The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file
a further amendment that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as
the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
COMBINED INFORMATION STATEMENT AND
PROSPECTUS FOR THE REORGANIZATION OF
|
Adaptive Fundamental Growth Fund
|
INTO
|
AI Quality Growth ETF
|
|
Adaptive Hedged High Income Fund
|
INTO
|
Adaptive High Income ETF
(formerly Adaptive Hedged High Income ETF)
|
|
Adaptive Hedged Multi-Asset Income Fund
|
INTO
|
RH Hedged Multi-Asset Income ETF
(formerly Adaptive Hedged Multi-Asset Income
ETF)
|
|
Adaptive Tactical Outlook Fund
|
INTO
|
RH Tactical Outlook ETF
|
|
Adaptive Tactical Rotation Fund
|
INTO
|
RH Tactical Rotation ETF
|
|
(each a series of Starboard Investment Trust)
|
|
(each a series of Starboard Investment Trust)
|
And
STATEMENT OF ADDITIONAL INFORMATION
TO COMBINED INFORMATION STATEMENT AND PROSPECTUS
SEPTEMBER 14 , 2021
Adaptive Fundamental Growth Fund
Adaptive Hedged High Income Fund
Adaptive Hedged Multi-Asset Income Fund
Adaptive Tactical Outlook Fund
Adaptive Tactical Rotation Fund
each a series of
Starboard Investment Trust
September 14 , 2021
Dear Shareholder,
We are sending this information to you because you are a shareholder of the Adaptive Fundamental Growth Fund, Adaptive Hedged High
Income Fund, Adaptive Hedged Multi-Asset Income Fund, Adaptive Tactical Outlook Fund, or Adaptive Tactical Rotation Fund (each, an “Existing Fund” and collectively, the “Existing Funds”), each a series of Starboard Investment Trust (“Starboard”).
We are pleased to announce that after careful consideration, Cavalier Investments, LLC dba Adaptive Investments (“Adaptive”), the Existing Funds’ investment adviser, recommended, and the Board of Trustees of Starboard approved, the reorganization
of the Existing Funds into the corresponding new series of Starboard as identified in the table below (the “Reorganization”). Each of the New Funds are a series of Starboard.
|
Existing Fund
|
New Fund
|
|
Adaptive Fundamental Growth Fund
|
AI Quality Growth ETF
|
|
Adaptive Hedged High Income Fund
|
Adaptive High Income ETF
|
|
Adaptive Hedged Multi-Asset Income Fund
|
RH Hedged Multi-Asset Income ETF
|
|
Adaptive Tactical Outlook Fund
|
RH Tactical Outlook ETF
|
|
Adaptive Tactical Rotation Fund
|
RH Tactical Rotation ETF
|
In the Reorganization, your shares of each Existing Fund will be exchanged for shares of the corresponding New Fund, which will be
exchange traded shares listed on NYSE Arca. The proposed Reorganization will result in a change to each Existing Fund’s expense ratio, risk profile, and purchase and redemption structure. The investment objective and principal investment
strategies of each Existing Fund will remain the same. There are additional risks associated with ETFs that are discussed in more detail in the information statement.
Adaptive serves as the adviser to the Existing Funds and will be the adviser to the New Funds. Adaptive believes the shareholders of the Existing Funds will benefit from the
Reorganization because, as an exchange traded fund (“ETF”):
|
•
|
The New Funds will have the same or lower expenses than the Existing Funds; the New Funds will operate at lower cost than the
Existing Funds. Specifically, transfer agency fees, shareholder servicing fees, and state registration fees are reduced or eliminated for ETFs as compared to traditional mutual funds. There are some expenses specific to ETFs, including
exchange listing fees and fees paid to the transfer agent and distributor exclusive to ETFs for services unique to ETFs. These fees are largely fixed and relatively low compared to the savings of other expenses incurred by traditional
mutual funds. |
| • |
The New Funds will have a more transparent structure with portfolio holdings being published each day. |
|
•
|
The New Funds will allow shareholders to buy and sell shares throughout the day at market prices instead of only buying or selling at the end of the day at the Existing Funds’ net asset value. Buying or selling shares of the New Funds may involve paying a brokerage commission and costs attributable to the bid-ask spread of the market price. Additionally, prices on the
exchange may be higher or lower than the New Funds’ net asset value, which means shareholders may pay more or receive less than NAV when they buy and sell shares of the New Funds. Shareholders will no longer redeem their shares for cash at
a value determined at the close of the market. |
| • |
The New Funds may have improved tax efficiency compared to the Existing Funds. |
The Reorganization does not require your approval, and you are not being asked to vote. A
Combined Information Statement and Prospectus (the “Information Statement”) containing information on the New Funds, reasons for the proposed Reorganization and benefits to the Existing Funds’ shareholders is enclosed. Also enclosed is the
Statement of Additional Information to the Information Statement, which should be read in conjunction with the Information Statement and provides additional information about the Reorganization.
As further explained in the enclosed Information Statement, upon satisfaction of the conditions set forth in the Agreement and Plan of
Reorganization, your current shares in your Existing Fund will be exchanged for shares of the corresponding New Fund, at the closing of the Reorganization. This exchange is expected to be a tax-free exchange for shareholders, except with respect
to cash received for any fractional shares, which, generally would be taxable. You may purchase and redeem shares of the Existing Funds in the ordinary course until the last business day before the closing.
No sales loads, commissions or other transactional fees will be imposed on shareholders in connection with exchange of their shares.
The Reorganization will take effect on or about October 22 , 2021. At that time, the shares of each Existing Fund that you
currently own would, in effect, be exchanged for shares of the corresponding New Fund with the same net asset value as of October 22 , 2021. The shares of the applicable New Fund will be transferred to your brokerage account. Some brokerage
firms may not accept fractional shares; if that is the case, each Existing Fund will redeem your fractional share at net asset value immediately after effectuating the Reorganization, and distribute the cash value of the fractional share to you. If
you do not have a brokerage account, the whole shares of the applicable New Fund and cash in lieu of fractional shares, if any, will be held by the New Funds’ transfer agent, Nottingham Shareholder Services, LLC, in an account at the New Funds’
custodian, Clear Street, LLC, awaiting your instructions.
The Board of Trustees of Starboard, on behalf of each of the Existing Funds, has approved the proposed
Reorganization, at the request of Adaptive. Likewise, the Board of Trustees of Starboard has authorized the Reorganization on behalf of each of the New Funds. You should review the Information Statement carefully and retain it for future
reference.
What are your options as a shareholder?
|
1.
|
Accept the Reorganization. When the Reorganization happens, your shares will be deposited into your brokerage account. (If you are a direct
shareholder, see below).
|
|
2.
|
Redeem your shares in your Existing Fund. You can do this by calling your broker or calling the Funds at 1-800-773-3863. No
sales loads will be imposed on you in connection with the redemption of your shares; however, your financial intermediary may charge commissions or other transactional fees, and there may be tax consequences if you redeem your shares in
your Existing Fund.
|
If you do not wish for your Existing Fund shares to be converted to New Fund shares, you will need to redeem your
shares.
You may hold your shares in a brokerage account, or you may hold your shares directly with the Fund. If you hold
your shares in a brokerage account, you do not need to take any action unless you wish to redeem your shares.
ALTHOUGH NO SHAREHOLDER APPROVAL IS REQUIRED FOR THE REORGANIZATION, DIRECT SHAREHOLDERS MUST TAKE
ACTION BEFORE RECEIVING THEIR NEW FUND SHARES.
You are a Direct Shareholder if you hold your Existing Fund shares directly with the Existing Fund.
If you hold your Existing Fund shares through a brokerage account, you are NOT a direct shareholder.
Direct shareholders must do one of the following:
1. Transfer your shares to the broker dealer of your choice. We urge you to begin this process immediately if this is your preferred option. More information
about how to complete such a transfer is provided below. This is the option that we recommend.
2. Redeem your shares in any Existing Fund. You can do this by calling the Funds at 1-800-773-3863 or otherwise in accordance with the redemption procedures
set forth in the applicable Existing Fund’s current prospectus.
If you are a direct shareholder and you fail to take any action, your shares will be converted into
shares of the applicable New Fund, and the whole shares of the applicable New Fund and cash in lieu of fractional shares, if any, will be held by the New Funds’ transfer agent, Nottingham Shareholder Services, LLC, in an account at the New Funds’
custodian, Clear Street, LLC, awaiting your instructions. You may provide instructions by calling the transfer agent at 1-800-773-3863.
|
THIS STEP IS ONLY REQUIRED FOR DIRECT SHAREHOLDERS. IF YOU ALREADY HOLD YOUR SHARES IN A BROKERAGE ACCOUNT, YOU CAN IGNORE THIS
SECTION.
Are You a Direct Shareholder?
If you are a Direct Shareholder, that means that your Existing Fund shares are held by the Fund’s transfer agent. If you receive quarterly
statements from an Existing Fund, then you hold your shares directly. If your shares in an Existing Fund are listed as a position on a statement from your brokerage firm, then you already hold your shares in a brokerage account. If you are
uncertain if you are a direct shareholder please call 1-800-773-3863, and ask if you are a direct shareholder. Additionally, if you hold your shares directly, you will receive separate communications from the transfer agent, including
email, regular mail, express delivery and via telephone, regarding the steps you need to take to hold a New Fund’s shares after the Reorganization. As mentioned above, you have the same options to
redeem your shares if you do not wish to hold shares of a New Fund. To redeem, please call the Existing Funds at 1-800-773-3863.
Transferring Your Direct Shares to a Brokerage Account
Transferring your shares from the transfer agent to a brokerage account should be a simple process. If you have a brokerage account or a
relationship with a brokerage firm, please talk to your broker and inform them that you would like to transfer a mutual fund position that you hold directly with the fund into your brokerage account. If you don’t have a brokerage account or
a relationship with a brokerage firm, you will need to open an account. Brokerage firms may charge a fee for opening a brokerage account, although, most larger brokerage firms do not charge a fee.
We suggest you provide your broker with a copy of your quarterly statement from the Existing Funds. Your broker will require your account number
with the Existing Funds, which can be found on your statement. Your broker will help you complete a form to initiate the transfer. Once you sign this form, your broker will submit the form to the transfer agent directly, and the shares will
be transferred into your brokerage account.
The sooner you initiate the transfer, the better. If
you have any questions about this process or need assistance, call us at 1-800-773-3863.
|
Sincerely,
Katherine Honey
President
Starboard Investment Trust
QUESTIONS AND ANSWERS RELATING TO THE REORGANIZATION
While we encourage you to read the full text of the enclosed Information Statement, below is a brief overview of the
proposal.
| Q. |
Has the Board approved the Reorganization?
|
| A. |
The Board of Trustees of Starboard Investment Trust (“Starboard”) has determined that the reorganization (the “Reorganization”) of each of the Adaptive Fundamental Growth Fund, Adaptive
Hedged High Income Fund, Adaptive Hedged Multi-Asset Income Fund, Adaptive Tactical Outlook Fund, or Adaptive Tactical Rotation Fund (each, an “Existing Fund” and collectively, the “Existing Funds”) into each of the AI Quality Growth ETF,
Adaptive High Income ETF, RH Hedged Multi-Asset Income ETF, RH Tactical Outlook ETF, or RH Tactical Rotation ETF (each, a “New Fund” and collectively, the “New Funds”), respectively, is in the best interests of the shareholders of
each Existing Fund.
|
| Q. |
What will happen to my existing shares?
|
| A. |
Your shares of your Existing Fund will be exchanged for shares of the corresponding New Fund, which will be exchange traded shares listed on NYSE Arca. You will not pay any sales charges in
connection with the Reorganization. Although the price of the shares of the New Funds may be different from the price of your current shares of the Existing Funds, the new shares you receive will have the same net asset value as your
current shares immediately prior to the Reorganization so that the net asset value of your investment will remain exactly the same.
|
| Q. |
How do the investment objective and principal strategies of the Existing Funds and the New Funds compare?
|
| A. |
The investment objective and principal investment strategies of each Existing Fund and its corresponding New Fund are identical.
|
| Q. |
How do the principal risks of the Existing Funds and the New Funds compare?
|
| A. |
Each New Fund has some additional principal risks that relate to the New Fund’s structure as an ETF that, as a mutual fund, the Existing Funds do not have. These additional risks are
discussed in more detail in the information statement in “Principal risks of Investing in the Funds – Additional Risks Associated with the New Funds.”
|
| Q. |
Will I incur any transaction costs as a result of the Reorganization?
|
| A. |
No. Shareholders will not incur any transaction costs, e.g., sales charges or redemption fees, as a result of the Reorganization.
|
| Q. |
What is the timetable for the Reorganization?
|
| A. |
The Reorganization is expected to occur on or about October 22 , 2021.
|
| Q. |
Who will pay for the Reorganization?
|
| A. |
The expenses of the information statement, including legal expenses, accounting fees, printing, packaging and postage, will be paid by Cavalier Investments, LLC dba Adaptive Investments, the
Funds’ investment adviser (“Adaptive”). The expenses associated with the Reorganization are estimated to be $125,000.
|
| Q. |
Will the Reorganization create a taxable event for me?
|
| A. |
The Reorganization is designed to be treated as tax-free reorganizations for U.S. federal income tax purposes. However, because some brokerage firms may not accept fractional shares, as part
of the Reorganization, some Existing Fund shareholders will receive cash for any fractional shares that they hold in the Existing Funds. The receipt of cash in respect of these fractional shares will be treated as if the shareholder
received a fractional share in the corresponding New Fund (with a proportionate part of its total tax basis allocated to such fractional share), and then redeemed such fractional share in exchange for cash in a taxable transaction.
Shareholders should consult their own tax advisers concerning the potential tax consequences of the Reorganization to them, including federal, state, local and foreign income and other tax consequences.
|
| Q. |
Will the Reorganization result in new or higher advisory fees for shareholders?
|
| A. |
The Reorganization will result in the same or lower advisory fee for shareholders. Each New Fund’s advisory fee is set forth below. The
advisory fee for each Existing Fund is 1.00%.
|
|
New Fund
|
New Fund Advisory Fee
|
|
AI Quality Growth ETF
|
0.90%
|
|
Adaptive High Income ETF
|
0.55%
|
|
RH Hedged Multi-Asset Income ETF
|
0.80%
|
|
RH Tactical Outlook ETF
|
1.00%
|
|
RH Tactical Rotation ETF
|
1.00%
|
| Q. |
Will I still be able to buy and redeem my shares directly with the Funds at net asset value after the Reorganization?
|
| A. |
No. After the Reorganization, shares of the New Funds may only be bought and sold on the NYSE Arca at market price through a broker dealer, who may charge a commission for such trades. The
market price of the New Funds’ shares on the NYSE Arca may differ from the New Funds’ daily net asset value and can be affected by market forces such as supply and demand, economic conditions and other factors, so the market price may be
higher or lower than the net asset value, which means that shareholders may pay more or receive less than the New Funds’ net asset value when they buy or sell shares of the New Funds. Shares of the New Funds can be bought and sold
throughout the day at market prices instead of only buying or selling at the end of the day at the Existing Funds’ net asset value.
|
| Q. |
Who should I call with questions about this Information Statement?
|
| A. |
If you have any questions about the Reorganization or Information Statement, please do not hesitate to call 1-800-773-3863.
|
NO ACTION ON YOUR PART IS REQUIRED TO EFFECT THE REORGANIZATION.
COMBINED INFORMATION STATEMENT/PROSPECTUS
SEPTEMBER 14 , 2021
FOR THE REORGANIZATION OF
|
Adaptive Fundamental Growth Fund
Institutional Class Shares CAFGX
Class C Shares CFGAX
Class A Shares CFDAX
|
IN
EXCHANGE
FOR
SHARES OF
|
AI Quality Growth ETF
AQGX
|
|
Adaptive Hedged High Income Fund
Institutional Class Shares CHIIX
Class C Shares CAHIX
|
Adaptive High Income ETF
AHHX
(formerly Adaptive Hedged High Income ETF)
|
|
Adaptive Hedged Multi-Asset Income Fund
Institutional Class Shares CADTX
Class C Shares CADAX
|
RH Hedged Multi-Asset Income ETF
AMAX
(formerly Adaptive Hedged Multi-Asset Income ETF)
|
|
Adaptive Tactical Outlook Fund
Institutional Class Shares CMSFX
Class C Shares CMSYX
Class A Shares CAVMX
|
RH Tactical Outlook ETF
RHTX
|
|
Adaptive Tactical Rotation Fund
Institutional Class Shares CTROX
Class C Shares CATOX
Class A Shares CAVTX
|
RH Tactical Rotation ETF
RHRX
|
|
(each a series of Starboard Investment Trust)
|
(each a series of Starboard Investment Trust)
|
c/o Nottingham Shareholder Services, LLC
116 South Franklin Street,
Rocky Mount, North Carolina 27804
1-800-773-3863
This Combined Information Statement and Prospectus (the “Information Statement”) is being furnished to shareholders
of the Adaptive Fundamental Growth Fund, Adaptive Hedged High Income Fund, Adaptive Hedged Multi-Asset Income Fund, Adaptive Tactical Outlook Fund, and Adaptive Tactical Rotation Fund (each, an “Existing Fund” and collectively, the “Existing
Funds”), each a series of Starboard Investment Trust (“Starboard”), in connection with an Agreement and Plan of Reorganization (the “Reorganization Agreement”) by and between Starboard, on behalf of each Existing Fund, and Starboard, on behalf of
each of the AI Quality Growth ETF, Adaptive High Income ETF, RH Hedged Multi-Asset Income ETF, RH Tactical Outlook ETF, and RH Tactical Rotation ETF (each, a “New Fund” and collectively, the “New Funds”), each a new series of Starboard.
The Reorganization Agreement provides that each Existing Fund will transfer all of its assets and liabilities to the
corresponding New Fund. In exchange for the transfer of these assets and liabilities, each New Fund will simultaneously issue shares to the corresponding Existing Fund in an amount equal in value to the net asset value of the applicable Existing
Fund’s shares as of the close of business on the business day preceding the foregoing transfers (the “Reorganization”). In the Reorganization, your shares of the Existing Funds will be exchanged for shares of the corresponding New Funds, which
will be exchange traded shares listed on NYSE Arca. These transfers are expected to occur on or about October 22 , 2021 (the “Closing Date”). A copy of the Reorganization Agreement is attached as Exhibit A.
Immediately after the transfer of each Existing Fund’s assets and liabilities, each Existing Fund will make a
liquidating distribution to its shareholders of the corresponding New Fund’s shares received, so that a holder of shares in each Existing Fund at the Closing Date of the Reorganization will receive a number of shares of the corresponding New Fund
with the same net asset value as the shareholder had in the Existing Fund immediately before the Reorganization. At the Closing Date of the Reorganization, shareholders of each Existing Fund will become shareholders of a corresponding New Fund.
The shares of each New Fund will be transferred to each shareholder’s brokerage account. Some brokerage firms may not accept fractional shares; if that is the case, the applicable Existing Fund will redeem your fractional share at net asset value
immediately after effectuating the Reorganization, and distribute the cash value of the fractional share to you. If a shareholder does not have a brokerage account, the shares of the applicable New Fund will be held by the New Fund’s transfer
agent, Nottingham Shareholder Services, LLC, in an account at the New Fund’s custodian, Clear Street, LLC, awaiting such shareholder’s instructions.
Starboard is a Delaware statutory trust and an open-end management investment company registered under the Investment
Company Act of 1940, as amended (the “1940 Act”). Cavalier Investments, LLC dba Adaptive Investments (“Adaptive”) is the investment adviser to the Existing Funds and will be the investment adviser to the New Funds. The Nottingham Company is the
administrator and fund accountant for the New Funds and the Existing Funds. Nottingham Shareholder Services, LLC is the transfer agent for the New Funds and the Existing Funds. Capital Investment Group, Inc. (the “Distributor”) is the principal
distributor of the Existing Funds and the New Funds.
This Information Statement sets forth concisely the information that a shareholder of an Existing Fund should know
about the Reorganization and should be retained for future reference. Certain additional relevant documents listed below, which have been filed with the U.S. Securities and Exchange Commission (the “SEC”), are incorporated in whole or in part by
reference. (That means that those documents are considered legally to be part of this Information Statement). For a detailed discussion of the investment objectives, policies, risks and restrictions of each Existing Fund, see the
Prospectus for each Existing Fund dated September 2 , 2021 (File No. 333-159484), which has been filed with the SEC and is
incorporated by reference into this Information Statement. For a detailed discussion of the investment objectives, policies, risks and restrictions of each New Fund, see the
Prospectus for each New Fund dated September 2, 2021 (File No. 333-159484), which has been filed with the SEC and is incorporated by
reference into this Information Statement. A
Statement of Additional Information for each Existing Fund dated September 2 , 2021 (File
No. 333-159484) has been filed with the SEC, and is incorporated by reference into this Information Statement. A
Statement of
Additional Information for each New Fund dated September 2, 2021 (File No. 333-159484), has been filed with the SEC and is incorporated by reference into this Information Statement. Copies of the Prospectus and Statement of
Additional Information for each Existing Fund and New Fund are available upon request and without charge by calling toll-free 1-800-773-3863 or by visiting https://www.nottinghamco.com/fundpages/Adaptive for each Existing Fund or on the New Funds’
website listed below or at www.sec.gov.
|
AI Quality Growth ETF
|
https://etfpages.com/AQGX
|
|
Adaptive High Income ETF
|
https://etfpages.com/AHHX
|
|
RH Hedged Multi-Asset Income ETF
|
https://etfpages.com/AMAX
|
|
RH Tactical Outlook ETF
|
https://etfpages.com/RHTX
|
|
RH Tactical Rotation ETF
|
https://etfpages.com/RHRX
|
Reports, proxy materials, and other information concerning the New Funds can also be inspected at NYSE Arca.
This Information Statement will be mailed on or about September 14 , 2021, to shareholders of record of each
Existing Fund as of July 31, 2021 (the “Record Date”).
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
THE U.S. SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OF THIS INFORMATION STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
No person has been authorized to give any information or to make any representations other than those contained in
this Information Statement and in the materials expressly incorporated herein by reference and, if given or made, such other information or representations must not be relied upon as having been authorized by the Fund.
TABLE OF CONTENTS
| SYNOPSIS
........................................................................................................................................................................................................................................................................................................
|
1
|
The Reorganization
..............................................................................................................................................................................................................................................................................
|
1
|
The Funds
.............................................................................................................................................................................................................................................................................................
|
1
|
Investment Objectives
.........................................................................................................................................................................................................................................................................
|
1
|
The Funds' Performance
.......................................................................................................................................................................................................................................................................
|
6
|
Investment Limitations
.........................................................................................................................................................................................................................................................................
|
6
|
The Funds' Purchase, Exchange and Redemption Procedures
.....................................................................................................................................................................................................
|
6
|
Distribution Arrangements
..................................................................................................................................................................................................................................................................
|
10
|
Frequent Trading Policy
.......................................................................................................................................................................................................................................................................
|
10
|
| PRINCIPAL RISKS OF INVESTING IN THE FUNDS
................................................................................................................................................................................................................................. |
11
|
| FEES AND EXPENSES
.................................................................................................................................................................................................................................................................................... |
22
|
| INFORMATION RELATING TO THE REORGANIZATION
..................................................................................................................................................................................................................... |
26
|
Description of the Reorganization
.....................................................................................................................................................................................................................................................
|
26
|
Costs of the Reorganization
...............................................................................................................................................................................................................................................................
|
27
|
Federal Income Taxes
...........................................................................................................................................................................................................................................................................
|
27
|
Capitalization
.........................................................................................................................................................................................................................................................................................
|
27
|
| REASONS FOR THE REORGANIZATION
.................................................................................................................................................................................................................................................. |
29
|
| SHAREHOLDER RIGHTS
............................................................................................................................................................................................................................................................................... |
30
|
General Shareholder Rights
................................................................................................................................................................................................................................................................
|
30
|
Taxes
.......................................................................................................................................................................................................................................................................................................
|
31
|
Record Date and Outstanding Shares
...............................................................................................................................................................................................................................................
|
33
|
Security Ownership of Certain Beneficial Owners and Management
..........................................................................................................................................................................................
|
34
|
| SHAREHOLDER INQUIRIES
.......................................................................................................................................................................................................................................................................... |
35
|
| EXHIBIT A
......................................................................................................................................................................................................................................................................................................... |
A-1
|
| EXHIBIT B
......................................................................................................................................................................................................................................................................................................... |
B-1
|
SYNOPSIS
This Synopsis is designed to allow you to compare the current fees, investment objective, policies and restrictions,
and distribution, purchase, exchange and redemption procedures of each Existing Fund with those of the corresponding New Fund. This Synopsis is a summary of certain information contained elsewhere in this Information Statement or incorporated by
reference into this Information Statement. Shareholders should read this entire Information Statement carefully. For more complete information, please read the Prospectus for each Existing Fund and the Prospectus for the corresponding New Fund.
The Reorganization
Background. Pursuant to the Reorganization Agreement, each Existing Fund
will transfer all of its assets and liabilities to the corresponding New Fund in exchange solely for shares of the New Fund. In the Reorganization, your shares of your Existing Fund will be exchanged for shares of the applicable New Fund, which
will be exchange traded shares listed on NYSE Arca.
Each Existing Fund will then distribute the corresponding New Fund’s shares that it receives to its shareholders in
complete liquidation. The result of the Reorganization is that shareholders of each Existing Fund will become shareholders of the corresponding New Fund. No contingent deferred sales charges will be imposed in connection with the Reorganization ,
and there will be no realignment of the Funds’ portfolios in connection with the Reorganization.
The Board of Trustees of Starboard, including the Trustees who are not “interested persons” within the meaning of
Section 2(a)(19) of the 1940 Act, has concluded that the Reorganization would be in the best interests of each of the Existing Funds and its shareholders, and that the interests of existing shareholders in each Existing Fund will not be diluted as
a result of the transactions contemplated by the Reorganization or suffer any unfair burden as a result of the Reorganization.
Tax Consequences. The Reorganization is intended to qualify, for U.S.
federal income tax purposes, as a tax-free reorganization. If the Reorganization so qualifies, shareholders of the Existing Funds will not recognize a gain or loss in the respective transactions (except with respect to cash, if any, received in
lieu of fractional shares). Shareholders should consult their own tax advisers concerning the potential tax consequences of the Reorganization to them, including federal, state, local and foreign income and other tax consequences. Except in the
normal course of managing the Existing Funds, the Existing Funds’ adviser does not intend to sell any securities prior to the Reorganization.
Special Considerations and Risk Factors. The investment objective, principal
investment strategies, and investment policies of each Existing Fund and the corresponding New Fund are identical. However, the New Funds are exchange-traded funds with their shares bought and sold on an exchange, and the Existing Funds are not,
and their shares are bought and sold directly with the Existing Funds. The New Funds are also subject to additional risks specific to ETFs. For a comparison of each Fund’s investment
objectives and principal investment strategies, see “Investment Objective” below. For a more complete discussion of the risks associated with the respective Funds, see “Principal Risks” below.
The Funds
Business of the Funds. Starboard is an open-end management investment
company organized as a Delaware statutory trust on May 13, 2009. Starboard offers redeemable shares in different series of investment portfolios. The New Funds and Existing Funds are each a series of Starboard. The Existing Funds offer three
classes of shares, designated Institutional Class, Class A, and Class C. The New Funds offer only one class of shares. Shareholders of each class of each Existing Fund will receive shares of the corresponding New Fund.
Investment Objectives
This section will help you compare the investment objectives and principal investment strategies
of each Existing Fund with those of the corresponding New Fund. This section also describes the key differences, if any, between the Funds. Please be aware that this is only a brief discussion. More complete information regarding the Funds may
be found in each Existing Fund’s prospectus and in the corresponding New Fund’s Prospectus.
Existing Funds and New Funds
Investment Objectives:
|
Existing Fund
|
|
New Fund
|
|
|
Adaptive Fundamental Growth Fund
|
Capital appreciation
|
AI Quality Growth ETF
|
Same.
|
|
Adaptive Hedged High Income Fund
|
Current income and real return
|
Adaptive High Income ETF
|
Same.
|
|
Adaptive Hedged Multi-Asset Income Fund
|
Total return through a combination of capital appreciation and current income
|
RH Hedged Multi-Asset Income ETF
|
Same.
|
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Adaptive Tactical Outlook Fund
|
Total return through a combination of capital appreciation and current income, with a secondary goal of downside protection
|
RH Tactical Outlook ETF
|
Same.
|
|
Adaptive Tactical Rotation Fund
|
Capital appreciation
|
RH Tactical Rotation ETF
|
Same.
|
Principal Investment Strategies:
Adaptive Fundamental Growth Fund and AI Quality Growth ETF
Each Fund’s Advisor seeks to achieve each Fund’s investment objective of capital appreciation by principally investing in domestic
common stocks that the Advisor believes to have above-average growth potential relative to their peers. The Advisor uses a proprietary screening system that incorporates quantitative and fundamental analysis in order to construct each Fund’s
portfolio.
Each Fund invests principally in domestic common stocks and is not limited in its investments by market capitalization. Each Fund may
invest in other investment companies, including mutual funds and exchange traded funds (“ETFs”) that are registered under the Investment Company Act of 1940, as amended (the “1940 Act”) and not affiliated with each Fund (“Portfolio Funds”).
The Advisor utilizes a screening and selection process to build a portfolio of quality domestic growth stocks, which includes a select
group of growth stocks that the Advisor believes have the potential for revenue growth rates higher than their peers.
First, the Advisor employs quantitative analysis of individual stock metrics in order to select stocks with quality and/or growth
characteristics. Quality metrics include earnings variability, return on equity, and debt to equity ratio. Growth metrics include revenue growth rates and companies with above average earnings growth. Second, the Advisor will select
approximately 30-40 stocks from this universe with an emphasis on companies that the Advisor believes may have a competitive advantage (such as strong products in industries with high barriers to entry), sustainable earnings growth rates, growth of
free cash flow, and/or potential for a high return on capital. This selection of 30-40 holdings is constructed to diversify across sectors and industries where current opportunities are viewed as favorable. The portfolio is generally equally
weighted based on the security’s market value.
Each Fund may employ a risk management strategy intended to manage the volatility of each Fund’s returns and reduce the overall risk of
investing in each Fund. The risk management strategy monitors technical and volatility metrics to gauge periods where there is potential for higher equity market risk. When periods of equity downside are more likely, the risk management strategy
will reduce equity exposure. When employing this risk management strategy, each Fund may allocate a significant percentage of its assets to cash and cash equivalents. When employing the risk management strategy, in addition to cash and cash
equivalents, each Fund may utilize a hedge overlay for downside protection, which will include put options and ETFs that have exposure to changes in volatility or offer inverse performance to equity markets (inverse ETFs). In order to effectively
execute the hedge overlay, when each Fund is not employing the risk management strategy, the Advisor will generally maintain an approximately 10% position in a broad market equity ETF, and the assets allocated to this broad market equity ETF are
reallocated to the risk management strategy investments in times of market stress. The hedge overlay will be used when the Advisor believes there is the potential for higher risk of loss in equity markets.
The Advisor may sell a portfolio security when its reward/risk measures weaken, the fundamentals of the stock change, to pursue
opportunities that the Advisor believes will be of greater benefit to each Fund, or to rebalance each Fund’s portfolio. The Advisor’s evaluation of reward/risk measures are based on a quarterly screen of price momentum and sector analysis relative
to other equity securities. The Advisor’s evaluation of changes in fundamentals includes a review of price earnings ratios, earnings growth, revenue growth and leverage ratios. As a result of its strategy, each Fund may have a relatively high level
of portfolio turnover compared to other mutual funds, which may affect each Fund’s performance due to higher transactions costs and higher taxes. Portfolio turnover will not be a limiting factor in making investment decisions.
Adaptive Hedged High Income Fund and Adaptive High Income ETF
The Advisor seeks to achieve each Fund’s investment objective of current income and real return by investing other investment companies,
including Portfolio Funds or making direct investments in equity securities based upon institutional research. Each Fund may invest in Master Limited Partnerships (“MLPs”), Real Estate Investment Trusts (“REITs”), Limited Partnerships, convertible
fixed income securities, and large capitalization equity securities, including preferred stocks, that the Advisor believes will generate income.
The investments of each Fund and Portfolio Funds will be comprised primarily of domestic and foreign (including emerging markets) fixed
income securities, principally consisting of bonds, corporate debt securities, and government securities. Such investments will frequently include high yield corporate bonds (or “junk bonds”). Each Fund will invest a significant amount (generally
at least 40%, and, often, greater than 80%) of its assets in securities that are rated below investment grade at the time of investment. Each Fund and Portfolio Funds may invest in fixed income securities of any maturity and any credit rating,
including bonds of issuers in default. Each Fund and Portfolio Funds will invest in inverse high yield investments (which attempt to short high yield or “junk” bonds) to provide a hedge to the portfolio during negative credit events, such as when
an increase in the default rates of any of the U.S. high yield sectors occurs or when there is an increase in the high yield bond spread. A high yield bond spread is the percentage difference in current yields of various classes of high-yield bonds
compared to investment-grade corporate bonds or another benchmark bond measure. The inverse high yield investments that each Fund and Portfolio Funds may invest in are ETFs that provide inverse exposure to high yield or “junk” bond markets. Each
Fund and Portfolio Funds do not have an established average portfolio duration and the average portfolio durations will vary. Duration is a measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates. In
general, the higher the duration, the more a bond’s price will drop as interest rates rise (and the greater the interest rate risk). For example, if rates were to rise 1%, a bond or bond fund with a five-year average duration would likely lose
approximately 5% of its value. Each Fund and Portfolio Funds will not be limited in their investments by sector criteria. The Portfolio Funds in which each Fund invests will have an investment objective similar to each Fund’s or will otherwise hold
permitted investments under each Fund’s investment policies. Although each Fund principally invests in Portfolio Funds with no sales related expenses or very low sales related expenses, each Fund is not precluded from investing in Portfolio Funds
with sales-related expenses, redemption fees, and/or service fees.
The Advisor uses an investment model for analyzing market trends. The investment model includes factors such as price momentum,
volatility, comparative indicators relative to certain indices and a recession model (a model that measures the probability of a recession within the next several months based on leading economic indicators). When the Advisor’s model indicates a
negative market trend, each Fund may hedge the Fund’s portfolio by investing in ETFs that invest in treasury bonds, exchange traded notes (“ETNs”) and leveraged and inverse ETFs. The leveraged ETFs hedge the Fund’s portfolio by offsetting equity
allocations without need to sell the long equity positions. Each Fund may hold significant cash or inverse ETF positions during unfavorable market conditions.
The Advisor will sell a Portfolio Fund when a more attractive investment opportunity is identified, or each Fund’s portfolio needs to be
rebalanced due to increases or decreases in each Fund’s net assets. Decisions by the Advisor to sell other portfolio securities will be based upon the Advisor’s research. The Advisor will analyze various high yield investments based on performance
expectations vs benchmark. The Advisor may opportunistically invest a portion of the portfolio that the Advisor believes may outperform the benchmark. The Advisor’s analysis includes dividend payments, and macroeconomic factors such as inflation
expectations, interest rates, equity sector analysis, and the political environment. Under certain market conditions such as when corporate bankruptcies are increasing or when corporate fundamentals are decreasing, each Fund may have a relatively
high level of portfolio turnover compared to other mutual funds, which may affect each Fund’s performance due to higher transaction costs and taxes. Portfolio turnover will not be a limiting factor in making investment decisions.
Adaptive Hedged Multi-Asset Income Fund and RH Hedged Multi-Asset Income ETF
The Advisor seeks to achieve each Fund’s investment objective of total return by investing in other investment companies, including
Portfolio Funds or by making direct investments. Each Fund’s portfolio will consist of a mix of direct and indirect investments through Portfolio Funds and each may be all of each Fund’s portfolio or none of each Fund’s portfolio at any given time.
Each Fund’s fixed income investments, both direct and indirect through Portfolio Funds, may include mortgage backed securities, asset backed securities, commercial mortgage backed securities, non-agency mortgage backed securities, corporate
investment grade securities, convertible securities, high yield-high risk bonds (commonly known as “junk bonds”), securities issued or guaranteed by certain U.S. Government agencies, instrumentalities and sponsored enterprises, ETNs and global debt
securities. Each Fund’s equity investments, both direct and indirect through Portfolio Funds, may include dividend paying equity securities, REITs, and preferred securities. Each Fund’s equity investments will not be limited by sector criteria or
market capitalization. Each Fund’s allocation of its assets into various asset classes will depend on the views of the Advisor as to the best value relative to what is currently presented in the marketplace.
Each Fund will invest in fixed income securities of any maturity and any credit rating, including below investment grade securities
(commonly referred to as “junk”). The below investment grade securities will include corporate bonds, securities of issuers in default, unrated securities, mortgage-backed securities, and asset-backed securities. Each Fund’s fixed income
investments will also include commodity based ETNs. The fixed income securities in which each Fund invests do not have an established average portfolio duration and the average portfolio durations will vary. Duration is a measure of the sensitivity
of the price of a bond or other debt instrument to a change in interest rates. In general, the higher the duration, the more a bond’s price will drop as interest rates rise (and the greater the interest rate risk). For example, if rates were to
rise 1%, a bond or bond fund with a five-year average duration would likely lose approximately 5% of its value. Each Fund will not be limited in its investments by sector criteria, and may invest in foreign securities, including foreign securities
in emerging markets.
The Advisor uses an investment model for analyzing market trends. The investment model includes factors such as price momentum,
volatility, comparative indicators relative to certain indices and a recession model (a model that measures the probability of a recession within the next several months based on leading economic indicators). The Advisor utilizes research and
valuation metrics to determine which fixed income asset classes have the greatest potential for producing positive performance and income, with a focus on capturing upside performance while protecting against loss. Valuation metrics are measures of
a company’s performance, financial health and prospects for future earnings by comparing the market’s opinion (share price) to actual reported earnings to help predict a company’s prospects. The fixed income Portfolio Funds are selected based on
liquidity, cost, and tracking error (degree to which an ETF that is not actively managed follows its index). The dividend paying equity securities are selected based on dividend yield and diversification. The preferred securities and REITs are
selected based on their yield relative to traditional fixed income sectors. When the Advisor’s model indicates a negative market trend, each Fund may hedge the Fund’s portfolio by investing in ETFs that invest in treasury bonds, ETNs and leveraged
ETFs (ETFs that seek to deliver multiples of the performance of the index or benchmark they track) and inverse ETFs (ETFs that seek to deliver the opposite of the performance of the index or benchmark they
track). The leveraged ETFs hedge the Fund’s portfolio by offsetting equity allocations without need to sell the long equity positions. Each Fund may hold significant cash or inverse ETF positions during unfavorable market conditions.
The Advisor will sell a portfolio security when a more attractive investment opportunity is identified, or each Fund’s portfolio needs
to be rebalanced due to increases or decreases in the Fund’s net assets. The Advisor identifies attractive investment opportunities based on its research, which includes the relative value of income producing assets and asset classes. In making its
determination, the Advisor will analyze the performance, correlations, drawdowns (a measure of a peak-to-trough decline during a specific period for an investment), up and down capture (a statistical measure of overall performance in up and down
markets), fees and expenses, and dividend or income payments of securities. Each Fund may invest up to 15% of its net assets in illiquid investments.
Adaptive Tactical Outlook Fund and RH Tactical Outlook ETF
Each Fund seeks to achieve each Fund’s investment objective of total return by investing ETFs.
The strategy will follow an asset allocation strategy under which the Advisor selects ETFs that invest in equity securities and fixed
income securities. The equity securities consist of primarily U.S. large cap, mid cap, and small cap securities. The fixed income securities will be primarily investment grade and may be of any duration and maturity, although, the Advisor expects
that most will be short to medium term (maturity of 1-10 years) fixed income securities. The Advisor selects individual ETFs based on their performance track record, portfolio manager views on the underlying investments, and risk/return analysis of
the ETF against a comparable benchmark. The asset allocation strategy of each Fund deploys each Fund’s assets among equity and fixed income securities based on the Advisor’s internal technical and economic fundamental research. Economic
fundamental research focuses on macroeconomic factors (e.g. economy and industry conditions). Each Fund may invest 0-100% of its assets in equity and in fixed income securities based on the optimal allocation suggested by the Advisor’s research.
Each Fund may also invest in ETFs that invest in alternative investments, which will consist primarily of REITs, limited partnerships, commodities, long/short equity, or global macro strategies to hedge the equity and fixed income investments with
0-20% of Fund assets.
The Portfolio Funds will not be limited in their investments by market capitalization or sector criteria. The selection of equity ETFs
is based on how well the ETF tracks an index for large cap securities (S&P 500), mid cap securities (S&P Mid Cap 400), and small cap securities (Russell 2000). The selection of fixed income ETFs is based on how well the ETF tracks an index
for short to intermediate US Treasuries, or the Bloomberg Barclays US Aggregate Bond Index. The Portfolio Funds in which a portfolio manager invests will have an investment objective similar to each Fund’s or will otherwise hold permitted
investments under each Fund’s investment policies set forth in this prospectus. Although each Fund principally invests in Portfolio Funds with no sales related expenses or very low sales related expenses, a portfolio manager is not precluded from
investing in Portfolio Funds with sales-related expenses, redemption fees, and/or service fees.
Each Fund will sell a Portfolio Fund when a more attractive investment opportunity is identified, or each Fund’s portfolio needs to be
rebalanced based on the Advisor’s internal technical and economic fundamental research. The Advisor’s research includes relative value of a security compared to other securities with similar market capitalization and equity style. The Advisor may
opportunistically invest a portion of the portfolio that the advisor believes may outperform the benchmark based on its analysis of macroeconomic factors such as inflation expectations, interest rates, equity sector analysis, and the political
environment. As a result of this strategy, each Fund may have a relatively high level of portfolio turnover compared to other mutual funds, which may affect each Fund’s performance due to higher transaction costs and taxes. Portfolio turnover will
not be a limiting factor in making investment decisions.
Adaptive Tactical Rotation Fund and RH Tactical Rotation ETF
The Advisor seeks to achieve each Fund’s investment objective of capital appreciation by investing in Portfolio Funds. Each Fund will
not generally invest in individual portfolio securities.
The Advisor utilizes sector rotation strategies that attempt to capitalize on changes in the business cycle. The investments of the
Portfolio Funds will generally be comprised of equity securities principally consisting of common stock, preferred stock, and convertible preferred stock of any market capitalization. The Advisor will balance each Fund’s Portfolio Funds around a
variety of specific sectors that will be invested in depending on market circumstances. In some circumstances, if too few sectors are invested, sector weighting may include a large allocation to cash.
The Advisor uses an investment model for analyzing market trends. The investment model includes factors such as price momentum,
volatility, and comparative indicators relative to certain indices. When the Advisor’s model indicates a negative market trend, each Fund may hedge the Fund’s portfolio by investing in ETFs that invest in treasury bonds, ETNs and leverage and
inverse ETFs. The leveraged ETFs hedge the Fund’s portfolio by offsetting equity allocations without need to sell the long equity positions. Each Fund may hold significant cash or inverse ETF positions during unfavorable market conditions. The
Advisor splits each Fund’s portfolio into three segments: core, opportunistic and dynamic. Each segment is comprised of a distinct universe of potential investments and the Advisor’s model provides a score for the universe of investments on a
monthly basis.
The Portfolio Funds in which each Fund invests will have an investment objective similar to each Fund’s or will
otherwise track particular market sectors. Although each Fund principally invests in Portfolio Funds with no sales related expenses or very low sales related expenses, each Fund is not precluded from investing in Portfolio Funds with sales-related
expenses, redemption fees, and/or service fees. The Advisor will tactically rebalance the portfolio approximately every five weeks and will add or reduce holdings based on relative strength and momentum indicators. Relative strength indicators
measure the strength of market trends of a particular security relative to other securities or a benchmark. Momentum indicators measure the momentum, or rate-of-change, of the strength indicators. As a result
of its strategy, each Fund may have a relatively high level of portfolio turnover compared to other mutual funds, which may affect each Fund’s performance due to higher transactions costs and higher taxes. Portfolio turnover will not be a limiting
factor in making investment decisions.
How the Funds Compare
Investment Objectives: The investment objective of each Existing Fund and
the respective New Fund are identical.
Principal Investment Strategies: The principal investment strategies of
each Existing Fund and the respective New Fund is identical.
For a discussion of the risks of investing in each Existing Fund and the corresponding New Fund, please see PRINCIPAL RISKS in this Information Statement.
The Funds’ Performance
Each New Fund will assume the performance history of the applicable Existing Fund.
Investment Limitations
Each Existing Fund’s and the respective New Fund’s fundamental investment limitations are identical.
The Funds’ Purchase, Exchange and Redemption Procedures
Each of the Existing Fund’s and the corresponding New Fund’s purchase, exchange, and redemption procedures and
policies regarding frequent trading as well as other features related to investing in the Funds are summarized below. The polices of the Existing Funds and the New Funds with respect to valuation and dividends are identical and materially similar,
respectively. A more complete description of each Fund’s policies and procedures can be found in each Existing Fund’s Prospectus and corresponding New Fund’s Prospectus.
Purchase and Redemption of Shares
Existing Funds:
Share Classes. The Existing Funds offer three classes of shares:
Institutional Class, Class A, and Class C. As discussed above under Fees and Expenses, each Existing Fund’s Class A shares are subject to a maximum initial sales charge of 4.50%. The Institutional Class
and Class C Shares of each Existing Fund and the sole class of the corresponding New Fund are offered without an initial sales charge. For each Existing Fund, the minimum initial investment in each share class is $1,000. The minimum subsequent
investment for all share classes is $100.
How to Buy Shares. You may purchase shares of the Existing Funds on any day
on which the NYSE is open for trading. Purchases of each Existing Fund’s shares can be made from the Existing Funds by mail, facsimile, telephone, or bank wire. In addition, brokers that are authorized designees of the Existing Funds may receive
purchase and redemption orders on behalf of the Existing Funds. These designated brokers are also authorized to designate other financial intermediaries to receive orders on behalf of the Existing Funds. Such orders will be deemed to have been
received by the Existing Funds when an authorized designee, or broker-authorized designee, receives the order, subject to the order being in good form. The orders will be priced at the NAV next computed after the orders are received by the
authorized broker, or broker-authorized designee. Orders received in good form prior to the close of the NYSE (normally 4:00 p.m. Eastern Time) will receive a share price based on that day’s NAV and orders received after the close of the NYSE will
receive a price based on the NAV determined at the close of regular trading on the next day that the NYSE is open. Investors may also be charged a fee by a broker or agent if shares are purchased through a broker or agent.
The Existing Funds reserve the right to (i) refuse any request to purchase shares for any reason and (ii) suspend the
offering of shares at any time. An investor that has placed a purchase order will be notified as soon as possible in such circumstances.
How to Redeem Shares. You can redeem shares of the Existing Funds on any
day on which the NYSE is open for trading. The Existing Funds typically expect that they will take up to seven days following the receipt of your redemption request to pay out redemption proceeds; however, the Existing Funds typically expect that
the payment of redemption proceeds will be initiated the next business day following the receipt of your redemption request regardless of the method of payment. The Existing Funds may delay forwarding a redemption check for recently purchased
shares while the Existing Funds determines whether the purchase payment will be honored. Such delay (which may take up to 15 days from the date of purchase) may be reduced or avoided if the purchase is made by certified check or wire transfer. In
all cases, the NAV next determined after receipt of the request for redemption will be used in processing the redemption request. The Existing Funds expect to pay redemptions from cash, cash equivalents, proceeds from the sale of additional Fund
shares, and then from the sale of portfolio securities. These redemption payment methods will be used in regular and stressed market conditions. The Existing Funds may also suspend redemptions, if permitted by the 1940 Act; (i) for any period
during which the NYSE is closed or trading on the NYSE is restricted; (ii) for any period during which an emergency exists as a result of which the Existing Funds’ disposal of their portfolio securities are not reasonably practicable for the
Existing Funds to fairly determine the value of their assets; or (iii) for such other periods as the SEC may order permit for the protection of the Existing Funds’ shareholders.
In addition, if you redeem your Class C Shares of the Existing Funds within the first year of purchase, you may be
subject to a contingent deferred sales charge. The contingent deferred sales charge is calculated as a percentage of the net asset value of the Class C Shares at the time of purchase or redemption by first determining whichever value is lower and
then multiplying that value by 1%. There is no contingent deferred sales charge on Institutional Class or Class A shares
New Funds:
Shares of the New Funds may be acquired or redeemed directly from the Funds at NAV only in large blocks of 10,000
shares called “Creation Units,” or multiples thereof. Only an authorized participant (“AP”) who has entered into an agreement with the Distributor may engage in creation or redemption transactions directly with the New Funds. Once created, shares
of the New Funds generally trade in the secondary market in amounts less than a Creation Unit. Individual Fund shares may only be bought and sold in the secondary market through a broker or dealer at market price.
Shares of the New Funds are listed for trading in the secondary market on NYSE Arca. Shares can be bought and sold
throughout the trading day like other publicly traded shares. When buying or selling shares through a broker, you will incur customary brokerage commissions and other charges. In addition, you may incur costs attributable to the difference
between the highest price a buyer is willing to pay to purchase shares of the New Funds (bid) and the lowest price a seller is willing to accept for shares of the New Funds (ask) when buying or selling shares in the secondary market (the “bid-ask
spread”). Because the New Funds’ shares trade at market prices rather than net asset value, the price you pay or receive for the New Funds’ shares may greater than NAV (premium) or less than NAV (discount)of such shares. The New Funds trade under
the following NYSE Arca ticker symbols:
|
AI Quality Growth ETF
|
AQGX
|
|
Adaptive High Income ETF
|
AHHX
|
|
RH Hedged Multi-Asset Income ETF
|
AMAX
|
|
RH Tactical Outlook ETF
|
RHTX
|
|
RH Tactical Rotation ETF
|
RHRX
|
You access recent information, including information on the New Funds’ NAV, market price, premiums and discounts, and
bid-ask spreads, on the Fund’s website listed below when it becomes available:
|
AI Quality Growth ETF
|
https://etfpages.com/AQGX
|
|
Adaptive High Income ETF
|
https://etfpages.com/AHHX
|
|
RH Hedged Multi-Asset Income ETF
|
https://etfpages.com/AMAX
|
|
RH Tactical Outlook ETF
|
https://etfpages.com/RHTX
|
|
RH Tactical Rotation ETF
|
https://etfpages.com/RHRX
|
The median bid-ask spread for the fiscal year ended May 31, 2021 is not available because the New Funds were not
operating as ETFs during the last fiscal year. The median bid-ask spread for the fiscal year ended May 31, 2022 will be available on the New Funds’ websites listed above when it becomes available.
The trading price of the New Funds’ shares on the Exchange is based on the market price, not the New Funds’ NAVs, so
it may differ from a New Funds’ daily NAV and can be affected by market forces such as supply and demand, economic conditions and other factors. Information regarding the number of days the market price of the New Funds’ shares was greater than the
New Funds’ NAV and the number of days it was less than the New Funds’ NAV (i.e., premium or discount) for the most recently completed calendar year, and the most recently completed calendar quarters is available on the New Funds’ websites listed
above.
How to Buy Creation Units. In order to purchase Creation Units of the New
Funds, an investor must generally deposit a designated portfolio of securities (the “Deposit Securities”) (and/or an amount in cash in lieu of some or all of the Deposit Securities) and generally make a cash payment referred to as the “Cash
Component.” For those APs that are not eligible for trading a Deposit Security, and in such other circumstances as Adaptive believes are in the best interests of the New Funds, custom orders are available. The list of the names and the amounts of
the Deposit Securities is made available by the New Funds’ custodian through the facilities of the NSCC immediately prior to the opening of business each day of the Exchange. The Cash Component represents the difference between the NAV of a
Creation Unit and the market value of the Deposit Securities. In the case of custom orders, cash- in-lieu may be added to the Cash Component to replace any Deposit Securities that either the AP may not be eligible to trade, or Adaptive believes
are in the best interests of the New Funds not to accept in-kind.
Orders must be placed in proper form by or through an AP that is a participant of the DTC (“DTC Participant”). All
standard orders must be placed for one or more whole Creation Units of Shares of the New Funds and must be received by the Distributor in proper form no later than the close of regular trading on the NYSE (ordinarily 4:00 p.m. Eastern time)
(“Closing Time”) in order to receive that day’s closing NAV per Share. In the case of custom orders, the order must be received by the Distributor no later than one hour prior to Closing Time in order to receive that day’s closing NAV per Share.
A custom order may be placed by an Authorized Participant in the event that Starboard permits or requires the substitution of an amount of cash to be added to the Cash Component to replace any Deposit Security that may not be available in
sufficient quantity for delivery or that may not be eligible for trading by such AP or the investor for which it is acting or any other relevant reason. A fixed creation transaction fee of $250 per transaction (the “Creation Transaction Fee”) is
applicable to each transaction regardless of the number of Creation Units purchased in the transaction. An additional variable charge for cash creations or partial cash creations may also be imposed to compensate the New Funds for the costs
associated with buying the applicable securities. The New Funds may adjust these fees from time to time based on actual experience. The price for each Creation Unit will equal the New Funds’ daily NAV per share times the number of Shares in a
Creation Unit plus the fees described above and, if applicable, any transfer taxes.
Shares of the New Funds may be issued in advance of receipt of all Deposit Securities subject to various conditions,
including a requirement to maintain cash at least equal to 105% and up to 115% of the market value of the missing Deposit Securities on deposit with Starboard.
How to Redeem Creation Units. Shares of the New Funds may be redeemed only
in Creation Units at their NAV and only on a day the Exchange is open for business. The New Funds’ custodian makes available immediately prior to the opening of business each day of the Exchange, through the facilities of the NSCC, the list of the
names and the amounts of the New Funds’ portfolio securities that will be applicable that day to redemption requests in proper form (“Redemption Securities”). Redemption Securities received on redemption may not be identical to Deposit Securities,
which are applicable to purchases of Creation Units. Unless cash redemptions or partial cash redemptions are available or specified for the New Funds as set forth below, the redemption proceeds consist of the Redemption Securities, plus cash in an
amount equal to the difference between the NAV of shares being redeemed as next determined after receipt by the transfer agent of a redemption request in proper form, and the value of the Redemption Securities (the “Cash Redemption Amount”), plus
the applicable redemption transaction fee, and, if applicable, any transfer taxes. Should the Redemption Securities have a value greater than the NAV of Shares being redeemed, a compensating cash payment to the New Funds equal to the differential,
plus the applicable redemption fee and, if applicable, any transfer taxes will be required to be arranged for, by or on behalf of the redeeming shareholder.
An order to redeem Creation Units of the New Funds may only be effected by or through an AP. An order to redeem must
be placed for one or more whole Creation Units and must be received by the transfer agent in proper form no later than the close of regular trading on the NYSE (normally 4:00 p.m. Eastern time) in order to receive that day’s closing NAV per share.
In the case of custom orders, the order must be received by the Distributor no later than one hour prior to Closing Time in order to receive that day’s closing NAV per Share.
The New Funds do not have a contingent deferred sales charge.
Comparison:
The front-end sales load for the Existing Funds and the New Funds are not substantially similar. The Existing Funds
have a front-end sales load on Class A shares but not on Institutional Class or Class C shares. The New Funds do not have a front-end sales load.
Shares of each Existing Fund are purchased in cash directly from the Existing Fund subject to certain minimum
investment requirements. Shares of each New Fund may only be purchased directly from the New Fund by APs, in Creation Units, and, usually, in-kind with Deposit Securities. Most shareholders will buy shares of the New Funds on the secondary
market. Shares of the Existing Funds are purchased at NAV at the close of regular trading on the NYSE on the days the NYSE is open for trading. Only APs purchasing Creation Units may purchase shares of the New Funds at NAV at the close of trading
on the NYSE on the days the NYSE is open. The New Funds are listed for trading in the secondary market on NYSE Arca, and most shareholders will purchase shares of the New Funds on NYSE Arca through brokers at its market price, which may be more or
less than the NAV of such shares. Shareholders may also incur brokerage commissions and costs attributable to the bid-ask spread when they purchase shares through brokers at market price.
Shares of each Existing Fund are redeemed in cash directly from the Existing Fund. Shares of each New Fund may only
be redeemed directly from the New Fund by APs, only in Creation Units, and, usually, in-kind with Redemption Securities. Most shareholders will sell shares of the New Funds on the secondary market. Shares of the Existing Funds are redeemed at NAV
at the close of regular trading on the NYSE on the days the NYSE is open for trading. Only APs redeeming Creation Units may redeem shares of the New Funds at NAV at the close of trading on the NYSE on the days the NYSE is open. The New Funds are
listed for trading in the secondary market on NYSE Arca, and most shareholders will redeem shares of the New Funds on NYSE Arca through brokers at its market price, which may be more or less than the NAV of such shares. Shareholders may also incur
brokerage commissions and costs attributable to the bid-ask spread when they sell shares through brokers at market price. The Existing Funds have a contingent deferred sales charge on Class C shares but not on Institutional Class or Class A
shares. The New Funds do not have a contingent deferred sales charge.
Automatic Investment Plan.
Existing Funds: Each Existing Fund enables shareholders to make regular monthly or quarterly investments in shares through
automatic charges to their checking account. With shareholder authorization and bank approval, each Existing Fund will automatically charge the shareholder’s checking account for the amount specified ($50 minimum), which will be automatically
invested in shares at the public offering price on or about the 21st day of the month. The shareholder may change the amount of the investment or discontinue the plan at any time by writing the Existing Fund.
New Funds: The New Funds do not have an automatic investment plan.
Comparison: The policies regarding Automatic Investment Plans for the Existing Funds and the New Funds are not substantially
similar. The Existing Funds have an automatic investment plan, and the New Funds do not have an automatic investment plan.
Exchange Feature.
Existing Funds: Each Existing Fund allows shareholders to exchange shares of the
Existing Fund for shares of the same class of any other series of the Trust that is a mutual fund advised by Adaptive and offered for sale in the state in which the shareholder resides. Shares may be exchanged for shares of the same class of any
other series of the Trust that is a mutual fund at the net asset value. The Trustees reserve the right to suspend, terminate, or amend the terms of the exchange privilege upon prior written notice to the shareholders.
New Funds: The New Funds do not allow shareholders to exchange their New Funds shares for shares of another fund.
Comparison: The exchange feature for the Existing Funds and the New Funds are not substantially similar. The Existing Funds
have an exchange feature, but the New Funds do not have an exchange feature.
Distribution Arrangements.
Existing Funds:
Pursuant to Rule 12b-1 under the 1940 Act, each Existing Fund has adopted plans (each a “Plan”) of distribution
pursuant to which each Existing Fund may directly incur or reimburse the distributor for certain expenses and fees related to the distribution and sale of its shares and for services provided to shareholders. Because these fees are paid out of
each Existing Fund’s assets on an on-going basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.
Under the Plan adopted by each Existing Fund, the Funds may pay 0.25% of each Existing Fund’s average daily net
assets attributable to Class A shares and 1.00% of the average daily net assets attributable to Class C shares. Each Existing Fund has not adopted the Plan for Institutional Class shares.
New Funds:
The New Funds do not have a Plan.
Comparison: The distribution arrangements for the Existing Funds and the New Funds are not substantially similar. The Existing
Funds have a Plan for Class A and Class C shares but not for Institutional Class shares. The New Funds do not have a Plan.
Frequent Trading Policy
Existing Funds:
Frequent purchases and redemptions of Existing Funds shares by a shareholder, known as frequent trading, present a number of risks to
the Existing Funds’ other shareholders. These risks include dilution in the value of Existing Funds shares held by long-term shareholders, interference with the efficient management of the Existing Funds’ portfolio holdings, and increased
brokerage and administration costs. Due to the potential of a thin market for some of the portfolio securities, as well as overall adverse market, economic, political, or other conditions that may affect the sale price of portfolio securities, the
Existing Funds could face untimely losses as a result of having to sell portfolio securities prematurely to meet redemptions. Frequent trading may also increase portfolio turnover, which may in turn result in increased capital gains taxes for
shareholders.
The Board has adopted a policy that is intended to discourage frequent trading by shareholders. The Existing Funds do not accommodate
frequent trading. Under the adopted policy, the Existing Funds’ transfer agent provides a daily record of shareholder trades to Adaptive. The Existing Funds’ transfer agent also monitors and tests shareholder purchase and redemption orders for
frequent trading. Adaptive has the discretion to limit investments, by refusing further purchase and exchange orders, from a shareholder that the Advisor believes has a pattern of trades not in the best interests of the other shareholders. In
addition to this discretionary policy, the Existing Funds will also limit investments from any shareholder account that, on two or more occasions during a 60-calendar day period, purchases and redeems shares over a period of less than 10 days
having a redemption amount within 10% of the purchase amount and greater than $10,000. In the event such a purchase and redemption pattern occurs, the shareholder account and any other account with the same taxpayer identification number will be
precluded from investing in such Fund for at least 30 calendar days after the second redemption transaction. The Existing Funds and Adaptive intend to apply this policy uniformly, except that the Existing Funds may not be able to identify or
determine that a specific purchase or redemption is part of a pattern of frequent trading or that a specific shareholder is engaged in frequent trading, particularly with respect to transactions made through omnibus accounts or accounts opened
through financial intermediaries such as broker-dealers and banks. Omnibus account arrangements permit multiple investors to aggregate their respective share ownership and to purchase, redeem, and exchange Fund shares without the identity of the
individual shareholders being immediately known to the Existing Funds. Like omnibus accounts, accounts opened through financial intermediaries normally permit shareholders to purchase, redeem, and exchange Existing Funds shares without the
identity of the shareholder being immediately known to the Existing Funds. Consequently, the ability of the Existing Funds to monitor and detect frequent trading through omnibus and intermediary accounts is limited, and there is no guarantee that
the Existing Funds can identify shareholders who might be engaging in frequent trading through these accounts or curtail such trading. In addition, this policy will not apply if Adaptive determines that a purchase and redemption pattern does not
constitute frequent trading, such as inadvertent errors that result in frequent purchases and redemptions. Inadvertent errors shall include purchases and/or redemptions made unintentionally or by mistake (e.g., where a shareholder unintentionally
or mistakenly invests in the Existing Funds and redeems immediately after recognizing the error). The shareholder shall have the burden of proving to the sole satisfaction of Adaptive that a purchase and redemption pattern was the result of an
inadvertent error. In such a case, Adaptive may choose to allow further purchase and exchange orders from such shareholder.
New Funds:
New Funds shares can only be purchased and redeemed directly from the New Funds in Creation Units by APs, and the vast majority of
trading in New Funds shares occurs on the secondary market. Because the secondary market trades do not directly involve the New Funds, it is unlikely those trades would cause the harmful effects of market timing, including dilution, disruption of
portfolio management, increases in the New Funds’ trading costs and the realization of capital gains. With regard to the purchase or redemption of Creation Units directly with the New Funds, to the extent effected in-kind (i.e., for securities), those trades do not cause the harmful effects that may result from frequent cash trades. To the extent trades are effected in whole or in part in cash, those trades could result in dilution to the New Funds
and increased transaction costs, which could negatively impact the New Funds’ ability to achieve its investment objective. However, direct trading by APs is critical to ensuring that New Funds shares trade at or close to NAV. The New Funds also
employ fair valuation pricing to minimize potential dilution from market timing. In addition, the New Funds impose transaction fees on purchases and redemptions of New Funds shares to cover the custodial and other costs incurred by the New Funds in
effecting trades. These fees increase if an investor substitutes cash in part or in whole for securities, reflecting the fact that a New Fund’s trading costs increase in those circumstances. Given this structure, the Trust has determined that it is
not necessary to adopt policies and procedures to detect and deter market timing of the New Funds’ shares.
Comparison: The policies regarding frequent trading for the Existing Funds and the New Funds are not substantially similar. The
Existing Funds have a policy not permitting frequent trading, and the New Funds do not have such a policy.
PRINCIPAL RISKS OF INVESTING IN THE FUNDS
Each Existing Fund and the corresponding New Fund are subject to identical risks with respect to the Funds’
investments. The “Explanation of Risks” is applicable to each of the Funds as noted in the table below. The “Additional Risks Associated with the New Funds” below relate to the New Funds’ structure as an ETF and are, therefore, only applicable to
the New Funds.
Explanation of Risks
| |
Adaptive
Fundamental
Growth
Fund and AI
Quality Growth
ETF
|
Adaptive
Hedged High
Income Fund
and Adaptive
High Income
ETF
|
Adaptive
Hedged Multi-
Asset Income
and RH Hedged
Multi-Asset
Income ETF
|
Adaptive
Tactical
Outlook Fund
and RH Tactical
Outlook ETF
|
Adaptive
Tactical
Rotation Fund
and RH Tactical
Rotation ETF
|
|
Asset-Backed Securities Investment
|
|
|
X
|
|
|
|
Cash and Cash Equivalents
|
X
|
X
|
X
|
|
|
|
Commodities
|
|
|
X
|
X
|
|
|
Common Stock
|
X
|
|
|
X
|
X
|
|
Control of Portfolio Funds
|
X
|
X
|
X
|
X
|
X
|
|
Convertible Securities
|
|
X
|
X
|
|
X
|
|
Corporate Debt Securities
|
|
X
|
X
|
|
|
| |
Adaptive
Fundamental
Growth
Fund and AI
Quality Growth
ETF
|
Adaptive
Hedged High
Income Fund
and Adaptive
High Income
ETF
|
Adaptive
Hedged Multi-
Asset Income
and RH Hedged
Multi-Asset
Income ETF
|
Adaptive
Tactical
Outlook Fund
and RH Tactical
Outlook ETF
|
Adaptive
Tactical
Rotation Fund
and RH Tactical
Rotation ETF
|
|
COVID-19
|
X
|
X
|
X
|
X
|
X
|
|
Credit
|
|
|
X
|
|
|
|
Cybersecurity
|
X
|
X
|
X
|
X
|
X
|
|
Equity Securities
|
X
|
X
|
|
X
|
X
|
|
ETF Investing
|
X
|
X
|
X
|
X
|
X
|
|
ETN
|
|
X
|
X
|
|
X
|
|
Fixed Income
|
|
X
|
X
|
X
|
|
|
Foreign Securities and Emerging Markets
|
|
X
|
X
|
|
|
|
Fund Investing
|
X
|
X
|
X
|
X
|
X
|
|
Hedging
|
|
X
|
X
|
|
|
|
High-Yield
|
|
X
|
X
|
|
|
|
Inflation
|
|
X
|
X
|
|
|
|
Interest Rate
|
|
X
|
X
|
|
|
|
Inverse ETF
|
X
|
|
|
|
|
|
Investment Advisor
|
X
|
X
|
X
|
X
|
X
|
|
Large-Cap Securities
|
X
|
X
|
|
X
|
X
|
|
Leveraged and Inverse ETFs
|
|
X
|
X
|
|
X
|
|
LIBOR
|
|
|
X
|
|
|
|
Liquidity
|
|
|
X
|
|
|
|
Managed Volatility
|
X
|
|
|
|
|
|
Market
|
X
|
X
|
X
|
X
|
X
|
|
MLPs
|
|
X
|
|
|
|
|
Mortgage-Backed Securities
|
|
|
X
|
|
|
|
Options
|
X
|
|
|
|
|
|
Portfolio Turnover
|
X
|
X
|
|
X
|
X
|
|
Preferred Equity
|
|
X
|
X
|
|
X
|
| |
Adaptive
Fundamental
Growth
Fund and AI
Quality Growth
ETF
|
Adaptive
Hedged High
Income Fund
and Adaptive
High Income
ETF
|
Adaptive
Hedged Multi-
Asset Income
and RH Hedged
Multi-Asset
Income ETF
|
Adaptive
Tactical
Outlook Fund
and RH Tactical
Outlook ETF
|
Adaptive
Tactical
Rotation Fund
and RH Tactical
Rotation ETF
|
|
Quantitative
|
X
|
X
|
X
|
|
X
|
|
Rating Agencies
|
|
|
X
|
|
|
|
REIT
|
|
X
|
X
|
|
|
|
Small-Cap and Mid-Cap Securities
|
X
|
|
|
X
|
X
|
|
U.S. Government Securities
|
|
|
X
|
|
|
Asset-Backed Securities Investment Risk. Asset-backed investments tend to increase in value less
than other debt securities when interest rates decline but are subject to similar risk of decline in market value during periods of rising interest rates. In a period of declining interest rates, the Fund may be required to reinvest more frequent
prepayments on asset-backed investments in lower-yielding investments. Asset-backed securities in the Fund invests may have underlying assets. There is a risk that borrowers may default on their obligations in respect of those underlying
obligations. Certain assets underlying asset-backed securities are subject to prepayment, which may reduce the overall return to asset-backed security holders. Holders also may experience delays in payment or losses on the securities if the full
amounts due on underlying sales contracts or receivables are not realized because of unanticipated legal or administrative costs of enforcing the contracts or because of depreciation or damage to the collateral securing certain contracts, or other
factors. The value of asset-backed securities may be substantially dependent on the servicing of the underlying asset pools and are therefore subject to risks associated with the negligence or malfeasance by their servicers and to the credit risk
of their servicers. The impairment of the value of collateral or other assets underlying an asset-backed security, such as a result of non-payment of loans or non-performance of other collateral or underlying assets, may result in a reduction in
the value of such asset-backed securities and losses to the Fund. It is possible that may, or all asset-backed securities will fall out of favor at any time or over time with investors, affecting adversely the values and liquidity of the
securities.
Cash and Cash Equivalents Risk. At any time, the Fund may have significant investments in cash
or cash equivalents. When a substantial portion of a portfolio is held in cash or cash equivalents, there is the risk that the value of the cash account, including interest, will not keep pace with inflation, thus reducing purchasing power over
time.
Commodities Risk. The Fund and Portfolio Funds may have exposure to the commodities markets,
subjecting the Fund to risks not associated with investments in traditional securities. The value of commodities related investments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or
factors affecting a particular industry or commodity, including drought, floods, weather, livestock disease, embargoes, and tariffs. The prices of industrial metals, precious metals, agriculture, and livestock
commodities may fluctuate widely due to changes in value, supply and demand, and governmental regulatory policies.
Common Stock Risk. Investments by the Fund and Portfolio Funds in shares of common stock may
fluctuate in value response to many factors, including the activities of the individual issuers whose securities the Fund or Portfolio Fund owns, general market and economic conditions, interest rates, and specific industry changes. Such price
fluctuations subject the Fund to potential losses. In addition, regardless of any one company’s particular prospects, a declining stock market may produce a decline in prices for all equity securities, which could also result in losses for the
Fund. Market declines may continue for an indefinite period of time, and investors should understand that during temporary or extended bear markets, the value of common stocks will decline.
Control of Portfolio Funds Risk. The Portfolio Funds each have their own unique investment
objective, strategies, and risks. There is no guarantee that the Portfolio Funds will achieve their investment objectives and the Fund has exposure to the investment risks of the Portfolio Funds in direct proportion to the allocation of assets
among the funds. The investment policies of the Portfolio Funds may differ from the Fund’s policies.
Although the Fund and the Advisor will evaluate regularly each Portfolio Fund to determine whether its investment program is consistent
with the Fund’s investment objective, the Advisor will not have any control over the investments made by a Portfolio Fund. Even though each Portfolio Fund is subject to certain constraints, the investment advisor of each Portfolio Fund may change
aspects of its investment strategies at any time. The Advisor will not have the ability to control or otherwise influence the composition of the investment portfolio of a Portfolio Fund.
Convertible Securities Risk. Convertible securities are fixed income securities that the Fund
or a Portfolio Fund has the option to exchange for equity securities at a specified conversion price. The option allows the Fund or Portfolio Fund to realize additional returns if the market price of the equity securities exceeds the conversion
price. For example, the Portfolio Fund may hold fixed income securities that are convertible into shares of common stock at a conversion price of $10 per share. If the market value of the shares of common stock reached $12, the Portfolio Fund
could realize an additional $2 per share by converting its fixed income securities. Convertible securities have lower yields than comparable fixed income securities. In addition, at the time a convertible security is issued the conversion price
exceeds the market value of the underlying equity securities. Thus, convertible securities may provide lower returns than non-convertible fixed income securities or equity securities depending upon changes in the price of the underlying equity
securities. However, convertible securities permit the Fund or Portfolio Fund to realize some of the potential appreciation of the underlying equity securities with less risk of losing its initial investment.
Corporate Debt Securities Risk. The Fund and Portfolio Funds may invest in corporate debt
securities. Corporate debt securities are fixed income securities issued by businesses. Notes, bonds, debentures, and commercial paper are the most prevalent types of corporate debt securities. The credit risks of corporate debt securities vary
widely among issuers. In addition, the credit risk of an issuer’s debt security may vary based on its priority for repayment. Higher ranking (senior) debt securities have a higher priority than lower ranking (subordinated) securities. This means
that the issuer might not make payments on subordinated securities while continuing to make payments on senior securities. In addition, in the event of bankruptcy, holders of senior securities may receive amounts otherwise payable to the holders
of subordinated securities. Some subordinated securities, like trust preferred and capital securities notes, also permit the issuer to defer payments under certain circumstances. Insurance companies issue securities known as surplus notes that
permit the insurance company to defer any payment that would reduce its capital below regulatory requirements.
COVID-19 Risk. An outbreak of infectious respiratory illness caused by a novel
coronavirus known as COVID-19 was first detected in China in December 2019 and has now been detected globally. COVID-19 has resulted in travel restrictions, closed international borders, enhanced health screenings at ports of entry and elsewhere,
disruption of and delays in healthcare service preparation and delivery, prolonged quarantines, cancellations, supply chain disruptions, and lower consumer demand, as well as general concern and uncertainty. The impact of COVID-19, and other
infectious illness outbreaks that may arise in the future, could adversely affect the economies of many countries or the entire global economy, individual issuers and capital markets in ways that cannot necessarily be foreseen. In addition, the
impact of infectious illnesses in emerging market countries may be greater due to generally less established healthcare systems. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic
risks in certain countries or globally. As such, issuers of debt securities with operations, productions, offices, and/or personnel in (or other exposure to) areas affected with the virus may experience significant disruptions to their business
and/or holdings. The potential impact on the credit markets may include market illiquidity, defaults and bankruptcies, among other consequences, particularly on issuers in the airline, travel and leisure and retail sectors. The extent to which
COVID-19 will affect the Fund, the Fund’s service providers’ and/or issuer’s operations and results will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the
severity of COVID-19 and the actions taken to contain COVID-19. Economies and financial markets throughout the world are becoming increasingly interconnected. As a result, whether or not the Fund invests in securities of issuers located in or with
significant exposure to countries experiencing economic, political and/or financial difficulties, the value and liquidity of the Fund’s investments may be negatively affected by such events. If there is a significant decline in the value of the
Fund’s portfolio, this may impact the Fund’s asset coverage levels for certain kinds of derivatives and other portfolio transactions. The duration of the COVID-19 outbreak and its impact on the global economy cannot be determined with certainty.
Credit Risk. Credit risk refers to the risk that an issuer or counterparty will
fail to pay its obligations to the Fund when they are due. As a result, the Fund’s income might be reduced, the value of the Fund’s investment might fall, and/or the Fund could lose the entire amount of its investment. Changes in the financial
condition of an issuer or counterparty, changes in specific economic, social, or political conditions that affect a particular type of security or other instrument or an issuer, and changes in economic, social, or political conditions generally can
increase the risk of default by an issuer or counterparty, which can affect a security’s or other instrument’s credit quality or value and an issuer’s or counterparty’s ability to pay interest and principal when due. The values of lower-quality
debt securities (commonly known as “junk bonds”) tend to be particularly sensitive to these changes.
Cybersecurity Risk. As part of its business, the Advisor processes, stores, and transmits large
amounts of electronic information, including information relating to the transactions of the Fund. The Advisor and the Fund are therefore susceptible to cybersecurity risk. Cyber-attacks include, among other behaviors, stealing or corrupting data
maintained online or digitally, denial of service attacks on websites, the unauthorized release of confidential information, and causing operational disruption. Successful cyber-attacks against, or security breakdowns of, the Fund or its advisor,
custodians, fund accountant, fund administrator, transfer agent, pricing vendors, and/or other third-party service providers may adversely impact the Fund and its shareholders. For instance, cyber-attacks may interfere with the processing of
shareholder transactions, impact the Fund’s ability to calculate its NAV, cause the release of private shareholder information or confidential Fund information, impede trading, cause reputational damage, and subject the Fund to regulatory fines,
penalties or financial losses, reimbursement or other compensation costs, and/or additional compliance costs. The Fund also may incur substantial costs for cybersecurity risk management in order to guard against any cyber incidents in the future.
The Fund and its shareholders could be negatively impacted as a result.
Equity Securities Risk. Investments by the Portfolio Funds in equity securities may fluctuate
in value response to many factors, including the activities of the individual issuers whose securities the Portfolio Fund owns, general market and economic conditions, interest rates, and specific industry changes. Such price fluctuations subject
the Fund to potential losses. During temporary or extended bear markets, the value of equity securities will decline, which could also result in losses for the Fund.
ETF Investing Risk. An investment in an ETF is an investment in another investment company and
therefore the Fund’s shareholders will indirectly bear its proportionate share of any fees and expenses of the ETFs in which the Fund invests in addition to the Fund’s own fees and expenses. As a result, the cost of investing will be higher than
the cost of investing directly in the ETFs and may be higher than mutual funds that invest directly in stocks and bonds. ETFs are subject to the following risks: (i) the market price of an ETF’s shares may trade above or below its NAV; (ii) an
active trading market for an ETF’s shares may not develop or be maintained; (iii) trading of an underlying ETF’s shares may be halted if the listing exchange’s officials deem such action appropriate, the shares are delisted from the exchange, or
the activation of market wide “circuit breakers” (which are tied to large decreases in stock prices) halts stock trading generally; or (iv) the ETF may fail to achieve close correlation with the index that it tracks due to a variety of factors,
such as rounding of prices and changes to the index and/or regulatory policies, resulting in the deviation of the ETF’s returns from that of its corresponding index. Some ETFs may be thinly traded, and the resulting higher costs associated with
respect to purchasing and selling the ETFs in the Fund’s portfolio will be borne by the Fund.
ETN Risk. Similar to ETFs, owning an ETN generally reflects the risks of owning the assets that
comprise the underlying market benchmark or strategy that the ETN is designed to reflect. ETNs also are subject to issuer and fixed-income risk. ETN holders are exposed to an issuer’s credit risk, which does not affect ETF holders. ETNs are
senior unsecured obligations of the issuer. The repayment of the principal and any applicable return at maturity or upon repurchase by the issuer are dependent on that issuer's ability to pay.
Fixed Income Risk. Fixed income risk factors include credit risk (the debtor may default) and
prepayment risk (the debtor may pay its obligation early or later than expected, potentially reducing the amount of interest payments or extending time to principal repayment). These risks could affect the value of a particular investment possibly
causing the Fund's share price and total return to be reduced and fluctuate more than other types of investments. When the Fund invests in fixed income securities the value of your investment in the Fund will fluctuate with changes in interest
rates. Typically, a rise in interest rates causes a decline in the value of fixed income securities. Interest rates are currently at historical lows, which may impact the Fund’s risk profile. In general, the market price of debt securities with
longer maturities will increase or decrease more in response to changes in interest rates than shorter-term securities. If the U.S. Federal Reserve’s Federal Open Market Committee (“FOMC”) raises the federal funds interest rate target, interest
rates across the U.S. financial system may rise. However, the magnitude of rate changes across maturities and borrower sectors is uncertain. Rising rates may decrease liquidity and increase volatility, which may make portfolio management more
difficult and costly to the Fund and its shareholders. Additionally, default risk increases if issuers must borrow at higher rates. Generally, these changing market conditions may cause the Fund’s share price to fluctuate or decline more than other
types of equity investments.
Foreign Securities and Emerging Markets Risk. Foreign securities have
investment risks different from those associated with domestic securities. Changes in foreign economies and political climates are more likely to affect the Fund or a Portfolio Fund with significant investments in foreign securities than another
fund that invests exclusively in domestic securities. The value of foreign currency denominated securities or foreign currency contracts is affected by the value of the local currency relative to the U.S. dollar. There may be less government
supervision of foreign markets, resulting in non-uniform accounting practices and less publicly available information about issuers of foreign securities. The value of foreign investments may be affected by changes in exchange control regulations,
application of foreign tax laws (including withholding tax), changes in governmental economic or monetary policy (in this country or abroad), or changed circumstances in dealings between nations. In addition, foreign brokerage commissions, custody
fees, and other costs of investing in foreign securities are often higher than in the United States. Investments in foreign issues could be affected by other factors not present in the United States, including expropriation, armed conflict,
confiscatory taxation, and potential difficulties in enforcing contractual obligations.
The Fund and Portfolio Funds may also invest in emerging markets, which are markets of countries in the initial stages of
industrialization and have low per capital income. In addition to the risks of foreign securities in general, countries in emerging markets are more volatile and can have relatively unstable governments, social and legal systems that do not
protect shareholders, economies based on only a few industries, and securities markets that trade a small number of issues which could reduce liquidity. There is also less publicly available information on emerging market companies due to
differences in regulation, accounting, auditing, and financial recordkeeping requirements, and the information available may be unreliable or outdated.
Fund Investing Risk. Investments in other investment companies subject the Fund to additional
operating and management fees and expenses. Investors in the Fund will indirectly bear fees and expenses charged by the funds in which the Fund invests, in addition to the Fund’s direct fees and expenses. As a result, the cost of investing in the
Fund will be higher than the cost of investing directly in the Portfolio Funds and also may be higher than other funds that invest directly in securities. The Fund’s performance depends in part upon the performance of the investment advisor to each
Portfolio Fund, the strategies and instruments used by the Portfolio Funds, and the Advisor's ability to select Portfolio Funds and effectively allocate fund assets among them. Furthermore, the use of a fund of funds structure could affect the
timing, amount, and character of distributions and therefore may increase the amount of taxes payable by you.
Hedging Risk. Techniques used by Advisor to hedge the
Fund’s investments carry the risks that such techniques may not protect against market declines. The techniques may also limit the Fund’s participation in market gains. Further, such techniques may increase portfolio transaction costs, which could
result in losses or reduced gains. They also may not be successful as the techniques are subject to the Advisor’s ability to correctly analyze and implement the hedging techniques in a timely manner.
High-Yield Risk. The Fund and Portfolio Funds may invest in junk bonds, including bonds of
issuers in default, and other fixed income securities that are rated below investment grade. Securities in this rating category are speculative and are usually issued by companies without long track records of sales and earnings, or by those
companies with questionable credit strength. Credit risk is greater for junk bonds, particularly for bonds of issuers in default, than for investment grade bonds, which is the risk that issuers will not make payments on fixed income securities
held by the Fund, resulting in losses to the Fund. Changes in economic conditions or other circumstances may have a greater effect on the ability of issuers of these securities to make principal and interest payments than they do on issuers of
higher-grade securities. The retail secondary market for junk bonds may be less liquid than that of higher-rated securities and adverse conditions could make it difficult at times to sell certain securities or could result in lower prices.
Additionally, these instruments are unsecured and may be subordinated to other creditor’s claims.
Inflation Risk. Fixed income securities held by the Fund and Portfolio Funds are subject to
inflation risk. Because inflation reduces the purchasing power of income produced by existing fixed income securities, the prices at which fixed income securities trade will be reduced to compensate for the fact that the income they produce is
worth less. This potential decrease in market value of fixed income securities would result in a loss in the value of the Fund’s portfolio.
Interest Rate Risk. Interest rates may rise resulting in a decrease in the value of the fixed
income securities held by the Fund and Portfolio Funds or may fall resulting in an increase in the value of such securities. Interest rates are currently at historic lows due to the various federal government stimulus programs as a result of the
COVID-19 pandemic. Fixed income securities with longer maturities involve greater risk than those with shorter maturities.
Inverse ETF Risk. Investing in inverse ETFs may result in increased volatility due to the
inverse ETF’s possible use of short sales of securities and derivatives such as options and futures. The use of leverage by an ETF increases risk to the Fund. The more a fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. During periods of increased volatility, inverse ETFs may not perform in the manner they are designed.
Investment Advisor Risk. The Advisor’s ability to choose suitable investments has a
significant impact on the ability of the Fund to achieve its investment objectives.
Large-Cap Securities Risk. Stocks of large companies as a group can fall out of favor with the
market, causing the Fund to underperform investments that have a greater focus on mid-cap or small-cap stocks. Larger, more established companies may be slow to respond to challenges and may grow more slowly than smaller companies.
Leveraged and Inverse ETFs. Investing in leveraged ETFs will amplify the Fund’s gains and
losses. Most leveraged ETFs “reset” daily. Due to the effect of compounding, their performance over longer periods of time can differ significantly from the performance of their underlying index or benchmark during the same period of time.
Investing in inverse ETFs may result in increased volatility due to the funds’ possible use of short sales of securities and derivatives such as options and futures. The use of leverage by an ETF increases risk to the Fund. The more a fund
invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. During periods of increased volatility, inverse ETFs may not perform in the manner they are
designed.
Libor Risk. Certain of the Fund’s or Portfolio Funds’ investments may be based on floating
rates, such as LIBOR. LIBOR, or the London Interbank Offered Rate, is a benchmark that dictates daily interest rates on loans and financial instruments globally. Plans are underway to phase out the use of LIBOR by the end of 2021, which indicates
the continuation of LIBOR and other reference rates on the current basis cannot and will not be guaranteed after 2021. Any replacement rate chosen may be less favorable than the current rates. Until the announcement of the replacement rate, the
Fund may continue borrow under the Credit Facilities at rates that reference LIBOR and invest in Underlying Funds that may hold underlying assets referencing LIBOR or otherwise use LIBOR. There remains uncertainty regarding the nature of any
replacement rate and the impact of the transition from LIBOR on the Fund’s transactions and the financial markets generally. As such, the potential effect of a transition away from LIBOR on the Fund’s investments and/or the Fund’s Credit Facilities
cannot yet be determined.
Liquidity Risk. Liquidity risk exists when particular investments of the Fund would be difficult
to purchase or sell, possibly preventing the Fund from selling such illiquid securities at an advantageous time or price, or possibly requiring the Fund to dispose of other investments at unfavorable times or prices in order to satisfy its
obligations.
Illiquid investments may be difficult to dispose of at a fair price at the times when the Fund believes it is desirable to do so. The
market price of illiquid investments generally is more volatile than that of more liquid investments, which may adversely affect the price that the Fund pays for or recovers upon the sale of such investments. Illiquid investments are also more
difficult to value, especially in challenging markets. The Sub-Advisor’s judgment may play a greater role in the valuation process. Investment of the Fund’s assets in illiquid securities may restrict the Fund’s ability to take advantage of market
opportunities.
Managed Volatility Risk. Techniques used by Advisor to
manage the volatility of the Fund’s investments carry the risks that such techniques may not protect against market declines. The techniques may also limit the Fund’s participation in market gains, particularly during periods where market values
are increasing but market volatility is high. Further, such techniques may increase portfolio transaction costs, which could result in losses or reduced gains. They also may not be successful as the techniques are subject to the Advisor’s ability
to correctly analyze and implement the volatility management techniques in a timely manner.
Market Risk. Market risk refers to the possibility that the value of securities held by the
Fund may decline due to daily fluctuations in the market. Market prices for securities change daily as a result of many factors, including developments affecting the condition of both individual companies and the market in general. The price of a
security may even be affected by factors unrelated to the value or condition of its issuer, including changes in interest rates, economic and political conditions, and general market conditions. The Fund’s
performance per share will change daily in response to such factors.
MLP Risk. Investments in securities of MLPs involve risks that differ from
investments in common stock, including risks related to limited control and limited rights to vote on matters affecting MLPs, risks related to potential conflicts of interest between an MLP and the MLP’s general partner, cash flow risks, dilution
risks, and risks related to the general partner’s right to require unit-holders to sell their common units at an undesirable time or price. Many of the Fund’s investments in MLPs will be subject to legal and other restrictions on resale or will
otherwise be less liquid than publicly traded securities. Certain MLP securities may trade in lower volumes due to their smaller capitalizations. Accordingly, those MLPs may be subject to more abrupt or erratic price movements and may lack
sufficient market liquidity to enable the Fund to effect sales at an advantageous time or without a substantial drop in price. Investment in those MLPs may restrict the Fund’s ability to take advantage of other investment opportunities. If the Fund
is one of the largest investors in certain MLPs, it may be more difficult for the Fund to buy and sell significant amounts of such investments without an unfavorable impact on prevailing market prices. Larger purchases or sales of MLP investments
by the Fund in a short period of time may cause abnormal movements in the market price of these investments. As a result, these investments may be difficult to dispose of at a fair price at the times when the Fund believes it is desirable to do so.
MLPs are generally considered interest-rate sensitive investments. During periods of interest rate volatility, these investments may not provide attractive returns, which may adversely impact the overall performance of the Fund.
The amount and tax characterization of cash available for distribution by an MLP depends upon the amount of cash
generated by such entity’s operations. Cash available for distribution by MLPs will vary widely from quarter to quarter and is affected by various factors affecting the entity’s operations. In addition to the risks described herein, operating
costs, capital expenditures, acquisition costs, construction costs, exploration costs and borrowing costs may reduce the amount of cash that an MLP has available for distribution in a given period. MLPs have the ability to modify their distribution
policies from time to time without input from or approval of the Fund.
MLPs are subject to various risks related to the underlying operating companies they control, including dependence upon
specialized management skills and the risk that those operating companies may lack or have limited operating histories. The success of the Fund’s investments in an MLP will vary depending on the underlying industry represented by the MLP’s
portfolio. Certain MLPs in which the Fund may invest depend upon their parent or sponsor entities for the majority of their revenues. If the parent or sponsor entities fail to make payments or satisfy their obligations to an MLP, the revenues and
cash flows of that MLP and ability of that MLP to make distributions to unit holders such as the Fund would be adversely affected.
Certain MLPs in which the Fund may invest depend upon a limited number of customers for substantially all of their
revenue. Similarly, certain MLPs in which the Fund may invest depend upon a limited number of suppliers of goods or services to continue their operations. The loss of those customers or suppliers could have a material adverse effect on an MLP’s
results of operations and cash flow, and on its ability to make distributions to unit holders such as the Fund.
The Fund is not responsible for operating MLPs and similar entities and cannot control or monitor their compliance with
applicable tax, securities and other laws and regulations necessary for the profitability of such investments. Holders of MLP units could potentially become subject to liability for all of the obligations of an MLP, if a court determines that the
rights of the unitholders to take certain action under the limited partnership agreement would constitute “control” of the business of that MLP, or if a court or governmental agency determines that the MLP is conducting business in a state without
complying with the limited partnership statute of that state. Furthermore, the structures and terms of the MLPs and other entities described in this prospectus may not be indicative of the structure and terms of every entity in which the Fund
invests. Although the MLP sector has grown significantly in recent years, such market trends may not continue due to economic conditions, which are not predictable, or other factors.
Market prices generally will be unavailable for some of the Fund’s investments, including MLP subordinated units, direct
ownership of general partner or managing member interests and restricted or unregistered securities of certain MLPs and private companies. The value of such securities will be determined by fair valuations determined by the Board or its designee in
accordance with procedures governing the valuation of portfolio securities adopted by the Board.
Mortgage-Backed Securities Risk. Investments by the Fund in fixed rate and floating rate
mortgage-backed securities will entail credit risks (i.e., the risk of non-payment of interest and principal) and market risks (i.e., the risk that interest rates and
other factors could cause the value of the instrument to decline). Many issuers or servicers of mortgage-backed securities guarantee timely payment of interest and principal on the securities, whether or not payments are made when due on the
underlying mortgages. This kind of guarantee generally increases the quality of a security but does not mean that the security’s market value and yield will not change. The values of mortgage-backed securities may change because of changes in the
market’s perception of the credit quality of the assets held by the issuer of the mortgage-backed securities or an entity, if any, providing credit support in respect of the mortgage-backed securities. In addition, an unexpectedly high rate of
defaults on the mortgages held by a mortgage pool may limit substantially the pool’s ability to make payments of principal or interest to the Fund as a holder of such securities, reducing the values of those securities or in some cases rendering
them worthless. The Fund also may purchase securities that are not guaranteed or subject to any credit support. An investment in a privately issued mortgage-backed security may be less liquid and subject to greater credit risks than an investment
in a mortgage-backed security that is issued or otherwise guaranteed by a federal government agency. The liquidity of mortgage-backed securities can change significantly over time. Like bond investments, the value of fixed rate mortgage-backed
securities will tend to rise when interest rates fall and fall when rates rise. Floating rate mortgage-backed securities generally tend to have more moderate changes in price when interest rates rise or fall, but their current yield will be
affected. In addition, the mortgage-backed securities market in general may be adversely affected by changes in governmental legislation or regulation. Factors that could affect the value of a mortgage-backed security include, among other things,
the types and amounts of insurance which an individual mortgage or that specific mortgage-backed security carries, the default and delinquency rate of the mortgage pool, the amount of time the mortgage loan has been outstanding, the loan-to-value
ratio of each mortgage, and the amount of overcollateralization or undercollateralization of a mortgage pool.
The residential mortgage market in the United States has experienced difficulties that may adversely affect the performance and market
value of certain of the Fund’s mortgage-related investments. Delinquencies and loses on residential mortgage loans generally increased in the last decade and potentially could begin to increase again. Ongoing developments in the residential
mortgage market may have additional consequences to the market for mortgage-backed securities.
In addition, the liquidity of mortgage-backed securities varies by type of security; at certain times a Fund may be unable to dispose of
such investments at a desirable time or at the value the Fund has placed on the investment. Because mortgage-backed securities may be less liquid than other securities, the Funds may be more susceptible to liquidity risks than funds that invest in
other securities. In the past, in stressed markets, certain types of mortgage-backed securities suffered periods of illiquidity if disfavored by the market.
Commercial mortgage-backed securities (“CMBS”) include securities that reflect an interest in, or are secured by, mortgage loans on
commercial real property. Many of the risks of investing in commercial mortgage-backed securities reflect the risks of investing in the real estate securing the underlying mortgage loans. These risks reflect the effects of local and other economic
U.S. conditions on real estate markets, the ability of tenants to make loan payments, and the ability of a property to attract and retain tenants. Commercial mortgage-backed securities may be less liquid and exhibit greater price volatility than
other types of mortgage- or asset-backed securities.
Options Risk.
There are risks associated with the sale and purchase of put options. As a seller (writer) of a put option, the Fund will tend to lose money if the value of the reference index falls below the strike price. As the buyer of a put option, the Fund
risks losing the entire premium invested in the option if the Fund does not exercise the option. If a put option purchased by the Fund is not sold when it has remaining value and if the market price of the underlying security remains equal to or
greater than the exercise price, the Fund will lose its entire investment in the option. Since many factors influence the value of an option, including the price of the underlying security, the exercise price, the time to expiration, the interest
rate, and the dividend rate of the underlying security, the Advisor’s success in implementing the Fund’s strategy may depend on an ability to predict movements in the prices of individual securities, fluctuations in markets, and movements in
interest rates. There is no assurance that a liquid market will exist when the Fund seeks to close out an option position. Where a position in a purchased option is used as a hedge against price movements in a related position, the price of the
option may move more or less than the price of the related position.
Portfolio Turnover Risk. The Advisor will sell Portfolio Funds and other securities when it is
in the best interest of the Fund and its shareholders to do so without regard to the length of time they have been held. As portfolio turnover may involve paying brokerage commissions and other transaction costs, there could be additional expenses
for the Fund. High rates of portfolio turnover may also result in the realization of short-term capital gains and losses. Any distributions resulting from such gains will be considered ordinary income for federal income tax purposes.
Preferred Equity Risk. Preferred equity’s right to dividends and liquidation proceeds is junior
to the rights of a company’s debt securities. The value of preferred equity may be subject to factors that affect fixed income and equity securities, including changes in interest rates and in a company’s creditworthiness. The value of preferred
equity tends to vary more with fluctuations in the underlying common equity and less with fluctuations in interest rates and tends to exhibit greater volatility. Shareholders of preferred equity may suffer a loss of value if dividends are not paid
and have limited voting rights.
Quantitative Risk. Securities or other investments selected using quantitative methods may
perform differently from the market as a whole for many reasons, including the factors used in building the quantitative analytical framework, the weights placed on each factor, and changing sources of market returns, among others. There can be no
assurance that these methodologies will enable the Fund to achieve its objective.
Rating Agencies Risk. Ratings are not an absolute standard of quality, but rather general
indicators that reflect only the view of the originating rating agencies from which an explanation of the significance of such ratings may be obtained. There is no assurance that a particular rating will continue for any given period of time or
that any such rating will not be revised downward or withdrawn entirely. Such changes may negatively affect the liquidity or market price of the securities in which the Fund invests. The ratings of securitized assets may not adequately reflect the
credit risk of those assets due to their structure.
REIT Risk. Investing in REITs involves certain unique risks in addition to those
associated with the real estate sector generally, including poor performance by the REIT’s manager, adverse changes to the tax laws, and the possible failure by the REIT to qualify for the favorable tax treatment available to REITs under the
Internal Revenue Code of 1986, as amended, or the exemption from registration under the 1940 Act. REITs are not diversified and are heavily dependent on cash flow. REITs whose underlying properties are concentrated in a particular industry or
region are also subject to risks affecting such industries and regions. REITs (especially mortgage REITs) are also subject to interest rate risks. By investing in REITs through the Fund, a shareholder will bear expenses of the REITs in addition to
Fund expenses.
Small-Cap and Mid-Cap Securities Risk. The Fund and Portfolio Funds may invest in securities
of small-cap and mid-cap companies, which involves greater risk than investing in larger and more established companies. This greater risk is, in part, attributable to the fact that the securities of these companies are usually less marketable
and, therefore, more volatile than securities of larger, more established companies or the market in general. Because these companies normally have fewer shares outstanding than larger companies, it may be more difficult to buy or sell significant
amounts of such shares without an unfavorable impact on prevailing prices. Another risk factor is that these companies often have limited product lines, markets, or financial resources and may lack management depth. Small-cap and mid-cap
companies are typically subject to greater changes in earnings and business prospects than are larger, more established companies. These companies may be more vulnerable than larger companies to adverse business or economic developments, the risk
exists that the companies will not succeed, and the prices of the companies’ shares could dramatically decline in value. You should expect that the value of the Shares will be more volatile than a fund that invests exclusively in
large-capitalization companies.
U.S. Government Securities Risk. Some U.S. Government securities, such as Treasury bills,
notes, and bonds and mortgage-backed securities guaranteed by the Government National Mortgage Association (Ginnie Mae), are supported by the full faith and credit of the United States; others are supported by the right of the issuer to borrow from
the U.S. Treasury; others are supported by the discretionary authority of the U.S. Government to purchase the agency’s obligations; still others are supported only by the credit of the issuing agency, instrumentality, or enterprise. Although U.S.
Government-sponsored enterprises may be chartered or sponsored by Congress, they are not funded by Congressional appropriations, their securities are not issued by the U.S. Treasury, their obligations are not supported by the full faith and credit
of the U.S. Government, and so investments in their securities or obligations issued by them involve greater risk than investments in other types of U.S. Government securities. In addition, certain governmental entities have been subject to
regulatory scrutiny regarding their accounting policies and practices and other concerns that may result in legislation, changes in regulatory oversight and/or other consequences that could adversely affect the credit quality, availability or
investment character of securities issued or guaranteed by these entities.
Additional Risks Associated with the New Funds
Authorized Participant Risk. Only an Authorized Participant may engage in creation or
redemption transactions directly with the New Funds. The New Funds have a limited number of institutions that may act as APs on an agency basis (i.e., on behalf of other market participants). Authorized Participant concentration risk may be
heightened for exchange-traded funds (ETFs), such as the New Funds, that invest in securities issued by non-U.S. issuers or other securities or instruments that have lower trading volumes.
ETF Structure Risks. The New Funds are structured as ETFs and as a result is subject to the
special risks, including:
|
o
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Not Individually Redeemable. Shares are not individually redeemable and may be redeemed by the New Funds
at NAV only in large blocks known as “Creation Units.” You may incur brokerage costs purchasing enough Shares to constitute a Creation Unit.
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|
o
|
Trading Issues. An active trading market for the New Funds’ shares may not be developed or maintained.
Trading in Shares on the Exchange may be halted due to market conditions or for reasons that, in the view of the Exchange, make trading in Shares inadvisable, such as extraordinary market volatility. There can be no assurance that Shares
will continue to meet the listing requirements of the Exchange. If the New Funds’ shares are traded outside a collateralized settlement system, the number of financial institutions that can act as authorized participants that can post
collateral on an agency basis is limited, which may limit the market for the New Funds’ shares.
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|
o
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Cash purchases. To the extent Creation Units are purchased by APs in cash instead of in-kind, the Fund
will incur certain costs such as brokerage expenses and taxable gains and losses. These costs could be imposed on the Funds and impact the Funds’ NAV if not fully offset by transaction fees paid by the APs.
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|
o
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Market Price Variance Risk. The market prices of Shares will fluctuate in response to changes in NAV and
supply and demand for Shares and will include a “bid-ask spread” charged by the exchange specialists, market makers or other participants that trade the particular security. There may be times when the market price and the NAV vary
significantly. This means that Shares may trade at a discount to NAV.
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•
|
In times of market stress, market makers may step away from their role market making in shares of ETFs and in executing trades, which can lead to
differences between the market value of Fund shares and the New Funds’ net asset value.
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|
•
|
To the extent authorized participants exit the business or are unable to process creations or redemptions and no other AP can step in to do so,
there may be a significantly reduced trading market in the New Funds’ shares, which can lead to differences between the market value of Fund shares and the New Funds’ net asset value.
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|
•
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The market price for the New Funds’ shares may deviate from the New Funds’ net asset value, particularly during times of market stress, with the
result that investors may pay significantly more or receive significantly less for Fund shares than the New Funds’ net asset value, which is reflected in the bid and ask price for Fund shares or in the closing price.
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•
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When all or a portion of an ETFs underlying securities trade in a market that is closed when the market for the New Funds’ shares is open, there
may be changes from the last quote of the closed market and the quote from the New Funds’ domestic trading day, which could lead to differences between the market value of the New Funds’ shares and the New Funds’ net asset value.
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•
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In stressed market conditions, the market for the New Funds’ shares may become less liquid in response to the deteriorating liquidity of the New
Funds’ portfolio. This adverse effect on the liquidity of the New Funds’ shares may, in turn, lead to differences between the market value of the New Funds’ shares and the New Funds’ net asset value.
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Early Close/Trading Halt Risk. An exchange or market may close or issue trading halts on
specific securities, or the ability to buy or sell certain securities or financial instruments may be restricted, which may prevent the New Funds from buying or selling certain securities or financial instruments. In these circumstances, the New
Funds may be unable to rebalance their portfolios, may be unable to accurately price their investments and may incur substantial trading losses.
Management Risk. The New Funds are subject to management risk because it is an actively managed
portfolio. In managing the New Funds’ portfolio securities, the Advisor will apply investment techniques and risk analyses in making investment decisions for the New Funds, but there can be no guarantee that these will produce the desired results.
FEES AND EXPENSES
After the Reorganization, you, as a shareholder, will pay the fees assessed by the applicable New Fund. The
following tables compare the current fees and expenses of each Existing Fund with those of the corresponding New Fund.
Comparison of Shareholder Fees
|
Funds
|
Maximum Sales
Charge (Load)
Imposed on
Purchase (as a
percentage of
offering price)
|
Maximum Deferred
Sales Charge
(Load) (as a
percentage of the
original purchase
price)
|
Exchange Fee
|
Redemption
Fee
|
|
Existing Funds – Institutional Class Shares
|
None
|
None
|
None
|
None
|
|
Existing Funds - Class A Shares
|
4.50%
|
None
|
None
|
None
|
|
Existing Funds - Class C Shares
|
None
|
1.00%1
|
None
|
None
|
|
New Funds
|
None
|
None
|
None
|
None
|
| 1 |
A 1.00% contingent deferred sales charge on shares redeemed within one year of purchase.
|
Comparison of Annual Operating Expenses
(as a percentage of average net assets)
Adaptive Fundamental Growth Fund/AI Quality Growth ETF
| |
Existing
Fund –
Institutional
Class Shares
|
Existing
Fund -
Class C
Shares
|
Existing
Fund –
Class A
Shares
|
Pro Forma
New Fund
|
|
Management Fees
|
1.00%
|
1.00%
|
1.00%
|
0.90%3
|
|
Distribution and Service (12b-1) Fees
|
None
|
1.00%
|
0.25%
|
None
|
|
Other Expenses
|
0.67%
|
0.65%
|
0.64%
|
0.56% 3
|
|
Acquired Fund Fees and Expenses
|
0.02%
|
0.02%
|
0.02%
|
0.02%
|
|
Total Fund Operating Expenses
|
1.69%
|
2.67%
|
1.91%
|
1.48%
|
|
Less Fee Waiver and/or Expense Limitation1, 2
|
(0.42)%
|
(0.40)%
|
(0.39)%
|
(0.51)% 3
|
|
Total Fund Operating Expenses After Fee Waiver and/or
Expense Limitation
|
1.27%
|
2.27%
|
1.52%
|
0.97%
|
Adaptive Hedged High Income Fund/Adaptive High Income ETF
| |
Existing
Fund –
Institutional
Class Shares
|
Existing
Fund –
Class C
Shares
|
Existing
Fund -
Class A
Shares
|
Pro Forma
New Fund
|
|
Management Fees
|
1.00%
|
1.00%
|
1.00%
|
0.55%3
|
|
Distribution and Service (12b-1) Fees
|
None
|
1.00%
|
0.25%
|
None
|
|
Other Expenses
|
2.35%
|
2.35%
|
2.35%
|
1.77% 3
|
|
Acquired Fund Fees and Expenses
|
0.32%
|
0.32%
|
0.32%
|
0.32%
|
|
Total Fund Operating Expenses
|
3.67%
|
4.67%
|
3.92%
|
2.64%
|
|
Less Fee Waiver and/or Expense Limitation1, 2
|
(2.10)%
|
(2.10)%
|
(2.10)%
|
(1.72)% 3
|
|
Total Fund Operating Expenses After Fee Waiver and/or
Expense Limitation
|
1.57%
|
2.57%
|
1.82%
|
0.92%
|
Adaptive Hedged Multi-Asset Income Fund/ RH Hedged Multi-Asset Income ETF
| |
Existing
Fund –
Institutional
Class Shares
|
Existing
Fund –
Class C
Shares
|
Existing
Fund -
Class A
Shares
|
Pro Forma
New Fund
|
|
Management Fees
|
1.00%
|
1.00%
|
1.00%
|
0.80%3
|
|
Distribution and Service (12b-1) Fees
|
None
|
1.00%
|
0.25%
|
None
|
|
Other Expenses
|
0.86%
|
0.88%
|
0.86%
|
0.63% 3
|
|
Acquired Fund Fees and Expenses
|
0.11%
|
0.11%
|
0.11%
|
0.11%
|
|
Total Fund Operating Expenses
|
1.97%
|
2.99%
|
2.22%
|
1.54%
|
|
Less Fee Waiver and/or Expense Limitation1, 2
|
(0.61)%
|
(0.63)%
|
(0.61)%
|
(0.58)% 3
|
|
Total Fund Operating Expenses After Fee Waiver and/or
Expense Limitation
|
1.36%
|
2.36%
|
1.61%
|
0.96%
|
Adaptive Tactical Outlook Fund/RH Tactical Outlook ETF
| |
Existing
Fund –
Institutional
Class Shares
|
Existing
Fund –
Class C
Shares
|
Existing
Fund -
Class A
Shares
|
Pro Forma
New Fund
|
|
Management Fees
|
1.00%
|
1.00%
|
1.00%
|
1.00%
|
|
Distribution and Service (12b-1) Fees
|
None
|
1.00%
|
0.25%
|
None
|
|
Other Expenses
|
1.92%
|
1.84%
|
1.81%
|
1.47% 3
|
|
Acquired Fund Fees and Expenses
|
0.12%
|
0.12%
|
.0.12%
|
0.12%
|
|
Total Fund Operating Expenses
|
3.04%
|
3.96%
|
3.18%
|
2.59%
|
|
Less Fee Waiver and/or Expense Limitation1, 2
|
(1.67)%
|
(1.59)%
|
(1.56)%
|
(1.22)%
|
|
Total Fund Operating Expenses After Fee Waiver and/or
Expense Limitation
|
1.37%
|
2.37%
|
1.62%
|
1.37%
|
Adaptive Tactical Rotation Fund/RH Tactical Rotation ETF
| |
Existing
Fund –
Institutional
Class Shares
|
Existing
Fund –
Class C
Shares
|
Existing
Fund -
Class A
Shares
|
Pro Forma
New Fund
|
|
Management Fees
|
1.00%
|
1.00%
|
1.00%
|
1.00%
|
|
Distribution and Service (12b-1) Fees
|
None
|
1.00%
|
0.25%
|
None
|
|
Other Expenses
|
1.34%
|
1.36%
|
1.34%
|
1.09% 3
|
|
Acquired Fund Fees and Expenses
|
0.19%
|
0.19%
|
0.19%
|
0.19%
|
|
Total Fund Operating Expenses
|
2.53%
|
3.55%
|
2.78%
|
2.28%
|
|
Less Fee Waiver and/or Expense Limitation1, 2
|
(1.09)%
|
(1.11)%
|
(1.09)%
|
(0.84)%
|
|
Total Fund Operating Expenses After Fee Waiver and/or
Expense Limitation
|
1.44%
|
2.44%
|
1.69%
|
1.44%
|
| 1 |
Adaptive has entered into an expense limitation agreement with each Existing Fund under which it has agreed to waive or reduce its fees and assume other
expenses of each Existing Fund, if necessary, in an amount that limits each Existing Fund’s annual operating expenses (exclusive of: (i) any front-end or contingent deferred loads; (ii) brokerage fees and commissions, (iii) acquired fund
fees and expenses; (iv) fees and expenses associated with investments in other collective investment vehicles or derivative instruments (including for example option and swap fees and expenses); (v) borrowing costs (such as interest and
dividend expense on securities sold short); (vi) taxes; and (vii) extraordinary expenses, such as litigation expenses (which may include indemnification of each Existing Fund’s officers and Trustees and contractual indemnification of each
Existing Fund service providers (other than Adaptive)) to not more than 1.25%, 1.50%, and 2.25% of the average daily net assets of the Institutional, Class A, and Class C shares of each Existing Fund, respectively. Net annual operating
expenses for each Existing Fund may exceed these limits to the extent that it incurs expenses enumerated above as exclusions. The expense limitation agreement runs through September 30, 2022 and may be terminated by the Board at
any time. Adaptive cannot recoup from each Existing Fund any amounts paid by Adaptive under the expense limitation agreement.
|
| 2 |
Adaptive has entered into an expense limitation agreement with each New Fund under which it has agreed to waive or reduce its fees and assume other
expenses of each New Fund, if necessary, in an amount that limits the New Fund’s annual operating expenses (exclusive of: (i) any front-end or contingent deferred loads; (ii) brokerage fees and commissions, (iii) acquired fund fees and
expenses; (iv) fees and expenses associated with investments in other collective investment vehicles or derivative instruments (including for example option and swap fees and expenses); (v) borrowing costs (such as interest and dividend
expense on securities sold short); (vi) taxes; and (vii) extraordinary expenses, such as litigation expenses (which may include indemnification of each New Fund’s officers and Trustees and contractual indemnification of each New Fund’s
service providers (other than Adaptive)) to not more than 0.95%, 0.60%, 0.85%, 1.25%, and 1.25% of the average daily net assets of the AI Quality Growth ETF, Adaptive High Income ETF, RH Hedged Multi-Asset Income ETF, RH Tactical
Outlook ETF, and RH Tactical Rotation ETF, respectively. Net annual operating expenses for each New Fund may exceed these limits to the extent that it incurs expenses enumerated above as exclusions. The expense limitation agreement runs
through September 30 , 2022 and may be terminated by the Board at any time. Adaptive cannot recoup from each New Fund any amounts paid by Adaptive under the expense limitation agreement.
|
| 3 |
Restated to reflect current contractual fees.
|
Examples
These Examples are intended to help you compare the cost of investing in each New Fund with the cost of investing in the applicable
Existing Fund. The Example assumes that you invest $10,000 in each Fund for the time periods indicated and then redeem (or you hold) all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return
each year and each Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions you would pay the following if you redeemed your shares at the end of each time period indicated:
Adaptive Fundamental Growth Fund
| |
|
|
|
|
| |
|
|
|
|
|
Existing Fund – Institutional Class Shares1
|
$129
|
$492
|
$878
|
$1,963
|
|
Existing Fund – Class C Shares1
|
$330
|
$792
|
$1,379
|
$2,973
|
|
Existing Fund – Class A Shares1
|
$598
|
$987
|
$1,401
|
$2,552
|
| |
|
|
|
|
|
New Fund1
|
$99
|
$418
|
$760
|
$1,725
|
| |
|
|
|
|
You would pay the following expenses if you did not redeem your shares:
| |
|
|
|
|
| |
|
|
|
|
|
Existing Fund – Institutional Class Shares1
|
$129
|
$492
|
$878
|
$1,963
|
|
Existing Fund – Class C Shares1
|
$230
|
$792
|
$1,379
|
$2,973
|
|
Existing Fund – Class A Shares1
|
$598
|
$987
|
$1,401
|
$2,552
|
| |
|
|
|
|
|
New Fund1
|
$99
|
$418
|
$760
|
$1,725
|
| |
|
|
|
|
Adaptive Hedged High Income Fund
| |
|
|
|
|
| |
|
|
|
|
|
Existing Fund – Institutional Class Shares1
|
$160
|
$929
|
$1,719
|
$3,787
|
|
Existing Fund – Class C Shares1
|
$360
|
$1,220
|
$2,186
|
$4,630
|
|
Existing Fund – Class A Shares1
|
$627
|
$1,407
|
$2,205
|
$4,277
|
| |
|
|
|
|
|
New Fund1
|
$94
|
$656
|
$1,246
|
$2,846
|
| |
|
|
|
|
You would pay the following expenses if you did not redeem
your shares:
| |
|
|
|
|
| |
|
|
|
|
|
Existing Fund – Institutional Class Shares1
|
$160
|
$929
|
$1,719
|
$3,787
|
| |
|
|
|
|
|
Existing Fund – Class C Shares1
|
$260
|
$1,220
|
$2,186
|
$4,630
|
|
Existing Fund – Class A Shares1
|
$627
|
$1,407
|
$2,205
|
$4,277
|
| |
|
|
|
|
|
New Fund1
|
$94
|
$656
|
$1,246
|
$2,846
|
| |
|
|
|
|
Adaptive Hedged Multi-Asset Income Fund
| |
|
|
|
|
| |
|
|
|
|
|
Existing Fund – Institutional Class Shares1
|
$138
|
$559
|
$1,006
|
$2,247
|
|
Existing Fund – Class C Shares1
|
$339
|
$865
|
$1,517
|
$3,264
|
|
Existing Fund – Class A Shares1
|
$606
|
$1,057
|
$1,533
|
$2,844
|
| |
|
|
|
|
|
New Fund1
|
$98
|
$430
|
$785
|
$1,785
|
| |
|
|
|
|
You would pay the following expenses if you did not redeem
your shares:
| |
|
|
|
|
| |
|
|
|
|
|
Existing Fund – Institutional Class Shares1
|
$138
|
$559
|
$1,006
|
$2,247
|
|
Existing Fund – Class C Shares1
|
$239
|
$865
|
$1,517
|
$3,264
|
|
Existing Fund – Class A Shares1
|
$606
|
$1,057
|
$1,533
|
$2,844
|
| |
|
|
|
|
|
New Fund1
|
$98
|
$430
|
$785
|
$1,785
|
| |
|
|
|
|
Adaptive Tactical Outlook Fund
| |
|
|
|
|
| |
|
|
|
|
|
Existing Fund – Institutional Class Shares1
|
$139
|
$782
|
$1,450
|
$3,238
|
|
Existing Fund – Class C Shares1
|
$340
|
$1,061
|
$1,900
|
$4,074
|
|
Existing Fund – Class A Shares1
|
$607
|
$1,247
|
$1,910
|
$3,675
|
| |
|
|
|
|
|
New Fund1
|
$139
|
$689
|
$1,266
|
$2,834
|
| |
|
|
|
|
You would pay the following expenses if you did not redeem
your shares:
| |
|
|
|
|
| |
|
|
|
|
|
Existing Fund – Institutional Class Shares1
|
$139
|
$782
|
$1,450
|
$3,238
|
|
Existing Fund – Class C Shares1
|
$240
|
$1,061
|
$1,900
|
$4,074
|
|
Existing Fund – Class A Shares1
|
$607
|
$1,247
|
$1,910
|
$3,675
|
| |
|
|
|
|
|
New Fund1
|
$139
|
$689
|
$1,266
|
$2,834
|
| |
|
|
|
|
Adaptive Tactical Rotation Fund
| |
|
|
|
|
| |
|
|
|
|
|
Existing Fund – Institutional Class Shares1
|
$147
|
$684
|
$1,247
|
$2,784
|
|
Existing Fund – Class C Shares1
|
$347
|
$986
|
$1,746
|
$3,746
|
|
Existing Fund – Class A Shares1
|
$614
|
$1,175
|
$1,761
|
$3,343
|
| |
|
|
|
|
|
New Fund1
|
$147
|
$632
|
$1,144
|
$2,550
|
| |
|
|
|
|
You would pay the following expenses if you did not redeem
your shares:
| |
|
|
|
|
| |
|
|
|
|
|
Existing Fund – Institutional Class Shares1
|
$147
|
$684
|
$1,247
|
$2,784
|
|
Existing Fund – Class C Shares1
|
$247
|
$986
|
$1,746
|
$3,746
|
|
Existing Fund – Class A Shares1
|
$614
|
$1,175
|
$1,761
|
$3,343
|
| |
|
|
|
|
|
New Fund1
|
$147
|
$632
|
$1,144
|
$2,550
|
| |
|
|
|
|
| 1 |
Assumes the Fund’s operating expenses for the one-year period are calculated net of any fee waivers and/or expenses reimbursed, and the Fund’s operating
expenses for the three-year, five-year or ten-year periods, as applicable, do not reflect fee waivers and/or expenses reimbursed.
|
The Examples above should not be considered a representation of future expenses. Actual expenses may be greater or less than those shown.
INFORMATION RELATING TO THE REORGANIZATION
Description of the Reorganization
The Reorganization Agreement provides that each Existing Fund will transfer all of their assets and liabilities to
the respective New Fund. In exchange for the transfer of these assets and liabilities, the New Fund will simultaneously issue shares to the applicable Existing Fund in an amount equal in value to the net asset value of each Existing Fund’s
shares. Shares of each New Fund are shares of beneficial interest without par value in Starboard under its Agreement and Declaration of Trust and By-Laws. Under the Agreement and Declaration of Trust and By-Laws, Starboard may issue an indefinite
number of shares of beneficial interest of each New Fund. Each share of each New Fund represents an equal proportionate interest with other shares of the New Fund. Each share has equal earnings, assets, and voting privileges, and is entitled to
dividends and other distributions out of the income earned and gain realized on the assets belonging to the New Fund as authorized by the Board of Trustees. Shares of each New Fund entitles its holders to one vote per full share and fractional
votes for fractional shares held. Shares of each New Fund received by each shareholder of the applicable Existing Fund in the Reorganization will be issued at NAV without a sales charge and will be fully paid and non-assessable. Shares have no
subscription or preemptive rights. In the event of a liquidation or dissolution of Starboard or a New Fund, shareholders of the New Fund are entitled to receive the assets available for distribution belonging to the New Fund, and a proportionate
distribution, based upon the relative asset values of the respective funds, of any general assets, if any, not belonging to any particular fund that are available for distribution.
Immediately after the transfer of each Existing Fund’s assets and liabilities, each Existing Fund will make a
liquidating distribution pro rata to its shareholders of record of all the corresponding New Fund shares received, so that a holder of shares in each Existing Fund at the Closing Date of the Reorganization
will receive a number of shares of the corresponding New Fund with the same net asset value as the shareholder had in each Existing Fund immediately before the Reorganization (and cash in lieu of fractional shares, if any). Such distribution will
be accomplished by the transfer of applicable New Fund shares credited to the account of each Existing Fund on the books of the New Fund’s transfer agent. Each account will represent the respective pro rata number
of full and fractional shares of the New Funds due to the shareholders of each corresponding Existing Fund. If brokers or the transfer agent are not capable of holding fractional shares for each Existing Fund’s shareholders, the value of such
fractional shares will be paid to Existing Fund shareholders in cash in redemption of such fractional shares. Any payment of cash for fractional shares in accordance with the Reorganization Agreement will be treated for federal income tax purposes
as (x) an exchange of shares of each Existing Fund for shares of the corresponding New Fund, followed immediately by (y) a redemption of such fractional shares in exchange for cash. All issued and outstanding shares of each Existing Fund will
simultaneously be canceled on the books of each Existing Fund.
The New Funds do not currently issue certificates to shareholders. Each Existing Fund’s shareholders will have the
right to receive any unpaid dividends or other distributions that were declared by each Existing Fund with respect to shares held on October 22 , 2021 (the “Closing Date”). No shares of the New Funds to be issued will have preemptive or
conversion rights. No front-end sales loads or contingent deferred sales charges will be imposed in connection with the receipt of such shares by each Existing Fund’s shareholders. Each Existing Fund will then be liquidated and terminated.
The Reorganization Agreement contains customary representations, warranties and conditions designed to ensure that
the Reorganization is fair to both parties. The Reorganization Agreement may be terminated if, on the Closing Date, any of the required conditions have not been met or if the representations and warranties are not true or, if at any time prior to
the Closing Date of the Reorganization, the Board of Trustees of Starboard determines that the consummation of the transactions contemplated by the Reorganization Agreement are not in the best interest of each Existing Fund’s shareholders.
Costs of Reorganization
The Existing Funds and the New Funds will not pay any costs related to the Reorganization. The costs of Information
Statement printing, postage and processing; legal review by legal counsel to Starboard of documents related to the Reorganization; accounting fees, fund start-up costs; conversion fees; legal fees, the cost of preparing the Reorganization Agreement
and the information statement on Form N-14 and any other Reorganization costs will be borne by Adaptive. The estimated costs of the Reorganization are $125,000.
Federal Income Taxes
The reorganization of each Existing Fund into the corresponding New Fund is intended to qualify for federal income
tax purposes as a tax-free reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). As such, neither the Existing Funds nor their shareholders will recognize gain or loss as a result of the Reorganization
(except with respect to cash, if any, received in lieu of fractional shares). The tax basis of the New Funds shares received will be the same as the basis of the Existing Funds shares exchanged and the holding period of the New Funds shares
received will include the holding period of the Existing Funds shares exchanged, provided that the shares exchanged were held as capital assets at the time of the Reorganization. As a condition to the closing of the Reorganization, Starboard will
receive an opinion from counsel to that effect. No tax ruling from the Internal Revenue Service (“IRS”) regarding the Reorganization has been requested. The opinion of counsel is not binding on the IRS and does not preclude the IRS from adopting
a contrary position. The receipt of any cash in respect of fractional shares will be treated as if the shareholder received a fractional share in the New Funds (with a proportionate part of its total tax basis allocated to such fractional share),
and then redeemed such fractional share in exchange for cash in a taxable transaction. Shareholders should consult their own tax advisers concerning any and all potential tax consequences of the Reorganization to them, including federal, state,
local and foreign income and other tax consequences.
As of May 31, 2021, the following Existing Funds have capital loss carryforwards as shown below and have no
expiration. The availability of the capital loss carryforwards are not expected to be impacted by the Reorganization.
| |
Adaptive
Hedged
Multi-Asset
Income Fund
|
Adaptive
Fundamental
Growth Fund
|
Adaptive
Hedged High
Income
Fund
|
Adaptive
Tactical
Outlook Fund
|
Adaptive
Tactical
Rotation Fund
|
|
Short-Term
|
$(-)
|
$(10,134,285)
|
$(1,687,513)
|
$(-)
|
$(4,113,763)
|
|
Long-Term
|
$(2,085,932)
|
$(-)
|
$(555,254)
|
$(303,673)
|
$(-)
|
|
Total Capital Loss
Carryforward
|
$(2,085,932)
|
$(10,134,285)
|
$(2,242,767
|
$(303,673)
|
$(4,113,763)
|
Capitalization
The following table sets forth, as of June 30 , 2021: (i) the unaudited capitalization of each class of
shares of each Existing Fund (ii) the hypothetical unaudited pro-forma capitalization of the New Funds, and (iii) the unaudited pro-forma combined capitalization of the New Funds after the Reorganization has closed. The capitalizations are likely
to be different on the Closing Date as a result of daily share purchase and redemption activity in each Existing Fund and changes in NAV.
Adaptive Fundamental Growth Fund/AI Quality Growth ETF
|
Shares of Fund
|
Net Assets
|
Adjustment for
Reorganization
Costs
|
Adjusted Net
Assets
|
Adjusted Net
Asset Value Per
Share
|
Shares
Outstanding
|
|
Existing Fund
|
|
|
|
|
|
|
Institutional Class Shares
|
$55,867,112
|
None
|
$55,867,112
|
$17.56
|
3,180,765
|
|
Class A Shares
|
$623,985
|
None
|
623,985
|
$9.92
|
62,881
|
|
Class C Shares
|
$2,648,768
|
None
|
$2,648,768
|
$16.30
|
162,540
|
|
New Fund – Proforma
|
$59,139,865
|
None
|
$59,139,865
|
17.56
|
3,367,097
|
|
Adjustment for Shares Outstanding
|
--
|
--
|
--
|
--
|
--
|
|
Combined Fund Proforma
|
$59,139,865
|
None
|
$59,139,865
|
17.56
|
3,367,097
|
| * |
Results may vary due to rounding
|
Adaptive Hedged High Income Fund/Adaptive High Income ETF
|
Shares of Fund
|
Net Assets
|
Adjustment for
Reorganization
Costs
|
Adjusted Net
Assets
|
Adjusted Net
Asset Value Per
Share
|
Shares
Outstanding
|
|
Existing Fund
|
|
|
|
|
|
|
Institutional Class Shares
|
6,618,130
|
None
|
$6,618,130
|
$10.46
|
632,436
|
|
Class C Shares
|
$284,558
|
None
|
$284,558
|
$10.37
|
27,437
|
|
New Fund – Proforma
|
$6,902,688
|
None
|
$6,902,688
|
$10.46
|
659,628
|
|
Adjustment for Shares Outstanding
|
--
|
--
|
--
|
--
|
--
|
|
Combined Fund Proforma
|
$6,902,688
|
None
|
$6,902,688
|
$10.46
|
659,628
|
| * |
Results may vary due to rounding
|
Adaptive Hedged Multi-Asset Income Fund/ RH Hedged Multi-Asset Income ETF
|
Shares of Fund
|
Net Assets
|
Adjustment for
Reorganization
Costs
|
Adjusted Net
Assets
|
Adjusted Net
Asset Value Per
Share
|
Shares
Outstanding
|
|
Existing Fund
|
|
|
|
|
|
|
Institutional Class Shares
|
$19,682,412
|
None
|
$19,682,412
|
$9.83
|
2,002,541
|
|
Class C Shares
|
$3,935,911
|
None
|
$3,935,911
|
$9.47
|
415,693
|
|
New Fund – Proforma
|
$23,618,323
|
None
|
$23,618,323
|
$9.83
|
2,402,991
|
|
Adjustment for Shares Outstanding
|
--
|
--
|
--
|
--
|
--
|
|
Combined Fund Proforma
|
$23,618,323
|
None
|
$23,618,323
|
$9.83
|
2,402,991
|
| * |
Results may vary due to rounding
|
Adaptive Tactical Outlook Fund/RH Tactical Outlook ETF
|
Shares of Fund
|
Net Assets
|
Adjustment for Reorganization
Costs
|
Adjusted Net
Assets
|
Adjusted Net
Asset Value Per
Share
|
Shares
Outstanding
|
|
Existing Fund
|
|
|
|
|
|
|
Institutional Class Shares
|
$13,068,769
|
None
|
$13,068,769
|
$14.73
|
887,199
|
|
Class A Shares
|
$36,241
|
None
|
$36,241
|
$10.01
|
3,621
|
|
Class C Shares
|
$650,636
|
None
|
$650,636
|
$13.65
|
47,649
|
|
New Fund – Proforma
|
$13,755,646
|
None
|
$13,755,646
|
$14.73
|
933,829
|
|
Adjustment for Shares Outstanding
|
--
|
--
|
--
|
--
|
--
|
|
Combined Fund Proforma
|
$13,755,646
|
None
|
$13,755,646
|
$14.73
|
933,829
|
| * |
Results may vary due to rounding
|
Adaptive Tactical Rotation Fund/RH Tactical Rotation ETF
|
Shares of Fund
|
Net Assets
|
Adjustment for Reorganization
Costs
|
Adjusted Net
Assets
|
Adjusted Net
Asset Value Per
Share
|
Shares
Outstanding
|
|
Existing Fund
|
|
|
|
|
|
|
Institutional Class Shares
|
$11,882,575
|
None
|
$11,882,575
|
$13.39
|
887,199
|
|
Class A Shares
|
$34,769
|
None
|
$34,769
|
$9.60
|
3,621
|
|
Class C Shares
|
$599,592
|
None
|
$599,592
|
$12.58
|
47,649
|
|
New Fund – Proforma
|
$12,507,106
|
None
|
$12,507,106
|
$13.39
|
933,829
|
|
Adjustment for Shares Outstanding
|
--
|
--
|
--
|
--
|
--
|
|
Combined Fund Proforma
|
$12,507,106
|
None
|
$12,507,106
|
$13.39
|
933,829
|
| * |
Results may vary due to rounding
|
REASONS FOR THE REORGANIZATION
At a meeting held on March 11, 2021, the Board of Trustees of Starboard approved the proposed Reorganization. The
factors shown below reflect the consideration of information presented at the time of the board meeting, which may differ from the updated information presented elsewhere in this Information Statement. At this meeting, representatives of Adaptive
provided, and the Board of Trustees reviewed, detailed information about the proposed Reorganization. Adaptive recommended that the Board approve the Reorganization. Adaptive provided information to the Board of Trustees concerning: (i) the
specific terms of the Reorganization, including information regarding comparative expense ratios; (ii) the proposed plans for ongoing management, distribution and operation of each Existing Fund and the corresponding New Fund; and (iii) the impact
of the Reorganization on each Existing Fund and its shareholders.
The factors considered by the Board with regard to the Reorganization include, but are not limited to, the following:
| • |
The investment objective and strategy of the Funds would remain the same; |
| • |
The same portfolio management team that currently manages each Existing Fund is expected to manage the corresponding New Fund; |
|
•
|
There were expected immediate costs savings and potential future cost savings to shareholders from the Reorganization due to a reduction in gross operating expenses through some reduced costs within the
ETF; |
|
•
|
The New Funds’ structure is expected to result in lowered platform fees and transactions costs, which may lead to an increase the Funds’ assets and may allow the Funds to benefit from economies of scale; |
|
•
|
The New Funds’ structure would be more transparent given the daily publishing of the portfolio holdings; |
|
•
|
The ability for shareholders to trade the New Funds’ shares during the day at the then current market price rather than the traditional open-end mutual fund structure only trading at the end of the day at the Funds’
net asset value; |
|
•
|
The tax efficiency of the New Funds’ structure, where proper trading of the portfolio by the portfolio manager can minimize the need for shareholders to recognize realized capital gains prior to selling their New
Funds shares; |
|
•
|
The Reorganization is not expected to result in any tax consequence to shareholders (except to the extent that some shareholders receive a cash payment for fractional shares, which could be taxable to the extent that
the cash received exceeds a shareholder’s tax basis allocable to the fractional share that is redeemed); and |
| • |
The Existing Funds and their shareholders will not bear any of the costs of the Reorganization. All costs of the Reorganization are to be paid by Adaptive. |
For these and other reasons, the Board concluded that, based upon the factors and determinations summarized above,
consummation of the Reorganization is in the best interests of each Existing Fund. The approval determinations were made on the basis of each Board member’s business judgment after consideration of all of the factors taken as a whole, though
individual Board members may have placed different weight on various factors and assigned different degrees of materiality to various conclusions.
A vote of the shareholders of the Existing Funds are not required to approve the Reorganization under Delaware law or
under the Trust’s Declaration of Trust. Further, under Rule 17a-8 of the 1940 Act, the Reorganization does not require a vote of the shareholders because:
(i) the Existing Funds do not have any policy that, pursuant to Section 13 of the 1940 Act, could not be changed without a vote of a majority of its outstanding voting
securities that differs materially from a comparable policy of the New Funds;
(ii) the New Funds’ advisory fees and advisory contract are not materially different from the advisory fees and advisory contract of the Existing Funds;
(iii) the Independent Trustees of the Existing Funds who were elected by its shareholders will comprise a majority of the Independent Trustees of the Board overseeing the New
Funds; and
(iv) after the Reorganization, the New Funds will not be authorized to pay fees under a 12b-1 plan that are greater than fees authorized to be paid by the Existing Funds under
such a plan.
The Reorganization meets all of these conditions, and, therefore, a vote of shareholders is not required under the
1940 Act. The Board of Trustees of the Trust is composed of four members, all of whom are Independent Trustees.
All of the Independent Trustees have been elected by Existing Funds shareholders. The Board is represented by independent legal counsel.
SHAREHOLDER RIGHTS
General Shareholder Rights
General. The Existing Funds and the New Funds are each a series of
Starboard. Starboard is an open-end management investment company that was established as a statutory trust under Delaware law by an Agreement and Declaration of Trust dated May 12, 2009. Starboard is governed by its By-Laws and by applicable
Delaware law.
Shares. Starboard is authorized to issue an unlimited number of shares of
beneficial interest, without par value, from an unlimited number of series of shares. The shares of each Starboard fund have no preference as to conversion, exchange, dividends, retirement or other features, and have no preemptive rights.
Voting Requirements. All Shares of Starboard entitled to vote on a matter
shall vote without differentiation between the separate series on a one-vote-per-each dollar (and a fractional vote for each fractional dollar) of the net asset value of each share (including fractional shares) basis; provided however, if a matter
to be voted on does not affect the interests of all series (or class of a series), then only the Shareholders of such affected series (or class) shall be entitled to vote on the matter.
Shareholder Meetings. Annual meetings of shareholders will not be held, but
special meetings of shareholders may be held under certain circumstances. Special meetings of the shareholders (“Special Meetings”) may be called at any time by the President, or by a majority of the Board of Trustees, and shall be called by the
Secretary upon written request of the holders of shares entitled to cast not less than twenty percent of all the votes entitled to be cast at such meeting provided that (a) such request shall state the purposes of such meeting and the matters
proposed to be acted on and (b) the shareholders requesting such meeting shall have paid to Starboard the reasonable estimated cost of preparing and mailing the notice thereof, which the Secretary shall determine and specify to such shareholders.
No special meeting need be called upon the request of shareholders entitled to cast less than a majority of all votes entitled to be cast at such meeting to consider any matter that is substantially the same as a matter voted on at any meeting of
the shareholders held during the preceding twelve months. The foregoing provisions notwithstanding, a Special Meeting shall be called upon the request of the holders of at least ten percent of the votes entitled to be cast for the purpose of
considering removal of a trustee from office as provided in Section 16(c) of the 1940 Act.
Election and Term of Trustees. The number of Trustees constituting the
Board of Trustees shall be fixed from time to time by a written instrument signed, or by resolution approved at a duly constituted meeting, by a majority of the Board of Trustees, provided, however, that the number of Trustees shall in no event be
less than one nor more than fifteen. Subject to the requirements of Section 16 and other requirements of the 1940 Act (including, without limitation, the requirements under certain rules adopted under the 1940 Act that disinterested Trustees be
nominated and selected by the then-current disinterested Trustees), the Board of Trustees, by action of a majority of the then Trustees at a duly constituted meeting, may fill vacancies in the Board of Trustees and remove Trustees with or without
cause. Each Trustee shall serve during the continued lifetime of Starboard until he or she dies, resigns, is declared bankrupt or incompetent by a court of competent jurisdiction, or is removed. Any Trustee may resign at any time by written
instrument signed by him or her and delivered to any officer of Starboard or to a meeting of Trustees. Such resignation shall be effective upon receipt unless specified to be effective at some other time. Except to the extent expressly provided
in a written agreement with Starboard, no Trustee resigning, and no Trustee removed shall have any right to any compensation for any period following his or her resignation or removal, or any right to damages or other payment on account of such
removal. Any Trustee may be removed: (a) at any time by written instrument signed by at least two-thirds of the number of Trustees prior to such removal; or (b) at any meeting of Shareholders by a vote of two-thirds of the total combined net
asset value of all Shares of Starboard issued and outstanding. A meeting of Shareholders for the purpose of electing or removing one or more Trustees may be called (i) by Trustees upon their own vote, or (ii) upon the demand of Shareholders owning
ten percent or more of the Shares of Starboard in the aggregate.
Shareholder Liability. Shareholders of series of Starboard are not
personally liable for the acts, omissions or obligations of Starboard or the Trustees.
Liability of Trustees. The Trustees shall not be responsible or liable in
any event for any neglect or wrong-doing of any officer, agent, employee, advisor or principal underwriter of Starboard, nor shall any Trustee be responsible for the act or omission of any other Trustee, and, as provided in Starboard’s by-laws,
Starboard, out of its assets, shall indemnify and hold harmless each and every Trustee and officer of Starboard from and against any and all claims, demands, costs, losses, expenses, and damages whatsoever arising out of or related to such
Trustee’s performance of his or her duties as a Trustee or officer of Starboard; provided that nothing herein contained shall indemnify, hold harmless or protect any Trustee or officer from or against any liability to Starboard or any Shareholder
to which he or she 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 or her office.
Every note, bond, contract, instrument, certificate or undertaking and every other act or thing whatsoever issued,
executed or done by or on behalf of Starboard or the Trustees or any of them in connection with Starboard shall be conclusively deemed to have been issued, executed or done only in or with respect to their or his or her capacity as Trustees or
Trustee, and such Trustees or Trustee shall not be personally liable thereon.
Reorganization. The Trustees may cause (i) Starboard or one or more of its
series to the extent consistent with applicable law to be merged into or consolidated with another trust, series or person, (ii) the shares of Starboard or any series to be converted into beneficial interests in another statutory trust (or series
thereof), (iii) the shares to be exchanged for assets or property under or pursuant to any state or federal statute to the extent permitted by law or (iv) a sale of assets of Starboard or one or more of its series. Such merger or consolidation,
share conversion, share exchange or sale of assets must be authorized by vote as provided in the by-laws of Starboard; provided that in all respects not governed by statute or applicable law, Trustees shall have power to prescribe the procedure
necessary or appropriate to accomplish a sale of assets, share exchange, merger or consolidation including the power to create one or more separate statutory trusts to which all or any part of the assets, liabilities, profits or losses of Starboard
may be transferred and to provide for the conversion of shares of Starboard or any Series into beneficial interests in such separate statutory trust or trusts (or series thereof).
Comparison of Shareholder Rights
The foregoing is only a summary of certain rights of shareholders of the Existing Funds and the New Funds under
Starboard’s governing charter documents and by-laws, state law, and the 1940 Act, and is not a complete description of provisions contained in those sources. Shareholders should refer directly to the provisions of state law, the 1940 Act and rules
thereunder for a more thorough description.
Because the Existing Funds and the New Funds are series of the same trust, there are no differences in shareholder
rights between the Existing Funds and the New Funds.
Taxes
Please consult your tax adviser regarding your specific questions about federal, state, local and foreign income and
other taxes. Below is a summary of certain U.S. federal income tax issues that affect the Funds and their shareholders. This summary is based on current tax laws, which may change, potentially, with retroactive effect. This summary is not
applicable to the tax consequences of the Reorganization. The tax-free nature of the Reorganization is discussed above under INFORMATION RELATING TO THE REORGANIZATION – Federal Income Taxes.
New Funds shares are traded throughout the day in the secondary market on a national securities exchange on an
intra-day basis and are created and redeemed in-kind and/or for cash in Creation Units at each day’s next calculated NAV. In-kind arrangements are designed to protect ongoing shareholders from the adverse effects on the New Funds’ portfolio that
could arise from frequent cash redemption transactions. In a mutual fund, such as each Existing Fund, redemptions can have an adverse tax impact on taxable shareholders if the mutual fund needs to sell portfolio securities to obtain cash to meet
net fund redemptions. These sales may generate taxable gains for the ongoing shareholders of the mutual fund, whereas the New Funds shares’ in-kind redemption mechanism generally will not lead to a tax event for the New Funds or their ongoing
shareholders.
The Existing Funds allow shareholders to elect to take dividends from net investment income or capital gains
distributions, if any, in cash or reinvest them in additional Existing Funds shares. No dividend reinvestment service is provided by the New Funds. Broker-dealers may make available the DTC book-entry Dividend Reinvestment Service for use by
beneficial owners of the New Funds for reinvestment of their dividend distributions. Beneficial owners should contact their broker to determine the availability and costs of the service and the details of participation therein. Brokers may require
beneficial owners to adhere to specific procedures and timetables. If this service is available and used, dividend distributions of both income and realized gains will be automatically reinvested in additional whole shares of the New Funds
purchased in the secondary market.
Distributions in cash may be reinvested automatically in additional whole New Fund shares only if the broker through
whom you purchased New Fund shares makes such option available.
For a detailed discussion of the investment objectives, policies, risks and restrictions of each Existing Fund, see
the
Prospectus for each Existing Fund dated September 2 , 2021 (File No. 333-159484), which has been filed with the SEC
and is incorporated by reference into this Information Statement. For a detailed discussion of the investment objectives, policies, risks and restrictions of the New Funds, see the
Prospectus for the New Funds dated September 2, 2021 (File No. 333-159484), which has been filed with the SEC and is incorporated by
reference into this Information Statement. A
Statement of Additional Information for each Existing Fund (dated September 2 , 2021 (File
No. 333-159484), ha s been filed with the SEC, and is incorporated by reference into this Information Statement. A
Statement of
Additional Information for the New Funds dated September 2, 2021 (File No. 333-159484), has been filed with the SEC, and is incorporated by reference into this Information Statement. Copies of the Prospectus and Statement of
Additional Information for each Existing Fund and the New Funds are available upon request and without charge by calling toll-free 1-800-773-3863 or by visiting https://www.nottinghamco.com/fundpages/Adaptive for each Existing Fund or on each New
Fund’s website listed below or at www.sec.gov.
|
AI Quality Growth ETF
|
https://etfpages.com/AQGX
|
|
Adaptive High Income ETF
|
https://etfpages.com/AHHX
|
|
RH Hedged Multi-Asset Income ETF
|
https://etfpages.com/AMAX
|
|
RH Tactical Outlook ETF
|
https://etfpages.com/RHTX
|
|
RH Tactical Rotation ETF
|
https://etfpages.com/RHRX
|
Starboard is subject to the information requirements of the Securities Exchange Act of 1934 and the 1940 Act and in
accordance therewith, and files reports and other information, including proxy materials and charter documents, with the SEC. Reports, information statements, registration statements and other information filed by Starboard may be inspected
without charge and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, DC 20549, and at the following regional offices of the SEC: Northeast Regional Office, 3 World Financial Center, Suite 400, New
York, New York 10281; Southeast Regional Office, 801 Brickell Avenue, Suite 1800, Miami, Florida 33131; Midwest Regional Office, 175 West Jackson Boulevard, Suite 900, Chicago, Illinois 60604; Central Regional Office, 1801 California Street, Suite
1500, Denver, Colorado 80202; and Pacific Regional Office, 5670 Wilshire Boulevard, Suite 1100, Los Angeles, California 90036. Copies of such materials may also be obtained from the EDGAR Database on the SEC’s Internet site at www.sec.gov, and the Public Reference Branch, Office of Consumer Affairs and Information Services, Securities and Exchange Commission, Washington, DC 20549 at prescribed rates.
Financial Statements. The financial statements of each Existing Fund for the fiscal year ended
May 31, 2021 have been audited by BBD, LLP, located at 1835 Market Street, 3rd Floor, Philadelphia, PA 19103, its independent registered public accounting firm, and are contained in the
Annual Report to shareholders. Starboard will furnish, without charge, a copy of the Annual Report and Semi-Annual Report upon request. Requests
should be made by calling toll-free 1-800-773-3863 or by visiting https://www.nottinghamco.com/fundpages/Adaptive. The
Annual Reports and
Semi-Annual Reports for each Existing Fund also are available on the SEC’s website at www.sec.gov. The New Funds have not yet commenced operations
and, therefore, have not produced shareholder reports.
The significant accounting policies of the Existing Funds and New Funds are identical.
The Financial Highlights relating to each Existing Fund contained in the
Annual Report for the fiscal year ended May 31, 2021 are attached as Exhibit B.
Under the Plan of Reorganization, each Existing Fund is proposed to be reorganized into the corresponding New Fund.
Pro forma financial information for the New Funds have not been prepared because the New Funds are newly-organized shells with no assets or liabilities that will commence investment operations upon completion of the Reorganization and continue
operations of each Existing Fund. Each Existing Fund will be the accounting survivor of the Reorganization.
Record Date and Outstanding Shares
At the close of business on the Record Date, there were outstanding the following shares of each Existing Fund:
|
Adaptive Fundamental Growth Fund
|
Number of Shares
|
|
Institutional Class
|
3,656,913.3220
|
|
Class A
|
62,881.2150
|
|
Class C
|
159,822.0810
|
|
Adaptive Hedged High Income Fund
|
Number of Shares
|
|
Institutional Class
|
597,558.0330
|
|
Class C
|
24,784.3860
|
|
Adaptive Hedged Multi-Asset Income Fund
|
Number of Shares
|
|
Institutional Class
|
1,944,053.8430
|
|
Class C
|
412,372.7050
|
|
Adaptive Tactical Outlook Fund
|
Number of Shares
|
|
Institutional Class
|
900,109.4910
|
|
Class A
|
3,621.2030
|
|
Class C
|
43,071.6060
|
|
Adaptive Tactical Rotation Fund
|
Number of Shares
|
|
Institutional Class
|
1,587,784.0770
|
|
Class A
|
10,123.8540
|
|
Class C
|
70,878.6610
|
At the close of business on the Record Date there were no New Fund shares outstanding.
Security Ownership of Certain Beneficial Owners and Management
As of the Record Date, the officers and Trustees of Starboard, as a group, beneficially owned less than 1% of the
outstanding shares of each Existing Fund. As of the Record Date, the New Funds had no shares outstanding.
A person who beneficially owns, either directly or indirectly, more than 25% of the voting securities of a series or
acknowledges the existence of such control may be presumed to control the Fund. A control person could potentially control the outcome of any proposal submitted to the shareholders for approval, including changes to a Fund’s fundamental policies
or terms of the investment advisory agreement with Adaptive.
As of the Record Date, to the knowledge of the Trustees and management of Starboard, other than as set forth below,
no person owned beneficially or of record 5% or more of the outstanding shares of each class of each Existing Fund.
Adaptive Fundamental Growth Fund
|
Record (R) or Beneficial (B) Owner
Name and Address
|
Status
|
Number of
Shares
|
Percentage
Ownership of
Class
|
Percentage
Ownership of
Fund
|
|
Institutional Class
|
|
|
|
|
|
LPL Financial
4707 Executive Drive
San Diego, CA 92121-3091
|
R
|
1,529,476.7840
|
41.82%
|
39.42%
|
|
Charles Schwab & Co. Inc.
Special Custody A/C FBO Customers
ATTN Mutual Funds
101 Montgomery St
San Francisco, CA 94104-4122
|
R
|
680,339.5430
|
18.60%
|
17.54%
|
|
Pershing LLC
1 Pershing Plaza
Jersey City, NJ 07399-0002
|
R
|
373,736.5590
|
10.22%
|
9.63%
|
|
Class A
|
|
|
|
|
|
Record (R) or Beneficial (B) Owner
Name and Address
|
Status
|
Number of
Shares
|
Percentage
Ownership of
Class
|
Percentage
Ownership of
Fund
|
|
LPL Financial
4707 Executive Drive
San Diego, CA 92121-3091
|
R
|
25,002.6930
|
39.76%
|
0.08%
|
|
Pershing LLC
1 Pershing Plaza
Jersey City, NJ 07399-0002
|
R
|
20,194.4780
|
32.12%
|
0.52%
|
|
COR Clearing LLC
1200 Landmark Center, STE 800
Omaha, NE 68102
|
R
|
12,603.8240
|
20.04%
|
0.00%
|
|
Rudolph Paul Dubs & Alice Dubs JTWROS
82433 Lord Lane
Ashby, NE 69333
|
B
|
3,222.2730
|
5.12%
|
0.01%
|
|
Class C
|
|
|
|
|
|
LPL Financial
4707 Executive Drive
San Diego, CA 92121-3091
|
R
|
63,849.3060
|
39.95%
|
1.65%
|
|
Pershing LLC
1 Pershing Plaza
Jersey City, NJ 07399-0002
|
R
|
29,194.8220
|
18.27%
|
0.75%
|
|
UBS WM USA
Omni Account M/F
Spec Cdy A/C EBOC UBSFSI
ATTN: Department Manager
1000 Harbor Blvd
Weehawken, NJ 07086
|
R
|
19,109.5000
|
11.96%
|
0.00%
|
|
RBC Capital Markets LLC
Mutual Fund Omnibus Processing
ATTN Mutual Fund Ops Manager
60 South Sixth Street – P08
Minneapolis, MN 55402-4400
|
R
|
8,148.2750
|
5.10%
|
0.00%
|
Adaptive Hedged High Income Fund
|
Record (R) or Beneficial (B) Owner
Name and Address
|
Status
|
Number of
Shares
|
Percentage
Ownership of
Class
|
Percentage
Ownership of
Fund
|
|
Institutional Class
|
|
|
|
|
|
Pershing LLC
1 Pershing Plaza
Jersey City, NJ 07399-0002
|
R
|
238,886.5020
|
39.98%
|
38.39%
|
|
LPL Financial
4707 Executive Drive
San Diego, CA 92121-3091
|
R
|
145,951.4840
|
24.42%
|
23.45%
|
|
Class C
|
|
|
|
|
|
Pershing LLC
1 Pershing Plaza
Jersey City, NJ 07399-0002
|
R
|
21,607.5010
|
87.18%
|
3.47%
|
Adaptive Hedged Multi-Asset Income Fund
|
Record (R) or Beneficial (B) Owner
Name and Address
|
Status
|
Number of
Shares
|
Percentage
Ownership of
Class
|
Percentage
Ownership of
Fund
|
|
Institutional Class
|
|
|
|
|
|
Charles Schwab & Co. Inc.
Special Custody A/C FBO Customers
ATTN Mutual Funds
101 Montgomery St
San Francisco, CA 94104-4122
|
R
|
717,503.0440
|
36.91%
|
30.45%
|
|
Pershing LLC
1 Pershing Plaza
Jersey City, NJ 07399-0002
|
R
|
382,018.0480
|
19.65%
|
16.21%
|
|
LPL Financial
4707 Executive Drive
San Diego, CA 92121-3091
|
R
|
276,309.0020
|
14.21%
|
11.73%
|
|
E*Trade Savings Bank
FBO #846
P.O. Box 6503
Englewood, CO 80155-6503
|
R
|
150,670.5670
|
7.75%
|
6.39%
|
|
Class C
|
|
|
|
|
|
Pershing LLC
1 Pershing Plaza
Jersey City, NJ 07399-0002
|
R
|
371,206.4900
|
90.02%
|
15.75%
|
|
LPL Financial
4707 Executive Drive
San Diego, CA 92121-3091
|
R
|
26,534.2810
|
6.43%
|
1.13%
|
Adaptive Tactical Outlook Fund
|
Record (R) or Beneficial (B) Owner
Name and Address
|
Status
|
Number of
Shares
|
Percentage
Ownership of
Class
|
Percentage
Ownership of
Fund
|
|
Institutional Class
|
|
|
|
|
|
Pershing LLC
1 Pershing Plaza
Jersey City, NJ 07399-0002
|
R
|
288,491.6490
|
32.05%
|
30.47 %
|
|
LPL Financial
4707 Executive Drive
San Diego, CA 92121-3091
|
R
|
220,560.9340
|
24.50%
|
23.30 %
|
|
Charles Schwab & Co. Inc.
Special Custody A/C FBO Customers
ATTN Mutual Funds
101 Montgomery St
San Francisco, CA 94104-4122
|
R
|
59,038.8010
|
6.56%
|
6. 24 %
|
|
Mid Atlantic Trust Company
FBO/Southfield Radiology Associates PLL
1251 Waterfront Place, Suite 525
Pittsburgh, PA 15222
|
R
|
53,970.6780
|
6.00%
|
5. 70 %
|
|
Class A
|
|
|
|
|
|
Pershing LLC
1 Pershing Plaza
Jersey City, NJ 07399-0002
|
R
|
2,341.13701
|
64.65%
|
0.25%
|
|
Rudolph Paul Dubs & Alice Dubs
JTWROS
|
B
|
1,280.0660
|
35.35%
|
0.14%
|
|
Record (R) or Beneficial (B) Owner
Name and Address
|
Status
|
Number of
Shares
|
Percentage
Ownership of
Class
|
Percentage
Ownership of
Fund
|
|
82433 Lord Lane
Ashby, NE 69333
|
|
|
|
|
|
Class C
|
|
|
|
|
|
Pershing LLC
1 Pershing Plaza
Jersey City, NJ 07399-0002
|
R
|
24,985.2540
|
58.01%
|
2.64%
|
|
LPL Financial
4707 Executive Drive
San Diego, CA 92121-3091
|
R
|
15,912.4330
|
36.94%
|
1.68%
|
Adaptive Tactical Rotation Fund
|
Record (R) or Beneficial (B) Owner
Name and Address
|
Status
|
Number of
Shares
|
Percentage
Ownership of
Class
|
Percentage
Ownership of
Fund
|
|
Institutional Class
|
|
|
|
|
|
Pershing LLC
1 Pershing Plaza
Jersey City, NJ 07399-0002
|
R
|
594,303.4460
|
37.43%
|
35.61%
|
|
LPL Financial
4707 Executive Drive
San Diego, CA 92121-3091
|
R
|
448,278.7740
|
28.43%
|
26.86%
|
|
E*Trade Savings Bank
FBO #604
P.O. Box 6503
Englewood, CO 80155-6503
|
R
|
110,647.6120
|
6.97%
|
6.63%
|
|
Class A
|
|
|
|
|
|
Pershing LLC
1 Pershing Plaza
Jersey City, NJ 07399-0002
|
R
|
6,304.0120
|
62.27%
|
0.38%
|
|
RBC Capital Markets LLC
Mutual Fund Omnibus Processing
ATTN Mutual Fund Ops Manager
60 South Sixth Street – P08
Minneapolis, MN 55402-4400
|
R
|
2,492.9480
|
24.62%
|
0.15%
|
|
Rudolph Paul Dubs & Alice Dubs JTWROS
82433 Lord Lane
Ashby, NE 69333
|
B
|
1,326.8940
|
13.11%
|
0.08%
|
| |
|
|
|
|
|
Class C
|
|
|
|
|
|
Pershing LLC
1 Pershing Plaza
Jersey City, NJ 07399-0002
|
R
|
43,966.4070
|
62.03%
|
2.63%
|
|
LPL Financial
4707 Executive Drive
San Diego, CA 92121-3091
|
R
|
19,384.9270
|
27.35%
|
1.16%
|
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to Starboard by calling 1-800-773-3863.
| |
By Order of the Board of Trustees,
Katherine Honey
President
Starboard Investment Trust
|
EXHIBIT A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (“Agreement”) is made as of October 22, 2021, among STARBOARD INVESTMENT TRUST, a
Delaware statutory trust, with its principal place of business at 116 South Franklin Street, Rocky Mount, North Carolina 27804 (“Trust”), on behalf of the Adaptive Fundamental Growth Fund, Adaptive Hedged High Income Fund, Adaptive Hedged
Multi-Asset Income Fund, Adaptive Tactical Outlook Fund and Adaptive Tactical Rotation Fund (each a “Mutual Fund”), and Trust, on behalf of the AI Quality Growth ETF, Adaptive High Income ETF, RH Hedged Multi-Asset Income ETF, RH Tactical
Outlook ETF and RH Tactical Rotation ETF, respectively, (each an “ETF”); and, solely for purposes of paragraph 6, CAVALIER INVESTMENTS, LLC dba Adaptive Investments, advisor to each ETF and each Mutual Fund (“Adaptive”). (Trust is sometimes
referred to herein as an “Investment Company,” and each Mutual Fund and each ETF is each sometimes referred to herein as a “Fund.”) Notwithstanding anything to the contrary contained herein, (1) the agreements, covenants, representations,
warranties, actions, and obligations (collectively, “Obligations”) of and by each Fund—and of and by the Investment Company of which that Fund is a series, on that Fund’s behalf—shall be the Obligations of that Fund only, (2) all rights and
benefits created hereunder in favor of a Fund shall inure to and be enforceable by the Investment Company of which that Fund is a series, on that Fund’s behalf, and (3) in no event shall any other series of the Trust or the assets thereof be held
liable with respect to the breach or other default by an obligated Fund or the Investment Company of its Obligations set forth herein.
Trust wishes to effect a reorganization described in Section 368(a) of the Internal Revenue Code of 1986, as amended (“Code”) (all
“Section” references are to the Code, unless otherwise noted), and intends this Agreement to be, and adopts it as, a “plan of reorganization” within the meaning of the regulations under the Code (“Regulations”). The reorganization will consist of
(1) the sale, assignment, conveyance, transfer and delivery of all of the property and assets of each Mutual Fund to each corresponding ETF in exchange solely for (a) shares of beneficial interest of each ETF (“ETF Shares”), as described herein,
and (b) the assumption by each ETF of all liabilities of each corresponding Mutual Fund, and (2) the subsequent distribution of ETF Shares (which shall then constitute all of the assets of each Mutual Fund) pro rata to the shareholders in exchange
for their shares of beneficial interest of each corresponding Mutual Fund (the “Mutual Fund Shares”) in complete liquidation thereof, and (3) terminating each Mutual Fund, all on the terms and conditions set forth herein (all the foregoing
transactions involving each Mutual Fund and each corresponding ETF being referred to herein collectively as the “Reorganization”).
The Investment Company’s board of trustees (the “Board”), including a majority of its members who are not “interested persons” (as that
term is defined in the Investment Company Act of 1940, as amended (“1940 Act”)) (“Non-Interested Persons”) of the Investment Company, (1) has duly adopted and approved this Agreement and the transactions contemplated hereby, (2) has duly authorized
performance thereof on the Funds’ behalf by all necessary Board action, and (3) has determined that participation in the Reorganization is in the best interests of each Mutual Fund and that the interests of the existing shareholders of each Mutual
Fund will not be diluted as a result of the Reorganization.
In consideration of the mutual promises contained herein, the parties agree as follows:
1. PLAN OF REORGANIZATION AND TERMINATION
1.1 Subject to the requisite approvals and the terms and conditions set forth herein, each Mutual Fund shall assign, sell, convey, transfer, and deliver all of its assets described in paragraph 1.2
(“Assets”) to each corresponding ETF. In exchange therefor:
(a) Each ETF shall issue and deliver to each corresponding Mutual Fund, as applicable, the number of full and fractional (all references herein to “fractional” shares meaning fractions rounded to the
third decimal place) ETF Shares having an aggregate net asset value (NAV) equal to the aggregate NAV of all full and fractional corresponding Mutual Fund Shares then outstanding. If brokers or the transfer agent are not capable of holding
fractional shares for Mutual Fund shareholders, the value of such fractional shares will be paid to Mutual Fund shareholders in cash in redemption of such fractional shares. Each Mutual Fund and each ETF agree that any payment of cash for
fractional shares in accordance with this Agreement will be treated for federal income tax purposes as (x) an exchange of shares of the Mutual Fund for shares of the corresponding ETF, followed immediately by (y) a redemption of such fractional
shares in exchange for cash. and
(b) Each ETF shall assume all of each corresponding Mutual Fund’s liabilities described in paragraph 1.3 (“Liabilities”).
Those transactions shall take place at the Closing (as defined in paragraph 2.1).
1.2 The Assets shall consist of all assets and property of every kind and nature—including all cash, cash equivalents, securities, commodities, futures interests, receivables (including interest and
dividends receivable), claims and rights of action, rights to register shares under applicable securities laws, and books and records—each Mutual Fund owns at the Effective Time (as defined in paragraph 2.1) and any deferred and prepaid expenses
shown as assets on each Mutual Fund’s books at that time.
1.3 The Liabilities shall consist of all of each Mutual Fund’s liabilities, whether known or unknown, accrued or contingent, debts, obligations, and duties existing at the Effective Time, excluding
Reorganization Expenses (as defined in paragraph 3.3(f)) borne by Adaptive pursuant to paragraph 6.
1.4 At the Effective Time (or as soon thereafter as is reasonably practicable), each Mutual Fund shall distribute all ETF Shares it receives pursuant to paragraph 1.1(a) to its shareholders of record
determined at the Effective Time (each, a “Shareholder”), in proportion to their Mutual Fund Shares then held of record and in constructive exchange therefor, and shall completely liquidate. That distribution shall be accomplished by Trust’s
transfer agent opening accounts on each ETF’s shareholder records in the name of the appropriate Depository Trust Company (“DTC”) participant for each Shareholder. Pursuant to that transfer, each Shareholder’s account shall be credited with the
number of full and fractional ETF Shares having an aggregate NAV equal to the aggregate NAV of Mutual Fund Shares that Shareholder holds at the Effective Time (and cash in lieu of fractional shares, if any). All issued and outstanding Mutual
Fund Shares, including any represented by certificates, shall simultaneously be canceled on each Mutual Fund’s shareholder records. Trust shall not issue certificates representing ETF Shares issued in connection with the Reorganization.
1.5 (a) The value of each Mutual Fund’s net assets (the assets to be acquired by each ETF hereunder, net of liabilities assumed by each ETF) shall be the value of such net assets computed as of the
Effective Time, using the valuation procedures set forth in each Mutual Fund’s then current prospectus and statement of additional information or such other valuation procedures as may be mutually agreed upon by the parties.
(b) All computations of value and NAV shall be made by The Nottingham Company, accounting agent for the Funds, in accordance with its regular practice in pricing the shares and assets of each Fund.
1.6 Any transfer taxes payable on the issuance and transfer of ETF Shares in a name other than that of the registered holder on each Mutual Fund’s shareholder records of Mutual Fund Shares actually or
constructively exchanged therefor shall be paid by the transferee thereof, as a condition of that issuance and transfer.
1.7 Any reporting responsibility of each Mutual Fund to a public authority, including the responsibility for filing regulatory reports, tax returns, and other documents with the U.S. Securities and
Exchange Commission (“Commission”), any state securities commission, any federal, state, and local tax authorities, and any other relevant regulatory authority, is and shall remain its responsibility up to and including the date on which it is
terminated, except that each ETF shall be responsible for preparing and filing any Form N-PORT or Form N-CSR (including the annual report to shareholders) if the fiscal period relating to such form ended prior to the Effective Time, but as of the
Effective Time such form has not yet been filed.
1.8 After the Effective Time, each Mutual Fund shall not conduct any business except in connection with its dissolution and termination. As soon as reasonably practicable after distribution of ETF
Shares pursuant to paragraph 1.4, but in all events within six months after the Effective Time, (a) each Mutual Fund shall be terminated as a series of Trust and (b) Trust shall make all filings and take all other actions in connection therewith
necessary and proper to effect each Mutual Fund’s complete dissolution.
2. CLOSING AND EFFECTIVE TIME
2.1 Unless the parties agree otherwise, all acts necessary to consummate the Reorganization (“Closing”) shall be deemed to take place simultaneously as of immediately after the close of business (4:00
p.m., Eastern Time) on or about October 22, 2021 (“Effective Time”). The Closing shall be held at the offices of The Nottingham Company, 116 South Franklin Street, Rocky Mount, North Carolina 27804.
2.2 Trust shall direct the custodian of each Mutual Fund’s assets to deliver at the Closing a certificate of an authorized officer (“Certificate”) stating and verifying that (a) the Assets it holds will
be transferred to each corresponding ETF at the Effective Time, (b) all necessary taxes in connection with the delivery of the Assets, including all applicable federal and state stock transfer stamps, if any, have been paid or provision for
payment has been made, and (c) the information (including adjusted basis and holding period, by lot) concerning the Assets, including all portfolio securities, transferred by each Mutual Fund to each corresponding ETF, as reflected on each ETF’s
books immediately after the Effective Time, does or will conform to that information on each Mutual Fund’s books immediately before the Effective Time.
2.3 Trust shall direct its transfer agent to deliver at the Closing (a) to Trust, a Certificate (1) verifying that each Mutual Fund’s shareholder records contain each Shareholder’s name and address and
the number of full and fractional outstanding Mutual Fund Shares that each such Shareholder owns at the Effective Time and (2) as to the opening of accounts on each ETF’s shareholder records in the name of the appropriate DTC participant for each
Shareholder and (b) to Trust, a confirmation, or other evidence satisfactory to Trust, that ETF Shares to be credited to each corresponding Mutual Fund at the Effective Time have been credited to such Mutual Fund’s account on those records.
2.4 Trust shall prepare, within five days before the Closing, a Certificate listing each security, by name of issuer and number of shares, that is being carried on each Mutual Fund’s books at an
estimated fair market value provided by an authorized pricing vendor for each Mutual Fund.
2.5 At the Closing, the Investment Company shall deliver, on behalf of each Fund, as applicable, (a) bills of sale, checks, assignments, share certificates, receipts, and/or other documents the
Investment Company or its counsel reasonably requests and (b) a Certificate in form and substance satisfactory to the recipient, and dated the Effective Time, to the effect that the representations and warranties it made in this Agreement are
true and correct at the Effective Time except as they may be affected by the transactions contemplated hereby.
3. REPRESENTATIONS AND WARRANTIES
3.1 Trust, on each Mutual Fund’s behalf, represents and warrants as follows:
(a) Trust (1) is a statutory trust that is duly organized, validly existing, and in good standing under the laws of the State of Delaware (“Delaware Law”), and its Certificate of Trust is on file with
the Secretary of State of Delaware (“Secretary”), (2) is duly registered under the 1940 Act as an open-end management investment company, and (3) has the power to own all its properties and assets and to carry on its business as described in its
current registration statement on Form N-1A;
(b) Each Mutual Fund is a duly established and designated series of Trust;
(c) The execution, delivery, and performance of this Agreement have been duly authorized at the date hereof by all necessary action on the part of Trust’s Board; and this Agreement constitutes a valid
and legally binding obligation of Trust, with respect to each Mutual Fund, enforceable in accordance with its terms, subject to the effect of bankruptcy, insolvency, fraudulent transfer, reorganization, receivership, moratorium, and other laws
affecting the rights and remedies of creditors generally and general principles of equity;
(d) At the Effective Time, Trust will have good and marketable title to the Assets for each Mutual Fund’s benefit and full right, power, and authority to sell, assign, transfer, and deliver the Assets
hereunder free of any liens or other encumbrances (except securities that are subject to “securities loans,” as referred to in Section 851(b)(2), or that are restricted to resale by their terms); and on delivery and payment for the Assets, Trust,
on each ETF’s behalf, will acquire good and marketable title thereto, subject to no restrictions on the full transfer thereof, including restrictions that might arise under the Securities Act of 1933, as amended (“1933 Act”);
(e) Trust, with respect to each Mutual Fund, is not currently engaged in, and its execution, delivery, and performance of this Agreement and consummation of the Reorganization will not result in, (1) a
conflict with or material violation of any provision of Delaware Law, Trust’s Certificate of Trust, or By-Laws, or any agreement, indenture, instrument, contract, lease, or other undertaking (each, an “Undertaking”) to which Trust, on each Mutual
Fund’s behalf, is a party or by which it is bound or (2) the acceleration of any obligation, or the imposition of any penalty, under any Undertaking, judgment, or decree to which Trust, on each Mutual Fund’s behalf, is a party or by which it is
bound;
(f) At or before the Effective Time, either (1) all material contracts and other commitments of each Mutual Fund (other than this Agreement and certain investment contracts, including options, futures,
forward contracts, and swap agreements) will terminate, or (2) provision for discharge and/or each ETF’s assumption of any liabilities of each corresponding Mutual Fund thereunder will be made, without either Fund’s incurring any penalty with
respect thereto and without diminishing or releasing any rights Trust may have had with respect to actions taken or omitted or to be taken by any other party thereto before the Closing;
(g) No litigation, administrative proceeding, action, or investigation of or before any court, governmental body, or arbitrator is presently pending or, to Trust’s knowledge, threatened against Trust,
with respect to each Mutual Fund or any of its properties or assets attributable or allocable to each Mutual Fund, that, if adversely determined, would materially and adversely affect each Mutual Fund’s financial condition or the conduct of its
business; and Trust, on each Mutual Fund’s behalf, knows of no facts that might form the basis for the institution of any such litigation, proceeding, action, or investigation and is not a party to or subject to the provisions of any order,
decree, judgment, or award of any court, governmental body, or arbitrator that materially and adversely affects each Mutual Fund’s business or Trust’s ability to consummate the transactions contemplated hereby;
(h) Each Mutual Fund’s Statement of Assets and Liabilities, Schedule of Investments, Statement of Operations, and Statement of Changes in Net Assets (each, a “Statement”) at and for the fiscal year ended
May 31, 202 1 , have been audited by BBD, LLP, an independent registered public accounting firm, have been furnished to each ETF. Such statements of assets and liabilities and schedules of investments fairly present the financial condition
of each Mutual Fund as of the dates thereof, and such statements of operations and changes in net assets fairly reflect the results of its operations and changes in net assets for the periods covered thereby in conformity with generally accepted
accounting principles;
(i) Since May 31, 2021 , there has not been any material adverse change in each Mutual Fund’s financial condition, assets, liabilities, or business, other than changes occurring in the ordinary
course of business, or any incurrence by each Mutual Fund of indebtedness maturing more than one year from the date that indebtedness was incurred; for purposes of this subparagraph, a decline in NAV per Mutual Fund Share due to declines in
market values of securities each Mutual Fund holds, the discharge of each Mutual Fund liabilities, or the redemption of Mutual Fund Shares by its shareholders shall not constitute a material adverse change;
(j) All federal and other tax returns, dividend reporting forms, and other tax-related reports (collectively, “Returns”) of each Mutual Fund required by law to have been filed by the Effective Time
(including any properly and timely filed extensions of time to file) shall have been filed and are or will be correct in all material respects, and all federal and other taxes shown as due or required to be shown as due on those Returns shall
have been paid or provision shall have been made for the payment thereof; to the best of Trust’s knowledge, no such Return is currently under audit and no assessment has been asserted with respect to those Returns; and each Mutual Fund is in
compliance in all material respects with all applicable Regulations pertaining to the reporting of dividends and other distributions on and redemptions of its shares and to withholding in respect thereof and is not liable for any material
penalties that could be imposed thereunder;
(k) Each Mutual Fund has met the requirements of Subchapter M of the Code for qualification and treatment as a “regulated investment company” within the meaning of Section 851 et seq. of the Code in respect of the taxable year since the commencement of operations and will continue meeting such requirements at all times through the Effective Time. Each Mutual Fund has not at any time since its
inception been liable for, and is not now liable for, any material income or excise tax pursuant to Section 852 or 4982 of the Code. Each Mutual Fund is in compliance in all material respects with applicable regulations of the Internal Revenue
Service pertaining to the reporting of dividends and other distributions on and redemptions of its shares of beneficial interest and to withholding in respect of dividends and other distributions to shareholders, and is not liable for any
material penalties that could be imposed thereunder;
(l) All issued and outstanding Mutual Fund Shares are, and at the Effective Time will be, duly and validly issued and outstanding, fully paid, and non-assessable by Trust and have been offered and sold
in every state and the District of Columbia in compliance in all material respects with applicable registration requirements of the 1933 Act and state securities laws; all issued and outstanding Mutual Fund Shares will, at the Effective Time, be
held by the persons and in the amounts set forth on Mutual Fund’s shareholder records, as provided in paragraph 2.3; and Mutual Fund does not have outstanding any options, warrants, or other rights to subscribe for or purchase any Mutual Fund
Shares, nor are there outstanding any securities convertible into any Mutual Fund Shares;
(m) Each Mutual Fund incurred the Liabilities, which are associated with the Assets, in the ordinary course of its business;
(n) No Mutual Fund is under the jurisdiction of a court in a “title 11 or similar case” (as defined in Section 368(a)(3)(A));
(o) Not more than 25% of the value of each Mutual Fund’s total assets (excluding cash, cash items, and Government securities) is invested in the stock and securities of any one issuer, and not more than
50% of the value of those assets is invested in the stock and securities of five or fewer issuers;
(p) Each Mutual Fund’s current prospectus and statement of additional information (1) conform in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and (2) at the date on which they were issued did not contain, and as supplemented by any supplement thereto dated prior to or at the Effective Time do not contain, any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;
(q) The information to be furnished by Trust for use in no-action letters, applications for orders, registration statements, proxy materials, and other documents filed or to be filed with any federal,
state, or local regulatory authority (including the Financial Industry Regulatory Authority, Inc. (“FINRA”)) that may be necessary in connection with the transactions contemplated hereby shall be accurate and complete in all material respects and
shall comply in all material respects with federal securities laws and other laws and regulations; and a combined prospectus/information statement on Form N-14 relating to ETF Shares issuable hereunder, and any supplement or amendment thereto,
including therein a prospectus (“N-14”) will, at the Effective Time, not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(r) The Certificate of Trust permits Trust to vary its shareholders’ investment; Trust does not have a fixed pool of assets; and each series thereof (including each Mutual Fund) is a managed portfolio of
securities, and Adaptive has the authority to buy and sell securities for each Mutual Fund;
(s) Each Mutual Fund’s investment operations from inception to the date hereof have been in compliance in all material respects with the investment policies and investment restrictions set forth in its
prospectus, except as previously disclosed in writing to Trust;
(t) ETF Shares to be delivered hereunder are not being acquired for the purpose of making any distribution thereof, other than in accordance with the terms hereof;
(u) At the Closing, at least 33 1⁄3% of each Mutual Fund’s portfolio assets (by fair market value) will meet the investment objectives, strategies, policies, risks and restrictions
of each corresponding ETF, and each Mutual Fund will not alter its portfolio in connection with the Reorganization to meet this 33 1⁄3% threshold. Each Mutual Fund did not enter into any line of business as part of the plan
of reorganization;
(v) To the best of the knowledge of each Mutual Fund’s management, (i) there is no plan or intention by any Mutual Fund shareholders to sell, exchange, redeem, or otherwise dispose of a number of Mutual
Fund Shares (or ETF Shares received in the Reorganization), in connection with the Reorganization, that would reduce each Mutual Fund shareholders’ ownership of Mutual Fund Shares (or equivalent ETF Shares) to a number of shares that was less
than 50 percent of the number of Mutual Fund Shares outstanding prior to the Closing; and (ii) there is no plan or intention by any shareholder owning 5% or more of Mutual Fund Shares to sell, exchange, redeem, or otherwise dispose of any Mutual
Fund Shares (or ETF Shares received in the Reorganization), in connection with the Reorganization;
(w) During the five-year period ending at the Effective Time, neither Mutual Fund nor any person related (as defined in Section 1.368-1(e)(4) of the Treasury Regulations without regard to
1.368-1(e)(4)(i)) to each Mutual Fund will have (i) acquired Mutual Fund Shares with consideration other than ETF Shares or Mutual Fund Shares, except in the ordinary course of each Mutual Fund’s business as an open-end investment company
pursuant to Section 22(e) of the 1940 Act; or (ii) made distributions with respect to Mutual Fund Shares except for (A) normal, regular dividend distributions made pursuant to the historic dividend paying practice of each Mutual Fund, and
(B) distributions and dividends declared and paid in order to ensure each Mutual Fund’s continuing qualification as a regulated investment company and to avoid the imposition of fund-level tax; and
(x) There is no intercorporate indebtedness existing between each ETF and each Mutual Fund that was issued, acquired, or will be settled at a discount.
3.2 Trust, on each ETF’s behalf, represents and warrants as follows:
(a) Trust (1) is a statutory trust that is duly organized, validly existing, and in good standing under Delaware Law, and its Certificate of Trust is on file with the Secretary, (2) is duly registered
under the 1940 Act as an open-end management investment company, and (3) has (or will have after its establishment and effectiveness of each ETF’s registration statement on Form N-1A) the power to own all its properties and assets and to carry on
its business as described in its current registration statement on Form N-1A;
(b) Each ETF is a duly established and designated series of Trust. Each ETF was established by the trustees of Trust in order to effect the transactions described in this Agreement. Each ETF was formed
solely for the purpose of consummating the Reorganization with each Mutual Fund, will not hold more than a nominal amount of assets necessary to facilitate its organization and will not carry on any business activities (other than such activities
as are customary to the organization of a new series of a registered investment company prior to its commencement of investment operations) between the date hereof and the Effective Time.
(c) The execution, delivery, and performance of this Agreement have been duly authorized at the date hereof by all necessary action on the part of Trust’s Board; and this Agreement constitutes a valid
and legally binding obligation of Trust, with respect to each ETF, enforceable in accordance with its terms, subject to the effect of bankruptcy, insolvency, fraudulent transfer, reorganization, receivership, moratorium, and other laws affecting
the rights and remedies of creditors generally and general principles of equity;
(d) As of the Effective Time, each ETF will have no shares of beneficial interest issued and outstanding prior to the consummation of the Reorganization. On and after the Effective Time, the authorized
capital of each ETF will consist of an unlimited number of shares of beneficial interest, no par value per share. ETF Shares to be issued to each Mutual Fund pursuant to this Agreement will have been duly authorized and, when issued and
delivered pursuant to this Agreement, will be legally and validly issued and will be fully paid and, except as set forth in such each ETF’s registration statement on Form N-1A, non-assessable by each ETF, and no shareholder of each ETF will have
any preemptive right of subscription or purchase in respect thereof. Further, the issuance of such ETF Shares will be in compliance with all applicable federal and state securities laws;
(e) No consideration other than ETF Shares (and each ETF’s assumption of the Liabilities) will be issued in exchange for the Assets in the Reorganization;
(f) Trust, with respect to each ETF, is not currently engaged in, and its execution, delivery, and performance of this Agreement and consummation of the Reorganization will not result in, (1) a conflict
with or material violation of any provision of Delaware Law, Trust’s Certificate of Trust, or any Undertaking to which Trust, on each ETF’s behalf, is a party or by which it is bound or (2) the acceleration of any obligation, or the imposition of
any penalty, under any Undertaking, judgment, or decree to which Trust, on each ETF’s behalf, is a party or by which it is bound;
(g) No litigation, administrative proceeding, action, or investigation of or before any court, governmental body, or arbitrator is presently pending or, to Trust’s knowledge, threatened against Trust,
with respect to each ETF or any of its properties or assets attributable or allocable to each ETF, that, if adversely determined, would materially and adversely affect each ETF’s financial condition or the conduct of its business; and Trust, on
each ETF’s behalf, knows of no facts that might form the basis for the institution of any such litigation, proceeding, action, or investigation and is not a party to or subject to the provisions of any order, decree, judgment, or award of any
court, governmental body, or arbitrator that materially and adversely affects each ETF’s business or Trust’s ability to consummate the transactions contemplated hereby;
(h) As of the Effective Time, no federal, state or other tax returns of each ETF will have been required by law to be filed and no federal, state or other taxes will be due by each ETF; each ETF will not
have been required to pay any assessments; and each ETF will not have any tax liabilities. Consequently, as of the Effective Time, each ETF will not have any tax deficiency or liability asserted against it or question with respect thereto
raised, and each ETF will not be under audit by the Internal Revenue Service or by any state or local tax authority for taxes in excess of those already paid.
(i) Each ETF intends to meet the requirements of Subchapter M of the Code for qualification and treatment as a “regulated investment company” within the meaning of Section 851 et seq. of the Code in
respect of the taxable year and will not take any action inconsistent with meeting such requirements at any time through the Effective Time. Upon filing its first income tax return at the completion of its first taxable year, each ETF will elect
to be a “regulated investment company” under Section 851 of the Code. Each ETF currently is not liable for any material income or excise tax pursuant to Section 852 or 4982 of the Code. Each ETF intends to comply in all material respects with
applicable regulations of the Internal Revenue Service pertaining to the reporting of dividends and other distributions on and redemptions of its shares of beneficial interest and to withholding in respect of dividends and other distributions to
shareholders and to avoid any potential material penalties that could be imposed thereunder;
(j) There is no plan or intention for any ETF to be dissolved or merged into another statutory or business trust or a corporation or any “fund” thereof (as defined in Section 851(g)(2) of the Code)
following the Reorganization;
(k) Assuming the truthfulness and correctness of Trust’s representation and warranty in paragraph 3.1(o), immediately after the Reorganization (1) not more than 25% of the value of each ETF’s total
assets (excluding cash, cash items, and Government securities) will be invested in the stock and securities of any one issuer and (2) not more than 50% of the value of those assets will be invested in the stock and securities of five or fewer
issuers;
(l) Immediately after the Effective Time, no ETF will be under the jurisdiction of a court in a “title 11 or similar case” (as defined in Section 368(a)(3)(A) of the Code);
(m) The information to be furnished by Trust for use in no-action letters, applications for orders, registration statements, proxy materials, and other documents filed or to be filed with any federal,
state, or local regulatory authority (including FINRA) that may be necessary in connection with the transactions contemplated hereby shall be accurate and complete in all material respects and shall comply in all material respects with federal
securities laws and other laws and regulations; and the N-14 will, at the Effective Time, not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading;
(n) The Certificate of Trust permits Trust to vary its shareholders’ investment; Trust will not have a fixed pool of assets; and each series thereof (including each ETF) will be a managed portfolio of
securities, and Adaptive will have the authority to buy and sell securities for each ETF;
(o) No ETF has a plan or intention to reacquire any of ETF Shares issued in the Reorganization, except in the ordinary course of its business as an open-end investment company;
(p) Each ETF is in the same line of business as each Mutual Fund preceding the Reorganization for purposes of Treasury Regulations Section 1.368-1(d)(2). Following the Reorganization, each ETF will
continue such line of business or use a significant portion of each Mutual Fund’s portfolio assets in a business, and each ETF has no plan or intention to change such line of business. Each ETF did not enter into any line of business as part of
the plan of reorganization. At the Closing, at least 33 1⁄3% of each Mutual Fund’s portfolio assets (by fair market value) will meet the investment objectives, strategies, policies, risks and restrictions of each
corresponding ETF. Each ETF has no plan or intention to change any of its investment objectives, strategies, policies, risks and restrictions after the Reorganization;
(q) To the best of the knowledge of each ETF’s management, (i) there is no plan or intention by any Mutual Fund shareholders to sell, exchange, redeem, or otherwise dispose of a number of Mutual Fund
Shares (or ETF Shares received in the Reorganization), in connection with the Reorganization, that would reduce each Mutual Fund shareholders’ ownership of Mutual Fund Shares (or equivalent ETF Shares) to a number of shares that was less than 50
percent of the number of Mutual Fund Shares outstanding prior to the Closing; and (ii) there is no plan or intention by any shareholder owning 5% or more of Mutual Fund Shares to sell, exchange, redeem, or otherwise dispose of any Mutual Fund
Shares (or ETF Shares received in the Reorganization), in connection with the Reorganization;
(r) There is no plan or intention for any ETF or any person related (as defined in Treasury Regulations Section 1.368-1(e)(4)) to each ETF, to acquire or redeem any of ETF Shares issued in the
Reorganization, either directly or through any transaction, agreement, or arrangement with any other person, other than redemptions by each ETF in the ordinary course of its business as an open-end investment company pursuant to Section 22(e) of
the 1940 Act; and
(s) There is no intercorporate indebtedness existing between each ETF and each Mutual Fund that was issued, acquired, or will be settled at a discount.
3.3 Trust, on behalf of each Mutual Fund, and Trust, on behalf of each ETF, respectively, hereby further covenant as follows:
(a) No governmental consents, approvals, authorizations, or filings are required under the 1933 Act, the Securities Exchange Act of 1934, as amended, the 1940 Act, or state securities laws, and no
consents, approvals, authorizations, or orders of any court are required, for its execution or performance of this Agreement on any Fund’s behalf, except for (1) Trust’s filing with the Commission of an N-14, and (2) consents, approvals,
authorizations, and filings that have been made or received or may be required after the Effective Time;
(b) The fair market value of ETF Shares each Shareholder receives will be equal to the fair market value of its Mutual Fund Shares it actually or constructively surrenders in exchange therefor;
(c) The Shareholders will pay their own expenses (such as fees of personal investment or tax advisers for advice regarding the Reorganization), if any, incurred in connection with the Reorganization;
(d) The fair market value of the Assets will equal or exceed the Liabilities to be assumed by each ETF and those to which the Assets are subject;
(e) None of the compensation received by any Shareholder who or that is an employee of or service provider to each Mutual Fund will be separate consideration for, or allocable to, any of Mutual Fund
Shares that Shareholder holds; none of ETF Shares any such Shareholder receives will be separate consideration for, or allocable to, any employment agreement, investment advisory agreement, or other service agreement; and the compensation paid to
any such Shareholder will be for services actually rendered and will be commensurate with amounts paid to third parties bargaining at arm’s-length for similar services; and
(f) No expenses incurred by any Mutual Fund or on its behalf in connection with the Reorganization will be paid or assumed by any ETF, Adaptive, or any other third party unless those expenses are
solely and directly related to the Reorganization (determined in accordance with the guidelines set forth in Rev. Rul. 73-54, 1973-1 C.B. 187) (“Reorganization Expenses”), and no cash or property other than ETF Shares will be transferred to each
Mutual Fund or any of its shareholders with the intention that it be used to pay any expenses (even Reorganization Expenses) thereof.
4. COVENANTS
4.1 Trust covenants to take all action necessary to obtain approval of the transactions contemplated hereby.
4.2 Trust covenants to prepare the N-14 in compliance with applicable federal and state securities laws.
4.3 Trust covenants that it will, from time to time, as and when requested by the other, execute and deliver or cause to be executed and delivered all assignments and other instruments, and will take or
cause to be taken any further action(s), it deems necessary or desirable in order to vest in, and confirm to, (a) Trust, on each ETF’s behalf, title to and possession of all the Assets, and (b) Trust, on each Mutual Fund’s behalf, title to and
possession of ETF Shares to be delivered hereunder, and otherwise to carry out the intent and purpose hereof.
4.4 Trust covenants to use all reasonable efforts to obtain the approvals and authorizations required by the 1933 Act, the 1940 Act, and applicable state securities laws it deems appropriate to commence
and continue each ETF’s operations after the Effective Time.
4.5 Subject to this Agreement, Trust covenants to take or cause to be taken all actions, and to do or cause to be done all things, reasonably necessary, proper, or advisable to consummate and effectuate
the transactions contemplated hereby.
5. CONDITIONS PRECEDENT
Each Fund’s obligations hereunder shall be subject to (a) performance by the corresponding Fund of all its obligations to be performed
hereunder at or before the Closing, (b) all representations and warranties on behalf of the corresponding Fund contained herein being true and correct in all material respects at the date hereof and, except as they may be affected by the
transactions contemplated hereby, at the Effective Time, with the same force and effect as if made at that time, and (c) the following further conditions that, at or before that time:
5.1 This Agreement and the transactions contemplated hereby shall have been duly adopted and approved by the Board, on behalf of each Fund;
5.2 All necessary filings shall have been made with the Commission and state securities authorities, and no order or directive shall have been received that any other or further action is required to
permit Trust to carry out the transactions contemplated hereby. The N-14 shall have become effective under the 1933 Act, no stop orders suspending the effectiveness thereof shall have been issued, and, to Trust’s best knowledge, no investigation
or proceeding for that purpose shall have been instituted or be pending, threatened, or contemplated under the 1933 Act or the 1940 Act. The Commission shall not have issued an unfavorable report with respect to the Reorganization under Section
25(b) of the 1940 Act nor instituted any proceedings seeking to enjoin consummation of the transactions contemplated hereby under Section 25(c) of the 1940 Act. All consents, orders, and permits of federal, state, and local regulatory
authorities (including the Commission and state securities authorities) Trust deems necessary to permit consummation, in all material respects, of the transactions contemplated hereby shall have been obtained, except where failure to obtain same
would not involve a risk of a material adverse effect on any Fund’s assets or properties;
5.3 At the Effective Time, no action, suit, or other proceeding shall be pending (or, to Trust’s best knowledge, threatened to be commenced) before any court, governmental agency, or arbitrator in which
it is sought to enjoin the performance of, restrain, prohibit, affect the enforceability of, or obtain damages or other relief in connection with, the transactions contemplated hereby;
5.4 Prior to the Closing, each Mutual Fund shall have declared a dividend or dividends which, together with all previous such dividends shall have the effect of distributing to Mutual Fund Shareholders
all of each Mutual Fund’s investment company taxable income for all taxable periods ending at the Effective Time (computed without regard to any deduction for dividends paid) and all of the net capital gains realized in all taxable periods ending
at the Effective Time (after reduction for any capital loss carryforward).
5.5 At any time before the Closing, Trust may waive any of the foregoing conditions (except those set forth in paragraphs 5.1, 5.2 and 5.4) if, in the judgment of the Board, that waiver will not have a
material adverse effect on the applicable Fund’s shareholders’ interests.
6. EXPENSES
Subject to complying with the representation and warranty contained in paragraph 3.3(f), Adaptive shall bear the entirety of the total
Reorganization Expenses. The Reorganization Expenses include (1) costs associated with preparing and filing each Mutual Fund’s prospectus supplements and the N-14, and printing and distributing each ETF’s prospectus and the N-14, (2) legal and
accounting fees, (3) transfer taxes for foreign securities and (4) any and all incremental Blue Sky fees. Notwithstanding the foregoing, expenses shall be paid by the Fund directly incurring them if and to the extent that the payment thereof by
another person would result in that Fund’s disqualification as a regulated investment company under the Code.
7. ENTIRE AGREEMENT; NO SURVIVAL
Trust, on behalf of each Mutual Fund, and Trust on behalf of each ETF, has not made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement of Trust, on behalf of each Mutual Fund, and Trust on behalf of each ETF. The representations, warranties, and covenants contained herein or in any document delivered pursuant
hereto or in connection herewith shall not survive the Closing.
8. TERMINATION
This Agreement may be terminated at any time at or before the Closing by resolution of either the Board, on behalf of each Mutual Fund,
or the Board, on behalf of each ETF, if circumstances should develop that, in the opinion of that Board, make proceeding with the Agreement inadvisable with respect to such Mutual Fund or such ETF, respectively. Any such termination resolution
will be effective when made. The termination of this Agreement with respect to each Mutual Fund or each ETF shall it affect the rights and obligations of any party in respect of any breach of this Agreement occurring prior to such termination.
9. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as may be deemed necessary or advisable by the authorized
officers of Trust, on behalf of each Mutual Fund, and Trust, on behalf of each ETF.
10. SEVERABILITY
Any term or provision hereof that is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the
extent of that invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions hereof or affecting the validity or enforceability of any of the terms and provisions hereof in any other jurisdiction.
11. MISCELLANEOUS
11.1 This Agreement shall be governed by and construed in accordance with Delaware Law, without giving effect to principles of conflicts of laws; provided that, in the case of any conflict between that
law and the federal securities laws, the latter shall govern.
11.2 Nothing expressed or implied herein is intended or shall be construed to confer on or give any person, firm, trust, or corporation other than Trust, on each ETF’s behalf, or Trust, on each Mutual
Fund’s behalf, and their respective successors and assigns any rights or remedies under or by reason of this Agreement.
11.3 Notice is hereby given that this instrument is executed and delivered on behalf of Trust’s trustees solely in their capacities as trustees, and not individually, and that Trust’s obligations under
this instrument are not binding on or enforceable against any of its trustees, officers, shareholders, or series other than the applicable Funds but are only binding on and enforceable against its property attributable to and held for the benefit
of such applicable Fund (“Fund’s Property”) and not Trust’s property attributable to and held for the benefit of any other series thereof. Trust, in asserting any rights or claims under this Agreement on its or a Fund’s behalf, shall look only
to the corresponding Fund’s Property in settlement of those rights or claims and not to the property of any other series of Trust or to those trustees, officers, or shareholders.
11.4 This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been executed by
Trust, on behalf of each Mutual Fund, and Trust on behalf of each ETF. The headings contained herein are for reference purposes only and shall not affect in any way the meaning or interpretation hereof.
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IN WITNESS WHEREOF, each party has caused this Agreement to be executed and
delivered by its duly authorized officer as of the day and year first written above.
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STARBOARD INVESTMENT TRUST, on behalf of the Adaptive Fundamental Growth Fund, Adaptive Hedged High Income
Fund, Adaptive Hedged Multi-Asset Income Fund, Adaptive Tactical Outlook Fund and Adaptive Tactical Rotation Fund
By: __________________________
Name: ________________________
Its: ___________________________
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STARBOARD INVESTMENT TRUST, on behalf of the AI Quality Growth ETF, Adaptive High Income ETF, RH Hedged
Multi-Asset Income ETF, RH Tactical Outlook ETF and RH Tactical Rotation ETF
By: __________________________
Name: ________________________
Its: ___________________________
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Solely for purposes of paragraph 6 hereof,
CAVALIER INVESTMENTS, LLC dba Adaptive Investments, advisor to the Adaptive Fundamental Growth Fund, Adaptive
Hedged High Income Fund, Adaptive Hedged Multi-Asset Income Fund, Adaptive Tactical Outlook Fund, Adaptive Tactical Rotation Fund, AI Quality Growth ETF, Adaptive High Income ETF, RH Hedged Multi-Asset Income ETF, RH Tactical
Outlook ETF and RH Tactical Rotation ETF
By: ___________________________
Name: _________________________
Its: ____________________________
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ITEM 15. INDEMNIFICATION.
Under Delaware law, Section 3817 of the Treatment of Delaware Statutory Trusts empowers Delaware business trusts to indemnify and hold
harmless any trustee or beneficial owner or other person from and against any and all claims and demands whatsoever, subject to such standards and restrictions as may be set forth in the governing instrument of the business trust. The Registrant’s
Trust Instrument contains the following provisions:
Every note, bond, contract, instrument, certificate or undertaking and every other act or thing whatsoever issued,
executed or done by or on behalf of the Trust or the Trustees or any of them in connection with the Trust shall be conclusively deemed to have been issued, executed or done only in or with respect to their or his or her capacity as Trustees or
Trustee, and such Trustees or Trustee shall not be personally liable thereon.
In addition, the Registrant has entered into the following agreements: Investment Advisory Agreements, Investment
Sub-Advisory Agreements, and Distribution Agreements. These agreements provide indemnification for those entities and their respective affiliates. Certain personnel of the Advisors, Distributor or Administrator may serve as trustees and/or officers
of the Trust.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (“Securities Act”), may
be permitted to trustees, officers and controlling persons of the Registrant by the Registrant pursuant to the Trust Instrument or otherwise, the Registrant is aware that in the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Securities Act and, therefore, is unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by trustees,
officers or controlling persons of the Registrant in connection with the successful defense of any act, suit or proceeding) is asserted by such trustees, officers or controlling persons in connection with the shares being registered, the 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 Securities Act
and will be governed by the final adjudication of such issues.
ITEM 17. UNDERTAKINGS.
(1) The undersigned Registrant agrees that prior to any public reoffering of the securities registered through the use of a prospectus
which is a part of this registration statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, as amended, the reoffering prospectus will contain the information called for by
the applicable registration form for reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.
Pursuant to the requirements of the Securities Act of 1933, as amended (“Securities Act”), the Registrant has duly
caused this N-14 to be signed on its behalf by the undersigned, thereto duly authorized, in the City of Rocky Mount, State of North Carolina on this 9th day of September 2021.
Pursuant to the requirements of the Securities Act, this Registration Statement has been signed below by the following
person in the capacities and on the date indicated.
