualified eligible person as that term is defined in CFTC Regulation 4.7 and consents to being treated as an exempt account under CFTC Rule 4.7(c);
(iv) The Subsidiary is an eligible contract participant (as such term is defined in Section 1(a)(18) of the Commodity Exchange Act); and
(v) The Subsidiary has read and understood the Disclosure Document (as defined in the Supplemental Trading Agreement), including the Risk Disclosure Statement contained therein, and will read amendments thereto when provided by the Trader, and is aware of the risks inherent in the Investment Program (as defined in the Supplement Trading Agreement) including, without limitation, the risks inherent in trading the financial instruments envisaged in the Investment Program and the Investment Restrictions (as defined in the Supplemental Trading Agreement).
Each party agrees to notify the other immediately in writing in the event that any of the representations above cease to be true.
3. Obligations of the Adviser .
(a) The Adviser shall provide (or cause the Subsidiarys Custodian (as defined in Section 4 hereof) to provide) timely information to the Trader regarding such matters as the composition of the Allocated Assets, cash requirements and cash available for investment in the Allocated Assets, and all other information as may be reasonably necessary for the Trader to perform its responsibilities hereunder.
(b) The Adviser has furnished the Trader with a copy of the prospectus and statement of additional information of the Portfolio and the Adviser agrees during the continuance of this Agreement to furnish the Trader copies of any revisions or supplements thereto at, or, if practicable, before the time the revisions or supplements become effective. The Adviser has also furnished the Trader with a list of any broker or dealer which is (i) an affiliated person of the Adviser, the Subsidiary or the Fund or any other investment adviser of the Subsidiary or Fund; (ii) the principal underwriter of the Subsidiarys or the Funds shares; or (iii) an affiliated person of such affiliated person or principal underwriter (the List) which is attached hereto as Schedule E and the Adviser agrees to provide 30 days written notice to the Trader of any changes to the List. The Adviser agrees to furnish the Trader with copies of any financial statements or reports made by the Portfolio to its shareholders, and any further materials or
information that the Trader may reasonably request to enable it to perform its functions under this Agreement.
4. Custodian . The Adviser shall provide the Trader with a copy of the Subsidiarys agreement with any custodian designated to hold the assets of the Subsidiary (the Custodian) and any material modifications thereto (the Custody Agreement) that may affect the Traders duties, copies of such modifications to be provided to the Trader reasonably in advance of the effectiveness of such modifications. The Allocated Assets shall be maintained in the custody of the Custodian identified in, and in accordance with the terms and conditions of, the Custody Agreement (or any sub-custodian properly appointed as provided in the Custody Agreement). The Trader shall have no liability for the acts or omissions of the Custodian. Any assets added to the Subsidiary shall be delivered directly to the Custodian.
5. Use of Name . During the term of this Agreement, the Adviser shall have permission to use the Traders name in the marketing of the Portfolio, and agrees to furnish the Trader, for its prior approval (which approval shall not be unreasonably withheld) at its principal office all prospectuses, proxy statements and reports to shareholders prepared for distribution to shareholders of the Portfolio or the public that refer to the Trader in any way. If the Adviser does not receive a response from the Trader with respect to such materials within five business days of its submission for approval, such materials shall be deemed accepted by the Trader. The Trader agrees that the Adviser may request that the Trader approve use of a certain type, and that the Adviser need not provide for approval each additional piece of marketing material that is of substantially the same type.
During the term of this Agreement, the Trader shall not use the Advisers name or the Funds name without the prior consent of the Adviser and the Fund.
6. Expenses . During the Term of this Agreement, the Trader will pay all expenses incurred by it in connection with the performance of its duties under paragraph 1 hereof other than the cost (including taxes, brokerage commissions and other transaction costs, if any) of the securities or other investment instruments purchased or sold for the Subsidiary.
7. Compensation of the Trader . As full compensation for all services rendered, facilities furnished and expenses borne by the Trader hereunder, the Trader shall be paid the fees in the amounts and in the manner set forth in Appendix A hereto.
8. Independent Contractor Status . The Trader shall for all purposes hereof be deemed to be an independent contractor and shall, unless otherwise provided or authorized, have no authority to act for or represent the Subsidiary, the Portfolio, the Fund or the Adviser in any way or otherwise be deemed an agent of the Subsidiary, the Portfolio, the Fund or the Adviser.
9. Liability and Indemnification .
(a) Liability . The duties of the Trader shall be confined to those expressly set forth herein with respect to the Allocated Assets. The Trader shall not be liable for any loss arising out of any services carried out under or in connection with this Agreement or the Supplemental Trading Agreement, except a loss resulting from the Traders material breach of this Agreement or its representations or warranties herein or resulting from the Traders willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties hereunder. Under no circumstances shall the Trader be liable for or indemnify against any loss arising out of any act or omission taken by another CTA, or any other third party, in respect of any portion of the Funds assets not managed by the Trader pursuant to this Agreement or for any loss arising out of circumstances beyond the Traders reasonable control including without limitation: acts of God; changes to law and regulation; acts of terrorism; market conditions affecting the execution or settlement of transactions or the value of assets; failure or breakdown in communications not reasonably within the Traders control; the failure of any relevant exchange or clearing house.
(b) Indemnification .
(i) The Trader shall indemnify the Adviser and the Subsidiary, and their respective affiliates and controlling persons (the Adviser Indemnified Persons) for any liability and expenses, including reasonable attorneys fees, which the Adviser and/or the Subsidiary and their respective affiliates and controlling persons may sustain as a result of the Traders material breach of this Agreement or its representations and warranties herein or as a result of the Traders willful misfeasance, bad faith, gross negligence or reckless disregard of its duties hereunder or violation of applicable law; provided, however, that the Adviser Indemnified Persons shall not be indemnified for any liability or expenses that may be sustained as a result of the Adviser Indemnified Persons willful misfeasance, bad faith, gross negligence, or reckless disregard of its duties hereunder.
(ii) The Adviser shall indemnify the Trader, its affiliates and its controlling persons (the Trader Indemnified Persons) for any liability and expenses, including reasonable attorneys fees, arising from, or in connection with, the Advisers material breach of this Agreement or its representations and warranties herein or as a result of the Advisers willful misfeasance, bad faith, gross negligence or reckless disregard of its duties hereunder or violation of applicable law; provided, however, that the Trader Indemnified Persons shall not be indemnified for any liability or expenses that may be sustained as a result of the Trader Indemnified Persons
willful misfeasance, bad faith, gross negligence, or reckless disregard of its duties hereunder.
10. Effective Date and Termination . This Agreement shall become effective as of the date of its execution, and:
(a) unless otherwise terminated, this Agreement shall continue in effect until August 16, 2017, and from year to year thereafter so long as such continuance is specifically approved at least annually (i) by the Board or by vote of a majority of the outstanding voting securities of the Portfolio, and (ii) by vote of a majority of the Directors of the Fund who are not interested persons of the Fund, the Adviser or the Trader, cast in person at a meeting called for the purpose of voting on such approval;
(b) this Agreement may at any time be terminated on 60 days written notice to the Trader either by vote of the Board or by vote of a majority of the outstanding voting securities of the Portfolio;
(c) this Agreement shall automatically terminate in the event of its assignment or upon the termination of the Advisory Agreement or the Supplemental Trading Agreement; and
(d) this Agreement may be terminated by the Trader on 60 days written notice to the Adviser and the Fund, or by the Adviser immediately upon notice to the Trader.
Upon notification of termination of this Agreement, the Trader shall continue to provide the services under this Agreement during any notice period and, to the extent the Trader has not already done so, on termination of this Agreement the Trader shall close out and shall, as soon as reasonably practicable, realize all investments having consideration for prevailing market conditions. Termination of this Agreement pursuant to this paragraph 10 shall be without the payment of any penalty and shall not affect the status, obligations or liabilities or any party hereto to the others including, without limitation, the Advisers obligation to pay fees in respect of the period prior to termination in accordance with this Agreement.
11. Amendment . This Agreement may be amended at any time by mutual consent of the Adviser and the Trader, provided that, if required by law, such amendment shall also have been approved by vote of a majority of the outstanding voting securities of the Portfolio and by vote of a majority of the Directors of the Fund who are not interested persons of the Fund, the Adviser, or the Trader, cast in person at a meeting called for the purpose of voting on such approval.
12. Assignment . The Trader may not assign this Agreement and this Agreement shall automatically terminate in the event of an assignment, as such term is defined in Section 2(a)(4) of the 1940 Act. The Trader shall notify the Adviser in writing
sufficiently in advance of any proposed change of control, as defined in Section 2(a)(9) of the 1940 Act, so as to enable the Fund and/or the Adviser to: (a) consider whether an assignment will occur, (b) consider whether to enter into a new Trading Agreement with the Trader, and (c) prepare, file, and deliver any disclosure document to the Portfolios shareholders as may be required by applicable law.
13. Miscellaneous . The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be construed in accordance with applicable federal law and the laws of the State of New Delaware and shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors (subject to paragraph 10 (c) hereof) and, to the extent provided in paragraph 9 hereof, each Trader Indemnified Person and Adviser Indemnified Person. In addition, the parties submit to the non-exclusive jurisdiction of the courts of the State of Delaware. Anything herein to the contrary notwithstanding, this Agreement shall not be construed to require, or to impose any duty upon, either of the parties to do anything in violation of any applicable laws or regulations. Any provision in this Agreement requiring compliance with any statute or regulation shall mean such statute or regulation as amended and in effect from time to time.
14. Regulation S-P . In accordance with Regulation S-P, if non-public personal information regarding any partys customers or consumers is disclosed to the other party in connection with this Agreement, the other party receiving such information will not disclose or use that information other than as necessary to carry out the purposes of this Agreement.
15. Confidentiality . Each of the parties agrees that any information or recommendation supplied by or concerning either the Adviser, the Subsidiary or the Trader, that are not otherwise in the public domain or previously known to the other party in connection with the performance of its obligations and duties hereunder or under the Supplemental Trading Agreement, including without limitation portfolio holdings of the Subsidiary, financial information or other information relating to a party to this Agreement, is to be regarded as confidential (Confidential Information) and held in the strictest confidence. Each of the parties may disclose Confidential Information to the extent required by applicable law, regulation or rule of any exchange to which that party might be subject, to those of its employees who need to know such information to perform their duties, to professional advisers or designates (such as the Subsidiarys custodian) who are bound by a duty of confidentiality substantially the same as that of the disclosing party, with prior written consent of the other party(ies) or where the Confidential Information has come into the public domain other than via a breach of an obligation of confidentiality. Such disclosure may only be made after prior written notice has been provided to the other party(ies), unless it is not possible to do so in the circumstances. Each party acknowledges that because of the proprietary nature of the Confidential Information described above, damages may not be an adequate remedy for any breach of the obligations under this paragraph 15 and therefore agrees that the
wronged party(ies) will be entitled to seek specific performance and any other form of equitable or interim remedies. The obligations in this paragraph 15 to keep any Confidential Information secret and strictly confidential shall continue to apply after the expiry or termination of this Agreement, howsoever terminated.
16. Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
Abbey Capital Limited |
|
|
|
|
|
|
|
|
By: |
|
|
|
|
|
Name: |
|
|
|
|
|
Title: |
|
|
|
|
|
|
|
|
Aspect Capital Limited |
|
|
|
|
|
By: |
|
|
|
|
|
Name: |
|
|
|
|
|
Title: |
|
|
|
|
|
|
|
|
Abbey Capital Offshore Fund Limited |
|
|
|
|
|
|
|
|
By: |
|
|
|
|
|
Name: |
|
|
|
|
|
Title: |
|
|
Appendix A
Trading Fees
Exhibit (g)(3)
RBB Fund Inc.
615 E. Michigan St.
Milwaukee, WI 53202
ADDENDUM TO CUSTODY AGREEMENT
This January 5, 2017 supplement to the Custody Agreement (this Addendum) is made between U.S. Bank National Association (U.S. Bank) and RBB Fund Inc. (RBB Fund Inc.).
Whereas , U.S. Bank and RBB Fund Inc. entered into the Custody Agreement dated June 30, 2016 and wish to supplement the Custody Agreement for the establishment of accounts by the Funds for investment in Vietnam.
Whereas , terms used in this Addendum shall have the same meaning as in the Custody Agreement
Therefore , the parties agree to the following:
1. Local Vietnam regulations require that RBB Fund Inc. maintain sufficient funds or securities in their accounts before the brokers can proceed with the execution of a transaction on the Stock Exchanges. Local Vietnam regulations further require that appointed local agents confirm to brokers that there are sufficient funds or securities in RBB Fund Inc.s accounts before brokers can proceed with the execution of a transaction on the STC.
2. Under current local Vietnam regulations, the local agent will receive a report from the Vietnam Securities Depository (VSD) reflecting transactions entered into on behalf of RBB Fund Inc. The local agent is required to confirm all transactions on this report within the time frames prescribed by the VSD from time to time. To complete this process, the local agent will seek instruction from the U.S. Bank Subcustodian, who will, in turn, seek instruction from U.S. Bank, who will, in turn, seek instruction from RBB Fund Inc. All confirmed transactions will be settled accordingly. In the event that the local agent does not submit its confirmation within the timeline set by the VSD, the transactions will still be settled on the basis of the above mentioned report. Any transaction details that are challenged will be investigated by the VSD before settlement and the decision of the VSD shall be binding.
3. If the relevant instructions are not received within the above-referenced deadlines, U.S. Bank will not be responsible for trades that are processed or cancelled by the VSD and will not be responsible if the local agent does not submit confirmation to the VSD within the regulatory deadlines. Further, U.S. Bank will not be responsible if the VSD directs the local agent to settle trades that are not challenged. RBB Fund Inc. will indemnify U.S. Bank for any loss, damage, cost, and any other liabilities that may accrue to U.S. Bank that arise from insufficient funds or securities in the RBB Fund Inc.s accounts or from any act, omission or default in relation to the above settlement instructions, except where such loss is caused by the gross negligence, fraud, or willful default of U.S. Bank.
4. RBB Fund Inc. therefore instructs and authorizes U.S. Bank to give permission to the Subcustodian and local agents to disclose the adequacy of Fund account balances to the broker, and to earmark the balances in RBB Fund Inc.s accounts, as described above. U.S. Bank is not responsible for any act, omission or default of the Subcustodian or local agents in relation to this disclosure and earmarking. For the avoidance of doubt, any negligence, willful misconduct or lack of good faith by the Subcustodian, local agent, or brokers will not constitute a breach of the Custody Agreement by U.S. Bank. Except as described here, U.S. Bank, the Subcustodian, and local agents will not be relieved from liability for negligence, willful misconduct, lack of good faith or other breach of an agreement under which they are appointed.
Except as set forth above, nothing herein shall be deemed to contravene the terms of the Custody Agreement, and the terms of the Custody Agreement remain in full force and effect.
This letter shall be governed by and construed in accordance with the law of the Custody Agreement.
Agreed as of the above written date:
U.S. BANK NATIONAL ASSOCIATION |
THE RBB FUND INC. |
|||
|
|
|||
|
|
|||
By: |
/s/ Michael R. McVoy, |
|
By: |
/s/ Salvatore Faia |
|
|
|
|
|
Title: |
Senior Vice President |
Title: |
President |
|
|
|
|
|
|
Date: |
as of January 5, 2017 |
Date: |
January 5, 2017 |
|
Exhibit (i)(1)
Drinker Biddle & Reath LLP
One Logan Square
Suite 2000
Philadelphia, PA 19103-6996
(215) 988-2700 (Phone)
(215) 988-2757 (Facsimile)
www.drinkerbiddle.com
April 10, 2017
The RBB Fund, Inc.
Bellevue Park Corporate Center
103 Bellevue Parkway
Wilmington, Delaware 19809
Re:
Shares Registered by Post-Effective Amendment No. 216 to
Registration Statement on Form N-1A (File No. 33-20827)
Ladies and Gentlemen:
We have acted as counsel to The RBB Fund, Inc. (the Company) in connection with the preparation and filing with the Securities and Exchange Commission of Post-Effective Amendment No. 216 (the Amendment) to the Companys Registration Statement on Form N-1A under the Securities Act of 1933, as amended. The Board of Directors of the Company has authorized the issuance and sale by the Company of the following classes and numbers of shares of common stock, $0.001 par value per share (collectively, the Shares), with respect to the Companys Abbey Capital Futures Strategy Fund:
PORTFOLIO |
|
CLASS |
|
AUTHORIZED
|
Abbey Capital Futures Strategy Fund |
|
RRRRR
|
|
100 million
|
The Amendment seeks to register an indefinite number of the Shares.
We have reviewed the Companys Articles of Incorporation, ByLaws, resolutions of its Board of Directors, and such other legal and factual matters as we have deemed appropriate. This opinion is based exclusively on the Maryland General Corporation Law and the federal law of the United States of America.
Based upon and subject to the foregoing, it is our opinion that the Shares, when issued for payment as described in the Companys Prospectuses offering the Shares and in accordance with the Companys Articles of Incorporation for not less than $0.001 per share, will be legally issued, fully paid and non-assessable by the Company.
We consent to the filing of this opinion as an exhibit to the Amendment to the Companys Registration Statement.
|
Very truly yours, |
|
|
|
/s/ Drinker Biddle & Reath LLP |
|
Drinker Biddle & Reath LLP |
Exhibit (i)(2)
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the reference to our Firm under the caption Counsel in the Statement of Additional Information that is included in Post-Effective Amendment No. 216 to the Registration Statement (No. 33-20827; 811-5518) on Form N-1A of The RBB Fund, Inc., under the Securities Act of 1933 and the Investment Company Act of 1940, respectively. This consent does not constitute a consent under section 7 of the Securities Act of 1933, and in consenting to the use of our name and the references to our Firm under such caption we have not certified any part of the Registration Statement and do not otherwise come within the categories of persons whose consent is required under said section 7 or the rules and regulations of the Securities and Exchange Commission thereunder.
|
/s/ Drinker Biddle & Reath LLP |
|
DRINKER BIDDLE & REATH LLP |
Philadelphia, Pennsylvania
April 10, 2017
Exhibit 99.B(j)
Consent of Independent Registered Public Accounting Firm
We consent to the references to our firm under the captions Financial Highlights in the Prospectus and Independent Registered Public Accounting Firm and Financial Statements in the Statement of Additional Information of Abbey Capital Futures Strategy Fund, dated April 10, 2017, and to the incorporation by reference of our report dated October 28, 2016 in the Registration Statement of The RBB Fund, Inc. (Form N-1A) (Post-Effective Amendment No. 216 to File No. 033-20827) with respect to the financial statements and financial highlights of Abbey Capital Futures Strategy Fund (one of the portfolios constituting The RBB Fund, Inc.) (the Fund), included in the Funds Annual Report to shareholders for the year ended August 31, 2016.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
April 10, 2017
Exhibit (m)(3)
THE RBB FUND, INC.
DISTRIBUTION PLAN
for Class T Shares of the
Abbey Capital Futures Strategy Fund
WHEREAS, The RBB Fund, Inc. (the Company) is engaged in business as an open-end investment company registered under the Investment Company Act of 1940, as amended (the 1940 Act); and
WHEREAS, the Directors of the Company have determined that there is a reasonable likelihood that the following Distribution Plan will benefit the Company and the holders of Class T Shares of the Abbey Capital Futures Strategy Fund (the Fund);
NOW, THEREFORE, the Directors of the Company hereby adopt this Distribution Plan pursuant to Rule 12b-1 under the 1940 Act.
SECTION 1. The Company has adopted this Distribution Plan (the Plan) to enable the Company to directly or indirectly bear expenses relating to the distribution of Class T Shares of the Fund.
SECTION 2. The Company will pay the distributor of Class T Shares of the Fund a fee at the annual rate of 0.25% of the Funds average daily net assets attributable to Class T Shares. The distributor may retain all or part of this fee as compensation for distribution or shareholder services it provides or it may use such fees for compensation of broker/dealers and other financial institutions and intermediaries that provide distribution or shareholder services as specified by the distributor. The actual fee to be paid by the distributor to broker/dealers and financial institutions and intermediaries will be negotiated based on the extent and quality of services provided.
SECTION 3. This Plan shall not take effect until it has been approved (a) by a vote of at least a majority of the outstanding Class T Shares of the Fund; and (b) together with any related agreements, by votes of the majority of both (i) the Directors of the Company and (ii) the Qualified Directors (as defined herein), cast in person at a Board of Directors meeting called for the purpose of voting on this Plan or such agreement.
SECTION 4. This Plan shall continue in effect for a period of more than one year after it takes effect only for so long as such continuance is specifically approved at least annually in the manner provided in Part (b) of Section 3 herein for the approval of this Plan.
SECTION 5. Any person authorized to direct the disposition of monies paid or payable by the Company pursuant to this Plan or any related agreement shall provide to the Directors of the Company, at least quarterly, a written report of the amounts so expended and the purposes for which such expenditures were made.
SECTION 6. This Plan may be terminated at any time by the vote of a majority of the Qualified Directors or by vote of a majority of the outstanding Class T Shares of the Fund.
SECTION 7. All agreements with any person relating to implementation of this Plan shall be in writing, and any agreement related to this Plan shall provide (a) that such agreement may be terminated at any time, without payment of any penalty, by the vote of a majority of the Qualified Directors or by vote of a majority of the outstanding Class T Shares of the Fund, on not more than 60 days written notice to any other party to the agreement; and (b) that such agreement shall terminate automatically in the event of its assignment.
SECTION 8. This Plan may be amended in the manner provided in Part (b) of Section 3 herein for the approval of this Plan; provided, however, that the Plan may not be amended to increase materially the amount of distribution expenses permitted pursuant to Section 2 hereof without the approval of a majority of the outstanding Class T Shares of the Fund.
SECTION 9. While this Plan is in effect, the selection and nomination of those Directors who are not interested persons of the Company shall be committed to the discretion of the Directors then in office who are not interested persons of the Company.
SECTION 10. As used in this Plan, (a) the term Qualified Directors shall mean those Directors who are not interested persons of the Company, and have no direct or indirect financial interest in the operation of this Plan or any agreements related to it, and (b) the terms assignment and interested person shall have the respective meanings specified in the 1940 Act and the rules and regulations thereunder, subject to such exemptions as may be granted by the Securities and Exchange Commission.
SECTION 11. This Plan shall not obligate the Company or any other party to enter into an agreement with any particular person.