UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM N-CSR

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number: 811-08194

 

FINANCIAL INVESTORS TRUST

(Exact name of Registrant as specified in charter)

 

1290 Broadway, Suite 1000, Denver, Colorado 80203

(Address of principal executive offices) (Zip code)

 

Karen Gilomen, Esq., Secretary

Financial Investors Trust

1290 Broadway, Suite 1000

Denver, Colorado 80203

(Name and address of agent for service)

 

Registrant’s telephone number, including area code: 303-623-2577

 

Date of fiscal year end: April 30

 

Date of reporting period: October 31, 2019

 

 

 

 

Item 1. Reports to Stockholders.

 

 

 

 

 

  

TABLE OF CONTENTS

 

 

SEMI-ANNUAL REPORT

 

 

SHAREHOLDER LETTER 1
PERFORMANCE UPDATE 4
DISCLOSURE OF FUND EXPENSES 6
PORTFOLIO OF INVESTMENTS 7
STATEMENT OF ASSETS AND LIABILITIES 18
STATEMENT OF OPERATIONS 19
STATEMENTS OF CHANGES IN NET ASSETS 20
FINANCIAL HIGHLIGHTS 22
NOTES TO FINANCIAL STATEMENTS 24
ADDITIONAL INFORMATION 30
PRIVACY POLICY 31

 

Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, paper copies of the Fund’s annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Fund’s website at www.dgifund.com, and you will be notified by mail each time a report is posted and provided with a website link to access the report.

 

You may, notwithstanding the availability of shareholder reports online, elect to receive all future shareholder reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the Fund, you can call 1.855.DGI. FUND (1-855-344-3863) to let the Fund know you wish to continue receiving paper copies of your shareholder reports.

 

If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically anytime by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by enrolling at www.dgifund.com.

 

Disciplined Growth Investors’ goal is to communicate clearly and transparently with our clients and mutual fund shareholders. It is mutually beneficial when our shareholders understand how we invest, what we are currently thinking and forecasting, and the specific investment decisions we have made. Our views and opinions regarding the investment prospects of our portfolio holdings and the Fund are “forward looking statements” which may or may not be accurate over the long term. While we believe we have a reasonable basis for these forecasts and have confidence in our investment team’s views, actual results may differ materially from those we anticipate. Information provided in this report should not be considered a recommendation to purchase or sell any particular security.

 

You can identify forward looking statements as those including words such as “believe”, “expect”, “anticipate”, “forecast”, and similar statement. We cannot assure future performance. These forward-looking statements are made only as-of the date of this report. Following the publication of this report, we will not update any of the forward-looking statements included here.

 

This material must be preceded or accompanied by a prospectus. Please read the prospectus carefully before investing.

 

OCTOBER 31, 2019 DGINV.COM

 

 

 

The Disciplined Growth Investors Fund Shareholder Letter

 

October 31, 2019 (Unaudited)

 

Fund Performance and Asset Mix:

The Disciplined Growth Investors Fund's (the "DGI Fund") fiscal year runs from May 1st to April 30th. For the 2019 fiscal year-to-date (5/1/19-10/31/19), The DGI Fund returned 0.95%. Stocks in the Fund decreased by 0.53% and bonds increased 5.52%.

 

Stocks in The DGI Fund underperformed the S&P 500® index, which increased 4.16%. The DGI Fund held 21 stocks that increased in value and 32 stocks that declined in value. The ten largest equity holdings in The DGI Fund combined to add 0.53% to the Fund’s total performance.

 

The Fund’s bond portfolio also underperformed the Barclays Intermediate Government & Corporate Credit index1, which gained 6.50% during the fiscal year-to-date.

 

Looking at different time periods, especially in the short term, can make market growth and Fund performance appear to vary wildly. 2019 is a good example. For the calendar year-to-date (January 1st through October 31st), The DGI Fund has increased 18.86% and the S&P 500 has increased 23.16%. Most of that increase took place in the first four months of the year. That leaves the fiscal year-to-date returns reflected in this report to be much more modest, especially considering the month of May was the worst performing month of the year so far.

 

We point this out as an example of the fickle manner with which the market can treat investors in the short term. We do not believe anyone can invest around these short term fluctuations or predict them accurately and repeatedly. We are focused on the long term ability of the companies in the portfolio to execute and the potential of those companies’ stocks for long term performance. With 69.4% stocks and 30.6% bonds & cash as of 10/31/19, we have positioned the Fund to reflect this long-term view and research, which shows expected returns for the Fund’s stocks materially in excess of expected returns for bonds.

 

You can find additional performance information and a full list of the Fund’s holdings in this Semi Annual report and at www.dgifund.com.

 

Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please call 1.855.DGI.FUND.

 

Portfolio Activity:

Since we last wrote to you last (April 30th), we added three new stocks to The DGI Fund, sold the remaining position in one, and one portfolio holding was acquired by another company.

 

New Stocks:

Pure Storage (PSTG) has pioneered the development of innovative computer storage for larger organizations. These storage systems are made of solid-state arrays, a new technology that has important advantages over existing disk-based storage solutions. Pure Storage’s systems provides customers with not only a simple solution and superior performance, but offers it at a lower overall cost and provides industry-leading customer service. The stock price has come under pressure recently on fears of competition, allowing us to buy into the company at what we see as an attractive price.

 

 

Semi-Annual Report | October 31, 2019 1

 

 

 

The Disciplined Growth Investors Fund Shareholder Letter

 

October 31, 2019 (Unaudited)

 

Cabot Oil & Gas (COG) is an exploration and production (E&P) company with all of its focus on the most productive and economic natural gas region in the United States: The Marcellus Shale in Northeast Pennsylvania. Cabot is currently the fourth largest producer of natural gas in the U.S. and one of the few energy companies that currently generates positive free cash flow2 & pays a dividend (despite historically low natural gas prices). We were given an opportunity to take an initial position in Cabot because the company decided to make a long-term strategic decision at the expense of short-term results, which Wall Street did not like because the decision delayed this year’s expected gas production totals.

 

Deluxe Corporation (DLX) is known for its very profitable, but declining, legacy check business. Over the last several years, the company has been adding new digital capabilities which it expects to be able to sell to its existing customer base of 4.8 million small businesses and 4600 financial institutions. We see this customer base as a strategic competitive advantage for Deluxe given the trusted partnerships the company forms with its clients. Deluxe also recently hired a new CEO who has extensive experience developing and growing businesses in these markets.

 

Complete Sales:

L Brands (LB) is the business behind the well-known Victoria’s Secret and Bath & Body Works brands. While it had a history of successfully developing these brands, recent missteps by management, significant market share losses at Victoria’s Secret, and evidence of a deteriorating internal culture ultimately caused us to sell our entire position in the company.

 

Acquisitions:

Medidata Solutions (MDSO) was acquired by the French technology company Dassault Systemes in June for $5.8 billion ($92.25 per share). While the acquisition will officially close later this calendar year, the two sides have agreed to all the terms, and we do not anticipate any regulatory or legal issues to prevent completion of the acquisition. The purchase price represents a 23% premium to Medidata’s valuation a few days prior to announcement of the acquisition.

 

Portfolio Construction Update:

We have updated the market cap range we consider to be Mid Cap equities to $1 billion to $15 billion. The previous upper limit we employed was $10 billion. This reflects what we believe to be a long-term increase in the upper limit of market cap size for companies that otherwise have the characteristics we look for in Mid Cap growth companies. This market cap range limitation applies only to the size of companies we typically consider to be new investment candidates for the Fund. We will continue to hold a position in companies whose market cap has exceeded $15 billion (or falls below $1 billion) based on our ongoing assessment of those companies’ individual risk profiles and expected returns. Prior to this change, we had not made a change to our definition of a Mid Cap company since the Fund’s inception.

 

Sincerely,

 

 

 

Portfolio Manager

Disciplined Growth Investors, Inc.

 

1The Barclay’s Government & Corporate Credit index includes both corporate (publicly-issued, fixed-rate, nonconvertible, investment grade, dollar-denominated, SEC-registered, corporate

 

 

2 1-855-DGI-FUND (344-3863) | www.DGIfund.com

 

 

 

The Disciplined Growth Investors Fund Shareholder Letter

 

October 31, 2019 (Unaudited)

 

    dept.) and government (Treasury Bond index, Agency Bond index, 1-3 Year Government index, and the 20+-Year treasury) indexes, including bonds with maturities up to ten years.

 

2For our purposes, defined here as operating cash flow less capital expenditures (CapEx). Operating Cash Flow is a measure of the amount of cash generated by a company's normal business operations. CapEx comprises money spent by a business or organization on acquiring or maintaining fixed assets, such as land, buildings, and equipment.

 

Asset class-specific performance is before fees. The Fund’s single fee – the management fee – is paid from the Fund’s holding of cash. Total Fund net-of-fees performance is presented in this letter, later in this annual report, and is updated monthly on the Fund’s website, www.dgifund.com.

 

The views of Disciplined Growth Investors, Inc. and information discussed in this commentary are as of the date of publication, are subject to change, and may not reflect the writers’ current views.

 

The views expressed are those of the Fund’s adviser only, and represent an assessment of market conditions at a specific point in time, are opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. Such information does not constitute a recommendation to buy or sell specific securities or investment vehicles. It should not be assumed that any investment will be profitable or will equal the performance of the portfolios or any securities or any sectors mentioned in this letter. The subject matter contained in this letter has been derived from several sources believed to be reliable and accurate at the time of compilation. Neither Disciplined Growth Investors, Inc. nor the Fund accepts any liability for losses either direct or consequential caused by the use of this information.

 

The Fund is distributed by ALPS Distributors, Inc.

 

The Fund is subject to investment risks, including possible loss of the principal amount invested and therefore is not suitable for all investors. The Fund may not achieve its objectives.

 

Diversification does not eliminate the risk of experiencing investment losses.

 

Fred Martin is a registered representative of ALPS Distributors, Inc. CFA Institute Marks are trademarks owned by the CFA Institute.

 

The S&P 500® Total Return Index is an unmanaged index of 500 common stocks chosen for market size, liquidity and industry group representation. It is a market-value weighted index. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly in the Index.

 

 

Semi-Annual Report | October 31, 2019 3

 

 

 

The Disciplined Growth Investors Fund Performance Update

 

October 31, 2019 (Unaudited)

 

Annualized Total Return Performance (for the period ended October 31, 2019)

 

  6 month Calendar YTD 1 Year 3 Year 5 Year Since Inception*
The Disciplined Growth Investors Fund 0.95% 18.86% 12.31% 11.41% 8.42% 11.71%
S&P 500® Total Return Index(1) 4.16% 23.16% 14.33% 14.91% 10.78% 14.58%

 

Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please call 1.855.DGI.FUND.

 

The table does not reflect the deductions of taxes a shareholder would pay on Fund distributions or redemptions of Fund shares.

 

Subject to investment risks, including possible loss of the principal amount invested.

 

Returns for periods less than 1 year are cumulative.

 

*Fund Inception date of August 12, 2011.

 

(1)The S&P 500® Total Return Index is an unmanaged index of 500 common stocks chosen for market size, liquidity and industry group representation. It is a market-value weighted index. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly in the Index.

 

 

4 1-855-DGI-FUND (344-3863) | www.DGIfund.com

 

 

 

The Disciplined Growth Investors Fund Performance Update

 

October 31, 2019 (Unaudited)

 

Growth of $10,000 Investment in the Fund (for the period ended October 31, 2019)

 

 

 

The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund since inception. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

 

Investing in the Fund is subject to investment risks, including possible loss of the principal amount invested.

 

Industry Sector Allocation

(as a % of Net Assets)*

 

Technology   31.54%
Consumer Discretionary   13.88%
Health Care   11.61%
Industrials   7.09%
Energy   1.73%
Communications   1.55%
Financials   1.40%
Consumer, Cyclical   0.61%
Corporate Bonds   21.74%
Foreign Corporate Bonds   0.64%
Foreign Government Bonds   0.31%
Government & Agency Obligations   6.83%
Other Assets in Excess of Liabilities   1.07%

 

Top Ten Holdings

(as a % of Net Assets)*

 

Edwards Lifesciences Corp.   3.85%
TJX Cos., Inc.   3.73%
Intuit, Inc.   3.04%
Ubiquiti, Inc.   2.69%
Align Technology, Inc.   2.65%
Plexus Corp.   2.50%
Intuitive Surgical, Inc.   2.44%
Open Text Corp.   2.26%
Middleby Corp.   2.21%
FactSet Research Systems, Inc.   1.96%
Top Ten Holdings   27.33%

 

*Holdings are subject to change, and may not reflect the current or future position of the portfolio.

 

 

Semi-Annual Report | October 31, 2019 5

 

 

 

The Disciplined Growth Investors Fund Disclosure of Fund Expenses

 

October 31, 2019 (Unaudited)

 

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund operating expenses. This example is intended to help you understand your ongoing costs (in dollars), of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

 

This example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period of May 1, 2019 through October 31, 2019.

 

Actual Expenses The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

 

Hypothetical Example for Comparison Purposes The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

 

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect transactional costs, such as sales charges (loads), redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 

  Beginning Account Value 5/1/2019 Ending Account Value 10/31/2019 Expense Ratio(a) Expenses Paid During period 5/1/2019 - 10/31/2019(b)
Actual $1,000.00 $1,009.50 0.78% $ 3.94
Hypothetical (5% return before expenses) $1,000.00 $1,021.22 0.78% $ 3.96

 

(a)The Fund's expense ratios have been annualized based on the Fund's most recent fiscal half-year expenses.
(b)Expenses are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184)/366 (to reflect the half-year period).

 

 

6 1-855-DGI-FUND (344-3863) | www.DGIfund.com

 

 

 

The Disciplined Growth Investors Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
COMMON STOCKS (69.41%)          
COMMUNICATIONS (1.55%)          
Media (1.55%)          
Stamps.com, Inc. (a)   36,943   $3,119,098 
TripAdvisor, Inc. (a)   16,505    666,802 
         3,785,900 
           
TOTAL COMMUNICATIONS        3,785,900 
           
CONSUMER DISCRETIONARY (13.88%)          
Apparel & Textile Products (1.15%)          
Ralph Lauren Corp.   12,934    1,242,440 
Under Armour, Inc. , Class A(a)   75,054    1,549,865 
         2,792,305 
           
Automotive Manufacturing (2.24%)          
Gentex Corp.   141,545    3,970,337 
Gentherm, Inc. (a)   35,826    1,496,452 
         5,466,789 
           
Gaming, Lodging & Restaurants (1.93%)          
Cheesecake Factory, Inc.   22,470    939,021 
Royal Caribbean Cruises, Ltd.   34,698    3,776,184 
         4,715,205 
           
Passenger Transportation (1.77%)          
JetBlue Airways Corp. (a)   222,898    4,301,931 
           
Retail - Consumer Discretionary (6.79%)          
Nordstrom, Inc.   71,346    2,561,321 
Sleep Number Corp. (a)   83,681    4,026,730 
TJX Cos., Inc.   157,601    9,085,698 
Urban Outfitters, Inc. (a)   30,431    873,370 
         16,547,119 
           
TOTAL CONSUMER DISCRETIONARY        33,823,349 
           
CONSUMER, CYCLICAL (0.62%)          
Retail (0.62%)          
MSC Industrial Direct Co., Inc. , Class A   20,443    1,496,632 
           
TOTAL CONSUMER, CYCLICAL        1,496,632 

 

 

Semi-Annual Report | October 31, 2019 7

 

 

 

The Disciplined Growth Investors Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
ENERGY (1.73%)        
Oil, Gas & Coal (1.73%)        
Cabot Oil & Gas Corp.   96,226   $1,793,653 
Core Laboratories NV   28,475    1,254,039 
Southwestern Energy Co. (a)   535,154    1,097,066 
Ultra Petroleum Corp. (a)   337,188    67,437 
         4,212,195 
           
TOTAL ENERGY        4,212,195 
           
FINANCIALS (1.40%)          
Banking (0.46%)          
TCF Financial Corp.   28,375    1,123,366 
           
Specialty Finance (0.94%)          
Deluxe Corp.   44,206    2,291,197 
           
TOTAL FINANCIALS        3,414,563 
           
HEALTH CARE (11.61%)          
Medical Equipment & Devices Manufacturing (11.61%)          
Align Technology, Inc. (a)   25,576    6,452,569 
Edwards Lifesciences Corp. (a)   39,356    9,381,683 
Intuitive Surgical, Inc. (a)   10,754    5,946,424 
Myriad Genetics, Inc. (a)   102,968    3,466,933 
Varian Medical Systems, Inc. (a)   25,305    3,057,097 
         28,304,706 
           
TOTAL HEALTH CARE        28,304,706 
           
INDUSTRIALS (7.08%)          
Electrical Equipment Manufacturing (1.59%)          
Cognex Corp.   75,310    3,877,712 
           
Machinery Manufacturing (3.01%)          
Graco, Inc.   43,386    1,961,047 
Middleby Corp. (a)   44,439    5,374,897 
         7,335,944 
Manufactured Goods (1.04%)          
Proto Labs, Inc. (a)   26,215    2,542,068 

 

 

8 1-855-DGI-FUND (344-3863) | www.DGIfund.com

 

 

 

The Disciplined Growth Investors Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
INDUSTRIALS (continued)        
Transportation & Logistics (1.44%)        
Landstar System, Inc.   30,964   $3,503,577 
           
TOTAL INDUSTRIALS        17,259,301 
           
TECHNOLOGY (31.54%)          
Design, Manufacturing & Distribution (2.50%)          
Plexus Corp. (a)   82,562    6,104,634 
           
Hardware (10.64%)          
Dolby Laboratories, Inc. , Class A   67,768    4,359,515 
Garmin, Ltd.   49,173    4,609,969 
Plantronics, Inc.   59,136    2,331,141 
Pure Storage, Inc. , Class A(a)   113,655    2,211,726 
Super Micro Computer, Inc. (a)   144,011    2,978,148 
Ubiquiti, Inc.   51,883    6,567,869 
ViaSat, Inc. (a)   41,592    2,863,193 
         25,921,561 
           
Semiconductors (3.80%)          
IPG Photonics Corp. (a)   12,927    1,735,837 
Microchip Technology, Inc.   31,555    2,975,321 
Power Integrations, Inc.   49,825    4,539,556 
         9,250,714 
           
Software (11.17%)          
Akamai Technologies, Inc. (a)   54,292    4,696,258 
Autodesk, Inc. (a)   30,216    4,452,630 
Intuit, Inc.   28,810    7,418,575 
Manhattan Associates, Inc. (a)   20,701    1,551,540 
Open Text Corp.   137,000    5,515,620 
RealPage, Inc. (a)   59,502    3,602,846 
         27,237,469 

 

 

Semi-Annual Report | October 31, 2019 9

 

 

 

The Disciplined Growth Investors Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
TECHNOLOGY (continued)        
Technology Services (3.43%)        
FactSet Research Systems, Inc.   18,888   $4,788,486 
IHS Markit, Ltd. (a)   27,705    1,939,904 
Paychex, Inc.   19,487    1,629,893 
         8,358,283 
           
TOTAL TECHNOLOGY        76,872,661 
           
TOTAL COMMON STOCKS          
(Cost $105,224,871)        169,169,307 

 

   Principal Amount   Value (Note 2) 
CORPORATE BONDS (21.74%)        
COMMUNICATIONS (1.33%)        
Cable & Satellite (0.35%)        
Comcast Corp.        
3.375% 08/15/2025  $810,000    863,657 
           
Entertainment Content (0.32%)          
CBS Corp.          
4.000% 01/15/2026   726,000    778,811 
           
Wireless Telecommunications Services (0.66%)          
AT&T, Inc.          
4.250% 03/01/2027   741,000    814,495 
4.450% 04/01/2024   4,000    4,339 
Verizon Communications, Inc.          
4.125% 03/16/2027   698,000    778,438 
         1,597,272 
           
TOTAL COMMUNICATIONS        3,239,740 
           
CONSUMER DISCRETIONARY (2.34%)          
Airlines (0.32%)          
Southwest Airlines Co.          
3.000% 11/15/2026   756,000    775,874 
           
Automobiles Manufacturing (0.31%)          
General Motors Financial Co., Inc.          
5.250% 03/01/2026   695,000    754,563 

 

 

10 1-855-DGI-FUND (344-3863) | www.DGIfund.com

 

 

 

The Disciplined Growth Investors Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Principal Amount   Value (Note 2) 
CONSUMER DISCRETIONARY (continued)        
Consumer Services (0.32%)        
Cintas Corp. No 2        
3.700% 04/01/2027  $710,000   $777,075 
           
Restaurants (0.33%)          
McDonald's Corp., Series MTN          
6.300% 03/01/2038   604,000    824,184 
           
Retail - Consumer Discretionary (1.06%)          
Advance Auto Parts, Inc.          
4.500% 12/01/2023   685,000    739,203 
Amazon.com, Inc.          
5.200% 12/03/2025   885,000    1,042,117 
Lowe's Cos., Inc.          
3.650% 04/05/2029   742,000    799,089 
         2,580,409 
           
TOTAL CONSUMER DISCRETIONARY        5,712,105 
           
CONSUMER STAPLES (0.32%)          
Mass Merchants (0.32%)          
Costco Wholesale Corp.          
2.750% 05/18/2024   760,000    789,558 
           
TOTAL CONSUMER STAPLES        789,558 
           
CONSUMER, NON-CYCLICAL (0.62%)          
Pharmaceuticals (0.62%)          
AbbVie, Inc.          
4.250% 11/14/2028   695,000    755,988 
CVS Health Corp.          
4.300% 03/25/2028   685,000    744,198 
         1,500,186 
           
TOTAL CONSUMER, NON-CYCLICAL        1,500,186 
           
ENERGY (2.19%)          
Exploration & Production (0.32%)          
Conoco Funding Co.          
7.250% 10/15/2031   551,000    784,064 

 

 

Semi-Annual Report | October 31, 2019 11

 

 

 

The Disciplined Growth Investors Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Principal Amount   Value (Note 2) 
ENERGY (continued)        
Pipeline (1.87%)        
Boardwalk Pipelines LP        
5.950% 06/01/2026  $670,000   $751,656 
Enbridge Energy Partners LP          
4.200% 09/15/2021   4,000    4,137 
5.875% 10/15/2025   643,000    748,627 
Enterprise Products Operating LLC          
3.950% 02/15/2027   710,000    768,379 
MPLX LP          
4.125% 03/01/2027   748,000    786,182 
ONEOK, Inc.          
4.550% 07/15/2028   694,000    755,996 
Williams Cos., Inc.          
3.750% 06/15/2027   718,000    748,185 
         4,563,162 
           
TOTAL ENERGY        5,347,226 
           
FINANCIALS (4.08%)          
Banks (0.95%)          
BB&T Corp., Series MTN          
3.875% 03/19/2029   695,000    757,302 
US Bancorp, Series MTN          
3.100% 04/27/2026   739,000    774,606 
Wells Fargo & Co., Series GMTN          
4.300% 07/22/2027   710,000    777,024 
         2,308,932 
           
Consumer Finance (0.31%)          
American Express Co.          
3.625% 12/05/2024   708,000    751,901 
           
Diversified Banks (0.95%)          
Bank of America Corp., Series L          
4.183% 11/25/2027   715,000    775,097 
Citigroup, Inc.          
4.300% 11/20/2026   720,000    781,306 
JPMorgan Chase & Co.          
4.125% 12/15/2026   690,000    754,331 
         2,310,734 
           
Financial Services (0.61%)          
Morgan Stanley, Series GMTN          
3.700% 10/23/2024   690,000    734,148 

 

 

12 1-855-DGI-FUND (344-3863) | www.DGIfund.com

 

 

 

The Disciplined Growth Investors Fund Portfolio of Investments

 

 October 31, 2019 (Unaudited)

 

   Principal Amount   Value (Note 2) 
FINANCIALS (continued)          
Financial Services (continued)          
Northern Trust Corp.          
3.950% 10/30/2025  $693,000   $758,773 
         1,492,921 
Life Insurance (0.31%)          
Principal Financial Group, Inc.          
3.100% 11/15/2026   726,000    753,881 
           
Property & Casualty Insurance (0.32%)          
American International Group, Inc.          
4.250% 03/15/2029   700,000    775,865 
           
Real Estate (0.63%)          
Simon Property Group LP          
3.250% 11/30/2026   728,000    767,545 
Welltower, Inc.          
4.250% 04/01/2026   712,000    778,728 
         1,546,273 
           
TOTAL FINANCIALS        9,940,507 
           
HEALTH CARE (0.96%)          
Managed Care (0.62%)          
Anthem, Inc.          
3.650% 12/01/2027   731,000    773,919 
UnitedHealth Group, Inc.          
3.750% 07/15/2025   691,000    750,032 
         1,523,951 
           
Pharmaceuticals (0.34%)          
Johnson & Johnson          
5.850% 07/15/2038   572,000    817,638 
           
TOTAL HEALTH CARE        2,341,589 
           
INDUSTRIALS (3.52%)          
Aerospace & Defense (0.92%)          
Lockheed Martin Corp.          
3.100% 01/15/2023   680,000    705,038 
Rockwell Collins, Inc.          
3.500% 03/15/2027   730,000    781,542 

 

 

Semi-Annual Report | October 31, 2019 13

 

 

 

The Disciplined Growth Investors Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Principal Amount   Value (Note 2) 
INDUSTRIALS (continued)        
Aerospace & Defense (continued)        
United Technologies Corp.        
3.950% 08/16/2025  $680,000   $744,967 
         2,231,547 
           
Electrical Equipment Manufacturing (0.32%)          
General Electric Co., Series MTN          
5.875% 01/14/2038   653,000    782,218 
           
Engineering & Construction (0.29%)          
Fluor Corp.          
4.250% 09/15/2028   725,000    718,883 
           
Railroad (0.70%)          
Burlington Northern Santa Fe LLC          
3.000% 03/15/2023   2,000    2,065 
3.400% 09/01/2024   875,000    931,692 
Union Pacific Corp.          
3.250% 08/15/2025   735,000    775,831 
         1,709,588 
           
Transportation & Logistics (0.64%)          
FedEx Corp.          
3.300% 03/15/2027   756,000    782,013 
United Parcel Service, Inc.          
6.200% 01/15/2038   558,000    777,633 
         1,559,646 
           
Waste & Environment Services & Equipment (0.65%)          
Republic Services, Inc.          
3.375% 11/15/2027   735,000    784,962 
Waste Management, Inc.          
3.150% 11/15/2027   745,000    787,309 
         1,572,271 
           
TOTAL INDUSTRIALS        8,574,153 

 

 

14 1-855-DGI-FUND (344-3863) | www.DGIfund.com

 

 

 

The Disciplined Growth Investors Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Principal Amount   Value (Note 2) 
MATERIALS (0.31%)        
Chemicals (0.31%)        
DuPont de Nemours, Inc.        
4.725% 11/15/2028  $666,000   $760,008 
           
TOTAL MATERIALS        760,008 
           
TECHNOLOGY (0.32%)          
Semiconductors (0.32%)          
Analog Devices, Inc.          
3.900% 12/15/2025   711,000    767,885 
           
TOTAL TECHNOLOGY        767,885 
           
UTILITIES (5.75%)          
Utilities (5.75%)          
Ameren Corp.          
2.500% 09/15/2024   690,000    695,497 
American Electric Power Co., Inc.          
3.200% 11/13/2027   731,000    770,107 
Black Hills Corp.          
3.150% 01/15/2027   700,000    710,669 
CenterPoint Energy, Inc.          
3.850% 02/01/2024   700,000    741,945 
CMS Energy Corp.          
3.000% 05/15/2026   760,000    782,612 
Dominion Energy, Inc., Series B          
2.750% 09/15/2022   695,000    707,190 
DTE Energy Co., Series C          
3.500% 06/01/2024   715,000    748,101 
Duke Energy Corp.          
3.950% 10/15/2023   690,000    733,506 
Edison International          
2.400% 09/15/2022   745,000    728,307 
Interstate Power & Light Co.          
3.400% 08/15/2025   723,000    758,632 
ITC Holdings Corp.          
4.050% 07/01/2023   540,000    568,257 
NiSource, Inc.          
3.850% 02/15/2023   695,000    724,790 
Potomac Electric Power Co.          
3.600% 03/15/2024   698,000    741,956 
PPL Capital Funding, Inc.          
3.100% 05/15/2026   820,000    840,870 

 

 

Semi-Annual Report | October 31, 2019 15

 

 

 

The Disciplined Growth Investors Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Principal Amount   Value (Note 2) 
UTILITIES (continued)        
Utilities (continued)        
PSEG Power LLC        
4.300% 11/15/2023  $675,000   $718,326 
Puget Energy, Inc.          
3.650% 05/15/2025   725,000    755,061 
Sempra Energy          
2.875% 10/01/2022   720,000    734,774 
Virginia Electric & Power Co., Series A          
3.800% 04/01/2028   710,000    782,154 
Wisconsin Electric Power Co.          
3.100% 06/01/2025   735,000    768,230 
         14,010,984 
           
TOTAL UTILITIES        14,010,984 
           
TOTAL CORPORATE BONDS         
(Cost $49,954,468)        52,983,941 
           
FOREIGN CORPORATE BONDS (0.64%)          
ENERGY (0.33%)          
Pipeline (0.33%)          
TransCanada PipeLines, Ltd.          
7.250% 08/15/2038   572,000    813,285 
           
TOTAL ENERGY        813,285 
           
FINANCIALS (0.31%)          
Diversified Banks (0.31%)          
Royal Bank of Canada, Series GMTN          
2.550% 07/16/2024   746,000    757,571 
           
TOTAL FINANCIALS        757,571 
           
TOTAL FOREIGN CORPORATE BONDS         
(Cost $1,488,801)        1,570,856 
           
FOREIGN GOVERNMENT BONDS (0.31%)          
Corp Andina de Fomento          
4.375% 06/15/2022   712,000    751,018 
           
TOTAL FOREIGN GOVERNMENT BONDS          
(Cost $742,930)        751,018 

 

 

16 1-855-DGI-FUND (344-3863) | www.DGIfund.com

 

 

The Disciplined Growth Investors Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Principal Amount   Value (Note 2) 
GOVERNMENT & AGENCY OBLIGATIONS (6.82%)        
U.S. Treasury Bonds        
1.500% 08/15/2026  $689,000   $684,452 
2.875% 05/15/2028   2,000,000    2,194,219 
6.500% 11/15/2026   77,000    102,129 
U.S. Treasury Notes          
1.250% 01/31/2020   4,500,000    4,496,748 
1.375% 09/15/2020   1,150,000    1,148,001 
1.375% 01/31/2021   3,550,000    3,541,125 
1.500% 04/15/2020   4,470,000    4,468,865 
           
TOTAL GOVERNMENT & AGENCY OBLIGATIONS          
(Cost $16,375,447)        16,635,539 

 

   Yield   Shares   Value (Note 2) 
SHORT TERM INVESTMENTS (0.89%)               
(0.89%)               
Fidelity Investments Money Market Government Portfolio - Class I   1.736%(b)   2,163,609    2,163,609 
                
TOTAL SHORT TERM INVESTMENTS              
(Cost $2,163,609)             2,163,609 
                
TOTAL INVESTMENTS (99.81%)               
(Cost $175,950,126)            $243,274,270 
                
Other Assets In Excess Of Liabilities (0.19%)             456,266 
                
NET ASSETS (100.00%)            $243,730,536 

 

(a)Non-Income Producing Security.
(b)Represents the 7-day yield.

 

For Fund compliance purposes, the Fund's industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine industry sub-classifications for reporting ease. Industries are shown as a percent of net assets.

 

See Notes to Financial Statements.

 

 

Semi-Annual Report | October 31, 2019 17

 

 

 

The Disciplined Growth Investors Fund Statement of Assets and Liabilities

 

October 31, 2019 (Unaudited)

 

ASSETS    
Investments, at value  $243,274,270 
Receivable for shares sold   25 
Dividends and interest receivable   627,373 
Total assets   243,901,668 
      
LIABILITIES     
Payable for shares redeemed   14,000 
Payable to adviser   157,132 
Total liabilities   171,132 
NET ASSETS  $243,730,536 
      
NET ASSETS CONSIST OF     
Paid-in capital (Note 5)  $169,592,852 
Distributable Earnings   74,137,684 
NET ASSETS  $243,730,536 
      
INVESTMENTS, AT COST  $175,950,126 
      
PRICING OF SHARES     
Net Asset Value, offering and redemption price per share  $21.27 
Shares of beneficial interest outstanding   11,460,248 

 

See Notes to Financial Statements.

 

 

18 1-855-DGI-FUND (344-3863) | www.DGIfund.com

 

 

The Disciplined Growth Investors Fund Statement of Operations

 

 

   For the Six Months Ended October 31, 2019 (Unaudited) 
INVESTMENT INCOME    
Dividends  $705,638 
Foreign taxes withheld   (11,874)
Interest   1,152,822 
Total investment income   1,846,586 
      
EXPENSES     
Investment advisory fees (Note 6)   920,281 
Total expenses   920,281 
NET INVESTMENT INCOME   926,305 
      
REALIZED AND UNREALIZED GAIN/LOSS ON INVESTMENTS     
Net realized gain on investments   3,701,404 
Net change in unrealized depreciation on investments   (2,380,663)
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS   1,320,741 
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS  $2,247,046 

 

See Notes to Financial Statements.

 

 

Semi-Annual Report | October 31, 2019 19

 

 

The Disciplined Growth Investors Fund Statements of Changes in Net Assets

 

 

   For the Six Months Ended October 31, 2019 (Unaudited)   For the Year Ended April 30, 2019 
OPERATIONS        
Net investment income  $926,305   $1,766,931 
Net realized gain   3,701,404    7,977,814 
Net change in unrealized appreciation/(depreciation)   (2,380,663)   21,055,807 
Net increase in net assets resulting from operations   2,247,046    30,800,552 
           
DISTRIBUTIONS (Note 3)          
Total distributions to shareholders   (883,844)   (7,508,119)
Net decrease in net assets from distributions   (883,844)   (7,508,119)
           
CAPITAL SHARE TRANSACTIONS (Note 5)          
Proceeds from sales of shares   5,316,088    20,768,296 
Issued to shareholders in reinvestment of distributions   876,683    7,471,582 
Cost of shares redeemed   (3,996,961)   (15,429,264)
Net increase from capital share transactions   2,195,810    12,810,614 
           
Net increase in net assets   3,559,012    36,103,047 
           
NET ASSETS          
Beginning of period   240,171,524    204,068,477 
End of period  $243,730,536   $240,171,524 
           
OTHER INFORMATION          
Share Transactions          
Issued   258,705    1,042,174 
Issued to shareholders in reinvestment of distributions   42,628    410,272 
Redeemed   (194,439)   (770,890)
Net increase in share transactions   106,894    681,556 

 

See Notes to Financial Statements.

 

 

20 1-855-DGI-FUND (344-3863) | www.DGIfund.com

 

 

Page Intentionally Left Blank

 

 

 

The Disciplined Growth Investors Fund

 

 

NET ASSET VALUE, BEGINNING OF PERIOD 
  
INCOME FROM OPERATIONS 
Net investment income(a) 
Net realized and unrealized gain/(loss) on investments 
Total from investment operations 
  
DISTRIBUTIONS 
From net investment income 
From net realized gain on investments 
Total distributions 
  
REDEMPTION FEES ADDED TO PAID-IN CAPITAL 
INCREASE/(DECREASE) IN NET ASSET VALUE 
NET ASSET VALUE, END OF PERIOD 
  
TOTAL RETURN 
  
RATIOS AND SUPPLEMENTAL DATA 
Net assets, end of period (000's) 
  
RATIOS TO AVERAGE NET ASSETS 
Expenses 
Net investment income 
  
PORTFOLIO TURNOVER RATE 

 

(a)Per share numbers have been calculated using the average shares method.
(b)Not annualized.
(c)In 2018 the Fund's total return consists of a voluntary reimbursement by the advisor for a realized investment loss. Excluding this item, total return would not have been impacted.
(d)Annualized.

 

See Notes to Financial Statements.

 

 

22 1-855-DGI-FUND (344-3863) | www.DGIfund.com

 

 

Financial Highlights

For a share outstanding during the periods presented

 

For the Six Months Ended October 31, 2019 (Unaudited)   For the Year Ended April 30, 2019   For the Year Ended April 30, 2018   For the Year Ended April 30, 2017   For the Year Ended April 30, 2016   For the Year Ended April 30, 2015 
$21.15   $19.12   $18.20   $15.96   $16.75   $15.02 
                            
 0.08    0.16    0.12    0.09    0.09    0.10 
 0.12    2.55    1.64    2.29    (0.44)   1.83 
 0.20    2.71    1.76    2.38    (0.35)   1.93 
                            
 (0.08)   (0.12)   (0.12)   (0.09)   (0.10)   (0.09)
     (0.56)   (0.72)   (0.05)   (0.34)   (0.11)
 (0.08)   (0.68)   (0.84)   (0.14)   (0.44)   (0.20)
                            
                      
 0.12    2.03    0.92    2.24    (0.79)   1.73 
$21.27   $21.15   $19.12   $18.20   $15.96   $16.75 
                            
 0.95%(b)   14.74%   9.75%(c)   14.96%   (2.05%)   12.87%
                            
$243,731   $240,172   $204,068   $159,774   $119,857   $113,342 
                            
 0.78%(d)   0.78%   0.78%   0.78%   0.78%   0.78%
 0.79%(d)   0.80%   0.64%   0.50%   0.59%   0.61%
                            
 10%(b)   22%   18%   16%   13%   14%

 

 

Semi-Annual Report | October 31, 2019 23

 

 

The Disciplined Growth Investors Fund Notes to Financial Statements

 

October 31, 2019 (Unaudited)

 

1. ORGANIZATION

 

 

Financial Investors Trust (the “Trust”), a Delaware statutory trust, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (“1940 Act”). The Trust consists of multiple separate portfolios or series. This semi-annual report describes The Disciplined Growth Investors Fund (the “Fund”). The Fund seeks long-term capital growth and as a secondary objective, modest income with reasonable risk.

 

2. SIGNIFICANT ACCOUNTING POLICIES

 

 

The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. The Fund is considered an investment company for financial reporting purposes under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946. The following is a summary of significant accounting policies consistently followed by the Fund in preparation of its financial statements.

 

Investment Valuation: The Fund generally values its securities based on market prices determined at the close of regular trading on the New York Stock Exchange (“NYSE”), normally 4:00 p.m. Eastern Time, on each day the NYSE is open for trading.

 

For equity securities and mutual funds that are traded on an exchange, the market price is usually the closing sale or official closing price on that exchange. In the case of equity securities not traded on an exchange, or if such closing prices are not otherwise available, the securities are valued at the mean of the most recent bid and ask prices on such day. Redeemable securities issued by open-end registered investment companies are valued at the investment company’s applicable net asset value, with the exception of exchange-traded open-end investment companies, which are priced as equity securities.

 

The market price for debt obligations is generally the price supplied by an independent third-party pricing service approved by the Board of Trustees of the Trust (the “Board” or the “Trustees”), which may use a matrix, formula or other objective method that takes into consideration quotations from dealers, market transactions in comparable investments, market indices and yield curves. If vendors are unable to supply a price, or if the price supplied is deemed to be unreliable, the market price may be determined using quotations received from one or more broker–dealers that make a market in the security. Fixed-income obligations, excluding municipal securities, having a remaining maturity of greater than 60 days, are typically valued at the mean between the evaluated bid and ask prices formulated by an independent pricing service. Corporate Bonds, U.S. Government & Agency, and U.S. Treasury Bonds & Notes are valued using market models that consider trade data, quotations from dealers and active market makers, relevant yield curve and spread data, creditworthiness, trade data or market information on comparable securities, and other relevant security specific information. Publicly traded Foreign Government Debt securities and Foreign Corporate Bonds are

 

 

24 1-855-DGI-FUND (344-3863) | www.DGIfund.com

 

 

The Disciplined Growth Investors Fund Notes to Financial Statements

 

October 31, 2019 (Unaudited)

 

typically traded internationally in the over-the-counter market and are valued at the mean between the bid and asked prices as of the close of business of that market. Mortgage-related and asset-backed securities are valued based on models that consider trade data, prepayment and default projections, benchmark yield and spread data and estimated cash flows of each tranche of the issuer. Publicly traded foreign government debt securities are typically traded internationally in the over-the-counter market and are valued at the mean between the bid and asked prices as of the close of business of that market.

 

When such prices or quotations are not available, or when Disciplined Growth Investors, Inc. (the “Adviser”) believes that they are unreliable, securities may be priced using fair value procedures approved by the Board.

 

Fair Value Measurements: The Fund discloses the classification of its fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.

 

Various inputs are used in determining the value of the Fund’s investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments. These inputs are categorized in the following hierarchy under applicable financial accounting standards:

 

Level 1 –Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that the Fund has the ability to access at the measurement date;

 

Level 2 –Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and

 

Level 3 –Significant unobservable prices or inputs (including the Fund’s own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date.

 

 

Semi-Annual Report | October 31, 2019 25

 

 

The Disciplined Growth Investors Fund Notes to Financial Statements

 

October 31, 2019 (Unaudited)

 

The following is a summary of each input used to value the Fund as of October 31, 2019:

 

Investments in Securities at Value  Level 1 - Unadjusted Quoted Prices   Level 2 - Other Significant Observable Inputs   Level 3 - Significant Unobservable Inputs   Total 
Common Stocks(a)  $169,169,307   $   $   $169,169,307 
Corporate Bonds(a)       52,983,941        52,983,941 
Foreign Corporate Bonds(a)       1,570,856        1,570,856 
Foreign Government Bonds       751,018        751,018 
Government & Agency Obligations       16,635,539        16,635,539 
Short Term Investments   2,163,609            2,163,609 
TOTAL  $171,332,916   $71,941,354   $   $243,274,270 

 

(a)For detailed descriptions of the underlying industries, see the accompanying Portfolio of Investments.

 

For the six months ended October 31, 2019, the Fund did not have any securities that used significant unobservable inputs (Level 3) in determining fair value.

 

Investment Transactions and Investment Income: Investment transactions are accounted for on the date the investments are purchased or sold (trade date). Realized gains and losses from investment transactions are reported on an identified cost basis, which is the same basis the Fund uses for federal income tax purposes. Interest income, which includes accretion of discounts, is accrued and recorded as earned. Dividend income is recognized on the ex-dividend date or for certain foreign securities, as soon as information is available to the Fund.

 

Trust Expenses: Some expenses of the Trust can be directly attributed to the Fund. Expenses which cannot be directly attributed to the Fund are apportioned among all funds in the Trust based on average net assets of each fund.

 

Fund Expenses: Expenses that are specific to the Fund are charged directly to the Fund.

 

Federal Income Taxes: The Fund complies with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies and intends to distribute substantially all of their net taxable income and net capital gains, if any, each year so that it will not be subject to excise tax on undistributed income and gains. The Fund is not subject to income taxes to the extent such distributions are made.

 

As of and during the six months ended October 31, 2019, the Fund did not have a liability for any unrecognized tax benefits. The Fund files U.S. federal, state, and local tax returns as required. The Fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return for federal purposes and four years for most state returns. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.

 

 

26 1-855-DGI-FUND (344-3863) | www.DGIfund.com

 

 

The Disciplined Growth Investors Fund Notes to Financial Statements

 

October 31, 2019 (Unaudited)

 

Distributions to Shareholders: The Fund normally pays dividends, if any, quarterly and distributes capital gains, if any, on an annual basis. Income dividend distributions are derived from dividends and other income the Fund receives from its investments, including short term capital gains. Long term capital gain distributions are derived from gains realized when the Fund sells a security it has owned for more than a year. The Fund may make additional distributions and dividends at other times if the portfolio manager believes doing so may be necessary for the Fund to avoid or reduce taxes.

 

3. TAX BASIS INFORMATION

 

 

Tax Basis of Investments: As of October 31, 2019, the aggregate cost of investments, gross unrealized appreciation/ (depreciation) and net unrealized appreciation for Federal tax purposes was as follows:

 

   The Disciplined Growth Investors Fund 
Gross appreciation (excess of value over tax cost)  $74,661,020 
Gross depreciation (excess of tax cost over value)   (7,336,876)
Net unrealized appreciation  $67,324,144 
Cost of investments for income tax purposes  $175,950,126 

 

Tax Basis of Distributions to Shareholders: The character of distributions made during the year from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or realized gain was recorded by the Fund.

 

The tax character of distributions paid during the year ended April 30, 2019, were as follows:

 

   Ordinary Income   Long-Term Capital Gain 
The Disciplined Growth Investors Fund  $1,871,972   $5,636,147 

 

The amounts and characteristics of tax basis distributions and composition of distributable earnings/(accumulated losses) are finalized at fiscal year-end. Accordingly, tax basis balances have not been determined as of October 31, 2019.

 

 

Semi-Annual Report | October 31, 2019 27

 

 

The Disciplined Growth Investors Fund Notes to Financial Statements

 

October 31, 2019 (Unaudited)

 

4. SECURITIES TRANSACTIONS

 

 

The Fund utilizes transfer in-kind transactions with the intent of saving on equity transaction costs for new shareholders at the institution they transferred from and for the Fund on the addition of assets. During the six months ended October 31, 2019, no assets were transferred in-kind.

 

The cost of purchases and proceeds from sales of securities (excluding short-term securities, transfers-in-kind, and U.S. Government Obligations) during the six months ended October 31, 2019, were as follows:

 

Fund  Purchases of Securities   Proceeds From Sales of Securities 
The Disciplined Growth Investors Fund  $19,426,355   $16,859,291 

 

Investment transactions in U.S. Government Obligations (excluding transfers-in-kind) during the six months ended October 31, 2019 were as follows:

 

Fund  Purchases of Securities   Proceeds From Sales of Securities 
The Disciplined Growth Investors Fund  $4,685,748   $6,092,934 

 

5. SHARES OF BENEFICIAL INTEREST

 

 

The capitalization of the Trust consists of an unlimited number of shares of beneficial interest with no par value per share. Holders of the shares of the Fund of the Trust have one vote for each share held and a proportionate fraction of a vote for each fractional share. All shares issued and outstanding are fully paid and are transferable and redeemable at the option of the shareholder. Purchasers of the shares do not have any obligation to make payments to the Trust or its creditors (other than the purchase price for the shares or make contributions to the Trust or its creditors solely by reason of the purchasers’ ownership of the shares. Shares have no pre-emptive rights.

 

6. MANAGEMENT AND RELATED-PARTY TRANSACTIONS

 

 

The Adviser, subject to the authority of the Board, is responsible for the overall management and administration of the Fund’s business affairs. The Adviser manages the investments of the Fund in accordance with the Fund’s investment objective, policies and limitations and investment guidelines established jointly by the Adviser and the Trustees. Pursuant to the Advisory Agreement, the Fund pays the Adviser a unitary management fee for the services and facilities it provides payable on a monthly basis at the annual rate of 0.78% of the Fund’s average daily net assets. The management fee is paid on a monthly basis.

 

Out of the unitary management fee, the Adviser pays substantially all expenses of the Fund, including the cost of transfer agency, custody, fund administration, bookkeeping and pricing services, legal, audit and other services, except for interest expenses, brokerage expenses, taxes and extraordinary expenses not incurred in the ordinary course of the Fund’s business. Also included are Trustee fees which were $4,375 for the six months ended October 31, 2019.

 

 

28 1-855-DGI-FUND (344-3863) | www.DGIfund.com

 

 

The Disciplined Growth Investors Fund Notes to Financial Statements

 

October 31, 2019 (Unaudited)

 

Fund Administrator Fees and Expenses

ALPS Fund Services, Inc. (“ALPS”) serves as administrator to the Fund. Pursuant to an Administration Agreement, ALPS provides operational services to the Fund including, but not limited to, fund accounting and fund administration and generally assists in the Fund’s operations. Officers of the Trust are employees of ALPS. The Fund’s administration fee is accrued on a daily basis and paid monthly. The Administrator is also reimbursed for certain out-of-pocket expenses. The administrative fee and out-of-pocket expenses are included in the unitary management fee paid to the Adviser.

 

Transfer Agent

ALPS serves as transfer, dividend paying and shareholder servicing agent for the Fund. ALPS receives an annual minimum fee, a fee based upon the number of shareholder accounts, and is also reimbursed for certain out-of-pocket expenses. The fee and out-of-pocket expenses are included in the unitary management fee paid to the Adviser.

 

Compliance Services

ALPS provides services that assist the Trust’s chief compliance officer in monitoring and testing the policies and procedures of the Trust in conjunction with requirements under Rule 38a-1 under the 1940 Act and receives an annual base fee. ALPS is reimbursed for certain out-of-pocket expenses. The fee and out-of-pocket expenses are included in the unitary management fee paid to the Adviser.

 

Principal Financial Officer

ALPS receives an annual fee for providing principal financial officer services to the Fund. The fee is included in the unitary management fee paid to the Adviser.

 

Distributor

ALPS Distributors, Inc. (“ADI” or the “Distributor”) (an affiliate of ALPS) acts as the distributor of the Fund’s shares pursuant to a Distribution Agreement with the Trust. Shares are sold on a continuous basis by ADI as agent for the Fund, and ADI has agreed to use its best efforts to solicit orders for the sale of the Fund’s shares, although it is not obliged to sell any particular amount of shares. ADI is not entitled to any compensation for its services as Distributor. ADI is registered as a broker-dealer with the Securities and Exchange Commission.

 

7. INDEMNIFICATIONS

 

 

Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that may contain general indemnification clauses, which may permit indemnification to the extent permissible under applicable law. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred.

 

8. SUBSEQUENT EVENTS

 

 

Subsequent events after the date of the Statement of Assets and Liabilities have been evaluated through the date the financial statements were issued.

 

 

Semi-Annual Report | October 31, 2019 29

 

 

The Disciplined Growth Investors Fund Additional Information

 

October 31, 2019 (Unaudited)

 

1. FUND HOLDINGS

 

 

The Fund’s portfolio holdings are made available semi-annually in shareholder reports within 60 days after the close of the period for which the report is being made, as required by federal securities laws. The Fund also files monthly portfolio holdings on Form N-PORT on a quarterly basis, with the schedule of portfolio holdings filed on Form N-PORT for the third month of the Fund’s fiscal quarter made publicly available 60 days after the end of the Fund’s fiscal quarter.

 

2. FUND PROXY VOTING POLICIES, PROCEDURES AND SUMMARIES

 

 

The Fund’s policies and procedures used in determining how to vote proxies and information regarding how the Fund voted proxies relating to portfolio securities during the most recent prior 12-month period ending June 30 are available without charge, (1) upon request, by calling (toll-free) 855-DGI-Fund and (2) on the SEC’s website at http://www.sec.gov.

 

 

30 1-855-DGI-FUND (344-3863) | www.DGIfund.com

 

 

The Disciplined Growth Investors Fund Privacy Policy

 

 

WHO WE ARE  
Who is providing this notice? The Disciplined Growth Investors Fund
WHAT WE DO  
How does the Fund protect my personal information? To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings.

 

 

How does the Fund collect my personal information?

We collect your personal information, for example, when you  

 

     open an account

     provide account information or give us your contact information

     make a wire transfer or deposit money

 

 

Why can’t I limit all sharing?

Federal law gives you the right to limit only

 

     sharing for affiliates’ everyday business purposes-information about your creditworthiness

     affiliates from using your information to market to you

     sharing for non-affiliates to market to you

 

State laws and individual companies may give you additional rights to limit sharing.

DEFINITIONS  
Affiliates Companies related by common ownership or control. They can be financial and nonfinancial companies.

 

Non-affiliates 

Companies not related by common ownership or control. They can be financial and nonfinancial companies.

 

     The Fund does not share with non-affiliates so they can market to you.

Joint marketing 

A formal agreement between non-affiliated financial companies that together market financial products or services to you. 

 

     The Fund does not jointly market.

 

 

Semi-Annual Report | October 31, 2019 31

 

 

The Disciplined Growth Investors Fund Privacy Policy

 

 

FACTS WHAT DOES THE FUND DO WITH YOUR PERSONAL INFORMATION?
WHY? Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.
WHAT? The types of personal information we collect and share depend on the product or service you have with us. This information can include:
 

     Social Security number and account transactions

     Account balances and transaction history

     Wire transfer instructions

HOW? All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons the Fund chooses to share; and whether you can limit this sharing.

 

REASONS WE CAN SHARE YOUR PERSONAL INFORMATION DOES THE FUND SHARE: CAN YOU LIMIT THIS SHARING?
For our everyday business purposes –
such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus
Yes No
For our marketing purposes –
to offer our products and services to you
No We do not share.
For joint marketing with other financial companies No We do not share.
For our affiliates’ everyday business purposes –
information about your transactions and experiences
Yes No
For our affiliates’ everyday business purposes –
information about your creditworthiness
No We do not share.
For non-affiliates to market to you No We do not share.

 

 

32 1-855-DGI-FUND (344-3863) | www.DGIfund.com

 

 

The Disciplined Growth Investors Fund Privacy Policy

 

 

OTHER IMPORTANT INFORMATION
California Residents If your account has a California home address, your personal information will not be disclosed to nonaffiliated third parties except as permitted by applicable California law, and we will limit sharing such personal information with our affiliates to comply with California privacy laws that apply to us.
Vermont Residents The State of Vermont requires financial institutions to obtain your consent prior to sharing personal information that they collect about you with affiliated companies and nonaffiliated third parties other than in certain limited circumstances. Except as permitted by law, we will not share personal information we collect about you with nonaffiliated third parties or other affiliated companies unless you provide us with your written consent to share such information.

 

 

Semi-Annual Report | October 31, 2019 33

 

 

 

 

THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS.

THE DISCIPLINED GROWTH INVESTORS FUND IS DISTRIBUTED BY ALPS DISTRIBUTORS, INC.

 

 

 

 

TABLE OF CONTENTS

 

Manager Commentary  
Emerald Growth Fund 1
Emerald Small Cap Value Fund 6
Emerald Insights Fund 12
Emerald Banking and Finance Fund 17
Disclosure of Fund Expenses 23
Schedule of Investments  
Emerald Growth Fund 25
Emerald Small Cap Value Fund 27
Emerald Insights Fund 29
Emerald Banking and Finance Fund 31
Statements of Assets and Liabilities 33
Statements of Operations 34
Statements of Changes in Net Assets  
Emerald Growth Fund 35
Emerald Small Cap Value Fund 37
Emerald Insights Fund 39
Emerald Banking and Finance Fund 41
Financial Highlights  
Emerald Growth Fund 43
Emerald Small Cap Value Fund 47
Emerald Insights Fund 51
Emerald Banking and Finance Fund 55
Notes to Financial Statements 59
Additional Information 67
Privacy Policy 68

 

 

 

Emerald Growth Fund Manager Commentary

 

  October 31, 2019 (Unaudited)

 

October 31, 2019

 

Dear Shareholders:

 

Investment Results:

The performance of the Emerald Growth Fund’s Class A shares (without sales load), for the six months ended October 31, 2019, declined by -4.23%, trailing the Russell 2000® Growth Index which declined by -1.73%.

 

Performance data quoted represents past performance. Past performance does not guarantee future results.

 

The market had a lot to contend with during the course of the last six months as trade tensions with China escalated, bond yields rallied, then retreated and rallied again, the 2yr-10yr yield curve inverted then steepened, downward revisions to global and domestic economic and earnings growth, fluctuating opinions on the pace at which the Federal Reserve (the “Fed”) will lower interest rates and the necessity of the cuts, ongoing social unrest in Hong Kong and last but not least the late September announcement of a Democratic led impeachment inquiry of President Trump.

 

The fall-out of all of the aforementioned was a meaningful late period style rotation which pressured growth stocks and drove meaningful outperformance by value stocks. After lagging throughout the first eight months of 2019, value stocks gained significant ground on their growth counterparts during the third calendar quarter. Value stocks surged driven by a meaningful factor rotation in the marketplace that took place during the month of September in which investors aggressively sold growth/momentum stocks and rotated to areas of the market that have underperformed and were more value in orientation. The shift occurred in tandem with a significant rally in treasury yields which was reflective of what we believe was a string of steadying global economic growth statistics, which appeared to indicate some level of stabilization in the global economic outlook. The abruptness and velocity of the shift was notable in its magnitude particularly during the month of September, with the Russell 2000® Growth underperforming the Russell 2000® Value by 596 basis points (bps) for the month.

 

The Value rotation was particularly painful for the fastest growing companies within the Russell 2000® Growth benchmark. According to a recent report from Steve DeSanctis of Jeffries, the top quartile of companies measured by sales growth declined by -10.09% for the third quarter, underperforming the Russell 2000® Growth Index total return of -4.17%. This underperformance represented a meaningful shift in trend from the first half of calendar 2019 where the top quartile of companies measured by sales growth appreciated by +19.47% on a year-to-date basis through September 30, 2019 and substantially outperformed the aggregate Russell 2000® Growth Index which returned +15.34% for the same period.

 

Investment Analysis:

The headwinds to growth and challenging stock selection within the Emerald Growth Fund led to the portfolio’s relative underperformance to the benchmark for the trailing period. At the sector level, underperformance within the Technology, Producer Durables, Consumer Discretionary and Financial Services sectors offset relative outperformance within the Healthcare, Consumer Staples and Energy sectors.

 

Relative underperformance within the Technology sector was the most significant detractor to return for the period driven by challenging stock selection within the software, electronic entertainment and telecommunications industries. Performance within the Producer Durables, Consumer Discretionary, and Financial Services sectors also detracted from performance for the period driven largely by relative underperformance within the air transport, machinery, back office, specialty retail, and education services industries.

 

Relative underperformance in the aforementioned sectors was partially offset by relative outperformance within the Healthcare, Consumer Staples and Energy sectors. The Healthcare sector was the largest positive contributor to return for the period driven by stock selection within the biotechnology, pharmaceuticals and healthcare services industries. Also contributing was performance within the Consumer Staples and Energy sectors, and specifically, holdings within the foods, energy equipment and alternative energy industries.

 

Exiting October 2019, the portfolio held the largest active exposure to the Consumer Discretionary, Consumer Staples and Financial Services sectors. Thoughts on those sectors and other areas of notable opportunity/ portfolio exposure are highlighted below:

 

The overweight position in the Consumer Discretionary sector is comprised of a diverse subset of companies within the casino & gambling, specialty retail, education services, home building, leisure time, diversified retail, apparel & shoes, and restaurant industries. Emerald Mutual Fund Advisers Trust (“Emerald” or the “Adviser”) believes that even amidst a more moderate consumer spending backdrop, these companies are positioned to benefit from company-specific initiatives to capture market-share and drive growth.

 

Similarly, the overweight to the Consumer Staples sector is comprised largely of a select group of niche high growth opportunities within the foods industry, which are poised to benefit from the addition of new retail outlets, expansion of shelf space within those outlets, market share gains, and further acquisition activity to build-out their individual stable of brands.

 

The Fund also held a relative overweight position to the Financial Services sector. Emerald continues to find opportunities in the sector, specifically within the banking, consumer lending and multi-line insurance industries. Within the banking industry, we believe that lower

 

 

Semi-Annual Report | October 31, 2019 1

 

 

Emerald Growth Fund Manager Commentary

 

  October 31, 2019 (Unaudited)

 

net interest margin and Earnings Per Share (EPS) expectations have already been factored into small capitalization bank stocks with banks in the Russell 2000 trading 23% below their 20 year median on a Price-to-Earnings (P/E) basis and 11% below their 20 year median on a Price to Tangible Book Value (P/TBV) basis. Further, we believe that net interest margins are poised to move higher over next several quarters as loan yields are starting to hit floors, and thus we believe there will be less pressure on earning asset yields in the 2H’19 and 2020. Lastly, our longer-term consolidation theme continues to playout as expected, with 81 deals announced during the third calendar quarter of 2019, which when annualized translates to 5.93% of all Federal Deposit Insurance Corporation (FDIC) insured banks being acquired. In fact, according to an October 1, 2019 industry brief from Raymond James, calendar year 2019 is on track to be the strongest year for mergers and acquisitions (M&A) activity since 1991.

 

The Healthcare sector, while underweight relative to the benchmark, also remains an area of meaningful exposure within the portfolio. At the industry level, the biotechnology industry remains the largest aggregate exposure. We continue to look for innovative therapeutics that can command premium pricing, though we note that competition for small niche patient populations is becoming a challenge. That being said, there continues to be a high-level of successful innovation in the marketplace. There were 14 drugs approved by the U.S. Food and Drug Administration (FDA) during the third quarter bringing the year-to-date total to 27 approvals. As a point of reference, on average the FDA has approved approximately 10.8 drugs per quarter from 2015-2018. Further, we also believe there is a developing opportunity in companies that have launched drugs in the past 2-3 years, as it often takes small companies several quarters to get their commercial organization running efficiently. Rounding out the portfolio’s Healthcare sector exposure are niche opportunities within the healthcare services, medical equipment, medical & dental instruments and pharmaceutical industries. While we continue to see select opportunities within the Healthcare sector, our enthusiasm for the broader sector remains guarded as we expect healthcare policy to remain a key point of debate and source of heightened sector volatility over the course of the 2020 Presidential Election Cycle.

 

Market Outlook:

As we look to the balance of 2019, recession fears appear to be subsiding and confidence increasing as both global manufacturing and global economic growth are showing signs of stabilization. From an earnings perspective, third quarter EPS for the S&P 500 are tracking toward a (-1%) year over year decline. While this is better than the (-3 to -4%) decline expected at the beginning of earnings season, the third quarter decline in earnings marks the first decline since the 2015-2016 manufacturing recession, according to a November 11, 2019 report from Savita Subramanian of Bank of America Merrill Lynch. According to the same report, forward estimates for the fourth quarter have continued to be revised downward as well with EPS for the S&P 500 now expected to be approximately flat, as compared to +3% growth expected on October 1. The market, however, appears to be looking through the weak absolute growth rates and is focused on a reacceleration in global economic growth and earnings growth in 2020. Therefore, in the near-term as long as incoming economic data and progress on trade continue to support the narrative of a 2020 global economic and earnings growth reacceleration, we believe the market is likely to be stable to higher through year-end. With that said, any deviation from that narrative whether from incoming economic data points, trade developments with China or perceived implications from changes in the political landscape (impeachment/2020 election) is likely to result in heightened market volatility.

 

Moving beyond 2019, the pace at which global growth can accelerate however, remains a significant point of uncertainty as the twin headwinds to business investment: China Trade Policy and Brexit remain unresolved. As a consequence, we do not believe the Federal Reserve’s (Fed) efforts to lower rates is likely to result in a meaningful uptick in economic growth until there is visible path to resolution with China. Even then, we question how quickly global growth can accelerate if growth in China continues to stagnate as we believe the lingering impact from the tariff driven shift of manufacturing to locations outside of China is likely to remain a headwind to growth. Under this scenario, and as we look around the globe, we believe the U.S. economy, thanks to the U.S. consumer, will remain the strongest of the developed market economies. Within this backdrop of a slowing but still growing U.S. economy, we believe small capitalization stocks which on a relative P/E of small vs. large capitalization stocks (at 0.9x) trade at a 17-year low to their large capitalization peers (according to a recent report from Jill Carey Hall of Bank of America Merrill Lynch), as well as growth stocks, given the ongoing scarcity of growth in the market, remain particularly well positioned.

 

Emerald as always remains focused on utilizing our fundamental bottom up research process to identify the most attractive growth opportunities within the small capitalization universe.

 

Top Contributors Top Detractors  
Reata Pharmaceuticals ForeScout Technologies Inc.  
Trex Company Green Dot Corporation  
Karyopharm Therapeutics Inc. Pluralsight Inc.  
Churchill Downs Inc. Glu Mobile Inc.  
Tetra Tech Inc. Chegg Inc.  
     
Kenneth G. Mertz II, CFA Stacey L. Sears Joseph W. Garner
Chief Investment Officer Portfolio Manager Portfolio Manager
Portfolio Manager  

 

Emerald Mutual Fund Advisers Trust

 

 

2 www.emeraldmutualfunds.com

 

 

Emerald Growth Fund Manager Commentary

 

October 31, 2019 (Unaudited)

 

Past performance does not guarantee future results. Fund prices fluctuate as the underlying assets have exposure to market fluctuations and other risks, as described in the Fund’s prospectus. Please visit www.emeraldmutualfunds.com to obtain current performance information and for the current prospectus and statement of additional information. This material must be preceded or accompanied by a prospectus. Please read the prospectus carefully before investing.

 

The views of Emerald Mutual Fund Advisers Trust and information discussed in this commentary are as of the date of publication, are subject to change, and may not reflect the writer's current views. The views expressed are those of the author only, and represent an assessment of market conditions at a specific point in time, are opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. Such information does not constitute a recommendation to buy or sell specific securities or investment vehicles. It should not be assumed that any investment will be profitable or will equal the performance of the Fund or any securities or any sectors mentioned in this letter. The subject matter contained in this letter has been derived from several sources believed to be reliable and accurate at the time of compilation. Neither Emerald Mutual Fund Advisers Trust nor the Fund accepts any liability for losses either direct or consequential caused by the use of this information.

 

The Emerald Growth Fund is distributed by ALPS Distributors, Inc.

 

The Fund is subject to investment risks, including possible loss of the principal amount invested and therefore is not suitable for all investors. The Fund may not achieve its objectives.

 

Diversification does not eliminate the risk of experiencing investment losses.

 

The Russell 2000® Growth Index measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 2000® Index companies with higher price-to-value ratios and higher forecasted growth values. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly into the Index.

 

The Russell 2000® Value Index measures the performance of small-cap value segment of the U.S. equity universe. It includes those Russell 2000 companies with lower price-to-book ratios (A ratio used to compare a stock's market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter's book value per share.) and lower forecasted growth values. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly into the Index.

 

A yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality but differing maturity dates. The most frequently reported yield curve compares the three-month, two-year, five-year and 30-year U.S. Treasury debt. This yield curve is used as a benchmark for other debt in the market, such as mortgage rates or bank lending rates, and it is also used to predict changes in economic output and growth.

 

Basis points refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 1/100th of 1%, or 0.01%, or 0.0001, and is used to denote the percentage change in a financial instrument. The relationship between percentage changes and basis points can be summarized as follows: 1% change = 100 basis points and 0.01% = 1 basis point.

 

Earnings per share (EPS) is calculated as a company's profit divided by the outstanding shares of its common stock. The resulting number serves as an indicator of a company's profitability. It is common for a company to report EPS that is adjusted for extraordinary items and potential share dilution.

 

The price-to-earnings ratio (P/E ratio) is the ratio for valuing a company that measures its current share price relative to its per-share earnings (EPS).

 

The price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard, or tangible, book value as reported in the company's balance sheet. The tangible book value number is equal to the company's total book value less than the value of any intangible assets.

 

The S&P 500® Total Return Index is an unmanaged index of 500 common stocks chosen for market size, liquidity and industry group representation. It is a market-value weighted index. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly in the Index.

 

 

Semi-Annual Report | October 31, 2019 3

 

 

Emerald Growth Fund Manager Commentary

 

October 31, 2019 (Unaudited)

 

TOP TEN HOLDINGS

(as a % of Net Assets)*

 

Trex Co., Inc.   2.72%
Chegg, Inc.   2.55%
Reata Pharmaceuticals, Inc.   2.22%
Five Below, Inc.   2.11%
Freshpet, Inc.   1.95%
NeoGenomics, Inc.   1.91%
Planet Fitness, Inc.   1.90%
Churchill Downs, Inc.   1.86%
Ciena Corp.   1.85%
LendingTree, Inc.   1.76%
Top Ten Holdings   20.83%

 

INDUSTRY SECTOR ALLOCATION

(as a % of Net Assets)

 

Health Care   27.11%
Consumer Discretionary   20.90%
Technology   16.35%
Financial Services   12.85%
Producer Durables   10.38%
Consumer Staples   5.14%
Materials & Processing   3.66%
Utilities   2.45%
Energy   0.89%
Cash, Cash Equivalents, & Other Net Assets   0.27%

 

*Holdings are subject to change, and may not reflect the current or future position of the portfolio.

ANNUALIZED TOTAL RETURN (for the period ended October 31, 2019)

 

 

            Since Expense Ratio
  6 Month 1 Year 3 Year 5 Year 10 Year Inception(1) Gross(2) Net(2)
Class A (NAV) -4.23% 6.98% 14.49% 9.70% 14.94% 11.01% 1.01% 1.01%
Class A (MOP) -8.79% 1.89% 12.66% 8.64% 14.37% 10.81% 1.01% 1.01%
Russell 2000® Growth Index(3) -1.73% 6.40% 13.22% 8.38% 13.38% 8.19%    
Class C (NAV) -4.59% 6.28% 13.73% 8.98% 14.18% 6.22% 1.66% 1.66%
Class C (CDSC) -5.54% 5.34% 13.73% 8.98% 14.18% 6.22% 1.66% 1.66%
Russell 2000® Growth Index(3) -1.73% 6.40% 13.22% 8.38% 13.38% 8.19%    
Investor Class -4.29% 6.93% 14.44% 9.66% 10.73% 1.06% 1.06%
Russell 2000® Growth Index(3) -1.73% 6.40% 13.22% 8.38% 13.38% 8.19%    
Institutional Class -4.09% 7.35% 14.85% 10.05% 15.29% 14.22% 0.71% 0.71%
Russell 2000® Growth Index(3) -1.73% 6.40% 13.22% 8.38% 13.38% 8.19%    

 

Performance quoted represents past performance, does not guarantee future results and current performance may be lower or higher than the data quoted. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Performance data current to the most recent month end may be obtained at www.emeraldmutualfunds.com.

 

Performance shown for periods prior to March 16, 2012, reflects the performance of the Forward Growth Fund, a series of Forward Funds (as a result of a reorganization of the Forward Growth Fund into the Emerald Growth Fund).

 

Returns for periods less than 1 year are cumulative.

 

The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

 

Subject to investment risks, including possible loss of the principal amount invested.

 

Maximum Offering Price (MOP) for Class A shares includes the Fund's maximum sales charge of 4.75%. Performance shown at NAV does not include these sales charges and would have been lower had it been taken into account.

 

A Contingent Deferred Sales Charge (CDSC) of 1.00% may apply to Class C shares redeemed within the first 12 months after a purchase.

 

(1)Inception Dates - Class A: 10/01/1992, Class C: 07/01/2000, Institutional Class: 10/21/2008, Investor Class: 05/01/2011
(2)Emerald Mutual Fund Advisers Trust ("Emerald" or the "Adviser") has agreed contractually to waive a portion of its fees and reimburse other expenses until August 31, 2020 in amounts necessary to limit the Fund's operating expenses (exclusive of Acquired Fund Fees and Expenses, brokerage expenses, interest expenses, taxes and extraordinary expense) for Class A, Class C, Institutional Class, and Investor Class shares to an annual rate (as percentage of the Fund's average daily net assets) of 1.29%, 1.94%, 0.99% and 1.34% respectively. The Adviser will be permitted to recover, on a class-by-class basis, expenses it has borne through the agreement described above to the extent that the Fund's expenses in later periods fall below the annual rates set forth in the relevant agreement. The Fund will not be obligated to pay any such deferred fees and expenses more than three years after the year(s) in which the fees and expense were incurred. The Adviser may not discontinue this waiver prior to August 31, 2020, without the approval by the Fund's Board of Trustees. Ratios as of the Prospectus dated August 31, 2019 and may differ from the ratios presented in the Financial Highlights.
(3)The Russell 2000® Growth Index measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 2000® Index companies with higher price-to-value ratios and higher forecasted growth values. The Index is not actively managed and does not reflect any deduction for fees, expenses or taxes. An investor may not invest directly into the Index.

 

 

4 www.emeraldmutualfunds.com

 

 

Emerald Growth Fund Manager Commentary

 

October 31, 2019 (Unaudited)

 

GROWTH OF $10,000 INVESTMENT IN THE FUND (for the period ended October 31, 2019)

 

Comparison of change in value of a $10,000 investment (includes applicable sales loads)

 

 

  

The chart represents historical performance of a hypothetical investment of $10,000 in the Fund since inception. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

 

Investing in the Fund is subject to investment risks, including possible loss of the principal amount invested.

 

 

Semi-Annual Report | October 31, 2019 5

 

 

Emerald Small Cap Value Fund Manager Commentary

 

October 31, 2019 (Unaudited)

 

October 31, 2019

 

Dear Shareholders:

 

Investment Results:

The performance of the Emerald Small Cap Value Fund Investor Class, for the six months ended October 31, 2018, reflected a gain of +2.18% (without sales load) outperforming the Russell 2000® Value Index which was down (-0.53%).

 

Performance data quoted represents past performance. Past performance does not guarantee future results.

 

At the end of August, we saw a shift in investors’ sentiment away from momentum and expensive stocks, and at the same time crowding into low valuation companies. This was a positive for small cap value stocks. However, will it last given weaker domestic economic data, lackluster earnings growth, and geopolitical concerns? (See our thoughts below)

 

Investment Analysis:

The Emerald Small Cap Value Fund (the “Small Cap Value Fund”) (without sales load) outperformed its benchmark for the 6-month period ended October 31, 2019. At the sector level, relative outperformance was driven by stock selection within the Materials & Processing, Energy, Financials, and Healthcare sectors. Relative underperformance was observed within Consumer Technology and Technology sectors, and a relative underweight to the benchmark’s Utilities sector.

 

As we mentioned in the past, banks are very important part of our benchmark and The Small Cap Value Fund’s portfolio. Banks and thrifts represent over 20% of the Russell 2000® Value holdings by weight. With recent changes to Fed policy and its impact on the yield curve, we anticipate headwinds for banks as we move into the third quarter 2019 earnings season. These headwinds will be driven by margin pressure due to the recent movement in London Interbank Offered Rate (LIBOR) rates and the most recent rate cut and the expectation for a third rate cut in December of 2019.

 

We anticipate continued downward pressure on net interest margins as banks report earnings given that the cost of deposits for banks have not moved down as fast as yields on adjustable/variable rate loans have adjusted downward after the most recent rate cuts. In fact, we expect the average net interest margin to be down 2 to 4 bps when banks report. During our most recent meetings with bank management teams, our takeaway has been that while rate cards for Certificates of Deposit (CDs) have moved lower and certainly, money market rates have reduced, these rates did not move by 25 basis points after the Fed cut in July. Our expectation is for cost of deposits to further reduce in 4Q19 and 1Q20 but net interest margin pressure will not subside until 1Q20.

 

While management teams have done a good job reducing expenses via branch closures and renegotiating contracts with core providers as well as reducing their labor force, we believe that expense reductions and share buybacks will not be enough to offset lower loan yields, slowing loan growth and stubborn deposit costs. As a result, our expectations are for an increased number of downward earnings revisions when banks report their third quarter results.

 

However, we believe the lower Net Interest Margin (NIM) and Earnings Per Share (EPS) expectations for 3Q19 are priced into the small cap bank stocks. In fact, we think the sector has been oversold. Banks in the Russell 2000 are trading 23% below their 20-year median on a Price-to-Earnings (P/E) basis and 11% below their 20-year median on a Price to Tangible Book Value (P/TBV) basis. To get back to their median relative P/TBV of past 10 years, small banks would have to write off 36% of their book value(1).

 

Additionally, we see an improving net interest margin scenario on the horizon as loan yields are starting to hit floors and thus we believe there will be less pressure on earning asset yields in the 2H19 and 2020. As a result, we believe that net interest margins for community banks as a group will be down 2-4 bps for the second half of 2019 but will stabilize and rise into the first half of 2020. Therefore, during the quarter, we reduced our exposure to banks, but we are still equal-weight to the industry within our benchmark.

 

We continue to believe that the Small Cap Value Fund’s portfolio is well positioned to benefit from a slowing, yet growing, domestic economy and the eventual turnaround in domestically focused industries. We continue to search for and invest in high quality companies that generate prodigious amounts of free cash flow, as well as financial services enterprises that trade significantly below their terminal value.

 

Market Outlook:

The economic data in the past few months have been telling us that the US economy is slowing down. While the overall economy seems okay, there is a material slowdown in manufacturing. In 3Q19, the Institute of Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI) averaged 49.4 for the quarter, down from 52.2 in 2Q19, and 58.7 for all 2018, the best year since 2004. The September ISM reading of 47.8

 

 

6 www.emeraldmutualfunds.com

 

 

Emerald Small Cap Value Fund Manager Commentary

 

October 31, 2019 (Unaudited)

 

represented the 2nd consecutive monthly decline after 30 months of manufacturing growth since the sector emerged from recession in autumn of 2016, and the weakest report in more than 10 years (since June 2009). ISM metrics have deteriorated every month this year (save March). However, Industrial production and capacity utilization remained at high levels through August 2019, with the data showing little to no moderation from levels in 2Q19. The fear is that the manufacturing sector’s problems, while not as big as it was in the past, will spillover to healthier parts of the economy.

 

There are many other worries on investors’ minds: We are in the 11th year of economic expansion, trade wars, yield curve inversion, slowing global economies (China 3Q19 Gross Domestic Product (GDP) lowest in three decades), Brexit, impeachment, etc. These headwinds have also shaken US CEOs’ confidence, with the latest reading (survey by the Conference Board) plunging into recession territory, thus explaining slowdowns in capital spending. While employment data continues to be strong, with unemployment claims remaining close to a five-decade low, the unemployment rate is a lagging indicator, and can worsen as trade wars protract and/or the US consumer would show signs of spending fatigue.

 

We believe that these concerns about a looming recession (timing uncertain), as well as lackluster earnings growth for small cap companies, are the causes for small caps underperformance by almost 600 bps relative to large caps year to date. Despite a strong performance in September for small cap value stocks, the Russell 2000® Value (R2V) is trailing the Russell 2000® Growth (R2G) by over 300 bps year to date, but growth’s edge over the last 12 months has almost entirely disappeared. Recently, valuations started to matter, and investors were not willing to buy growth at any price. The big question is, can the value rally continue?

 

We say: Value is cheap! On a P/E basis the R2V trades at 14.7X vs. the R2G at 24.8X, whereas, 41% of the companies in the growth benchmark are loss making vs. 27% in value benchmark. The R2V is also historically significantly cheaper relative to the R2G for the following valuation metrics: Price to Cash Flow, Price to Sales, and P/E to Growth(2). In addition, if the Fed continues to lower rates and facilitate easing monetary policy, the dollar should weaken and it would favor longer duration equities more prevalent within small-caps. If there would not be a recession next year, 2020 earnings growth would re-accelerate. 2020 earnings growth for small caps are expected to be 18.5% vs. 9% for large caps, and 18.7% for small cap value vs. 12.6% for small cap growth(3). With broadening earnings growth, the premium for growth companies should diminish.

 

We believe that the backdrop is positive for small cap value stocks to continue to outperform other asset classes. However, we have two concerns about our thesis: 1. Since banks make up over 20% of our benchmark, without their leadership, it would be hard to beat growth. Moreover, with the Fed lowering rates, banks will have tough time showing earnings growth in the near term. However, as stated above, we believe that conditions will improve in 1H20, and currently banks are trading at trough valuations; 2. If plunging rates mean that the global economy is heading into a recession, then large caps will have the upper hand, as investors will shy away from riskier small cap companies.

 

As always, we will continue to seek attractive investment opportunities for our clients by focusing on high-quality companies identified and evaluated by our fundamental research and active portfolio management.

 

Top Contributors Top Detractors
Kirkland Lake Gold Ltd. Whiting Petroleum Corporation
Aaron’s, Inc. Gray Television, Inc.
Reata Pharmaceuticals, Inc. Blucora, Inc.
Rexford Industrial Realty, Inc. PlayAGS, Inc.
Universal Forest Products, Inc. Magnolia Oil & Gas Corp.
   
Sincerely,  
   
Ori Elan Steven E. Russell, Esq.
Vice President Vice President
Portfolio Manager Portfolio Manager

 

Emerald Mutual Fund Advisers Trust

 

 

Semi-Annual Report | October 31, 2019 7

 

 

Emerald Small Cap Value Fund Manager Commentary

 

October 31, 2019 (Unaudited)

 

Past performance does not guarantee future results. Fund prices fluctuate as the underlying assets have exposure to market fluctuations and other risks, as described in the Fund’s prospectus. Please visit www.emeraldmutualfunds.com to obtain current performance information and for the current prospectus and statement of additional information. This material must be preceded or accompanied by a prospectus. Please read the prospectus carefully before investing.

 

The views of Emerald Mutual Fund Advisers Trust and information discussed in this commentary are as of the date of publication, are subject to change, and may not reflect the writer's current views. The views expressed are those of the author only, and represent an assessment of market conditions at a specific point in time, are opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. Such information does not constitute a recommendation to buy or sell specific securities or investment vehicles. It should not be assumed that any investment will be profitable or will equal the performance of the Fund or any securities or any sectors mentioned in this letter. The subject matter contained in this letter has been derived from several sources believed to be reliable and accurate at the time of compilation. Neither Emerald Mutual Fund Advisers Trust nor the Fund accepts any liability for losses either direct or consequential caused by the use of this information.

 

The Emerald Small Cap Value Fund is distributed by ALPS Distributors, Inc.

 

The Fund is subject to investment risks, including possible loss of the principal amount invested and therefore is not suitable for all investors. The Fund may not achieve its objectives.

 

Diversification does not eliminate the risk of experiencing investment losses.

 

The term Russell 2000® Value Index refers to a composite of small cap companies located in the United States that also exhibit a value probability. The Russell 2000® Value is published does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly into the Index.

 

A yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality but differing maturity dates. The most frequently reported yield curve compares the three-month, two-year, five-year and 30-year U.S. Treasury debt. This yield curve is used as a benchmark for other debt in the market, such as mortgage rates or bank lending rates, and it is also used to predict changes in economic output and growth.

 

(1)Raymond James, Institutional Equity Strategy, 04 September, 2019
(2)Jefferies, JEF's Valuation Handbook—Despite Shifts Last Month, No Change in Rel Valuations, 03 October, 2019
(3)Jefferies, JEF's SMID-Cap Strategy—Q3 '19 Recap & Outlook, 02 October, 2019

 

Tangible book value (TBV) is a valuation ratio expressing the price of a security compared to its hard, or tangible, book value as reported in the company's balance sheet. The tangible book value number is equal to the company's total book value less the value of any intangible assets.

 

The London Interbank Offered Rate (LIBOR) is a benchmark interest rate at which major global banks lend to one another in the international interbank market for short-term loans.

 

Net interest margin is a metric that examines how successful a firm's investment decisions are compared to its debt situations.

 

The ISM Manufacturing Index is a widely-watched indicator of recent U.S. economic activity. The index is often referred to as the Purchasing Manager's Index (PMI).

 

 

8 www.emeraldmutualfunds.com

 

 

Emerald Small Cap Value Fund Manager Commentary

 

October 31, 2019 (Unaudited)

 

TOP TEN HOLDINGS

(as a % of Net Assets)*

 

Rexford Industrial Realty, Inc.   2.96%
Aaron's, Inc.   2.73%
Photronics, Inc.   2.53%
Kirkland Lake Gold, Ltd.   2.51%
Universal Forest Products, Inc.   2.50%
Meta Financial Group, Inc.   2.37%
ICF International, Inc.   2.21%
Delek US Holdings, Inc.   2.21%
Cubic Corp.   2.05%
OSI Systems, Inc.   2.01%
Top Ten Holdings   24.08%

 

INDUSTRY SECTOR ALLOCATION

(as a % of Net Assets)

 

Financial Services   41.49%
Producer Durables   16.89%
Consumer Discretionary   12.80%
Technology   11.54%
Materials & Processing   6.28%
Energy   5.79%
Health Care   2.97%
Utilities   1.17%
Cash, Cash Equivalents, & Other Net Assets   1.07%

 

*Holdings are subject to change, and may not reflect the current or future position of the portfolio.

ANNUALIZED TOTAL RETURN (for the period ended October 31, 2019)(1),(2)

 

 

          Since Expense Ratio
  6 Month 1 Year 3 Years 5 Years Inception(2) Gross(3) Net(3)
Class A (NAV) 2.19% 5.76% 8.91% 6.26% 9.33% 2.89% 1.35%
Class A (MOP) -2.61% 0.71% 7.16% 5.23% 8.58% 2.89% 1.35%
Russell 2000® Value Index(4) -0.53% 3.22% 8.60% 6.24% 9.79%    
Class C (NAV) 1.87% 5.13% 8.24% 5.56% 8.62% 3.44% 2.00%
Class C (CDSC) 0.87% 4.35% 8.24% 5.56% 8.62% 3.44% 2.00%
Russell 2000® Value Index(4) -0.53% 3.22% 8.60% 6.24% 9.79%    
Investor Class 2.18% 5.87% 9.11% 6.43% 9.50% 2.83% 1.25%
Russell 2000® Value Index(4) -0.53% 3.22% 8.60% 6.24% 9.79%    
Institutional Class 2.41% 6.18% 9.34% 6.63% 9.72% 2.44% 1.00%
Russell 2000® Value Index(4) -0.53% 3.22% 8.60% 6.24% 9.79%    

 

Performance quoted represents past performance, does not guarantee future results and current performance may be lower or higher than the data quoted. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Performance data current to the most recent month end may be obtained at www.emeraldmutualfunds.com.

 

Returns for periods less than 1 year are cumulative.

 

The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

 

Subject to investment risks, including possible loss of the principal amount invested.

 

Maximum Offering Price (MOP) for Class A shares includes the Fund's maximum sales charge of 4.75%. Performance shown at NAV does not include these sales charges and would have been lower had it been taken into account.

 

A Contingent Deferred Sales Charge (CDSC) of 1.00% may apply to Class C shares redeemed within the first 12 months after a purchase.

 

(1)As of June 26, 2015, the Emerald Small Cap Value Fund was reorganized as a successor to the Elessar Small Cap Value Fund (the Predecessor Fund), a series of Elessar Investment Trust. The performance shown for periods prior to June 26, 2015 reflects the performance of the Predecessor Fund's Institutional Class and Investor Class shares. The Predecessor Fund did not offer Class A or Class C shares. The performance shown for Class A and C shares prior to June 30, 2015 reflect the historical performance of the Predecessor Fund’s Institutional and Investor Shares since inception on October 15, 2012, calculated using the fees and expenses of Class A and C shares, respectively.
(2)Commencement Dates - Class A: 06/30/2015, Class C: 06/30/2015, Institutional Class: 10/15/2012, Investor Class:10/15/2012
(3)Emerald Mutual Fund Advisers Trust (“Emerald” or the “Adviser”) has agreed contractually to waive a portion of its fees and reimburse other expenses until August 31, 2020 in amounts necessary to limit the Fund’s operating expenses (exclusive of Acquired Fund Fees and Expenses, brokerage expenses, interest expenses, taxes and extraordinary expense) for Class A, Class C, Institutional Class, and Investor Class shares to an annual rate (as percentage of the Fund’s average daily net assets) of 1.35%, 2.00%, 1.00% and 1.25% respectively. The Adviser will be permitted to recover, on a class-by-class basis, expenses it has borne through the agreement described above to the extent that the Fund's expenses in later periods fall below the annual rates set forth in the relevant agreement. The Fund will not be obligated to pay any such deferred fees and expenses more than three years after the year(s) in which the fees and expense were incurred. The Adviser may not discontinue this waiver prior to August 31, 2020, without the approval by the Fund's Board of Trustees. Ratios as of the Prospectus dated August 31, 2019 and may differ from the ratios presented in the Financial Highlights.

 

 

Semi-Annual Report | October 31, 2019 9

 

 

Emerald Small Cap Value Fund Manager Commentary

 

October 31, 2019 (Unaudited)

 

(4)The Russell 2000® Value Index measures the performance of small-cap value segment of the U.S. equity universe. It includes those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly into the Index.

 

Important Risks

Investing in smaller companies generally will present greater investment risks, including: greater price volatility, greater sensitivity to changing economic conditions and less liquidity than the securities of larger, more mature companies.

 

 

10 www.emeraldmutualfunds.com

 

 

Emerald Small Cap Value Fund Manager Commentary

 

October 31, 2019 (Unaudited)

 

GROWTH OF $10,000 INVESTMENT IN THE FUND (for the period ended October 31, 2019)

 

Comparison of change in value of a $10,000 investment (includes applicable sales loads)

 

 

 

 

The chart represents historical performance of a hypothetical investment of $10,000 in the Fund since inception. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

 

Investing in the Fund is subject to investment risks, including possible loss of the principal amount invested.

 

Semi-Annual Report | October 31, 2019 11

 

 

Emerald Insights Fund Manager Commentary

 

October 31, 2019 (Unaudited)

 

October 31, 2019

 

Dear Shareholders:

 

Investment Results:

The performance of the Emerald Insights Fund (the “Insights Fund”) Class A Shares (without the sales load) for the six months ended October 31, 2019 reflected a return of +0.26%, trailing the Russel 3000® Growth Index benchmark return of +4.05%. Performance for the period suffered in large part due to the continued flow of funds into low volatility, bond proxy, momentum-type names as well as from the severe underperformance of small capitalization stocks (an area of overweight for the Fund) vs. large caps in the benchmark.

 

Performance data quoted represents past performance. Past performance does not guarantee future results.

 

Investment Analysis:

From an economic perspective, indicators were mixed during the period - with most consumer, employment and housing related measures registering moderate strength, with domestic manufacture, construction and corporate profit measures weakening and then stabilizing as the period progressed. Monetary indicators improved, with M2 growth(1) improving and the Fed cutting rates twice for a total of 50 basis points (bps). The yield curve, as measured by the U.S. 10/1 year note/bill ratio, inverted and then normalized toward the end of the reporting period, although negative rates persisted in many global economies. The ongoing trade war had a negative impact on a number of the Insights Fund holdings over the period, but trade tensions appeared to ease as the reporting cycle progressed.

 

The Insights Fund portfolio continued to have estimated earnings growth rates substantially above the benchmark per our internal estimates (>300bps), while at the same time trading at a discount on Price/Cash Flow, Price/Book and Price/Sales ratios. The Insights Fund had a lower weighted average market capitalization than the benchmark but was still very large, and contained more non-earners than the benchmark in the Technology and Healthcare sectors. This exposure to non-earners as well as our overweight vs. the benchmark to some smaller, high-growth names, detracted from performance, as non-earners and small-caps were some of the indices worst performers.

 

Market Outlook:

After more than two years of low volatility, low growth, bond proxy momentum stock outperformance, the market finally began to witness a sector rotation into growthier, and in some cases more cyclically oriented exposure - an area where Emerald has generally been overweight. Given our portfolio growth/valuation metrics mentioned above, if this growth/valuation disparity narrows, we believe our portfolio is positioned to take advantage of the rotation as well as any movement back to small caps which are tracking toward historic valuation lows vs. large caps.

 

Related to the domestic U.S. economy, based on the current data in front of us, we do not believe a recession is likely in the next one year period. It is widely held that consumer spending constitutes at least 70% of GDP, while manufacturing, which is clearly in a slowdown, makes up just 11% of economic activity. By most measures the consumer is in good shape. Employment is at record levels, the savings rate, consumer sentiment and retail a sales are strong, and monetary policy is stimulative. Mortgage rates, inflation and unemployment are all at extreme lows - hardly an environment for a contraction. As growth managers with a belief that earnings growth drives stock prices, and while earnings growth was weak during the reporting period, we expect growth to re-emerge as 2020 progresses, especially for some of the Fund’s overweight sectors like Energy and Materials. At this point, we are comfortable that, absent an exogenous shock, i.e. Trade, Geopolitics, no recession is in the near-term offing.

 

The Insights Fund’s portfolio remains overweight the Energy, Material and Utilities sectors. We are underweight Technology, Staples, Consumer Discretionary, Financials, and Producer Durables and approximately equal weight Healthcare. We think we have the correct balance of secular and cyclical growers, along with exposure to names that position us defensively should the economy falter, offset by higher-octane holdings in Energy, Materials, Banking, Software, and Security. This barbell approach has served us well in the past. We continue to employ our 10-step research process to identify and analyze high growth companies with strong management teams and differentiated, competitively defensible technologies. We feel confident that over time our process will result in rust-adjusted returns above our benchmark.

 

Top Contributors Top Detractors  
InMode Ltd. Glu Mobile Inc.  
Apple Inc. PlayAGS, Inc.  
Reata Pharmaceuticals, Inc. Class A Chart Industries, Inc.  
Microsoft Corporation Amazon.com, Inc.  
Trex Company, Inc. Malibu Boats Inc Class A  
     
David A. Volpe, CFA Stephen L. Amsterdam Joseph Hovorka
Deputy Chief Investment Officer Associate Portfolio Manager Associate Portfolio Manager
Portfolio Manager    

 

Emerald Mutual Fund Advisers Trust

 

 

12 www.emeraldmutualfunds.com

 

 

Emerald Insights Fund Manager Commentary

 

October 31, 2019 (Unaudited)

 

Past performance does not guarantee future results. Fund prices fluctuate as the underlying assets have exposure to market fluctuations and other risks, as described in the Fund’s prospectus. Please visit www.emeraldmutualfunds.com to obtain current performance information and for the current prospectus and statement of additional information. This material must be preceded or accompanied by a prospectus. Please read the prospectus carefully before investing.

 

The views of Emerald Mutual Fund Advisers Trust and information discussed in this commentary are as of the date of publication, are subject to change, and may not reflect the writer's current views. The views expressed are those of the author only, and represent an assessment of market conditions at a specific point in time, are opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. Such information does not constitute a recommendation to buy or sell specific securities or investment vehicles. It should not be assumed that any investment will be profitable or will equal the performance of the Fund or any securities or any sectors mentioned in this letter. The subject matter contained in this letter has been derived from several sources believed to be reliable and accurate at the time of compilation. Neither Emerald Mutual Fund Advisers Trust nor the Fund accepts any liability for losses either direct or consequential caused by the use of this information.

 

The Emerald Insights Fund is distributed by ALPS Distributors, Inc.

 

The Fund is subject to investment risks, including possible loss of the principal amount invested and therefore is not suitable for all investors. The Fund may not achieve its objectives.

 

Diversification does not eliminate the risk of experiencing investment losses.

 

The Russell 3000® Growth Index is a market capitalization weighted index based on the Russell 3000® index. The Russell 3000® Growth Index includes companies that display signs of above average growth. The index is used to provide a gauge of the performance of growth stocks in the United States. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly into the Index.

 

A yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality but differing maturity dates. The most frequently reported yield curve compares the three-month, two-year, five-year and 30-year U.S. Treasury debt. This yield curve is used as a benchmark for other debt in the market, such as mortgage rates or bank lending rates, and it is also used to predict changes in economic output and growth.

 

The price-to-cash flow (P/CF) ratio is a stock valuation indicator or multiple that measures the value of a stock’s price relative to its operating cash flow per share.

 

The price-to-book ratio compares a company's market value to its book value. The market value of a company is its share price multiplied by the number of outstanding shares. The book value is the net assets of a company.

 

The price-to-sales (P/S) ratio is a valuation ratio that compares a company’s stock price to its revenues. It is an indicator of the value placed on each dollar of a company’s sales or revenues.

 

The U.S. 10 year note/1 year bill ratio is a ratio of normally positive sloping interest rates across maturities of identical credit instruments.

 

(1)M2 is a measure of the money supply that includes cash, checking deposits, and easily convertible near money.

 

 

Semi-Annual Report | October 31, 2019 13

 

 

Emerald Insights Fund Manager Commentary

 

October 31, 2019 (Unaudited)

 

TOP TEN HOLDINGS

(as a % of Net Assets)*

 

Microsoft Corp.   5.39%
Apple, Inc.   4.84%
Amazon.com, Inc.   4.54%
Alphabet, Inc.   3.53%
iShares Expanded Tech-Software Sector ETF   2.57%
Chegg, Inc.   2.30%
Harsco Corp.   2.15%
Trex Co., Inc.   2.04%
Visa, Inc.   1.91%
LendingTree, Inc.   1.88%
Top Ten Holdings   31.15%

 

INDUSTRY SECTOR ALLOCATION

(as a % of Net Assets)

 

Technology   32.58%
Health Care   16.94%
Consumer Discretionary   14.44%
Producer Durables   9.03%
Financial Services   8.31%
Materials & Processing   4.35%
Energy   4.24%
Consumer Staples   3.44%
Utilities   1.60%
Cash, Cash Equivalents, & Other Net Assets   5.07%

 

*Holdings are subject to change, and may not reflect the current or future position of the portfolio.

ANNUALIZED TOTAL RETURN (for the period ended October 31, 2019)

 

 

          Since Expense Ratio
  6 Month 1 Year 3 Year 5 Year Inception(1) Gross(2) Net(2)
Class A (NAV) 0.26% 11.65% 13.54% 7.47% 7.53% 2.19% 1.35%
Class A (MOP) -4.47% 6.37% 11.71% 6.43% 6.53% 2.19% 1.35%
Russell MidCap® Growth Index(3) 2.04% 18.93% 16.81% 10.92% 11.47%    
Russell 3000® Growth Index(4) 4.05% 16.34% 18.50% 13.05% 13.67%    
Class C (NAV) 0.00% 10.92% 12.79% 6.74% 6.79% 2.84% 2.00%
Class C (CDSC) -1.00% 10.06% 12.79% 6.74% 6.79% 2.84% 2.00%
Russell MidCap® Growth Index(3) 2.04% 18.93% 16.81% 10.92% 11.47%    
Russell 3000® Growth Index(4) 4.05% 16.34% 18.50% 13.05% 13.67%    
Investor Class 0.35% 11.71% 13.49% 7.42% 7.46% 2.24% 1.40%
Russell MidCap® Growth Index(3) 2.04% 18.93% 16.81% 10.92% 11.47%    
Russell 3000® Growth Index(4) 4.05% 16.34% 18.50% 13.05% 13.67%    
Institutional Class 0.43% 11.95% 13.85% 7.77% 7.82% 1.89% 1.05%
Russell MidCap® Growth Index(3) 2.04% 18.93% 16.81% 10.92% 11.47%    
Russell 3000® Growth Index(4) 4.05% 16.34% 18.50% 13.05% 13.67%    

 

The performance quoted represents past performance, does not guarantee future results and current performance may be lower or higher than the data quoted. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Performance data current to the most recent month end may be obtained at www.emeraldmutualfunds.com.

 

Returns for periods less than 1 year are cumulative.

 

The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

 

Subject to investment risks, including possible loss of the principal amount invested.

 

Maximum Offering Price (MOP) for Class A shares includes the Fund's maximum sales charge of 4.75%. Performance shown at NAV does not include these sales charges and would have been lower had it been taken into account.

 

A Contingent Deferred Sales Charge (CDSC) of 1.00% may apply to Class C shares redeemed within the first 12 months after a purchase.

 

(1)Inception Date – August 1, 2014.
(2)Emerald Mutual Fund Advisers Trust ("Emerald" or the "Adviser") has agreed contractually to waive a portion of its fees and reimburse other expenses until August 31, 2020 in amounts necessary to limit the Fund's operating expenses (exclusive of Acquired Fund Fees and Expenses, brokerage expenses, interest expenses, taxes and extraordinary expense) for Class A, Class C, Institutional Class, and Investor Class shares to an annual rate (as percentage of the Fund's average daily net assets) of 1.35%, 2.00%, 1.05% and 1.40% respectively. The Adviser will be permitted to recover, on a class-by-class basis, expenses it has borne through the agreement described above to the extent that the Fund's expenses in later periods fall below the annual rates set forth in the relevant agreement. The Fund will not be obligated to pay any such deferred fees and expenses more than three years after the year(s) in which the fees and expense were incurred. The Adviser may not discontinue this waiver prior to August 31, 2020, without the approval by the Fund's Board of Trustees. Ratios as of the Prospectus dated August 31, 2019 and may differ from the ratios presented in the Financial Highlights.
(3)The Russell MidCap® Growth Index measures the performance of the mid-cap growth segment of the U.S. equity universe. It includes those Russell Midcap Index companies with higher price-to-book ratios and higher forecasted growth values. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly into the Index.
(4)The Russell 3000® Growth Index is a market capitalization weighted index based on the Russell 3000® index. The Russell 3000® Growth Index includes companies that display signs of above average growth. The index is used to provide a gauge of the performance of growth stocks in the United States. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly into the Index.

 

 

14 www.emeraldmutualfunds.com

 

 

Emerald Insights Fund Manager Commentary

 

October 31, 2019 (Unaudited)

 

Important Risks

Investing in smaller companies generally will present greater investment risks, including: greater price volatility, greater sensitivity to changing economic conditions and less liquidity than the securities of larger, more mature companies.

 

 

Semi-Annual Report | October 31, 2019 15

 

 

Emerald Insights Fund Manager Commentary

 

October 31, 2019 (Unaudited)

 

GROWTH OF $10,000 INVESTMENT IN THE FUND (for the period ended October 31, 2019)

 

Comparison of change in value of a $10,000 investment (includes applicable sales loads)

 

 

 

The chart represents historical performance of a hypothetical investment of $10,000 in the Fund since inception. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

 

Investing in the Fund is subject to investment risks, including possible loss of the principal amount invested.

 

 

16 www.emeraldmutualfunds.com

 

 

Emerald Banking and Finance Fund Manager Commentary

 

October 31, 2019 (Unaudited)

 

October 31, 2019

 

Dear Shareholders:

 

Investment Results:

The Emerald Banking & Finance Fund (the “Banking & Finance Fund”) outperformed the Russell 2000® Index for the six months ended October 31, 2019, returning 0.52% (without sales charge) vs. (-1.09)% for the Index. During the six month ended October 31, 2019, the Russell 2000® Financial Services Index returned +2.95%; the SNL Small Cap U.S. Bank & Thrift Index gained +2.38% versus a +4.16% gain delivered by the Standard & Poor’s 500 Index and a loss of (-0.53)% for the Russell 2000® Value Index.

 

Performance data quoted represents past performance. Past performance does not guarantee future results.

 

Our April 30, 2019 Annual Report shareholder letter lamented the fact that,

 

Uncertainty continues to rule “bank land.” Will the yield curve invert? Will the Fed raise rates in 2019? Will the Fed cut rates? Will the strong dollar come home to roost? Will there be a trade deal with China? Iran...Venezuela...North Korea, etcetera, etcetera, etcetera.

 

Well in fact the yield curve did invert, although the 2 and 10 year yield curve only inverted for a matter of hours and in our opinion the curve needs to be inverted for several weeks before it becomes a reliable predictor of a recession. The Federal Reserve (Fed) did not raise rates but instead has cut rates by 25 basis points three times in 2019 nearly reversing all of the four increases in 2018, with the last cut lowering the range to 1.5% from 1.75%. There still has been no trade deal with China and there have been so many reports of trade deal- on and trade deal- off we fear this uncertainty will last well into 2020. Meanwhile investors seemingly have become numb to the headlines about global risks such as Iran, Venezuela, North Korea and now Syria as we close out 2019.

 

With that said, banks continue to grow earnings, loans and deposits while credit quality remains impressive despite the “one-off” concerns investors have endured related to shared national credits in the energy patch as well as quick service food franchises and healthcare. Despite the ongoing health and profitability of the banking sector, banks continue to trade at attractive valuations. Market sentiment was tempered as the three Fed interest rate decreases resulted in an almost immediate reduction in loan yields while deposit pricing typically lags Fed rate decreases by six months thus leading to a market sure to experience lower net interest margins in the second half of 2019 and so far this has played out as expected.

 

With that said the volatile ride continues as the financial sector continues its rebound from the dismal Q4’18 performance with Class A shares (HSSAX) having rebounded 18.57% from the bottom of December 24, 2018 through October 31, 2019 (without sales charge).

 

Investment Analysis:

Profitability at U.S. banks with less than $10 billion in assets continued their upward ascend despite fears of a slowing economy and the Fed cutting rates, according to S&P Global. According to the S&P Global Data Dispatch report, the median return on average equity among the 247 publicly traded banks and thrifts in the analysis was 10.69% for the quarter, slightly above the 10.68% posted in the third quarter of 2018. However, the group’s median net interest margin fell to 3.63% from 3.72% year-over-year.

 

To help offset the net interest margin compression management teams have successfully reduced expenses as they renegotiate contracts, rationalize the banks’ branch footprints and reduce wage expense. In the third quarter, dozens of banks reported a year-over-year decline in full-time employee numbers and we believe headcount and other expense shrinkage will continue to be a long term trend. With that said, the median efficiency ratio improved in Q3 to 59.60%, down from 60.38% in the year ago quarter.

 

Ten years after the “financial crisis” and credit quality remains, dare we say “pristine?” No, we won’t go that far we will say it remains “good.” The median net charge-off ratio for banks with less than $10 billion in assets increased 1 basis point year-over-year to 0.05%. As previously mentioned, we have seen some “one-off” credit deterioration in shared national credits focused in the energy, healthcare and franchise restaurant sectors but nothing that has proven to be a systemic issue. Moving forward we have been focusing our attention to agriculture loans. We believe loss of income resulting from the continuing trade war between the U.S. and China is forcing more farmers to tap the resilient value of their land to keep them going through next year’s planting season. According to a survey of lenders released at the American Bankers Association’s annual agricultural banking conference, more than 46% of bankers expect an increase in loans secured by farmland over the next year, compared with 37% who saw an uptick in this kind of financing over the previous 12 months. The findings suggest that many farmers are burning through cash they had put aside to weather unprofitable harvests from lower commodity prices. The equity stored in the value of their farmland is considered the last financial resort for some to cover operating expenses. So far, loans secured by farmland are holding up well, but bankers are growing increasingly concerned that credit quality will weaken if the trade war drags on much longer. Roughly three out of four of the agriculture lenders surveyed by the ABA and Farmer Mac said that farmers’ ability to repay loans is their top concern.

 

 

Semi-Annual Report | October 31, 2019 17

 

 

Emerald Banking and Finance Fund Manager Commentary

 

October 31, 2019 (Unaudited)

 

Median year-over-year loan growth has slowed as loans grew 7.4% in Q3 down from 10.7% loan growth in the third quarter of 2018. Deposit growth also slowed to a median 7.8% year-over-year, down from 8.7% in the third quarter of 2018.

 

Market Outlook:

In our last shareholder letter we stated that, “the set-up for the next 12 months for the bank sector is the ‘haziest’ we have seen in some time.” We believe that the picture has cleared somewhat since then and feel incrementally more positive. While the trade war with China has not come to a conclusion we believe an agreement will be reached prior to the 2020 election, likely in the first half of 2020 and bank stocks will likely react positively. Additionally, we believe that several ongoing themes will support the bank stocks such as deregulation, solid credit quality, continued earnings growth, and merger activity.

 

We believe our long term consolidation theme will continue to play out as a tailwind for the sector. In Q3’19, 81 acquisitions were announced which when annualized translates to 5.93% of all FDIC insured banks being acquired. That 5.93% annualized rate was above the 5.13% reported in Q2’19 and the 4.73% reported in Q3’18. In fact, 2019 is on track to be the strongest year for M&A activity since 1991 and Q3’19 was the strongest third quarter in the data set. (Source: Raymond James Industry Brief - October 1st 2019)

 

Additionally, we see an improving net interest margin scenario on the horizon as loan yields are starting to hit floors and thus we believe there will be less pressure on earning asset yields in the 2H’19 and 2020. As a result, we believe that net interest margin for community banks as a group will be down 2-4 basis points in the 2H’19 but will stabilize and rise into the first half of 2020.

 

We believe that as in the fourth quarter of 2018, the expectations for lower net interest margins and slower earnings growth was priced into community stocks and the pull back in community bank valuations was overdone. In fact at the beginning of the month of September, banks in the Russell 2000 were trading 23% below their 20 year median on a price-to-earnings (P/E) basis and 11% below their 20 year median on a P/TBV basis. At those valuations, to get back to the relative P/TBV of the past 10 years, small banks would have to write off 31% of their book value. (Source: Raymond James; Equity Strategy September 4th 2019) We believe that community banks were oversold in the fourth quarter of 2018 leading to a rebound in performance in HSSAX of 18.57% from its low in 2018 seen on December 24th 2018. We believe the community bank sector is currently repricing from the oversold levels experienced in September of 2019. In fact, HSSAX has rebounded 6.86% from its low in the month of September 2019 (September 3, 2019).

 

We believe that bank valuations will continue to rebound to the median 10 year historical valuations at a minimum. Our focus remains on seeking companies capable of producing above average organic growth, relatively stable net interest margin moving forward, and improving earnings power aided by lower efficiency ratios, with potential for accretive mergers and acquisition activity, as we deploy Emerald’s 10-step research process.

 

Top Contributors Top Detractors  
Meta Financial Group, Inc. Merchants Bancorp  
Kirkland Lake Gold Ltd. Green Dot Corporation Class A  
Stewardship Financial Corporation Bank of N.T. Butterfield & Son Limited  
Amerant Bancorp Inc. Class A SVB Financial Group  
MoneyGram International, Inc. CBTX, Inc.  
     
Kenneth G. Mertz II, CFA Steven E. Russell, Esq.  
Chief Investment Officer Portfolio Manager  
Portfolio Manager    

 

Emerald Mutual Fund Advisers Trust

 

 

18 www.emeraldmutualfunds.com

 

 

Emerald Banking and Finance Fund Manager Commentary

 

October 31, 2019 (Unaudited)

 

Past performance does not guarantee future results. Fund prices fluctuate as the underlying assets have exposure to market fluctuations and other risks, as described in the Fund’s prospectus. Please visit www.emeraldmutualfunds.com to obtain current performance information and for the current prospectus and statement of additional information. This material must be preceded or accompanied by a prospectus. Please read the prospectus carefully before investing.

 

The views of Emerald Mutual Fund Advisers Trust and information discussed in this commentary are as of the date of publication, are subject to change, and may not reflect the writer's current views. The views expressed are those of the author only, and represent an assessment of market conditions at a specific point in time, are opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. Such information does not constitute a recommendation to buy or sell specific securities or investment vehicles. It should not be assumed that any investment will be profitable or will equal the performance of the Fund or any securities or any sectors mentioned in this letter. The subject matter contained in this letter has been derived from several sources believed to be reliable and accurate at the time of compilation. Neither Emerald Mutual Fund Advisers Trust nor the Fund accepts any liability for losses either direct or consequential caused by the use of this information.

 

The Emerald Banking and Finance Fund is distributed by ALPS Distributors, Inc.

 

The Fund is subject to investment risks, including possible loss of the principal amount invested and therefore is not suitable for all investors. The Fund may not achieve its objectives.

 

Diversification does not eliminate the risk of experiencing investment losses.

 

The Russell 2000® Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000® Index is a subset of the Russell 3000® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership. The Index is not actively managed and does not reflect any deduction of fees, expenses or taxes. An investor may not invest directly into the Index.

 

The Russell 2000® Financial Services Index – is comprised of the smallest financial services companies in the Russell 3000 Index. The Index is not actively managed and does not reflect any deductions for fees, expense, or taxes. An investor may not invest directly in the Index.

 

SNL Small Cap Bank & Thrift Index: Includes all publicly traded (NYSE, NYSE Amex, NASDAQ, OTC BB, Pink Sheets) Banks and Thrifts in SNL's coverage universe with $250M to $1B Total Common Market Capitalization as of most recent pricing data. Source: SNL Financial, data as of April 30, 2019.

 

The Standard & Poor’s 500® Index is an unmanaged index of 500 common stocks chosen for the market size, liquidity and industry group representation. It is a market-value weighted index. The Index is not actively managed and does not reflect any deduction for fees, expenses or taxes. An investor may not invest directly into the Index

 

The Russell 2000® Value Index measures the performance of small-cap value segment of the U.S. equity universe. It includes those Russell 2000 companies with lower price-to-book ratios (A ratio used to compare a stock's market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter's book value per share.) and lower forecasted growth values. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly into the Index.

 

A yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality but differing maturity dates. The most frequently reported yield curve compares the three-month, two-year, five-year and 30-year U.S. Treasury debt. This yield curve is used as a benchmark for other debt in the market, such as mortgage rates or bank lending rates, and it is also used to predict changes in economic output and growth.

 

 

Semi-Annual Report | October 31, 2019 19

 

 

Emerald Banking and Finance Fund Manager Commentary

 

October 31, 2019 (Unaudited)

 

TOP TEN HOLDINGS

(as a % of Net Assets)*

 

Triumph Bancorp, Inc.   3.87%
Meta Financial Group, Inc.   3.70%
Bancorp, Inc.   3.68%
Metropolitan Bank Holding Corp.   3.64%
Bank7 Corp.   3.34%
Esquire Financial Holdings, Inc.   3.16%
ServisFirst Bancshares, Inc.   3.16%
Amerant Bancorp, Inc.   3.15%
Innovative Industrial Properties, Inc.   2.47%
Kirkland Lake Gold, Ltd.   2.42%
Top Ten Holdings   32.59%

 

INDUSTRY SECTOR ALLOCATION

(as a % of Net Assets)

 

Banks: Diversified   67.12%
Banks: Savings, Thrift & Mortgage Lending   9.39%
Consumer Lending   3.60%
Equity Reit - Industrial   3.20%
Diversified Financial Services   2.82%
Mining   2.58%
Computer Services Software & Systems   2.29%
Asset Management & Custodian   1.97%
Insurance: Property-Casualty   1.56%
Commercial Finance & Mortgage Companies   1.50%
Insurance: Multi-Line   0.93%
Equity Reit - Office   0.86%
Financial Data & Systems   0.65%
Advertising Agencies   0.53%
Equity Reit - Diversified   0.24%
Cash, Cash Equivalents, & Other Net Assets   0.76%

 

*Holdings are subject to change, and may not reflect the current or future position of the portfolio.

ANNUALIZED TOTAL RETURN (for the period ended October 31, 2019)

 

 

  6       10 Since Expense Ratio
  Month 1 Year 3 Year 5 Year Year Inception(1) Gross(2) Net(2)
Class A (NAV) 0.52% -2.21% 9.45% 9.15% 12.36% 8.53% 1.42% 1.42%
Class A (MOP) -4.25% -6.86% 7.69% 8.09% 11.82% 8.30% 1.42% 1.42%
Russell 2000® Index(3) -1.09% 4.91% 10.96% 7.37% 12.27% 7.97%    
Russell 2000® Financial Services Index(4) 2.95% 9.48% 10.39% 8.71% 12.62% 8.52%    
Class C (NAV) 0.14% -2.88% 8.73% 8.44% 11.65% 8.51% 2.07% 2.07%
Class C (CDSC) -0.86% -3.62% 8.73% 8.44% 11.65% 8.51% 2.07% 2.07%
Russell 2000® Index(3) -1.09% 4.91% 10.96% 7.37% 12.27% 7.97%    
Russell 2000® Financial Services Index(4) 2.95% 9.48% 10.39% 8.71% 12.62% 8.52%    
Investor Class 0.48% -2.24% 9.48% 9.17% 11.04% 1.47% 1.47%
Russell 2000® Index(3) -1.09% 4.91% 10.96% 7.37% 12.27% 7.97%    
Russell 2000® Financial Services Index(4) 2.95% 9.48% 10.39% 8.71% 12.62% 8.52%    
Institutional Class 0.65% -1.88% 9.82% 9.51% 13.26% 1.12% 1.12%
Russell 2000® Index(3) -1.09% 4.91% 10.96% 7.37% 12.27% 7.97%    
Russell 2000® Financial Services Index(4) 2.95% 9.48% 10.39% 8.71% 12.62% 8.52%    

 

The performance quoted represents past performance, does not guarantee future results and current performance may be lower or higher than the data quoted. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Performance data current to the most recent month end may be obtained at www.emeraldmutualfunds.com.

 

Performance shown for periods prior to March 16, 2012, reflects the performance of the Forward Banking & Finance Fund, a series of Forward Funds (as a result of a reorganization of the Forward Banking & Finance Fund into the Emerald Banking & Finance Fund).

 

Returns for periods less than 1 year are cumulative.

 

The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

 

Subject to investment risks, including possible loss of the principal amount invested.

 

Maximum Offering Price (MOP) for Class A shares includes the Fund's maximum sales charge of 4.75%. Performance shown at NAV does not include these sales charges and would have been lower had it been taken into account.

 

A Contingent Deferred Sales Charge (CDSC) of 1.00% may apply to Class C shares redeemed within the first 12 months after a purchase.

 

(1)Inception Dates - Class A: 02/18/1997, Class C: 07/01/2000, Institutional Class: 03/19/2012, Investor Class: 03/16/2010

(2)Emerald Mutual Fund Advisers Trust ("Emerald" or the "Adviser") has agreed contractually to waive a portion of its fees and reimburse other expenses until August 31, 2020 in amounts necessary to limit the Fund's operating expenses (exclusive of Acquired Fund Fees and Expenses, brokerage expenses, interest expenses, taxes and extraordinary expense) for Class A, Class C, Institutional Class, and Investor Class shares to an annual rate (as percentage of the Fund's average daily net assets) of 1.84%, 2.49%, 1.54% and 1.89% respectively. The Adviser will be permitted to recover, on a class-by-class basis, expenses it has borne through the agreement described above to the extent

 

 

20 www.emeraldmutualfunds.com

 

 

Emerald Banking and Finance Fund Manager Commentary

 

October 31, 2019 (Unaudited)

 

that the Fund's expenses in later periods fall below the annual rates set forth in the relevant agreement. The Fund will not be obligated to pay any such deferred fees and expenses more than three years after the year(s) in which the fees and expense were incurred. The Adviser may not discontinue this waiver prior to August 31, 2020, without the approval by the Fund's Board of Trustees. Ratios as of the Prospectus dated August 31, 2019 and may differ from the ratios presented in the Financial Highlights.

(3)The Russell 2000® Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000® is a subset of the Russell 3000® Index representing approximately 8% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership. The index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly into an index.

(4)The Russell 2000® Financial Services Index is an additional index, and is comprised of the smallest financial services companies in the Russell 3000 Index. The Index is not actively managed and does not reflect any deductions for fees, expense, or taxes. An investor may not invest directly in the Index.

 

Important Risks

A fund that concentrates in a particular industry will involve a greater degree of risk than a fund with a more diversified portfolio. Investing in smaller companies generally will present greater investment risks, including: greater price volatility, greater sensitivity to changing economic conditions and less liquidity than the securities of larger, more mature companies.

 

 

Semi-Annual Report | October 31, 2019 21

 

 

Emerald Banking and Finance Fund Manager Commentary

 

October 31, 2019 (Unaudited)

 

GROWTH OF $10,000 INVESTMENT IN THE FUND (for the period ended October 31, 2019)

 

Comparison of change in value of a $10,000 investment (includes applicable sales loads)

 

 

 

The chart represents historical performance of a hypothetical investment of $10,000 in the Fund since inception. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

 

Investing in the Fund is subject to investment risks, including possible loss of the principal amount invested.

 

 

22 www.emeraldmutualfunds.com

 

 

Emerald Funds Disclosure of Fund Expenses

 

October 31, 2019 (Unaudited)

 

As a shareholder of the Funds, you incur two types of costs: (1) transaction costs, including applicable sales charges (loads); and (2) ongoing costs, including management fees, distribution and service (12b-1) fees, shareholder services fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the (six-month) period and held for the entire period May 1, 2019 through October 31, 2019.

 

Actual Expenses

The first line for each share class of the Fund in the table below provides information about actual account values and actual expenses. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the applicable line under the heading titled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

 

Hypothetical Example For Comparison Purposes

The second line for each share class of each Fund in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other mutual funds.

 

Please note that the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees or exchange fees. Therefore, the second line for each share class of the Fund within the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If these transactional costs were included, your costs would have been higher.

 

   Beginning
Account Value
05/01/19
  Ending
Account Value
10/31/19
  Expense
Ratio(a)
  Expense Paid
During Period
5/01/19 - 10/31/19(b)
Emerald Growth Fund            
Class A            
Actual  $1,000.00   $957.70    1.01%  $4.97 
Hypothetical (5% return before expenses)  $1,000.00   $1,020.06    1.01%  $5.13 
Class C                    
Actual  $1,000.00   $954.10    1.67%  $8.20 
Hypothetical (5% return before expenses)  $1,000.00   $1,016.74    1.67%  $8.47 
Institutional Class                    
Actual  $1,000.00   $959.10    0.69%  $3.40 
Hypothetical (5% return before expenses)  $1,000.00   $1,021.67    0.69%  $3.51 
Investor Class                    
Actual  $1,000.00   $957.10    1.05%  $5.17 
Hypothetical (5% return before expenses)  $1,000.00   $1,019.86    1.05%  $5.33 
                     
Emerald Small Cap Value Fund                    
Class A                    
Actual  $1,000.00   $1,021.90    1.35%  $6.86 
Hypothetical (5% return before expenses)  $1,000.00   $1,018.35    1.35%  $6.85 
Class C                    
Actual  $1,000.00   $1,018.70    2.00%  $10.15 
Hypothetical (5% return before expenses)  $1,000.00   $1,015.08    2.00%  $10.13 
Institutional Class                    
Actual  $1,000.00   $1,024.10    1.00%  $5.09 
Hypothetical (5% return before expenses)  $1,000.00   $1,020.11    1.00%  $5.08 
Investor Class                    
Actual  $1,000.00   $1,021.80    1.25%  $6.35 
Hypothetical (5% return before expenses)  $1,000.00   $1,018.85    1.25%  $6.34 

 

 

Semi-Annual Report | October 31, 2019 23

 

 

Emerald Funds Disclosure of Fund Expenses

 

October 31, 2019 (Unaudited)

 

   Beginning
Account Value
05/01/19
   Ending
Account Value
10/31/19
   Expense
Ratio(a)
   Expense Paid
During Period
5/01/19 - 10/31/19(b)
 
Emerald Insights Fund                
Class A                    
Actual  $1,000.00   $1,002.60    1.35%  $6.80 
Hypothetical (5% return before expenses)  $1,000.00   $1,018.35    1.35%  $6.85 
Class C                    
Actual  $1,000.00   $1,000.00    2.00%  $10.05 
Hypothetical (5% return before expenses)  $1,000.00   $1,015.08    2.00%  $10.13 
Institutional Class                    
Actual  $1,000.00   $1,004.30    1.05%  $5.29 
Hypothetical (5% return before expenses)  $1,000.00   $1,019.86    1.05%  $5.33 
Investor Class                    
Actual  $1,000.00   $1,003.50    1.40%  $7.05 
Hypothetical (5% return before expenses)  $1,000.00   $1,018.10    1.40%  $7.10 
                     
Emerald Banking and Finance Fund                    
Class A                    
Actual  $1,000.00   $1,005.20    1.49%  $7.51 
Hypothetical (5% return before expenses)  $1,000.00   $1,017.65    1.49%  $7.56 
Class C                    
Actual  $1,000.00   $1,001.40    2.13%  $10.72 
Hypothetical (5% return before expenses)  $1,000.00   $1,014.43    2.13%  $10.79 
Institutional Class                    
Actual  $1,000.00   $1,006.50    1.13%  $5.70 
Hypothetical (5% return before expenses)  $1,000.00   $1,019.46    1.13%  $5.74 
Investor Class                    
Actual  $1,000.00   $1,004.80    1.50%  $7.56 
Hypothetical (5% return before expenses)  $1,000.00   $1,017.60    1.50%  $7.61 

 

(a)The Fund's expense ratios have been based on the Fund's most recent fiscal half-year expenses.
(b)Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184)/366 (to reflect the half-year period).

 

 

24 www.emeraldmutualfunds.com

 

 

Emerald Growth Fund Schedule of Investments

 

October 31, 2019 (Unaudited)

 

Shares      Value (Note 2) 
COMMON STOCKS: 99.73%    
Consumer Discretionary: 20.90%    
 768,349   American Eagle Outfitters, Inc.  $11,817,208 
 1,044,667   Chegg, Inc.(a)   32,029,490 
 164,826   Children's Place, Inc.   13,500,898 
 179,706   Churchill Downs, Inc.   23,359,983 
 202,299   Chuy's Holdings, Inc.(a)   4,930,027 
 487,123   Del Taco Restaurants, Inc.(a)   3,719,184 
 211,882   Five Below, Inc.(a)   26,508,557 
 191,070   Jack in the Box, Inc.   16,053,701 
 249,281   Marcus Corp.   8,999,044 
 202,187   Meritage Homes Corp.(a)   14,575,661 
 575,849   Noodles & Co.(a)   3,069,275 
 246,016   Ollie's Bargain Outlet Holdings, Inc.(a)   15,715,502 
 374,933   Planet Fitness, Inc., Class A(a)   23,868,235 
 523,272   SeaWorld Entertainment, Inc.(a)   13,824,846 
 430,101   Steven Madden, Ltd.   17,711,559 
 381,200   Taylor Morrison Home Corp., Class A(a)   9,549,060 
 370,375   Tilly's, Inc., Class A   3,800,047 
 250,360   Urban Outfitters, Inc.(a)   7,185,332 
 370,606   YETI Holdings, Inc.(a)   12,344,886 
         262,562,495 
           
Consumer Staples: 5.14%     
 945,701   BellRing Brands, Inc., Class A(a)   16,521,397 
 7,184   Boston Beer Co., Inc., Class A(a)   2,690,121 
 469,817   Freshpet, Inc.(a)   24,552,636 
 847,045   Simply Good Foods Co.(a)   20,786,484 
         64,550,638 
           
Energy: 0.89%
 478,011   New Fortress Energy LLC(a)   8,240,910 
 120,420   Viper Energy Partners LP   2,898,509 
         11,139,419 
           
Financial Services: 12.85%    
 79,593   Agree Realty Corp.   6,269,541 
 159,120   Ameris Bancorp   6,818,292 
 266,841   Axos Financial, Inc.(a)   7,751,731 
 480,456   BRP Group, Inc., Class A(a)   7,783,387 
 81,892   Bryn Mawr Bank Corp.   3,120,904 
 27,043   CenterState Bank Corp.   685,811 
 55,159   CNB Financial Corp.   1,724,822 
 525,752   CrossFirst Bankshares, Inc.(a)   7,029,304 
 122,232   eHealth, Inc.(a)   8,438,897 
 1,011,100   Everi Holdings, Inc.(a)   10,171,666 
 146,592   Evo Payments, Inc., Class A(a)   4,167,611 
 122,502   First Choice Bancorp   2,739,145 
 57,497   Industrial Logistics Properties Trust   1,221,236 
 61,453   LendingTree, Inc.(a)   22,113,862 
 280,509   Moelis & Co., Class A   10,008,561 
 134,758   Monmouth Real Estate Investment Corp.   2,032,151 
Shares      Value (Note 2) 
Financial Services (continued)   
 460,737   OceanFirst Financial Corp.  $11,025,436 
 448,774   Pacific Premier Bancorp, Inc.   15,148,366 
 173,409   Palomar Holdings, Inc.(a)   7,829,416 
 238,038   Pinnacle Financial Partners, Inc.   14,001,395 
 73,480   QTS Realty Trust, Inc., REIT, Class A   3,937,793 
 237,840   STAG Industrial, Inc.   7,382,554 
         161,401,881 
           
Health Care: 27.11%    
 320,427   Adamas Pharmaceuticals, Inc.(a)   1,316,955 
 127,224   Addus HomeCare Corp.(a)   10,713,533 
 359,176   Aimmune Therapeutics, Inc.(a)   9,992,276 
 466,137   Applied Therapeutics, Inc.(a)   7,695,922 
 152,451   Arena Pharmaceuticals, Inc.(a)   7,426,650 
 853,513   ArQule, Inc.(a)   8,629,016 
 269,960   AtriCure, Inc.(a)   7,178,236 
 390,128   Avrobio, Inc.(a)   5,664,659 
 1,178,244   BioDelivery Sciences International, Inc.(a)   6,810,250 
 276,010   Biohaven Pharmaceutical Holding Co., Ltd.(a)   12,674,379 
 655,619   Catalyst Pharmaceuticals, Inc.(a)   3,101,078 
 370,320   Collegium Pharmaceutical, Inc.(a)   4,443,840 
 452,950   Dicerna Pharmaceuticals, Inc.(a)   7,469,146 
 500,000   Exicure, Inc.(a)   1,305,000 
 102,057   Haemonetics Corp.(a)   12,321,342 
 725,347   Horizon Therapeutics PLC(a)   20,969,782 
 371,540   Insmed, Inc.(a)   6,906,929 
 216,038   Integer Holdings Corp.(a)   16,729,983 
 871,986   Karyopharm Therapeutics, Inc.(a)   10,202,236 
 88,947   LivaNova PLC(a)   6,291,221 
 45,150   Livongo Health, Inc.(a)   974,789 
 129,603   Merit Medical Systems, Inc.(a)   2,676,950 
 78,141   Mirati Therapeutics, Inc.(a)   7,359,319 
 1,046,059   NeoGenomics, Inc.(a)   23,986,133 
 2,035,891   Oncocyte Corp.(a)   3,461,015 
 163,963   Oyster Point Pharma, Inc.(a)   3,079,225 
 215,634   PTC Therapeutics, Inc.(a)   8,817,274 
 427,963   Radius Health, Inc.(a)   12,171,268 
 135,072   Reata Pharmaceuticals, Inc., Class A(a)   27,835,638 
 460,203   Replimune Group, Inc.(a)   7,823,451 
 178,978   Tabula Rasa HealthCare, Inc.(a)   9,117,139 
 326,979   Tandem Diabetes Care, Inc.(a)   20,135,367 
 207,824   Teladoc Health, Inc.(a)   15,919,318 
 120,197   TransMedics Group, Inc.(a)   2,156,334 
 340,850   Twist Bioscience Corp.(a)   8,119,047 
 183,015   Varex Imaging Corp.(a)   5,492,280 
 342,591   Vericel Corp.(a)   5,436,919 
 180,523   Zogenix, Inc.(a)   8,060,352 
         340,464,251 
           
Materials & Processing: 3.66%    
 91,725   Carpenter Technology Corp.   4,496,360 

 

 

Semi-Annual Report | October 31, 2019 25

 

 

 

Emerald Growth Fund Schedule of Investments

 

October 31, 2019 (Unaudited)

 

Shares      Value (Note 2) 
Materials & Processing (continued) 
 439,013   PQ Group Holdings, Inc.(a)  $7,230,544 
 389,399   Trex Co., Inc.(a)   34,224,278 
         45,951,182 
           
Producer Durables: 10.38%    
 229,970   Aerojet Rocketdyne Holdings, Inc.(a)   9,941,603 
 200,000   Air Transport Services Group, Inc.(a)   4,182,000 
 60,125   Allied Motion Technologies, Inc.   2,276,333 
 202,888   Chart Industries, Inc.(a)   11,895,324 
 399,593   Harsco Corp.(a)   8,099,750 
 127,607   Insperity, Inc.   13,479,127 
 190,337   Knoll, Inc.   5,089,611 
 1,161,756   Kratos Defense & Security Solutions, Inc.(a)   21,933,953 
 155,734   NV5 Global, Inc.(a)   11,279,814 
 215,416   Tetra Tech, Inc.   18,842,438 
 319,956   TriNet Group, Inc.(a)   16,954,468 
 415,770   Tutor Perini Corp.(a)   6,431,962 
         130,406,383 
           
Technology: 16.35%    
 187,500   Alarm.com Holdings, Inc.(a)   9,262,500 
 626,079   Ciena Corp.(a)   23,240,052 
 66,150   EverQuote, Inc., Class A(a)   1,342,845 
 340,571   ForeScout Technologies, Inc.(a)   10,475,964 
 1,516,391   Glu Mobile, Inc.(a)   8,992,199 
 482,910   Leaf Group, Ltd.(a)   1,434,243 
 21,573   Lumentum Holdings, Inc.(a)   1,351,764 
 28,184   MACOM Technology Solutions Holdings, Inc.(a)   640,904 
 244,392   Mercury Systems, Inc.(a)   18,001,915 
 362,060   Model N, Inc.(a)   10,785,767 
 66,765   New Relic, Inc.(a)   4,276,966 
 156,015   Perficient, Inc.(a)   6,115,788 
 432,018   PlayAGS, Inc.(a)   4,985,488 
 756,598   Pluralsight, Inc., Class A(a)   13,679,292 
 73,550   Proofpoint, Inc.(a)   8,485,463 
 109,616   Q2 Holdings, Inc.(a)   7,836,448 
 419,395   Rapid7, Inc.(a)   21,007,495 
 384,466   SailPoint Technologies Holding, Inc.(a)   7,443,262 
 488,358   SVMK, Inc.(a)   8,985,787 
 696,516   USA Technologies, Inc.(a)   4,513,424 
 292,454   Varonis Systems, Inc.(a)   20,925,084 
 623,956   Viavi Solutions, Inc.(a)   9,958,338 
 84,687   Vocera Communications, Inc.(a)   1,686,965 
         205,427,953 
           
Utilities: 2.45%    
 14,982   Boingo Wireless, Inc.(a)   141,880 
 205,625   Cogent Communications Holdings, Inc.   12,057,850 
 155,697   Shenandoah Telecommunications Co.   5,007,215 

  

Shares      Value (Note 2) 
Utilities (continued)    
 1,387,075   Vonage Holdings Corp.(a)  $13,551,723 
         30,758,668 
           
     Total Common Stocks     
     (Cost $914,688,269)   1,252,662,870 
           
SHORT TERM INVESTMENTS: 0.24%    
 2,985,193   Dreyfus Government Cash Management Fund - Institutional Class 1.741% (7-Day Yield)   2,985,193 
           
     Total Short Term Investments     
    (Cost $2,985,193)   2,985,193 
           
Total Investments: 99.97%     
(Cost $917,673,462)   1,255,648,063 
           
Other Assets In Excess Of Liabilities: 0.03%   417,389 
Net Assets: 100.00%  $1,256,065,452 

 

(a)Non-income producing security.

 

For Fund compliance purposes, the Fund's industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine industry sub-classifications for reporting ease. Industries are shown as a percentage of net assets.

 

See Notes to Financial Statements.

 

 

26 www.emeraldmutualfunds.com

 

 

 

Emerald Small Cap Value Fund Schedule of Investments

 

October 31, 2019 (Unaudited)

 

Shares      Value (Note 2) 
COMMON STOCKS: 98.93%
Consumer Discretionary: 12.80%     
 1,138   Aaron's, Inc.  $85,270 
 477   Children's Place, Inc.   39,071 
 1,200   Eldorado Resorts, Inc.(a)   53,724 
 6,759   GameStop Corp., Class A   36,769 
 3,699   Gray Television, Inc.(a)   60,701 
 2,825   Meritor, Inc.(a)   62,235 
 4,678   Party City Holdco, Inc.(a)   26,290 
 4,906   ZAGG, Inc.(a)   36,157 
         400,217 
           
Energy: 5.79%     
 1,310   Arcosa, Inc.   50,317 
 1,728   Delek US Holdings, Inc.   69,033 
 3,936   Magnolia Oil & Gas Corp., Class A(a)   38,652 
 962   Viper Energy Partners LP   23,155 
         181,157 
           
Financial Services: 41.49%     
 2,582   Amalgamated Bank, Class A   47,018 
 3,392   Amerant Bancorp, Inc., Class B(a)   48,166 
 727   Americold Realty Trust   29,145 
 1,239   Ameris Bancorp   53,091 
 1,814   Ares Management Corp., Class A   53,640 
 1,669   Axos Financial, Inc.(a)   48,484 
 4,384   Bancorp, Inc.(a)   47,786 
 3,074   Bank7 Corp.   55,947 
 2,635   Baycom Corp.(a)   55,704 
 3,242   Bridgewater Bancshares, Inc.(a)   40,817 
 2,910   BRP Group, Inc., Class A(a)   47,142 
 1,529   CNB Financial Corp.   47,812 
 1,407   Easterly Government Properties, Inc.   31,404 
 1,102   Employers Holdings, Inc.   46,659 
 258   Euronet Worldwide, Inc.(a)   36,138 
 503   First Merchants Corp.   19,894 
 2,879   Heritage Insurance Holdings, Inc.   38,348 
 703   Innovative Industrial Properties, Inc.   53,428 
 1,433   Investar Holding Corp.   35,553 
 2,336   Meta Financial Group, Inc.   73,958 
 976   Moelis & Co., Class A   34,824 
 1,563   People's Utah Bancorp   45,483 
 2,177   Plymouth Industrial REIT, Inc.   41,058 
 1,924   Rexford Industrial Realty, Inc.   92,526 
 1,234   Synovus Financial Corp.   41,796 
 2,193   TPG RE Finance Trust, Inc.   44,364 
 1,169   Triumph Bancorp, Inc.(a)   37,934 
 988   Western Alliance Bancorp   48,738 
         1,296,857 
           
Health Care: 2.97%     
 336   Biohaven Pharmaceutical Holding Co., Ltd.(a)   15,429 
 1,478   Karyopharm Therapeutics, Inc.(a)   17,293 
Shares      Value (Note 2) 
Health Care (continued)
 2,006   Varex Imaging Corp.(a)  $60,200 
         92,922 
           
Materials & Processing: 6.28%     
 1,673   Kirkland Lake Gold, Ltd.   78,547 
 1,237   Koppers Holdings, Inc.(a)   39,708 
 1,551   Universal Forest Products, Inc.   78,108 
         196,363 
           
Producer Durables: 16.89%     
 1,073   Air Lease Corp.   47,191 
 1,071   Allied Motion Technologies, Inc.   40,548 
 1,539   Columbus McKinnon Corp.   57,743 
 868   Cubic Corp.   64,006 
 1,028   Douglas Dynamics, Inc.   48,141 
 2,535   Harsco Corp.(a)   51,384 
 1,525   Hillenbrand, Inc.   46,955 
 807   ICF International, Inc.   69,152 
 633   OSI Systems, Inc.(a)   62,819 
 906   SP Plus Corp.(a)   40,018 
         527,957 
           
Technology: 11.54%     
 1,749   Blucora, Inc.(a)   37,831 
 2,280   Cerence, Inc.(a)   35,340 
 1,255   Ebix, Inc.   53,501 
 1,924   Kulicke & Soffa Industries, Inc.   45,685 
 417   MKS Instruments, Inc.   45,128 
 6,690   Photronics, Inc.(a)   78,941 
 2,623   PlayAGS, Inc.(a)   30,269 
 3,130   Turtle Beach Corp.(a)   34,055 
         360,750 
           
Utilities: 1.17%     
 3,732   Vonage Holdings Corp.(a)   36,462 
           
     Total Common Stocks     
    

(Cost $2,563,831)

   3,092,685 
           
SHORT TERM INVESTMENTS: 0.42%     
 13,247   Dreyfus Government Cash Management Fund - Institutional Class 1.741% (7-Day Yield)   13,247 
           
     Total Short Term Investments     
    

(Cost $13,247)

   13,247 
           
Total Investments: 99.35%     

(Cost $2,577,078)

   3,105,932 

 

Semi-Annual Report | October 31, 2019 27

 

 

 

Emerald Small Cap Value Fund Schedule of Investments

 

October 31, 2019 (Unaudited)

 

  Shares  Value (Note 2) 
Utilities (continued)     
      
Other Assets In Excess Of Liabilities: 0.65%   20,193 
Net Assets: 100.00%  $3,126,125 

 

(a)Non-income producing security.

 

For Fund compliance purposes, the Fund's industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine industry sub-classifications for reporting ease. Industries are shown as a percentage of net assets.

 

See Notes to Financial Statements.

 

 

28 www.emeraldmutualfunds.com

 

 

 

Emerald Insights Fund Schedule of Investments

 

October 31, 2019 (Unaudited)

 

Shares      Value (Note 2) 
COMMON STOCKS: 92.36%
Consumer Discretionary: 14.44%
 302   Amazon.com, Inc.(a)  $536,551 
 599   Burlington Stores, Inc.(a)   115,110 
 8,864   Chegg, Inc.(a)   271,770 
 953   Churchill Downs, Inc.   123,880 
 3,937   Cinemark Holdings, Inc.   144,094 
 930   Dine Brands Global, Inc.   68,030 
 479   Home Depot, Inc.   112,364 
 1,076   Lennar Corp., Class A   64,130 
 616   Polaris, Inc.   60,768 
 7,928   SeaWorld Entertainment, Inc.(a)   209,458 
         1,706,155 
           
Consumer Staples: 3.44%     
 8,644   BellRing Brands, Inc., Class A(a)   151,010 
 428   Boston Beer Co., Inc., Class A(a)   160,269 
 1,830   Freshpet, Inc.(a)   95,636 
         406,915 
           
Energy: 4.24%     
 2,041   Diamondback Energy, Inc.   175,036 
 5,577   Magnolia Oil & Gas Corp., Class A(a)   54,766 
 4,134   Oil States International, Inc.(a)   58,992 
 3,248   Parsley Energy, Inc., Class A   51,351 
 6,808   Tellurian, Inc.(a)   54,260 
 4,445   Viper Energy Partners LP   106,991 
         501,396 
           
Financial Services: 8.31%     
 1,029   Blackstone Group, Inc., Class A   54,702 
 831   Citigroup, Inc.   59,716 
 562   Euronet Worldwide, Inc.(a)   78,719 
 640   Fiserv, Inc.(a)   67,930 
 989   JPMorgan Chase & Co.   123,546 
 617   LendingTree, Inc.(a)   222,027 
 1,262   Visa, Inc., Class A   225,721 
 3,041   Western Alliance Bancorp   150,013 
         982,374 
           
Health Care: 16.94%     
 1,116   Abbott Laboratories   93,309 
 1,002   Alnylam Pharmaceuticals, Inc.(a)   86,914 
 3,284   Applied Therapeutics, Inc.(a)   54,219 
 2,747   Avrobio, Inc.(a)   39,886 
 9,556   BioDelivery Sciences International, Inc.(a)   55,234 
 1,922   Biohaven Pharmaceutical Holding Co., Ltd.(a)   88,258 
 1,592   BioTelemetry, Inc.(a)   62,661 
 11,833   Catalyst Pharmaceuticals, Inc.(a)   55,970 
 3,930   Dicerna Pharmaceuticals, Inc.(a)   64,806 
 2,406   Horizon Therapeutics PLC(a)   69,558 
 6,977   Inmode, Ltd.(a)   214,613 
 8,199   Insmed, Inc.(a)   152,419 
Shares      Value (Note 2) 
Health Care (continued)     
 2,055   Integer Holdings Corp.(a)  $159,139 
 659   Merck & Co., Inc.   57,109 
 1,845   Merit Medical Systems, Inc.(a)   38,109 
 1,490   Oyster Point Pharma, Inc.(a)   27,982 
 2,115   PTC Therapeutics, Inc.(a)   86,482 
 379   Reata Pharmaceuticals, Inc., Class A(a)   78,104 
 1,311   Sarepta Therapeutics, Inc.(a)   108,892 
 4,850   SmileDirectClub, Inc.(a)   56,721 
 2,229   Tabula Rasa HealthCare, Inc.(a)   113,545 
 1,168   Tandem Diabetes Care, Inc.(a)   71,925 
 924   Teladoc Health, Inc.(a)   70,778 
 669   Veeva Systems, Inc., Class A(a)   94,884 
         2,001,517 
           
Materials & Processing: 4.35%     
 7,862   Cleveland-Cliffs, Inc.   56,842 
 2,816   GMS, Inc.(a)   84,368 
 1,308   Scotts Miracle-Gro Co.   131,310 
 2,747   Trex Co., Inc.(a)   241,434 
         513,954 
           
Producer Durables: 9.03%     
 2,627   Chart Industries, Inc.(a)   154,021 
 275   CoStar Group, Inc.(a)   151,118 
 12,524   Harsco Corp.(a)   253,861 
 6,372   Kratos Defense & Security Solutions, Inc.(a)   120,303 
 217   Lockheed Martin Corp.   81,740 
 797   NV5 Global, Inc.(a)   57,727 
 1,498   OSI Systems, Inc.(a)   148,662 
 956   TopBuild Corp.(a)   99,357 
         1,066,789 
           
Technology: 30.01%     
 102   Adobe, Inc.(a)   28,349 
 331   Alphabet, Inc., Class A(a)   416,663 
 1,876   Anaplan, Inc.(a)   88,547 
 2,300   Apple, Inc.   572,148 
 3,336   Dropbox, Inc., Class A(a)   66,120 
 640   Facebook, Inc., Class A(a)   122,656 
 722   Fortinet, Inc.(a)   58,886 
 14,389   Glu Mobile, Inc.(a)   85,327 
 1,621   Knowles Corp.(a)   34,981 
 912   Lumentum Holdings, Inc.(a)   57,146 
 4,444   Microsoft Corp.   637,136 
 7,878   MobileIron, Inc.(a)   49,316 
 1,086   NVIDIA Corp.   218,308 
 474   Palo Alto Networks, Inc.(a)   107,783 
 4,916   PlayAGS, Inc.(a)   56,731 
 3,118   Pluralsight, Inc., Class A(a)   56,374 
 844   Proofpoint, Inc.(a)   97,372 
 7,682   Pure Storage, Inc., Class A(a)   149,492 
 3,233   Rapid7, Inc.(a)   161,941 

 

 

Semi-Annual Report | October 31, 2019 29

 

 

Emerald Insights Fund Schedule of Investments

 

October 31, 2019 (Unaudited)

 

Shares      Value (Note 2) 
Technology (continued)     
 1,382   RealPage, Inc.(a)  $83,680 
 362   salesforce.com, Inc.(a)   56,649 
 288   ServiceNow, Inc.(a)   71,211 
 924   Take-Two Interactive Software, Inc.(a)   111,203 
 2,202   Varonis Systems, Inc.(a)   157,553 
         3,545,572 
           
Utilities: 1.60%     
 2,292   Aqua America, Inc.   103,896 
 8,713   Vonage Holdings Corp.(a)   85,126 
         189,022 
     Total Common Stocks     
    

(Cost $8,861,189)

   10,913,694 
           
EXCHANGE TRADED FUNDS: 2.57%     
Technology: 2.57%     
 1,411   iShares Expanded Tech-Software Sector ETF   303,252 
           
     Total Exchange Traded Funds     
    

(Cost $303,743)

   303,252 

 

SHORT TERM INVESTMENTS: 5.07%     
 599,193   Dreyfus Government Cash Management Fund - Institutional Class 1.741% (7-Day Yield)   599,193 
           
     Total Short Term Investments      
    

(Cost $599,193)

   599,193 

 

Total Investments: 100.00%     

(Cost $9,764,125)

   11,816,139 
      
Other Assets In Excess Of Liabilities: 0.00%   159 
Net Assets: 100.00%  $11,816,298 

 

(a)Non-income producing security.

 

For Fund compliance purposes, the Fund's industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine industry sub-classifications for reporting ease. Industries are shown as a percentage of net assets.

 

See Notes to Financial Statements.

 

 

30 www.emeraldmutualfunds.com

 

 

Emerald Banking and Finance Fund Schedule of Investments

 

October 31, 2019 (Unaudited)

 

Shares      Value
(Note 2)
 
COMMON STOCKS: 99.24%    
Consumer Discretionary: 0.53%    
Advertising Agencies: 0.53%     
 111,560   QuinStreet, Inc.(a)  $1,431,315 
           
Financial Services: 93.84%     
Asset Management & Custodian: 1.97%     
 243,486   Focus Financial Partners, Inc., Class A(a)   5,327,474 
           
Banks: Diversified: 67.12%     
 70,605   1st Source Corp.   3,613,564 
 19,953   Amalgamated Bank, Class A   363,344 
 65,534   Amerant Bancorp, Inc., Class B(a)   930,583 
 433,450   Amerant Bancorp, Inc., Class A(a)   8,517,292 
 69,178   American Business Bank(a)   2,358,970 
 80,890   Ameris Bancorp   3,466,136 
 913,279   Bancorp, Inc.(a)   9,954,741 
 316,977   Bank of Commerce Holdings   3,556,482 
 189,583   Bank of NT Butterfield & Son, Ltd.   6,246,760 
 495,424   Bank7 Corp.   9,016,717 
 241,551   Baycom Corp.(a)   5,106,388 
 224,440   Business First Bancshares, Inc.   5,485,314 
 175,146   CBTX, Inc.   5,017,933 
 107,000   Centric Financial Corp.(a)   1,025,060 
 118,810   Civista Bancshares, Inc.   2,670,849 
 110,003   CNB Financial Corp.   3,439,794 
 195,152   Coastal Financial Corp.(a)   2,937,038 
 26,842   Community Heritage Financial, Inc.   546,235 
 135,870   CrossFirst Bankshares, Inc.(a)   1,816,582 
 15,353   Enterprise Financial Services Corp.   672,461 
 351,830   Esquire Financial Holdings, Inc.(a)   8,549,469 
 104,051   First Mid Bancshares, Inc.   3,631,380 
 66,405   FS Bancorp, Inc.   3,801,686 
 169,547   FVCBankcorp, Inc.(a)   2,919,599 
 200,000   Guaranty Bancshares, Inc.   6,332,000 
 211,862   Heritage Commerce Corp.   2,546,581 
 103,116   Investar Holding Corp.   2,558,308 
 107,636   Live Oak Bancshares, Inc.   1,953,593 
 53   Mechanics Bank/Walnut Creek CA(a)   1,636,401 
 339,799   Merchants Bancorp   5,548,918 
 229,276   Metropolitan Bank Holding Corp.(a)   9,845,111 
 27,451   Opus Bank   680,510 
 150,710   Origin Bancorp, Inc.   5,303,485 
 127,472   People's Utah Bancorp   3,709,435 
 19,234   Potomac Bancshares, Inc.   265,622 
 279,177   Professional Holding Corp.(a)   5,164,774 
 254,684   Seacoast Commerce Banc Holdings   4,635,249 
 243,750   ServisFirst Bancshares, Inc.   8,531,250 
 71,032   Southern First Bancshares, Inc.(a)   2,863,300 
 307,100   Spirit of Texas Bancshares, Inc.(a)   6,418,390 
 14,044   TriState Capital Holdings, Inc.(a)   324,697 
 321,966   Triumph Bancorp, Inc.(a)   10,447,797 
 168,750   Unity Bancorp, Inc.   3,685,500 
Shares      Value
(Note 2)
 
Banks: Diversified (continued)     
 135,517   Veritex Holdings, Inc.  $3,336,429 
         181,431,727 
           
Banks: Savings, Thrift & Mortgage Lending: 9.39%     
 22,330   Axos Financial, Inc.(a)   648,686 
 52,558   Heritage Financial Corp.   1,446,922 
 262,103   Malvern Bancorp, Inc.(a)   5,865,865 
 315,532   Meta Financial Group, Inc.   9,989,743 
 561,684   Sterling Bancorp, Inc.   5,442,718 
 250,000   University Bancorp, Inc./Ann Arbor MI(a)   2,000,000 
         25,393,934 
           
Commercial Finance & Mortgage Companies: 1.50%     
 1,222,440   ECN Capital Corp.   4,047,132 
           
Consumer Lending: 3.60%     
 184,318   Curo Group Holdings Corp.(a)   2,578,609 
 1,970   LendingTree, Inc.(a)   708,905 
 624,263   MoneyGram International, Inc.(a)   2,472,081 
 99,650   OneMain Holdings, Inc.   3,986,000 
         9,745,595 
           
Diversified Financial Services: 2.82%     
 176,340   Cannae Holdings, Inc.(a)   5,149,128 
 184,790   Repay Holdings Corp.(a)   2,481,730 
         7,630,858 
           
Equity REIT: Diversified: 0.24%     
 23,330   Acadia Realty Trust   652,773 
           
Equity REIT: Industrial: 3.20%     
 17,700   Americold Realty Trust   709,593 
 88,000   Innovative Industrial Properties, Inc.   6,688,000 
 29,490   Plymouth Industrial REIT, Inc.   556,181 
 14,710   Rexford Industrial Realty, Inc.   707,404 
         8,661,178 
           
Equity REIT: Office: 0.86%     
 30,610   Easterly Government Properties, Inc.   683,215 
 97,846   Postal Realty Trust, Inc., Class A   1,643,813 
         2,327,028 
           
Financial Data & Systems: 0.65%     
 34,921   CPI Card Group, Inc.(a)   63,906 
 110,410   International Money Express, Inc.(a)   1,691,481 
         1,755,387 
           
Insurance: Multi-Line: 0.93%     
 86,740   BRP Group, Inc., Class A(a)   1,405,188 
 30,648   James River Group Holdings, Ltd.   1,097,505 
         2,502,693 
           
Insurance: Property-Casualty: 1.56%     
 94,901   Kingstone Cos., Inc.   765,851 
 

Semi-Annual Report | October 31, 2019 31

 

 

Emerald Banking and Finance Fund Schedule of Investments

 

October 31, 2019 (Unaudited)

 

Shares      Value
(Note 2)
 
Insurance: Property-Casualty (continued)    
 18,353   Kinsale Capital Group, Inc.  $1,940,279 
 51,270   NMI Holdings, Inc., Class A(a)   1,499,648 
         4,205,778 
           
Materials & Processing: 2.58%     
Precious Metals & Minerals: 2.58%     
 251,100   Bonterra Resources, Inc.(a)   419,337 
 139,458   Kirkland Lake Gold, Ltd.   6,547,553 
         6,966,890 
           
Technology: 2.29%     
Computer Services Software & Systems: 2.29%     
 145,310   Ebix, Inc.   6,194,565 
           
     Total Common Stocks     
    

(Cost $231,995,458)

   268,274,327 
SHORT TERM INVESTMENTS: 0.35%     
 947,905   Dreyfus Government Cash Management Fund - Institutional Class 1.741% (7-Day Yield)   947,905 
           
     Total Short Term Investments     
    

(Cost $947,905)

   947,905 
Total Investments: 99.59%     

(Cost $232,943,363)

   269,222,232 

 

Other Assets In Excess Of Liabilities: 0.41%   1,095,155 
Net Assets: 100.00%  $270,317,387 

 

(a)Non-income producing security.

 

For Fund compliance purposes, the Fund's industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine industry sub-classifications for reporting ease. Industries are shown as a percentage of net assets.

 

See Notes to Financial Statements.

 

 

32 www.emeraldmutualfunds.com

 

 

Emerald Funds Statements of Assets and Liabilities

 

October 31, 2019 (Unaudited)

 

   Emerald Growth Fund   Emerald Small Cap Value Fund   Emerald Insights Fund   Emerald Banking and Finance Fund 
ASSETS:                
Investments, at value  $1,255,648,063   $3,105,932   $11,816,139   $269,222,232 
Receivable for investments sold   13,575,625    16,000    142,024    3,719,550 
Receivable for shares sold   810,800    15    16,000    128,844 
Receivable due from advisor       10,658    3,637     
Interest and dividends receivable   223,920        429    28,502 
Other assets   47,069    26,939    24,184    30,515 
Total Assets   1,270,305,477    3,159,544    12,002,413    273,129,643 
LIABILITIES:                    
Payable for investments purchased   12,149,209        149,501    1,881,691 
Payable for shares redeemed   1,214,249    16,000    16,000    510,332 
Investment advisory fees payable   591,090            213,718 
Payable to fund accounting and administration   44,289    1,939    2,264    9,743 
Payable for distribution and service fees   144,033    659    3,167    119,385 
Payable for trustee fees and expenses   23,951    78    198    5,950 
Payable for transfer agency fees   25,251    2,987    2,942    34,845 
Payable for chief compliance officer fee   3,543    17    27    1,161 
Payable for principal financial officer fee   1,709    8    13    438 
Payable for professional fees   13,108    9,865    9,870    11,869 
Accrued expenses and other liabilities   29,593    1,866    2,133    23,124 
Total Liabilities   14,240,025    33,419    186,115    2,812,256 
NET ASSETS  $1,256,065,452   $3,126,125   $11,816,298   $270,317,387 
NET ASSETS CONSIST OF:                    
Paid-in capital (Note 5)  $918,474,099   $2,938,025   $9,917,952   $238,928,142 
Total distributable earnings   337,591,353    188,100    1,898,346    31,389,245 
NET ASSETS  $1,256,065,452   $3,126,125   $11,816,298   $270,317,387 
INVESTMENTS, AT COST  $917,673,462   $2,577,078   $9,764,125   $232,943,363 
PRICING OF SHARES                    
Class A: (a)                    
Net Asset Value, offering and redemption price per share  $24.90   $7.45   $11.54   $32.88 
Net Assets  $163,601,473   $1,792,228   $10,222,725   $67,976,898 
Shares of beneficial interest outstanding   6,571,487    240,470    885,938    2,067,698 
Maximum offering price per share (NAV/.9525, based on maximum sales charge of 4.75% of the offering price)  $26.14   $7.82   $12.12   $34.52 
Class C: (a)                    
Net Asset Value, offering and redemption price per share  $20.60   $7.09   $11.04   $27.91 
Net Assets  $23,148,683   $41,602   $141,297   $37,555,657 
Shares of beneficial interest outstanding   1,123,551    5,867    12,797    1,345,366 
Institutional Class:                    
Net Asset Value, offering and redemption price per share  $26.05   $7.64   $11.74   $33.92 
Net Assets  $982,494,544   $813,638   $1,392,707   $133,690,807 
Shares of beneficial interest outstanding   37,722,750    106,542    118,592    3,940,802 
Investor Class:                    
Net Asset Value, offering and redemption price per share  $24.77   $7.49   $11.49   $31.11 
Net Assets  $86,820,752   $478,657   $59,569   $31,094,025 
Shares of beneficial interest outstanding   3,504,748    63,874    5,186    999,570 

 

(a)Redemption price per share may be reduced for any applicable contingent deferred sales charge. For a description of a possible sales charge, please see the Funds' Prospectus.

 

See Notes to Financial Statements.

 

 

Semi-Annual Report | October 31, 2019 33

 

 

Emerald Funds Statements of Operations

 

For the Six Months Ended October 31, 2019 (Unaudited)

 

   Emerald Growth Fund   Emerald Small Cap Value Fund   Emerald Insights Fund   Emerald Banking and Finance Fund 
INVESTMENT INCOME:                
Dividends  $3,326,994   $22,014   $34,854   $1,820,503 
Foreign taxes withheld       (23)       (10,323)
Total Investment Income   3,326,994    21,991    34,854    1,810,180 
                     
EXPENSES:                    
Investment advisory fee (Note 6)   3,691,289    13,041    41,012    1,402,479 
Administration fee   269,875    8,450    10,227    66,584 
Custodian fee   57,866    2,726    2,527    24,995 
Professional fees   20,127    8,894    8,942    13,082 
Transfer agent fee   110,585    15,810    16,760    96,033 
Delegated transfer agent equivalent services fees                    
Class A   1,219            4,251 
Class C   335            996 
Institutional Class   420    9         
Investor Class   736    2         
Trustee fees and expenses   24,001    67    198    5,757 
Registration/filing fees   32,593    21,342    18,408    31,781 
Reports to shareholder and printing fees   59,344    591    811    29,848 
Distribution and service fees                    
Class A   303,868    3,748    16,252    132,962 
Class C   127,697    188    712    209,512 
Institutional Class   135,909        139    5,647 
Investor Class   178,622    622    169    66,381 
Chief compliance officer fee   28,289    82    231    6,858 
Principal financial officer fee   4,394    15    35    1,058 
Other   19,432    4,494    4,614    9,078 
Total expenses before waiver   5,066,601    80,081    121,037    2,107,302 
Less fees waived/reimbursed by investment advisor (Note 6)       (58,167)   (48,761)    
Total Net Expenses   5,066,601    21,914    72,276    2,107,302 
NET INVESTMENT INCOME/(LOSS):   (1,739,607)   77    (37,422)   (297,122)
                     
REALIZED AND UNREALIZED GAIN/(LOSS)                    
Net realized gain/(loss)   (12,083,106)   66,486    235,496    4,843,546 
Net realized gain on foreign currency transactions               79 
Net change in unrealized depreciation   (42,638,752)   (16,232)   (133,341)   (4,574,983)
NET REALIZED AND UNREALIZED GAIN/(LOSS)   (54,721,858)   50,254    102,155    268,642 
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS  $(56,461,465)  $50,331   $64,733   $(28,480)

 

See Notes to Financial Statements.

 

 

34 www.emeraldmutualfunds.com

 

 

Emerald Growth Fund Statements of Changes in Net Assets

 

 

   For the Six Months Ended October 31, 2019 (Unaudited)   Year Ended April 30, 2019 
OPERATIONS:          
Net investment loss  $(1,739,607)  $(3,687,116)
Net realized gain/(loss)   (12,083,106)   65,609,700 
Net change in unrealized appreciation/(depreciation)   (42,638,752)   79,706,677 
Net increase/(decrease) in net assets resulting from operations   (56,461,465)   141,629,261 
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3):        0 0 
Total amount of distributions          
Class A       (18,783,708)
Class C       (3,291,825)
Institutional Class       (85,437,977)
Investor Class       (9,170,727)
Net decrease in net assets from distributions       (116,684,237)
SHARE TRANSACTIONS (NOTE 5):          
Class A          
Proceeds from sale of shares   10,349,204    28,831,338 
Issued to shareholders in reinvestment of distributions       17,242,400 
Cost of shares redeemed   (27,885,748)   (100,627,275)
Net decrease from share transactions   (17,536,544)   (54,553,537)
Class C          
Proceeds from sale of shares   96,452    1,048,239 
Issued to shareholders in reinvestment of distributions       2,913,276 
Cost of shares redeemed   (5,620,709)   (7,089,084)
Net decrease from share transactions   (5,524,257)   (3,127,569)
Institutional Class          
Proceeds from sale of shares   87,260,343    294,328,397 
Issued to shareholders in reinvestment of distributions       76,474,139 
Cost of shares redeemed   (112,113,390)   (176,456,213)
Net increase/(decrease) from share transactions   (24,853,047)   194,346,323 
Investor Class          
Proceeds from sale of shares   10,725,622    30,586,078 
Issued to shareholders in reinvestment of distributions       3,282,222 
Cost of shares redeemed   (24,083,121)   (40,897,792)
Net decrease from share transactions   (13,357,499)   (7,029,492)
Net increase/(decrease) in net assets  $(117,732,812)  $154,580,749 
NET ASSETS:          
Beginning of period   1,373,798,264    1,219,217,515 
End of period  $1,256,065,452   $1,373,798,264 

 

 

Semi-Annual Report | October 31, 2019 35

 

 

Emerald Growth Fund Statements of Changes in Net Assets

 

 

   For the Six Months Ended October 31, 2019 (Unaudited)   Year Ended April 30, 2019 
Other Information:        
SHARE TRANSACTIONS:        
Class A        
Sold   413,334    1,099,455 
Distributions reinvested       819,116 
Redeemed  (1,106,537)   (3,863,070)
Net decrease in shares outstanding  (693,203)   (1,944,499)
Class C          
Sold   4,592    52,709 
Distributions reinvested       166,283 
Redeemed   (269,676)   (327,363)
Net decrease in shares outstanding   (265,084)   (108,371)
Institutional Class          
Sold   3,323,832    10,623,887 
Distributions reinvested       3,482,429 
Redeemed   (4,286,275)   (6,569,755)
Net increase/(decrease) in shares outstanding   (962,443)   7,536,561 
Investor Class          
Sold   429,411    1,272,243 
Distributions reinvested       156,669 
Redeemed   (959,519)   (1,552,305)
Net decrease in shares outstanding   (530,108)   (123,393)

 

See Notes to Financial Statements.

 

36 www.emeraldmutualfunds.com

 

 

Emerald Small Cap Value Fund Statements of Changes in Net Assets

 

 

   For the Six Months Ended October 31, 2019 (Unaudited)   Year Ended April 30, 2019 
OPERATIONS:          
Net investment income/(loss)  $77   $(6,269)
Net realized gain/(loss)   66,486    (289,522)
Net change in unrealized depreciation   (16,232)   (513,409)
Net increase/(decrease) in net assets resulting from operations   50,331    (809,200)
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3):        0 0 
Total amount of distributions          
Class A       (832,298)
Class C       (2,956)
Institutional Class       (268,960)
Investor Class       (122,718)
Net decrease in net assets from distributions       (1,226,932)
SHARE TRANSACTIONS (NOTE 5):          
Class A          
Proceeds from sale of shares   68,002    1,888,438 
Issued to shareholders in reinvestment of distributions       832,298 
Cost of shares redeemed   (962,578)   (2,655,284)
Net increase/(decrease) from share transactions   (894,576)   65,452 
Class C          
Proceeds from sale of shares   2,800    26,343 
Issued to shareholders in reinvestment of distributions       2,956 
Cost of shares redeemed       (88,998)
Net increase/(decrease) from share transactions   2,800    (59,699)
Institutional Class          
Proceeds from sale of shares   8,494    340,310 
Issued to shareholders in reinvestment of distributions       268,960 
Cost of shares redeemed   (86,857)   (2,426,213)
Net decrease from share transactions   (78,363)   (1,816,943)
Investor Class          
Proceeds from sale of shares   16,864    134,280 
Issued to shareholders in reinvestment of distributions       122,718 
Cost of shares redeemed   (55,856)   (125,199)
Net increase/(decrease) from share transactions   (38,992)   131,799 
Net decrease in net assets  $(958,800)  $(3,715,523)
NET ASSETS:          
Beginning of period   4,084,925    7,800,448 
End of period  $3,126,125   $4,084,925 

 

 

Semi-Annual Report | October 31, 2019 37

 

 

Emerald Small Cap Value Fund Statements of Changes in Net Assets

 

 

   For the Six Months Ended October 31, 2019 (Unaudited)   Year Ended April 30, 2019 
Other Information:          
SHARE TRANSACTIONS:          
Class A          
Sold   9,543    193,926 
Distributions reinvested       131,485 
Redeemed   (134,520)   (338,910)
Net decrease in shares outstanding  (124,977)   (13,499)
Class C          
Sold   422    4,031 
Distributions reinvested       488 
Redeemed       (9,693)
Net increase/(decrease) in shares outstanding   422    (5,174)
Institutional Class          
Sold   1,166    31,414 
Distributions reinvested       41,570 
Redeemed   (11,795)   (255,759)
Net decrease in shares outstanding   (10,629)   (182,775)
Investor Class          
Sold   2,326    12,696 
Distributions reinvested       19,295 
Redeemed   (7,937)   (15,655)
Net increase/(decrease) in shares outstanding   (5,611)   16,336 

 

See Notes to Financial Statements.

 

38 www.emeraldmutualfunds.com

 

 

Emerald Insights Fund Statements of Changes in Net Assets

 

 

   For the Six Months Ended October 31, 2019 (Unaudited)   Year Ended April 30, 2019 
OPERATIONS:          
Net investment loss  $(37,422)  $(74,164)
Net realized gain   235,496    165,436 
Net change in unrealized appreciation/(depreciation)   (133,341)   1,129,078 
Net increase in net assets resulting from operations   64,733    1,220,350 
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3):        0 0 
Total amount of distributions          
Class A       (1,601,857)
Class C       (21,254)
Institutional Class       (260,149)
Investor Class       (27,338)
Net decrease in net assets from distributions       (1,910,598)
SHARE TRANSACTIONS (NOTE 5):          
Class A          
Proceeds from sale of shares   1,374,942    875,418 
Issued to shareholders in reinvestment of distributions       1,591,552 
Cost of shares redeemed   (610,596)   (1,860,087)
Net increase from share transactions   764,346    606,883 
Class C          
Proceeds from sale of shares   5,000    17,884 
Issued to shareholders in reinvestment of distributions       21,254 
Cost of shares redeemed   (5,078)   (22,797)
Net increase/(decrease) from share transactions   (78)   16,341 
Institutional Class          
Proceeds from sale of shares   35,330    282,451 
Issued to shareholders in reinvestment of distributions       260,149 
Cost of shares redeemed   (31,698)   (242,872)
Net increase from share transactions   3,632    299,728 
Investor Class          
Proceeds from sale of shares   4,600    53,100 
Issued to shareholders in reinvestment of distributions       27,338 
Cost of shares redeemed   (117,483)   (20,835)
Net increase/(decrease) from share transactions   (112,883)   59,603 
Net increase in net assets  $719,750   $292,307 
NET ASSETS:          
Beginning of period   11,096,548    10,804,241 
End of period  $11,816,298   $11,096,548 

 

 

Semi-Annual Report | October 31, 2019 39

 

 

Emerald Insights Fund Statements of Changes in Net Assets

 

 

   For the Six Months Ended October 31, 2019 (Unaudited)   Year Ended April 30, 2019 
Other Information:        
SHARE TRANSACTIONS:        
Class A          
Sold   123,184    83,189 
Distributions reinvested       169,134 
Redeemed  (54,060)   (147,542)
Net increase in shares outstanding  69,124    104,781 
Class C          
Sold   457    2,031 
Distributions reinvested       2,349 
Redeemed   (457)   (1,680)
Net increase in shares outstanding       2,700 
Institutional Class          
Sold   3,096    19,447 
Distributions reinvested       27,241 
Redeemed   (2,829)   (21,265)
Net increase in shares outstanding   267    25,423 
Investor Class          
Sold   406    4,162 
Distributions reinvested       2,921 
Redeemed   (10,453)   (1,500)
Net increase/(decrease) in shares outstanding   (10,047)   5,583 

 

See Notes to Financial Statements.

 

40 www.emeraldmutualfunds.com

 

 

Emerald Banking and Finance Fund Statements of Changes in Net Assets

 

 

   For the Six Months Ended October 31, 2019 (Unaudited)   Year Ended April 30, 2019 
OPERATIONS:        
Net investment loss  $(297,122)  $(2,526,089)
Net realized gain   4,843,625    39,986,351 
Net change in unrealized depreciation   (4,574,983)   (104,241,265)
Net decrease in net assets resulting from operations   (28,480)   (66,781,003)
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3):          
Total amount of distributions          
Class A       (24,656,256)
Class C       (13,297,550)
Institutional Class       (37,095,621)
Investor Class       (11,056,960)
Net decrease in net assets from distributions       (86,106,387)
SHARE TRANSACTIONS (NOTE 5):          
Class A          
Proceeds from sale of shares   5,017,390    42,099,315 
Issued to shareholders in reinvestment of distributions       20,425,832 
Cost of shares redeemed   (24,259,396)   (101,578,106)
Net decrease from share transactions   (19,242,006)   (39,052,959)
Class C          
Proceeds from sale of shares   357,744    8,581,109 
Issued to shareholders in reinvestment of distributions       11,494,938 
Cost of shares redeemed   (12,693,927)   (26,316,417)
Net decrease from share transactions   (12,336,183)   (6,240,370)
Institutional Class          
Proceeds from sale of shares   9,193,115    96,435,931 
Issued to shareholders in reinvestment of distributions       24,683,933 
Cost of shares redeemed   (38,654,855)   (115,500,368)
Net increase/(decrease) from share transactions   (29,461,740)   5,619,496 
Investor Class          
Proceeds from sale of shares   447,398    16,871,872 
Issued to shareholders in reinvestment of distributions       10,138,517 
Cost of shares redeemed   (10,726,518)   (36,983,304)
Net decrease from share transactions   (10,279,120)   (9,972,915)
Net decrease in net assets  $(71,347,529)  $(202,534,138)
NET ASSETS:          
Beginning of period   341,664,916    544,199,054 
End of period  $270,317,387   $341,664,916 

 

 

Semi-Annual Report | October 31, 2019 41

 

 

Emerald Banking and Finance Fund Statements of Changes in Net Assets

 

 

   For the Six Months Ended October 31, 2019 (Unaudited)   Year Ended April 30, 2019 
Other Information:          
SHARE TRANSACTIONS:          
Class A          
Sold   156,963    975,875 
Distributions reinvested       679,954 
Redeemed   (756,954)   (2,733,766)
Net decrease in shares outstanding  (599,991)   (1,077,937)
Class C          
Sold   13,150    233,767 
Distributions reinvested       448,146 
Redeemed   (464,890)   (819,451)
Net decrease in shares outstanding   (451,740)   (137,538)
Institutional Class          
Sold   276,916    2,318,054 
Distributions reinvested       798,833 
Redeemed   (1,170,804)   (3,002,806)
Net increase/(decrease) in shares outstanding   (893,888)   114,081 
Investor Class          
Sold   14,609    392,263 
Distributions reinvested       356,613 
Redeemed   (352,780)   (1,028,361)
Net decrease in shares outstanding   (338,171)   (279,485)

 

See Notes to Financial Statements.

 

42 www.emeraldmutualfunds.com

 

 

Emerald Growth Fund Financial Highlights

 

For a share outstanding throughout the years presented

 

   CLASS A 
   For the Six Months Ended October 31, 2019 (Unaudited)   Year Ended April 30, 2019   Year Ended April 30, 2018   Year Ended April 30, 2017   Year Ended April 30, 2016   Year Ended April 30, 2015 
NET ASSET VALUE, BEGINNING OF PERIOD  $26.00   $25.99   $21.83   $17.52   $20.02   $18.11 
INCOME/(LOSS) FROM OPERATIONS:                              
Net investment loss(a)   (0.06)   (0.13)   (0.16)   (0.11)   (0.15)   (0.18)
Net realized and unrealized gain/(loss) on investments   (1.04)   2.61    4.32    4.42    (1.88)   3.43 
Total from Investment Operations   (1.10)   2.48    4.16    4.31    (2.03)   3.25 
                               
LESS DISTRIBUTIONS:                              
From capital gains       (2.47)           (0.47)   (1.34)
Total Distributions       (2.47)           (0.47)   (1.34)
NET INCREASE/(DECREASE) IN NET ASSET VALUE   (1.10)   0.01    4.16    4.31    (2.50)   1.91 
NET ASSET VALUE, END OF PERIOD  $24.90   $26.00   $25.99   $21.83   $17.52   $20.02 
                               
TOTAL RETURN(b)   (4.23)%(c)   11.79%   19.06%   24.60%   (10.28)%   18.38%
RATIOS/SUPPLEMENTAL DATA:                              
Net Assets, End of Period (000s)  $163,601   $188,883   $239,316   $270,389   $323,603   $123,828 
RATIOS TO AVERAGE NET ASSETS:                              
Net Investment loss   (0.50)%(d)   (0.50)%   (0.64)%   (0.57)%   (0.81)%   (0.93)%
Operating expenses excluding reimbursement/waiver   1.01%(d)   1.01%   1.03%   1.08%   1.17%   1.29%
Operating expenses including reimbursement/waiver   1.01%(d)   1.01%   1.03%   1.08%   1.17%   1.29%
PORTFOLIO TURNOVER RATE   22%(c)   64%   66%   54%   45%   68%

 

(a)Per share amounts are based upon average shares outstanding.
(b)Total return does not reflect the effect of sales charges.
(c)Not Annualized.
(d)Annualized.

 

See Notes to Financial Statements.

 

Semi-Annual Report | October 31, 2019 43

 

 

Emerald Growth Fund Financial Highlights

 

For a share outstanding throughout the years presented

 

   CLASS C 
   For the Six Months Ended October 31, 2019 (Unaudited)   Year Ended April 30, 2019   Year Ended April 30, 2018   Year Ended April 30, 2017   Year Ended April 30, 2016   Year Ended April 30, 2015 
NET ASSET VALUE, BEGINNING OF PERIOD  $21.59   $22.18   $18.75   $15.14   $17.48   $16.07 
INCOME/(LOSS) FROM OPERATIONS:                              
Net investment loss(a)   (0.12)   (0.26)   (0.27)   (0.21)   (0.24)   (0.27)
Net realized and unrealized gain/(loss) on investments   (0.87)   2.14    3.70    3.82    (1.63)   3.02 
Total from Investment Operations   (0.99)   1.88    3.43    3.61    (1.87)   2.75 
                               
LESS DISTRIBUTIONS:                              
From capital gains       (2.47)           (0.47)   (1.34)
Total Distributions       (2.47)           (0.47)   (1.34)
NET INCREASE/(DECREASE) IN NET ASSET VALUE   (0.99)   (0.59)   3.43    3.61    (2.34)   1.41 
NET ASSET VALUE, END OF PERIOD  $20.60   $21.59   $22.18   $18.75   $15.14   $17.48 
                               
TOTAL RETURN(b)   (4.59)%(c)   11.08%   18.29%   23.84%   (10.87)%   17.58%
RATIOS/SUPPLEMENTAL DATA:                              
Net Assets, End of Period (000s)  $23,149   $29,975   $33,197   $34,642   $42,075   $15,427 
RATIOS TO AVERAGE NET ASSETS:                              
Net Investment loss   (1.15)%(d)   (1.15)%   (1.30)%   (1.22)%   (1.46)%   (1.58)%
Operating expenses excluding reimbursement/waiver   1.67%(d)   1.66%   1.68%   1.73%   1.81%   1.94%
Operating expenses including reimbursement/waiver   1.67%(d)   1.66%   1.68%   1.73%   1.81%   1.94%
PORTFOLIO TURNOVER RATE   22%(c)   64%   66%   54%   45%   68%

 

(a)Per share amounts are based upon average shares outstanding.
(b)Total return does not reflect the effect of sales charges.
(c)Not Annualized.
(d)Annualized.

 

See Notes to Financial Statements.

 

44 www.emeraldmutualfunds.com

 

 

Emerald Growth Fund Financial Highlights

 

For a share outstanding throughout the years presented

 

 

   INSTITUTIONAL CLASS 
   For the Six Months Ended October 31, 2019 (Unaudited)   Year Ended April 30, 2019   Year Ended April 30, 2018   Year Ended April 30, 2017   Year Ended April 30, 2016   Year Ended April 30, 2015 
NET ASSET VALUE, BEGINNING OF PERIOD  $27.16   $26.94   $22.56   $18.04   $20.54   $18.49 
INCOME/(LOSS) FROM OPERATIONS:                              
Net investment loss(a)   (0.02)   (0.05)   (0.09)   (0.05)   (0.10)   (0.12)
Net realized and unrealized gain/(loss) on investments   (1.09)   2.74    4.47    4.57    (1.93)   3.51 
Total from Investment Operations   (1.11)   2.69    4.38    4.52    (2.03)   3.39 
                               
LESS DISTRIBUTIONS:                              
From capital gains       (2.47)           (0.47)   (1.34)
Total Distributions       (2.47)           (0.47)   (1.34)
NET INCREASE/(DECREASE) IN NET ASSET VALUE   (1.11)   0.22    4.38    4.52    (2.50)   2.05 
NET ASSET VALUE, END OF PERIOD  $26.05   $27.16   $26.94   $22.56   $18.04   $20.54 
                               
TOTAL RETURN   (4.09)%(b)   12.17%   19.41%   25.06%   (9.97)%   18.77%
RATIOS/SUPPLEMENTAL DATA:                              
Net Assets, End of Period (000s)  $982,495   $1,050,538   $839,076   $596,550   $453,190   $174,107 
RATIOS TO AVERAGE NET ASSETS:                              
Net Investment loss   (0.18)%(c)   (0.18)%   (0.33)%   (0.26)%   (0.51)%   (0.63)%
Operating expenses excluding reimbursement/waiver   0.69%(c)   0.69%   0.72%   0.77%   0.87%   0.99%
Operating expenses including reimbursement/waiver   0.69%(c)   0.69%   0.72%   0.77%   0.87%   0.99%
PORTFOLIO TURNOVER RATE   22%(b)   64%   66%   54%   45%   68%

 

(a)Per share amounts are based upon average shares outstanding.
(b)Not Annualized.
(c)Annualized.

 

See Notes to Financial Statements.

 

Semi-Annual Report | October 31, 2019 45

 

 

Emerald Growth Fund Financial Highlights

 

For a share outstanding throughout the years presented

 

   INVESTOR CLASS 
   For the Six Months Ended October 31, 2019 (Unaudited)   Year Ended April 30, 2019   Year Ended April 30, 2018   Year Ended April 30, 2017   Year Ended April 30, 2016   Year Ended April 30, 2015 
NET ASSET VALUE, BEGINNING OF PERIOD  $25.88   $25.88   $21.75   $17.46   $19.97   $18.06 
INCOME/(LOSS) FROM OPERATIONS:                              
Net investment loss(a)   (0.07)   (0.14)   (0.17)   (0.12)   (0.16)   (0.17)
Net realized and unrealized gain/(loss) on investments   (1.04)   2.61    4.30    4.41    (1.88)   3.42 
Total from Investment Operations   (1.11)   2.47    4.13    4.29    (2.04)   3.25 
                               
LESS DISTRIBUTIONS:                              
From capital gains       (2.47)           (0.47)   (1.34)
Total Distributions       (2.47)           (0.47)   (1.34)
NET INCREASE/(DECREASE) IN NET ASSET VALUE   (1.11)   0.00    4.13    4.29    (2.51)   1.91 
NET ASSET VALUE, END OF PERIOD  $24.77   $25.88   $25.88   $21.75   $17.46   $19.97 
                               
TOTAL RETURN   (4.29)%(b)   11.81%   18.99%   24.57%   (10.36)%   18.44%
RATIOS/SUPPLEMENTAL DATA:                              
Net Assets, End of Period (000s)  $86,821   $104,403   $107,629   $114,033   $112,526   $23,517 
RATIOS TO AVERAGE NET ASSETS:                              
Net Investment loss   (0.53)%(c)   (0.53)%   (0.68)%   (0.61)%   (0.84)%   (0.91)%
Operating expenses excluding reimbursement/waiver   1.05%(c)   1.04%   1.07%   1.12%   1.19%   1.27%
Operating expenses including reimbursement/waiver   1.05%(c)   1.04%   1.07%   1.12%   1.19%   1.27%
PORTFOLIO TURNOVER RATE   22%(b)   64%   66%   54%   45%   68%

 

(a)Per share amounts are based upon average shares outstanding.
(b)Not Annualized.
(c)Annualized.

 

See Notes to Financial Statements.

 

46 www.emeraldmutualfunds.com

 

 

Emerald Small Cap Value Fund Financial Highlights

 

For a share outstanding throughout the periods presented

 

   CLASS A 
   For the Six Months Ended October 31, 2019 (Unaudited)   Year Ended April 30, 2019   Year Ended April 30, 2018   Year Ended April 30, 2017   For the Period October 1, 2015 to April 30, 2016(a)   Period Ended September 30, 2015(b) 
NET ASSET VALUE, BEGINNING OF PERIOD  $7.29   $10.45   $16.27   $13.00   $12.70   $14.12 
INCOME/(LOSS) FROM OPERATIONS:                              
Net investment loss(c)   (0.00)(d)   (0.02)   (0.06)(e)   (0.07)(e)   (0.09)   (0.01)
Net realized and unrealized gain/(loss) on investments   0.16    (1.06)   2.13    3.34    0.44    (1.03)
Total from Investment Operations   0.16    (1.08)   2.07    3.27    0.35    (1.04)
                               
LESS DISTRIBUTIONS:                              
From investment income                   (0.05)    
From capital gains       (2.08)   (7.89)           (0.38)
Total Distributions       (2.08)   (7.89)       (0.05)   (0.38)
NET INCREASE/(DECREASE) IN NET ASSET VALUE   0.16    (3.16)   (5.82)   3.27    0.30    (1.42)
NET ASSET VALUE, END OF PERIOD  $7.45   $7.29   $10.45   $16.27   $13.00   $12.70 
                               
TOTAL RETURN(f)   2.19%(g)   (7.30)%   12.41%   25.15%   2.77%(g)   (7.49)%(g)
RATIOS/SUPPLEMENTAL DATA:                              
Net Assets, End of Period (000s)  $1,792   $2,664   $3,959   $1,909   $340   $14 
RATIOS TO AVERAGE NET ASSETS:                              
Net Investment loss   (0.07)%(h)   (0.19)%   (0.42)%   (0.46)%   (1.13)%(h)   (0.24)%(h)
Operating expenses excluding reimbursement/waiver   4.68%(h)   2.89%   2.56%   2.26%   2.69%(h)   2.16%(h)
Operating expenses including reimbursement/waiver   1.35%(h)   1.35%   1.35%   1.35%   1.35%(h)   1.35%(h)
PORTFOLIO TURNOVER RATE   22%(g)   101%   71%   66%   31%(g)   69%(g)(i)

 

(a)Effective March 3, 2015 the Board approved changing the fiscal year-end of the Fund from September 30 to April 30.
(b)Class A commenced operations on June 30, 2015.
(c)Per share amounts are based upon average shares outstanding.
(d)Less than $0.005 per share.
(e)The amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and redemptions of Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
(f)Total return does not reflect the effect of sales charges.
(g)Not Annualized.
(h)Annualized.
(i)Portfolio turnover rate is calculated at the Fund level and represents the year ended September 30, 2015.

 

See Notes to Financial Statements.

 

Semi-Annual Report | October 31, 2019 47

 

 

Emerald Small Cap Value Fund Financial Highlights

 

For a share outstanding throughout the periods presented

 

   CLASS C

 
   For the Six Months Ended October 31, 2019 (Unaudited)   Year Ended April 30, 2019   Year Ended April 30, 2018   Year Ended April 30, 2017   For the Period October 1, 2015 to April 30, 2016(a)   Period Ended September 30, 2015(b) 
NET ASSET VALUE, BEGINNING OF PERIOD  $6.96   $10.15   $16.10   $12.94   $12.68   $14.12 
INCOME/(LOSS) FROM OPERATIONS:                              
Net investment loss(c)   (0.03)   (0.08)   (0.13)(d)   (0.13)(d)   (0.14)   (0.03)
Net realized and unrealized gain/(loss) on investments   0.16    (1.03)   2.07    3.29    0.43    (1.03)
Total from Investment Operations   0.13    (1.11)   1.94    3.16    0.29    (1.06)
                               
LESS DISTRIBUTIONS:                              
From investment income                   (0.03)    
From capital gains       (2.08)   (7.89)           (0.38)
Total Distributions       (2.08)   (7.89)       (0.03)   (0.38)
NET INCREASE/(DECREASE) IN NET ASSET VALUE   0.13    (3.19)   (5.95)   3.16    0.26    (1.44)
NET ASSET VALUE, END OF PERIOD  $7.09   $6.96   $10.15   $16.10   $12.94   $12.68 
                               
TOTAL RETURN(e)   1.87%(f)   (7.88)%   11.63%   24.42%   2.28%(f)   (7.63)%(f)
RATIOS/SUPPLEMENTAL DATA:                              
Net Assets, End of Period (000s)  $42   $38   $108   $211   $566   $14 
RATIOS TO AVERAGE NET ASSETS:                              
Net Investment loss   (0.76)%(g)   (0.88)%   (0.98)%   (0.93)%   (2.06)%(g)   (0.89)%(g)
Operating expenses excluding reimbursement/waiver   5.41%(g)   3.44%   3.20%   2.70%   3.37%(g)   2.81%(g)
Operating expenses including reimbursement/waiver   2.00%(g)   2.00%   2.00%   2.00%   2.00%(g)   2.00%(g)
PORTFOLIO TURNOVER RATE   22%(f)   101%   71%   66%   31%(f)   69%(f)(h)

 

(a)Effective March 3, 2015 the Board approved changing the fiscal year-end of the Fund from September 30 to April 30.
(b)Class C commenced operations on June 30, 2015.
(c)Per share amounts are based upon average shares outstanding.
(d)The amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and redemptions of Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
(e)Total return does not reflect the effect of sales charges.
(f)Not Annualized.
(g)Annualized.
(h)Portfolio turnover rate is calculated at the Fund level and represents the year ended September 30, 2015.

 

See Notes to Financial Statements.

 

48 www.emeraldmutualfunds.com

 

 

 

Emerald Small Cap Value Fund Financial Highlights

 

For a share outstanding throughout the periods presented

 

    INSTITUTIONAL CLASS  
   For the Six Months Ended October 31, 2019 (Unaudited)   Year Ended April 30, 2019   Year Ended April 30, 2018   Year Ended April 30, 2017   For the Period October 1, 2015 to April 30, 2016(a)   Year Ended September 30, 2015(b) 
NET ASSET VALUE, BEGINNING OF PERIOD  $7.46   $10.59   $16.35   $13.02   $12.71   $12.76 
INCOME FROM OPERATIONS:                              
Net investment income/(loss)(c)   0.01    0.01(d)   0.00(e)   0.02    (0.01)   0.06 
Net realized and unrealized gain/(loss) on investments   0.17    (1.06)   2.13    3.31    0.38    0.33 
Total from Investment Operations   0.18    (1.05)   2.13    3.33    0.37    0.39 
                               
LESS DISTRIBUTIONS:                              
From investment income                   (0.06)   (0.06)
From capital gains       (2.08)   (7.89)           (0.38)
Total Distributions       (2.08)   (7.89)       (0.06)   (0.44)
NET INCREASE/(DECREASE) IN NET ASSET VALUE   0.18    (3.13)   (5.76)   3.33    0.31    (0.05)
NET ASSET VALUE, END OF PERIOD  $7.64   $7.46   $10.59   $16.35   $13.02   $12.71 
                               
TOTAL RETURN   2.41%(f)   (6.90)%   12.76%   25.58%   2.94%(f)   2.93%
SUPPLEMENTAL DATA:                              
Net Assets, End of Period (000s)  $814   $874   $3,177   $4,989   $13,691   $16,507 
RATIOS TO AVERAGE NET ASSETS:                              
Net Investment income/(loss)   0.24%(g)   0.13%   0.02%   0.13%   (0.07)%(g)   0.45%
Operating expenses excluding reimbursement/waiver   4.38%(g)   2.44%   2.20%   1.56%   1.75%(g)   1.43%
Operating expenses including reimbursement/waiver   1.00%(g)   1.00%   1.00%   1.00%   1.00%(g)   1.00%
PORTFOLIO TURNOVER RATE   22%(f)   101%   71%   66%   31%(f)   69%

 

(a)Effective March 3, 2015 the Board approved changing the fiscal year-end of the Fund from September 30 to April 30.
(b)Prior to its June 26, 2015 reorganization with and into the Emerald Small Cap Value Fund, the Fund was known as the Elessar Small Cap Value Fund.
(c)Per share amounts are based upon average shares outstanding.
(d)The amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and redemptions of Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
(e)Less than $0.005 per share.
(f)Not Annualized.
(g)Annualized.

 

See Notes to Financial Statements.

 

Semi-Annual Report | October 31, 2019 49

 

 

Emerald Small Cap Value Fund Financial Highlights

 

For a share outstanding throughout the periods presented

 

   INVESTOR CLASS 
   For the Six Months Ended October 31, 2019 (Unaudited)   Year Ended April 30, 2019   Year Ended April 30, 2018   Year Ended April 30, 2017   For the Period October 1, 2015 to April 30, 2016(a)   Year Ended September 30, 2015(b) 
NET ASSET VALUE, BEGINNING OF PERIOD  $7.33   $10.46   $16.26   $12.98   $12.68   $12.73 
INCOME FROM OPERATIONS:                              
Net investment income/(loss)(c)   (0.00)(d)   (0.01)   (0.04)(e)   (0.02)(e)   (0.02)   0.03 
Net realized and unrealized gain/(loss) on investments   0.16    (1.04)   2.13    3.30    0.37    0.35 
Total from Investment Operations   0.16    (1.05)   2.09    3.28    0.35    0.38 
                               
LESS DISTRIBUTIONS:                              
From investment income                   (0.05)   (0.05)
From capital gains       (2.08)   (7.89)           (0.38)
Total Distributions       (2.08)   (7.89)       (0.05)   (0.43)
NET INCREASE/(DECREASE) IN NET ASSET VALUE   0.16    (3.13)   (5.80)   3.28    0.30    (0.05)
NET ASSET VALUE, END OF PERIOD  $7.49   $7.33   $10.46   $16.26   $12.98   $12.68 
                               
TOTAL RETURN   2.18%(f)   (6.99)%   12.54%   25.27%   2.80%(f)   2.82%
SUPPLEMENTAL DATA:                              
Net Assets, End of Period (000s)  $479   $509   $556   $614   $1,946   $399 
RATIOS TO AVERAGE NET ASSETS:                              
Net Investment income/(loss)   0.00%(g)(h)   (0.10)%   (0.25)%   (0.11)%   (0.25)%(g)   0.22%
Operating expenses excluding reimbursement/waiver   4.62%(g)   2.83%   2.44%   1.83%   2.14%(g)   1.67%
Operating expenses including reimbursement/waiver   1.25%(g)   1.25%   1.25%   1.25%   1.25%(g)   1.25%
PORTFOLIO TURNOVER RATE   22%(f)   101%   71%   66%   31%(f)   69%

 

(a)Effective March 3, 2015 the Board approved changing the fiscal year-end of the Fund from September 30 to April 30.
(b)Prior to its June 26, 2015 reorganization with and into the Emerald Small Cap Value Fund, the Fund was known as the Elessar Small Cap Value Fund.
(c)Per share amounts are based upon average shares outstanding.
(d)Less than $0.005 per share.
(e)The amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and redemptions of Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
(f)Not Annualized.
(g)Annualized.
(h)Less than 0.005%

 

See Notes to Financial Statements.

 

50 www.emeraldmutualfunds.com

 

 

Emerald Insights Fund Financial Highlights

 

For a share outstanding throughout the periods presented

 

   CLASS A 
   For the Six Months Ended October 31, 2019 (Unaudited)   Year Ended April 30, 2019   Year Ended April 30, 2018   Year Ended April 30, 2017   Year Ended April 30, 2016  

For the Period August 1, 2014 (Inception)

to April 30, 2015

 
NET ASSET VALUE, BEGINNING OF PERIOD  $11.51   $13.09   $11.33   $9.69   $10.98   $10.00 
INCOME/(LOSS) FROM OPERATIONS:                              
Net investment loss(a)   (0.04)   (0.09)   (0.07)   (0.06)   (0.05)   (0.05)
Net realized and unrealized gain/(loss) on investments   0.07    1.04    1.83    1.70    (1.24)   1.03 
Total from Investment Operations   0.03    0.95    1.76    1.64    (1.29)   0.98 
                               
LESS DISTRIBUTIONS:                              
From capital gains       (2.53)                
Total Distributions       (2.53)                
NET INCREASE/(DECREASE) IN NET ASSET VALUE   0.03    (1.58)   1.76    1.64    (1.29)   0.98 
NET ASSET VALUE, END OF PERIOD  $11.54   $11.51   $13.09   $11.33   $9.69   $10.98 
                               
TOTAL RETURN(b)   0.26%(c)   11.53%   15.53%   16.92%   (11.75%)   9.80%(c)
RATIOS/SUPPLEMENTAL DATA:                              
Net Assets, End of Period (000s)  $10,223   $9,397   $9,321   $10,127   $11,388   $6,493 
RATIOS TO AVERAGE NET ASSETS:                              
Net Investment loss   (0.71%)(d)   (0.71%)   (0.58%)   (0.57%)   (0.54%)   (0.66%)(d)
Operating expenses excluding reimbursement/waiver   2.25%(d)   2.18%   2.10%   2.10%   2.01%   2.57%(d)(e)
Operating expenses including reimbursement/waiver   1.35%(d)   1.35%   1.35%   1.35%   1.35%   1.35%(d)(e)
PORTFOLIO TURNOVER RATE   38%(c)   63%   138%   75%   99%   88%(c)

 

(a)Per share amounts are based upon average shares outstanding.
(b)Total return does not reflect the effect of sales charges.
(c)Not Annualized.
(d)Annualized.
(e)Expense ratios before reductions for startup costs may not be representative of longer term operating periods.

 

See Notes to Financial Statements.

 

Semi-Annual Report | October 31, 2019 51

 

 

Emerald Insights Fund Financial Highlights

 

For a share outstanding throughout the periods presented

 

   CLASS C 
   For the Six Months Ended October 31, 2019 (Unaudited)   Year Ended April 30, 2019   Year Ended April 30, 2018   Year Ended April 30, 2017   Year Ended April 30, 2016   For the Period August 1, 2014 (Inception) to April 30, 2015 
NET ASSET VALUE, BEGINNING OF PERIOD  $11.04   $12.75   $11.11   $9.56   $10.92   $10.00 
INCOME/(LOSS) FROM OPERATIONS:                              
Net investment loss(a)   (0.07)   (0.16)   (0.15)   (0.13)   (0.11)   (0.10)
Net realized and unrealized gain/(loss) on investments   0.07    0.98    1.79    1.68    (1.25)   1.02 
Total from Investment Operations   0.00    0.82    1.64    1.55    (1.36)   0.92 
                               
LESS DISTRIBUTIONS:                              
From capital gains       (2.53)                
Total Distributions       (2.53)                
NET INCREASE/(DECREASE) IN NET ASSET VALUE   0.00    (1.71)   1.64    1.55    (1.36)   0.92 
NET ASSET VALUE, END OF PERIOD  $11.04   $11.04   $12.75   $11.11   $9.56   $10.92 
                               
TOTAL RETURN(b)   0.00%(c)   10.75%   14.76%   16.21%   (12.45%)   9.20%(c)
RATIOS/SUPPLEMENTAL DATA:                              
Net Assets, End of Period (000s)  $141   $141   $129   $112   $101   $27 
RATIOS TO AVERAGE NET ASSETS:                              
Net Investment loss   (1.36%)(d)   (1.36%)   (1.24%)   (1.22%)   (1.17%)   (1.34%)(d)
Operating expenses excluding reimbursement/waiver   2.90%(d)   2.84%   2.75%   2.76%   2.70%   7.25%(d)(e)
Operating expenses including reimbursement/waiver   2.00%(d)   2.00%   2.00%   2.00%   2.00%   2.00%(d)(e)
PORTFOLIO TURNOVER RATE   38%(c)   63%   138%   75%   99%   88%(c)

 

(a)Per share amounts are based upon average shares outstanding.
(b)Total return does not reflect the effect of sales charges.
(c)Not Annualized.
(d)Annualized.
(e)Expense ratios before reductions for startup costs may not be representative of longer term operating periods.

 

See Notes to Financial Statements.

 

52 www.emeraldmutualfunds.com

 

 

 

Emerald Insights Fund Financial Highlights

 

For a share outstanding throughout the periods presented

 

   INSTITUTIONAL CLASS   
   For the Six Months Ended October 31, 2019 (Unaudited)   Year Ended April 30, 2019   Year Ended April 30, 2018   Year Ended April 30, 2017   Year Ended April 30, 2016   For the Period August 1, 2014 (Inception) to April 30, 2015 
NET ASSET VALUE, BEGINNING OF PERIOD  $11.69   $13.22   $11.41   $9.73   $10.99   $10.00 
INCOME/(LOSS) FROM OPERATIONS:                              
Net investment loss(a)   (0.02)   (0.05)   (0.04)   (0.03)   (0.00)(b)   (0.03)
Net realized and unrealized gain/(loss) on investments   0.07    1.05    1.85    1.71    (1.26)   1.02 
Total from Investment Operations   0.05    1.00    1.81    1.68    (1.26)   0.99 
                               
LESS DISTRIBUTIONS:                              
From capital gains       (2.53)                
Total Distributions       (2.53)                
NET INCREASE/(DECREASE) IN NET ASSET VALUE   0.05    (1.53)   1.81    1.68    (1.26)   0.99 
NET ASSET VALUE, END OF PERIOD  $11.74   $11.69   $13.22   $11.41   $9.73   $10.99 
                               
TOTAL RETURN   0.43%(c)   11.81%   15.86%   17.27%   (11.46%)   9.90%(c)
RATIOS/SUPPLEMENTAL DATA:                              
Net Assets, End of Period (000s)  $1,393   $1,383   $1,228   $1,048   $1,729   $279 
RATIOS TO AVERAGE NET ASSETS:                              
Net Investment loss   (0.41%)(d)   (0.41%)   (0.29%)   (0.28%)   (0.05%)   (0.34%)(d)
Operating expenses excluding reimbursement/waiver   1.92%(d)   1.87%   1.77%   1.78%   1.90%   4.66%(d)(e)
Operating expenses including reimbursement/waiver   1.05%(d)   1.05%   1.05%   1.05%   1.05%   1.05%(d)(e)
PORTFOLIO TURNOVER RATE   38%(c)   63%   138%   75%   99%   88%(c)

 

(a)Per share amounts are based upon average shares outstanding.
(b)Less than $0.005 per share.
(c)Not Annualized.
(d)Annualized.
(e)Expense ratios before reductions for startup costs may not be representative of longer term operating periods.

 

See Notes to Financial Statements.

 

Semi-Annual Report | October 31, 2019 53

 

 

 

Emerald Insights Fund Financial Highlights

 

For a share outstanding throughout the periods presented

 

   INVESTOR CLASS   
   For the Six Months Ended October 31, 2019 (Unaudited)   Year Ended April 30, 2019   Year Ended April 30, 2018   Year Ended April 30, 2017   Year Ended April 30, 2016   For the Period August 1, 2014 (Inception) to April 30, 2015 
NET ASSET VALUE, BEGINNING OF PERIOD  $11.45   $13.05   $11.29   $9.67   $10.96   $10.00 
INCOME/(LOSS) FROM OPERATIONS:                              
Net investment loss(a)   (0.04)   (0.10)   (0.08)   (0.07)   (0.08)   (0.05)
Net realized and unrealized gain/(loss) on investments   0.08    1.03    1.84    1.69    (1.21)   1.01 
Total from Investment Operations   0.04    0.93    1.76    1.62    (1.29)   0.96 
                               
LESS DISTRIBUTIONS:                              
From capital gains       (2.53)                
Total Distributions       (2.53)                
NET INCREASE/(DECREASE) IN NET ASSET VALUE   0.04    (1.60)   1.76    1.62    (1.29)   0.96 
NET ASSET VALUE, END OF PERIOD  $11.49   $11.45   $13.05   $11.29   $9.67   $10.96 
                               
TOTAL RETURN   0.35%(b)   11.41%   15.59%   16.75%   (11.77%)   9.60%(b)
RATIOS/SUPPLEMENTAL DATA:                              
Net Assets, End of Period (000s)  $60   $174   $126   $88   $86   $448 
RATIOS TO AVERAGE NET ASSETS:                              
Net Investment loss   (0.67%)(c)   (0.77%)   (0.65%)   (0.63%)   (0.72%)   (0.67%)(c)
Operating expenses excluding reimbursement/waiver   2.11%(c)   2.08%   2.07%   2.09%   1.91%   2.96%(c)(d)
Operating expenses including reimbursement/waiver   1.40%(c)   1.40%   1.40%   1.40%   1.40%   1.40%(c)(d)
PORTFOLIO TURNOVER RATE   38%(b)   63%   138%   75%   99%   88%(b)

 

(a)Per share amounts are based upon average shares outstanding.
(b)Not Annualized.
(c)Annualized.
(d)Expense ratios before reductions for startup costs may not be representative of longer term operating periods.

 

See Notes to Financial Statements.

 

54 www.emeraldmutualfunds.com

 

 

 

Emerald Banking and Finance Fund Financial Highlights

 

For a share outstanding throughout the years presented

 

   CLASS A   
   For the Six Months Ended October 31, 2019 (Unaudited)   Year Ended April 30, 2019   Year Ended April 30, 2018   Year Ended April 30, 2017   Year Ended April 30, 2016   Year Ended April 30, 2015 
NET ASSET VALUE, BEGINNING OF PERIOD  $32.71   $46.01   $41.61   $31.27   $28.85   $26.11 
INCOME/(LOSS) FROM OPERATIONS:                              
Net investment loss(a)   (0.04)   (0.24)   (0.29)   (0.17)   (0.06)   (0.16)
Net realized and unrealized gain/(loss) on investments   0.21    (5.35)   5.98    10.51    2.48    2.90 
Total from Investment Operations   0.17    (5.59)   5.69    10.34    2.42    2.74 
                               
LESS DISTRIBUTIONS:                              
From capital gains       (7.71)   (1.29)            
Total Distributions       (7.71)   (1.29)            
NET INCREASE/(DECREASE) IN NET ASSET VALUE   0.17    (13.30)   4.40    10.34    2.42    2.74 
NET ASSET VALUE, END OF PERIOD  $32.88   $32.71   $46.01   $41.61   $31.27   $28.85 
                               
TOTAL RETURN(b)   0.52%(c)   (10.65)%   13.59%   33.07%   8.39%   10.49%
RATIOS/SUPPLEMENTAL DATA:                              
Net Assets, End of Period (000s)  $67,977   $87,267   $172,338   $172,106   $110,601   $48,575 
RATIOS TO AVERAGE NET ASSETS:                              
Net Investment loss   (0.28)%(d)   (0.58)%   (0.65)%   (0.46)%   (0.21)%   (0.58)%
Operating expenses excluding reimbursement/waiver   1.49%(d)   1.42%   1.41%   1.43%   1.48%   1.60%
Operating expenses including reimbursement/waiver   1.49%(d)   1.42%   1.41%   1.43%   1.48%   1.60%
PORTFOLIO TURNOVER RATE   11%(c)   55%   62%   36%   30%   33%

 

(a)Per share amounts are based upon average shares outstanding.
(b)Total return does not reflect the effect of sales charges.
(c)Not Annualized.
(d)Annualized.

 

See Notes to Financial Statements.

 

Semi-Annual Report | October 31, 2019 55

 

 

Emerald Banking and Finance Fund Financial Highlights

 

For a share outstanding throughout the years presented

 

   CLASS C 
   For the Six Months Ended October 31, 2019 (Unaudited)   Year Ended April 30, 2019   Year Ended April 30, 2018   Year Ended April 30, 2017   Year Ended April 30, 2016   Year Ended April 30, 2015 
NET ASSET VALUE, BEGINNING OF PERIOD  $27.87   $40.83   $37.29   $28.20   $26.19   $23.86 
INCOME/(LOSS) FROM OPERATIONS:                              
Net investment loss(a)   (0.13)   (0.44)   (0.51)   (0.36)   (0.24)   (0.30)
Net realized and unrealized gain/(loss) on investments   0.17    (4.81)   5.34    9.45    2.25    2.63 
Total from Investment Operations   0.04    (5.25)   4.83    9.09    2.01    2.33 
                               
LESS DISTRIBUTIONS:                              
From capital gains       (7.71)   (1.29)            
Total Distributions       (7.71)   (1.29)            
NET INCREASE/(DECREASE) IN NET ASSET VALUE   0.04    (12.96)   3.54    9.09    2.01    2.33 
NET ASSET VALUE, END OF PERIOD  $27.91   $27.87   $40.83   $37.29   $28.20   $26.19 
                               
TOTAL RETURN(b)   0.14%(c)   (11.21)%   12.85%   32.23%   7.67%   9.77%
RATIOS/SUPPLEMENTAL DATA:                              
Net Assets, End of Period (000s)  $37,556   $50,079   $78,988   $76,072   $52,366   $31,862 
RATIOS TO AVERAGE NET ASSETS:                              
Net Investment loss   (0.93)%(d)   (1.23)%   (1.30)%   (1.11)%   (0.87)%   (1.23)%
Operating expenses excluding reimbursement/waiver   2.13%(d)   2.07%   2.06%   2.08%   2.13%   2.25%
Operating expenses including reimbursement/waiver   2.13%(d)   2.07%   2.06%   2.08%   2.13%   2.25%
PORTFOLIO TURNOVER RATE   11%(c)   55%   62%   36%   30%   33%

 

(a)Per share amounts are based upon average shares outstanding.
(b)Total return does not reflect the effect of sales charges.
(c)Not Annualized.
(d)Annualized.

 

See Notes to Financial Statements.

 

56 www.emeraldmutualfunds.com

 

 

Emerald Banking and Finance Fund Financial Highlights

 

For a share outstanding throughout the years presented

 

   INSTITUTIONAL CLASS 
   For the Six Months Ended October 31, 2019 (Unaudited)   Year Ended April 30, 2019   Year Ended April 30, 2018   Year Ended April 30, 2017   Year Ended April 30, 2016   Year Ended April 30, 2015 
NET ASSET VALUE, BEGINNING OF PERIOD  $33.70   $46.95   $42.30   $31.69   $29.15   $26.29 
INCOME/(LOSS) FROM OPERATIONS:                              
Net investment income/(loss)(a)   0.01    (0.09)   (0.15)   (0.05)   0.03    (0.07)
Net realized and unrealized gain/(loss) on investments   0.21    (5.45)   6.09    10.66    2.51    2.93 
Total from Investment Operations   0.22    (5.54)   5.94    10.61    2.54    2.86 
                               
LESS DISTRIBUTIONS:                              
From capital gains       (7.71)   (1.29)            
Total Distributions       (7.71)   (1.29)            
NET INCREASE/(DECREASE) IN NET ASSET VALUE   0.22    (13.25)   4.65    10.61    2.54    2.86 
NET ASSET VALUE, END OF PERIOD  $33.92   $33.70   $46.95   $42.30   $31.69   $29.15 
                               
TOTAL RETURN   0.65%(b)   (10.30)%   13.97%   33.48%   8.71%   10.88%
RATIOS/SUPPLEMENTAL DATA:                              
Net Assets, End of Period (000s)  $133,691   $162,910   $221,638   $134,027   $61,654   $23,730 
RATIOS TO AVERAGE NET ASSETS:                              
Net Investment income/(loss)   0.07%(c)   (0.23)%   (0.34)%   (0.14)%   0.11%   (0.25)%
Operating expenses excluding reimbursement/waiver   1.13%(c)   1.06%   1.09%   1.11%   1.15%   1.27%
Operating expenses including reimbursement/waiver   1.13%(c)   1.06%   1.09%   1.11%   1.15%   1.27%
PORTFOLIO TURNOVER RATE   11%(b)   55%   62%   36%   30%   33%

 

(a)Per share amounts are based upon average shares outstanding.
(b)Not Annualized.
(c)Annualized.

 

See Notes to Financial Statements.

 

Semi-Annual Report | October 31, 2019 57

 

 

Emerald Banking and Finance Fund Financial Highlights

 

For a share outstanding throughout the years presented

 

   INVESTOR CLASS 
   For the Six Months Ended October 31, 2019 (Unaudited)   Year Ended April 30, 2019   Year Ended April 30, 2018   Year Ended April 30, 2017   Year Ended April 30, 2016   Year Ended April 30, 2015 
NET ASSET VALUE, BEGINNING OF PERIOD  $30.96   $44.05   $39.86   $29.95   $27.64   $25.01 
INCOME/(LOSS) FROM OPERATIONS:                              
Net investment loss(a)   (0.04)   (0.23)   (0.25)   (0.16)   (0.07)   (0.15)
Net realized and unrealized gain/(loss) on investments   0.19    (5.15)   5.73    10.07    2.38    2.78 
Total from Investment Operations   0.15    (5.38)   5.48    9.91    2.31    2.63 
                               
LESS DISTRIBUTIONS:                              
From capital gains       (7.71)   (1.29)            
Total Distributions       (7.71)   (1.29)            
NET INCREASE/(DECREASE) IN NET ASSET VALUE   0.15    (13.09)   4.19    9.91    2.31    2.63 
NET ASSET VALUE, END OF PERIOD  $31.11   $30.96   $44.05   $39.86   $29.95   $27.64 
                               
TOTAL RETURN   0.48%(b)   (10.64)%   13.67%   33.09%   8.36%   10.52%
RATIOS/SUPPLEMENTAL DATA:                              
Net Assets, End of Period (000s)  $31,094   $41,410   $71,236   $85,557   $80,404   $27,440 
RATIOS TO AVERAGE NET ASSETS:                              
Net Investment loss   (0.29)%(c)   (0.60)%   (0.60)%   (0.46)%   (0.23)%   (0.56)%
Operating expenses excluding reimbursement/waiver   1.50%(c)   1.43%   1.37%   1.43%   1.48%   1.58%
Operating expenses including reimbursement/waiver   1.50%(c)   1.43%   1.37%   1.43%   1.48%   1.58%
PORTFOLIO TURNOVER RATE   11%(b)   55%   62%   36%   30%   33%

 

(a)Per share amounts are based upon average shares outstanding.
(b)Not Annualized.
(c)Annualized.

 

See Notes to Financial Statements.

 

58 www.emeraldmutualfunds.com

 

 

Emerald Funds Notes to Financial Statements

 

October 31, 2019 (Unaudited)

 

1. ORGANIZATION

 

Financial Investors Trust (the “Trust”), a Delaware statutory trust, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The Trust consists of multiple separate portfolios or series. This semi-annual report describes the Emerald Growth Fund, Emerald Small Cap Value Fund, Emerald Insights Fund, and Emerald Banking and Finance Fund (each a “Fund” and collectively, the “Funds”). The Emerald Small Cap Value Fund is a successor to a previously operational fund which was a series of Elessar Funds Investment Trust, a Delaware statutory trust, and was organized into a series of the Trust effective as of the close of business on June 26, 2015. Effective March 3, 2015, the Board approved changing the fiscal year end of the Emerald Small Cap Value Fund from September 30 to April 30.

 

The Emerald Growth Fund and Emerald Insights Fund seek to achieve long-term growth through capital appreciation. The Emerald Small Cap Value Fund seeks long-term capital appreciation. The Emerald Banking and Finance Fund seeks to achieve long term growth through capital appreciation with income as a secondary objective.

 

2. SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. The Funds are considered an investment company for financial reporting purposes under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946. The following is a summary of significant accounting policies consistently followed by the Funds in preparation of their financial statements.

 

Investment Valuation: The Funds generally value their securities based on market prices determined at the close of regular trading on the New York Stock Exchange (“NYSE”), normally, 4:00 p.m. Eastern Time, on each business day the NYSE is open for trading.

 

For equity securities and mutual funds that are traded on an exchange, the market price is usually the closing sale or official closing price on that exchange. In the case of equity securities not traded on an exchange, or if such closing prices are not otherwise available, the securities are valued at the mean of the most recent bid and ask prices on such day. Redeemable securities issued by open-end registered investment companies are valued at the investment company’s applicable net asset value, with the exception of exchange-traded open-end investment companies, which are priced as equity securities.

 

The market price for debt obligations is generally the price supplied by an independent third-party pricing service approved by the Board of Trustees of the Trust (the “Board” or the “Trustees”), which may use a matrix, formula or other objective method that takes into consideration quotations from dealers, market transactions in comparable investments, market indices and yield curves. If vendors are unable to supply a price, or if the price supplied is deemed to be unreliable, the market price may be determined using quotations received from one or more brokers–dealers that make a market in the security.

 

Equity securities that are primarily traded on foreign securities exchanges are valued at the preceding closing values of such securities on their respective exchanges, except when an occurrence subsequent to the time a value was so established is likely to have changed such value. In such an event, the fair values of those securities are determined in good faith through consideration of other factors in accordance with procedures established by and under the general supervision of the Board.

 

When such prices or quotations are not available, or when Emerald Mutual Fund Advisers Trust, (the “Adviser”), believes that they are unreliable, securities may be priced using fair value procedures approved by the Board.

 

Fair Value Measurements: A three-tier hierarchy has been established to classify fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available. Various inputs are used in determining the value of each Fund’s investments as of the reporting period end. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments.

 

 

Semi-Annual Report | October 31, 2019 59

 

 

Emerald Funds Notes to Financial Statements

 

October 31, 2019 (Unaudited)

 

These inputs are categorized in the following hierarchy under applicable financial accounting standards:

 

Level 1 –Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that the Funds have the ability to access at the measurement date;
Level 2 –Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and
Level 3 –Significant unobservable prices or inputs (including the Funds’ own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date.

 

The following is a summary of each input used to value the Funds as of October 31, 2019:

 

Investments in Securities at Value  Level 1 - Quoted Prices   Level 2 - Other Significant Observable Inputs   Level 3 - Significant Unobservable Inputs   Total 
Emerald Growth Fund                    
Common Stocks(a)  $1,252,662,870   $   $   $1,252,662,870 
Short Term Investments   2,985,193            2,985,193 
TOTAL  $1,255,648,063   $   $   $1,255,648,063 

 

Investments in Securities at Value  Level 1 - Quoted Prices   Level 2 - Other Significant Observable Inputs   Level 3 - Significant Unobservable Inputs   Total 
Emerald Small Cap Value Fund                
Common Stocks(a)  $3,092,685   $   $   $3,092,685 
Short Term Investments   13,247            13,247 
TOTAL  $3,105,932   $   $   $3,105,932 

 

Investments in Securities at Value  Level 1 - Quoted Prices   Level 2 - Other Significant Observable Inputs   Level 3 - Significant Unobservable Inputs   Total 
Emerald Insights Fund                
Common Stocks(a)  $10,913,694   $   $   $10,913,694 
Exchange Traded Funds(a)   303,252            303,252 
Short Term Investments   599,193            599,193 
TOTAL  $11,816,139   $   $   $11,816,139 

 

Investments in Securities at Value  Level 1 - Quoted Prices   Level 2 - Other Significant Observable Inputs   Level 3 - Significant Unobservable Inputs   Total 
Emerald Banking and Finance Fund                
Common Stocks                
Banks: Diversified  $176,266,953   $5,164,774   $   $181,431,727 
Other(a)   86,842,600            86,842,600 
Short Term Investments   947,905            947,905 
TOTAL  $264,057,458   $5,164,774   $   $269,222,232 

 

(a)For detailed descriptions of sector and industry, see the accompanying Schedule of Investments.

 

For the six months ended October 31, 2019, the Funds did not have any securities that used significant unobservable inputs (Level 3) in determining fair value.

 

 

60 www.emeraldmutualfunds.com

 

 

 

Emerald Funds Notes to Financial Statements

 

October 31, 2019 (Unaudited)

 

Investment Transactions and Investment Income: Investment transactions are accounted for on the date the investments are purchased or sold (trade date). Realized gains and losses from investment transactions are reported on an identified cost basis, which is the same basis the Funds use for federal income tax purposes. Interest income, which includes accretion of discounts, is accrued and recorded as earned. Dividend income is recognized on the ex-dividend date or for certain foreign securities, as soon as information is available to the Funds. All of the realized and unrealized gains and losses and net investment income, are allocated daily to each class in proportion to its average daily net assets.

 

Real Estate Investment Trusts (“REITs”): The Funds may invest a portion of their assets in REITs and are subject to certain risks associated with direct investment in REITs. REITs may be affected by changes in the value of their underlying properties and by defaults by borrowers or tenants. REITs depend generally on their ability to generate cash flow to make distributions to shareowners, and certain REITs have self-liquidation provisions by which mortgages held may be paid in full and distributions of capital returns may be made at any time. In addition, the performance of a REIT may be affected by its failure to qualify for tax-free pass-through of income under the Internal Revenue Code of 1986, as amended (the “Code”), or its failure to maintain exemption from registration under the 1940 Act. A Fund’s investments in REITs may result in such Fund’s receipt of cash in excess of the REITs’ earnings. If the Fund receives such distributions all or a portion of these distributions will constitute a return of capital to such Fund. Receiving a return of capital distribution from REITs will reduce the amount of income available to be distributed to Fund shareholders. Income from REITs generally will not be eligible for treatment as qualified dividend income. As the final character of the distributions is not known until reported by the REITs on their 1099s, the Funds utilize an average of the prior year’s reallocation information as an estimate for the current year character of distributions.

 

Trust Expenses: Some expenses of the Trust can be directly attributed to the Funds. Expenses which cannot be directly attributed to the Funds are apportioned among all funds in the Trust based on average net assets of each fund.

 

Fund and Class Expenses: Expenses that are specific to a Fund or class of shares of a Fund, including distribution fees (Rule 12b-1 fees) and shareholder servicing fees, are charged directly to that Fund or share class. All expenses of a Fund, other than class specific expenses, are allocated daily to each class in proportion to its average daily net assets. Expenses that are common to the Funds generally are allocated among the Funds in proportion to their average daily net assets.

 

Federal Income Taxes: Each Fund complies with the requirements under Subchapter M of the Code, applicable to regulated investment companies and intends to distribute substantially all of its net taxable income and net capital gains, if any, each year so that the Funds will not be subject to excise tax on undistributed income and gains. The Funds are not subject to income taxes to the extent such distributions are made.

 

As of and during the six months ended October 31, 2019, the Funds did not have a liability for any unrecognized tax benefits. The Funds file U.S. federal, state, and local tax returns as required. The Funds’ tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return for federal purposes and four years for most state returns. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.

 

Distributions to Shareholders: Each Fund normally pays dividends and distributes capital gains, if any, on an annual basis. Income dividend distributions are derived from dividends and other income each Fund receives from its investments, including short-term capital gains. Long term capital gain distributions are derived from gains realized when each Fund sells a security it has owned for more than a year. Each Fund may make additional distributions and dividends at other times if the portfolio manager believes doing so may be necessary for each Fund to avoid or reduce taxes.

 

3. TAX BASIS INFORMATION

 

Tax Basis of Investments: As of October 31, 2019, the aggregate cost of investments, gross unrealized appreciation/(depreciation) and net unrealized appreciation/(depreciation) for Federal tax purposes was as follows:

 

   Gross Appreciation (excess of value over tax cost)   Gross Depreciation (excess of tax cost over value)   Net Unrealized Appreciation/(Depreciation)   Cost of Investments for Income Tax Purposes 
Emerald Growth Fund  $405,240,692   $(70,278,085)  $334,962,607   $920,685,456 
Emerald Small Cap Value Fund   628,553    (117,057)   511,496    2,594,436 
Emerald Insights Fund   2,289,220    (327,427)   1,961,793    9,854,346 
Emerald Banking and Finance Fund   47,309,853    (11,030,986)   36,278,867    232,943,365 

 

 

Semi-Annual Report | October 31, 2019 61

 

 

Emerald Funds Notes to Financial Statements

 

October 31, 2019 (Unaudited)

 

Tax Basis of Distributions to Shareholders: The character of distributions made during the year from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or realized gain were recorded by each Fund.

 

The tax characters of distributions paid by the Funds for the fiscal year ended April 30, 2019 were as follows:

 

   Ordinary Income   Long-Term Capital Gain 
Emerald Growth Fund  $   $116,684,237 
Emerald Small Cap Value Fund       1,226,932 
Emerald Insights Fund   170,539    1,740,059 
Emerald Banking and Finance Fund       86,106,387 

 

The amounts and characteristics of tax basis distributions and composition of distributable earnings/(accumulated losses) are finalized at fiscal year-end. Accordingly, tax basis balances have not been determined as of October 31, 2018.

 

4. SECURITIES TRANSACTIONS

 

 

The cost of purchases and proceeds from sales of securities (excluding short-term securities) during the six months ended October 31, 2019 was as follows:

 

Funds  Cost of Investments Purchased   Proceeds from Investments Sold 
Emerald Growth Fund  $286,613,630   $330,651,310 
Emerald Small Cap Value Fund   761,719    1,769,639 
Emerald Insights Fund   4,257,199    4,039,857 
Emerald Banking and Finance Fund   32,860,023    104,913,475 

 

5. SHARES OF BENEFICIAL INTEREST

 

The capitalization of the Trust consists of an unlimited number of shares of beneficial interest with no par value per share. Holders of the shares of the Funds of the Trust have one vote for each share held and a proportionate fraction of a vote for each fractional share. All shares issued and outstanding are fully paid and are transferable and redeemable at the option of the shareholder. Purchasers of the shares do not have any obligation to make payments to the Trust or its creditors (other than the purchase price for the shares) or make contributions to the Trust or its creditors solely by reason of the purchaser’s ownership of the shares. Shares have no pre-emptive rights.

 

6. MANAGEMENT AND RELATED-PARTY TRANSACTIONS

 

The Adviser, subject to the authority of the Board, is responsible for the overall management and administration of the Funds’ business affairs. The Adviser manages the investments of the Funds in accordance with the Funds’ investment objective, policies and limitations and investment guidelines established jointly by the Adviser and the Trustees. Pursuant to the Advisory Agreement, the Funds pay the Adviser fees for the services and facilities it provides payable on a monthly basis at the annual rate set forth below of the Funds’ average daily net assets. The management fee is paid on a monthly basis.

 

Emerald Growth Fund  
Average Total Net Assets Contractual Fee
Up to and including $250M 0.75%
Over $250M and including $500M 0.65%
Over $500M and including $750M 0.55%
Over $750M 0.45%

 

Emerald Small Cap Value Fund  
Average Total Net Assets Contractual Fee
Up to and including $250M 0.75%
Over $250M and including $500M 0.65%
Over $500M and including $750M 0.55%
Over $750M 0.45%

 

 

 

62 www.emeraldmutualfunds.com

 

 

Emerald Funds Notes to Financial Statements

 

October 31, 2019 (Unaudited)

 

Emerald Insights Fund  
Average Total Net Assets Contractual Fee
Up to and including $250M 0.75%
Over $250M and including $500M 0.65%
Over $500M and including $750M 0.55%
Over $750M 0.45%

 

Emerald Banking and Finance Fund  
Average Total Net Assets Contractual Fee
Up to and including $100M 1.00%
Over $100M 0.90%

 

The Adviser has contractually agreed to limit each Fund’s total annual operating expenses (exclusive of acquired fund fees and expenses, brokerage expenses, interest expenses, taxes and extraordinary expense) set forth to the annual shares (as percentages of a Fund’s average daily net assets) in the following table for Class A, Class C, Institutional Class, and Investor Class shares. This agreement (the “Expense Agreement”) is in effect from September 1, 2019 through August 31, 2020. The prior Expense Agreement was in effect from September 1, 2018 through August 31, 2019. The Adviser will be permitted to recover, on a class-by-class basis, expenses it has borne through the expense agreement to the extent that a Fund’s expenses in later periods fall below the expense cap in effect at the time of the waiver or reimbursement. Notwithstanding the foregoing, the Funds will not be obligated to pay any such fees and expenses more than three years after the date of the waiver or reimbursement. The Adviser may not discontinue this waiver, prior to August 31, 2020, without the approval by the Fund’s Board. Fees waived/reimbursed by the Adviser for the six months ended October 31, 2019 are disclosed in the Statements of Operations.

 

Emerald Growth Fund      
Class A Class C Institutional Class Investor Class
1.29% 1.94% 0.99% 1.34%

 

Emerald Small Cap Value Fund
Class A Class C Institutional Class Investor Class
1.35% 2.00% 1.00% 1.25%

 

Emerald Insights Fund      
Class A Class C Institutional Class Investor Class
1.35% 2.00% 1.05% 1.40%

 

Emerald Banking and Finance Fund
Class A Class C Institutional Class Investor Class
1.84% 2.49% 1.54% 1.89%

 

 

Semi-Annual Report | October 31, 2019 63

 

 

Emerald Funds Notes to Financial Statements

 

October 31, 2019 (Unaudited)

 

For the six months ended October 31, 2019, the fee waivers/reimbursements and recoupments of past waived fees were as follows:

 

Fund  Fees Waived/ Reimbursed By Adviser   Recoupment of Past Waived Fees By Adviser 
Emerald Growth Fund        
Class A  $   $ 
Class C        
Institutional Class        
Investor Class        
Emerald Small Cap Value Fund          
Class A  $35,607   $ 
Class C   641     
Institutional Class   13,532     
Investor Class   8,387     
Emerald Insights Fund          
Class A  $41,705   $ 
Class C   638     
Institutional Class   5,959     
Investor Class   459     
Emerald Banking and Finance Fund          
Class A  $   $ 
Class C        
Institutional Class        
Investor Class        

 

As of October 31, 2019, the balances of recoupable expenses for each Fund were as follows:

 

Fund  Expires 2020   Expires 2021   Expires 2022   Expires 2023   Total 
Emerald Growth Fund                    
Class A  $   $   $   $   $ 
Class C                    
Institutional Class                    
Investor Class                    
Emerald Small Cap Value Fund                         
Class A  $5,682   $32,984   $63,581   $35,607   $137,854 
Class C   3,066    1,410    936    641    6,052 
Institutional Class   35,060    53,528    27,060    13,532    129,180 
Investor Class   4,234    7,303    8,872    8,387    28,795 
Emerald Insights Fund                         
Class A  $42,505   $72,407   $77,413   $41,705   $234,031 
Class C   445    908    1,019    638    3,010 
Institutional Class   4,736    8,238    11,141    5,959    30,073 
Investor Class   306    693    1,004    459    2,462 
Emerald Banking and Finance Fund                         
Class A  $   $   $   $   $ 
Class C                    
Institutional Class                    
Investor Class                    

 

 

64 www.emeraldmutualfunds.com

 

 

Emerald Funds Notes to Financial Statements

 

October 31, 2019 (Unaudited)

 

Fund Administrator Fees and Expenses: ALPS Fund Services, Inc. (“ALPS”) serves as administrator to the Funds and the Funds have agreed to pay expenses incurred in connection with their administrative activities. Pursuant to an Administration Agreement, ALPS provides operational services to the Funds including, but not limited to, fund accounting and fund administration and generally assist in the Funds’ operations. Officers of the Trust are employees of ALPS. The Funds’ administration fee is accrued on a daily basis and paid monthly. Administration fees paid by the Funds for the six months ended October 31, 2019 are disclosed in the Statements of Operations.

 

The Administrator is also reimbursed by the Funds for certain out-of-pocket expenses.

 

Transfer Agent: ALPS serves as transfer, dividend paying and shareholder servicing agent for the Funds. ALPS receives an annual minimum fee, a fee based upon the number of shareholder accounts, and is also reimbursed by the Funds for certain out-of-pocket expenses. Transfer agent fees paid by the Funds for the six months ended October 31, 2019 are disclosed in the Statements of Operations.

 

Compliance Services: ALPS provides services that assist the Trust’s chief compliance officer in monitoring and testing the policies and procedures of the Trust in conjunction with requirements under Rule 38a-1 under the 1940 Act and receives an annual base fee. ALPS is reimbursed for certain out-of-pocket expenses by the Funds. Compliance service fees paid by the Funds for the six months ended October 31, 2019 are disclosed in the Statements of Operations.

 

Principal Financial Officer: ALPS receives an annual fee for providing principal financial officer services to the Funds. Principal financial officer fees paid by the Funds for the six months ended October 31, 2019 are disclosed in the Statements of Operations.

 

Distributor: ALPS Distributors, Inc. (“ADI” or the “Distributor”) (an affiliate of ALPS) acts as the distributor of the Funds’ shares pursuant to a Distribution Agreement with the Trust. Shares are sold on a continuous basis by ADI as agent for the Funds, and ADI has agreed to use its best efforts to solicit orders for the sale of Funds’ shares, although it is not obliged to sell any particular amount of shares. ADI is not entitled to any compensation for its services as Distributor. ADI is registered as a broker-dealer with the U.S. Securities and Exchange Commission.

 

Each Fund has adopted a separate Distribution and Services Plan (each a “Plan” and collectively, the “Plans”) pursuant to Rule 12b-1 of the 1940 Act. The Plans allow each Fund, as applicable, to use each Fund’s assets to pay fees in connection with the distribution and marketing of the Funds’ shares and/or the provision of shareholder services to the Funds’ shareholders. The Plan permits payment for services in connection with the administration of plans or programs that use shares of each Fund as their funding medium and for related expenses. The recipients of such payments may include other affiliates of the Adviser, broker-dealers, financial institutions, plan sponsors and administrators and other financial intermediaries through which investors may purchase shares of the Fund. The Plans permit each Fund to make total payments at an annual rate of up to 0.35%, 0.75% and 0.25% of the average daily net asset value of Class A, Class C and Investor Class, respectively. Because these fees are paid out of the Funds’ assets on an ongoing basis, over time they will increase the cost of an investment in the Funds, and Plan fees may cost an investor more than other types of sales charges.

 

Each Fund, except the Emerald Small Cap Value Fund, has adopted a Shareholder Services Plan (a “Shareholder Services Plan”) with respect to its Class C, Institutional Class and Investor Class shares. Under the Shareholder Services Plan, a Fund is authorized to compensate certain financial intermediaries, including broker-dealers and Fund affiliates which may include the Distributor, Adviser and/or the transfer agent (the “Participating Organizations”), an aggregate fee in an amount not to exceed on an annual basis 0.25%, 0.05% and 0.15% of the average daily net asset value of Class C, Institutional Class and Investor Class, respectively, of the Funds attributable to or held in the name of the Participating Organizations pursuant to an agreement with such Participating Organizations (the “Agreement”). Each Agreement will set forth the non-distribution related shareholder services to be performed by the Participating Organizations for the benefit of a Fund’s shareholders who have elected to have such Participating Organizations service their accounts. Any amount of such payment not paid to Participating Organizations during a Fund’s fiscal year for such service activities shall be reimbursed to the Fund as soon as practicable. Shareholder Services Plan fees are included with distribution and service fees in the Statements of Operations. Fees recaptured pursuant to the Shareholder Services Plan for the six months ended October 31, 2019 are included as an offset to distribution and service fees as disclosed in the Statements of Operations.

 

The Emerald Small Cap Value Fund has adopted a Shareholder Services Plan (the “Plan”) with respect to its Class C shares. Under the Plan, the Fund is authorized to pay banks and its affiliates and other institutions, including broker-dealers and Fund affiliates which may include the Distributor, Adviser and/or the transfer agent (“Class C Participating Organizations”), an aggregate fee in an amount not to exceed on an annual basis 0.25% of the average daily net asset value of Class C shares of the Fund attributable to or held in the name of the Participating Organizations for its clients as compensation for providing shareholder service activities, which do not include distribution services pursuant to an agreement with Participating Organizations. Any amount of such payment not paid to the Participating Organizations during the Fund’s fiscal year for such service activities shall be reimbursed to the Fund as soon as practicable. Plan fees are included with distribution and service fees in the Statements of Operations. Fees recaptured pursuant to the Plan for the six months ended October 31, 2019 are included as an offset to distribution and service fees as disclosed in the Statements of Operations.

 

 

Semi-Annual Report | October 31, 2019 65

 

 

Emerald Funds Notes to Financial Statements

 

October 31, 2019 (Unaudited)

 

Trustees

 

The fees and expenses of the independent Trustees of the Board are presented in the Statements of Operations.

 

7. INDEMNIFICATIONS

 

Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that may contain general indemnification clauses, which may permit indemnification to the extent permissible under applicable law. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred.

 

8. SUBSEQUENT EVENTS

 

Subsequent events after the date of the Statements of Assets and Liabilities have been evaluated through the date the financial statements were issued.

 

 

66 www.emeraldmutualfunds.com

 

 

Emerald Funds Additional Information

 

October 31, 2019 (Unaudited)

 

1. FUND HOLDINGS

 

The Funds’ portfolio holdings are made available semi-annually in shareholder reports within 60 days after the close of the period for which the report is being made, as required by federal securities laws. The Funds also file monthly portfolio holdings on Form N-PORT on a quarterly basis, with the schedule of portfolio holdings filed on Form N-PORT for the third month of each Fund’s fiscal quarter made publicly available 60 days after the end of the Funds’ fiscal quarter.

 

2. FUND PROXY VOTING POLICIES, PROCEDURES AND SUMMARIES

 

Each Fund’s policies and procedures used in determining how to vote proxies and information regarding how the Funds voted proxies relating to portfolio securities during the most recent prior 12-month period ending June 30 are available without charge, (1) upon request, by calling (toll-free) (855) 828-9909 and (2) on the SEC’s website at http://www.sec.gov.

 

 

Semi-Annual Report | October 31, 2019 67

 

 

Emerald Funds Privacy Policy

 

 

Who We Are  
Who is providing this notice? Emerald Banking and Finance Fund, Emerald Growth Fund, Emerald Insights Fund and Emerald Small Cap Value Fund
What We Do  
How do the Funds protect my personal information? To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings.
How do the Funds collect my personal information? We collect your personal information, for example, when you
       open an account
       provide account information or give us your contact information
       make a wire transfer or deposit money
Why can’t I limit all sharing? Federal law gives you the right to limit only
       sharing for affiliates’ everyday business purposes-information about your creditworthiness
       affiliates from using your information to market to you
       sharing for non-affiliates to market to you
  State laws and individual companies may give you additional rights to limit sharing.
Definitions  
Affiliates Companies related by common ownership or control. They can be financial and nonfinancial companies.
Non-affiliates Companies not related by common ownership or control. They can be financial and nonfinancial companies.
       The Funds do not share with non-affiliates so they can market to you.
Joint marketing A formal agreement between non-affiliated financial companies that together market financial products or services to you.
       The Funds do not jointly market.
Other Important Information  
California residents If your account has a California home address, your personal information will not be disclosed to nonaffiliated third parties except as permitted by applicable California law, and we will limit sharing such personal information with our affiliates to comply with California privacy laws that apply to us.
Vermont residents The State of Vermont requires financial institutions to obtain your consent prior to sharing personal information that they collect about you with affiliated companies and nonaffiliated third parties other than in certain limited circumstances. Except as permitted by law, we will not share personal information we collect about you with nonaffiliated third parties or other affiliated companies unless you provide us with your written consent to share such information.

 

 

68 www.emeraldmutualfunds.com

 

 

Emerald Funds Privacy Policy

 

 

FACTS WHAT DO THE FUNDS DO WITH YOUR PERSONAL INFORMATION?
WHY? Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.
WHAT? The types of personal information we collect and share depend on the product or service you have with us. This information can include:
  • Social Security number and account transactions
  • Account balances and transaction history
  • Wire transfer instructions
HOW? All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons the Funds choose to share; and whether you can limit this sharing.

 

Reasons we can share your personal information Do the funds share: Can you limit this sharing?
For our everyday business purposes –
such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus
Yes No
For our marketing purposes –
to offer our products and services to you  
No We do not share.
For joint marketing with other financial companies   No We do not share.
For our affiliates’ everyday business purposes –
information about your transactions and experiences  
Yes No
For our affiliates’ everyday business purposes –
information about your creditworthiness  
No We do not share.
For non-affiliates to market to you   No We do not share.

 

 

Semi-Annual Report | October 31, 2019 69

 

 

 

 

 

 

 

 

 

Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, paper copies of the Fund’s annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Funds’ website at www.GrandeurPeakGlobal.com and you will be notified by mail each time a report is posted and provided with a website link to access the report.

 

You may, notwithstanding the availability of shareholder reports online, elect to receive all future shareholder reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the Funds, you can call 1.855.377.7325 to let the Funds know you wish to continue receiving paper copies of your shareholder reports.

 

If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Funds electronically anytime by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by enrolling at www.GrandeurPeakGlobal.com.

 

 

 

 

 

TABLE OF CONTENTS

 

Shareholder Letter 2
Performance Update 10
Disclosure of Fund Expenses 34
Portfolio of Investments  
Grandeur Peak Emerging Markets Opportunities Fund 36
Grandeur Peak Global Contrarian Fund 39
Grandeur Peak Global Micro Cap Fund 42
Grandeur Peak Global Opportunities Fund 45
Grandeur Peak Global Reach Fund 49
Grandeur Peak Global Stalwarts Fund 54
Grandeur Peak International Opportunities Fund 57
Grandeur Peak International Stalwarts Fund 61
Statements of Assets and Liabilities 64
Statements of Operations 66
Statements of Changes in Net Assets  
Grandeur Peak Emerging Markets Opportunities Fund 68
Grandeur Peak Global Contrarian Fund 69
Grandeur Peak Global Micro Cap Fund 70
Grandeur Peak Global Opportunities Fund 71
Grandeur Peak Global Reach Fund 72
Grandeur Peak Global Stalwarts Fund 73
Grandeur Peak International Opportunities Fund 74
Grandeur Peak International Stalwarts Fund 75
Financial Highlights  
Grandeur Peak Emerging Markets Opportunities Fund 76
Grandeur Peak Global Contarian Fund 78
Grandeur Peak Global Micro Cap Fund 79
Grandeur Peak Global Opportunities Fund 80
Grandeur Peak Global Reach Fund 82
Grandeur Peak Global Stalwarts Fund 84
Grandeur Peak International Opportunities Fund 86
Grandeur Peak International Stalwarts Fund 88
Notes to Financial Statements 90
Disclosure Regarding Approval of Fund Advisory Agreement 102
Additional Information 106
Privacy Policy 107

 

 

 

Grandeur Peak Funds® Shareholder Letter

 

October 31, 2019 (Unaudited)

 

Dear Fellow Shareholders,

 

In 2014, after almost three years in business, we wrote in the Q1 investor letter:

 

“Here we sit with the global economy still struggling, our companies without a lot of wind in their sails and valuations not that great.”

 

Since then the market, as measured by the MSCI All Country World Investible Market Index (ACWI IMI)1, is up another 44.4% or about 7% annualized. Back in 2014, when we had doubts that we would continue to have a strong market wind filling our sails, we wrote:

 

“As an investment team we have to take to the oars and figure out which of our names we should be adding to and to a lesser degree find some new names, first looking over our watch lists, then elsewhere. This, of course is easier said than done.”

 

Now 22 quarters later in 2019, we have a nearly similar feeling. We thought it would be helpful (again) to remind you of how we attempt to generate returns for our portfolios in a tough market environment.

 

The Grandeur Peak Process of Investing

While there are 8,820 stocks in the ACWI IMI, there are actually close to 40,000 publicly listed companies that we consider investible2. Our goal is to look at the financials of all 40,000 companies at least twice a year and make a determination as to which of these companies we will add to our research universe. What we’re looking for in these screens are certain characteristics (e.g. growth rates, profitability, cash flow generation, etc.) that we believe are indicative of high quality companies. We employ a very systematic approach to screening this universe whereby over the course of a 52-week schedule we screen the entire universe twice to hopefully minimize the number of high quality companies that slip through the cracks.

 

For us, a great (high quality) company is one that operates a good business. According to CNBC, Warren Buffett once said: “I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.”3 We look for companies that have plenty of headroom to grow. We believe a good business allows for the possibility of large market share gains. Think about Cisco4 back in 1990. The company became public on February 16, 1990 with a $200 million market capitalization. The opportunity for growth was enormous. But just as important as the opportunity to grow, a business must have economies of scale such that growth will lead to increased profitability as measured by factors such as rising returns on assets and capital. A third important characteristic that is indicative of a great business is a strong competitive advantage, what Buffett refers to as a “moat”5. Having a strong competitive advantage can allow a company to stay profitable for years. Indicators of a moat around a business are sticky customers, steady recurring revenue, a diverse customer base with little risk of revenue drying up if a large customer or two were to leave, and strong bargaining power with suppliers and customers.

 

Another very important aspect of a good company, we believe, is the motivation, integrity and skill of the management team. In many cases, making a good business into a good company requires the right management team. This is why we travel so much. We think it’s vitally important to meet management face to face. More recently, we’ve refined our approach to evaluating the environmental, social and governance (ESG) aspects of the companies we research. While we’ve always felt that ESG principles are at the heart of our focus on Quality, and ESG analysis has always been an inherent part of our fundamental research process, we are now developing more systematic tools to help us incorporate ESG analysis into our process.

 

Finally, we make a distinction between good companies and good stocks. Finding a great company is only half the battle. If a great company’s stock isn’t attractively priced, it might not make a very good investment. So ultimately, the entire framework of our investment process can be boiled down to a three dimensional matrix through which we analyze each company along the key measures: Quality, Value and Momentum (QVM). When we speak of “momentum,” we’re not talking about stock price momentum or technical momentum, but rather fundamental business momentum: how well the business is doing. Through our screening and follow-on research process, what we’re ultimately trying to determine is where on the QVM spectrum a company lies and does that make it a buy, hold, trim, or sell.

 

 

1The MSCI ACWI Investable Market Index (IMI) captures large, mid and small cap representation across 23 Developed Markets (DM) and 26 Emerging Markets (EM) countries. With 9,072 constituents, the index is comprehensive, covering approximately 99% of the global equity investment opportunity set.
2Up from 30,000 when we wrote in Q1-2014
3Schuyler Velasco, “Ten pieces of investment advice from America's greatest investor” (Aug 30, 2013), http://www.cnbc.com/id/101000052
4As of 10/31/2019, Grandeur Peak Funds owned zero shares of Cisco Systems, Inc.
5A moat, as Buffet has popularized the term, refers to a business' ability to maintain competitive advantages over its competitors in order to protect its long-term profits and market share from competing firms.

 

 

2 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

Grandeur Peak Funds® Shareholder Letter

 

October 31, 2019 (Unaudited)

 

One question we get asked by prospective clients is: Are we Growth or Value investors? The easy, although confusing answer to that question is: “Yes.” What we really are though, are Quality investors. Some might refine our classification as “Quality Growth,” and while that is partially true, we are firm believers that the Value factor in our QVM matrix is as important as the Quality factor. In the words of Professor Robert Novy-Marx:

 

“Buying high quality assets without paying premium prices is just as much value investing as buying average quality assets at discount prices. Strategies that exploit the quality dimension of value are profitable on their own, and accounting for both dimensions of value by trading on combined quality and price signals yields dramatic performance improvements over traditional value strategies. Accounting for quality also yields significant performance improvements for investors trading momentum as well as value.”6

 

In September we launched our Global Contrarian strategy. Many of you have asked why we think a fifth global strategy is necessary. There’s a subtle nuance to our research framework that we think this manifestation of our process can bring to the table. As outlined above, our process is to identify what we believe are the highest quality companies in the market, and then own them at acceptable valuations (“Quality-then-Value”). The approach of the Contrarian strategy is to mine our internal database of quality companies for those that we believe exhibit exceptionally good valuations. With Value as the starting point, we then make a determination if the overall Quality is acceptable. This “Value-then-Quality” approach can lead to a different perspective that we think will enhance our research process, and ultimately could benefit all of our strategies and clients.

 

While it is impossible to time these things (and more importantly to note, we’re not trying to time anything here), we think a “Value-then-Quality” approach might be a good approach to global markets after a brief period of underperformance of traditional Value investing as detailed in Exhibit 1:

 

Exhibit 1: Total Return of the MSCI ACWI Growth and Value Indices

 

  

Source: MSCI (data from 12/31/2018 - 9/30/2019)

 

Past performance does not guarantee future results.

 

Exhibit 1 shows the total return of the MSCI ACWI Large Cap Growth, MSCI ACWI Large Cap Value, and MSCI ACWI Small Cap Value Indexes7 over the past seven quarters. Over this period, there has been an unusual bifurcation between the return of the Growth and Value indices. This

 

 

6Robert Novy-Marx, “The Quality Dimension of Value Investing”, Recent Working Papers http://rnm.simon.rochester.edu (March 2013)
7The MSCI ACWI Large Cap Growth Index captures large-cap securities exhibiting overall growth style characteristics across 23 Developed Markets (DM) countries and 26 Emerging Markets (EM) countries. The MSCI ACWI Large Cap Value Index captures large cap securities exhibiting overall value style characteristics across 23 Developed Markets (DM) countries* and 26 Emerging Markets (EM) countries. The MSCI ACWI Small Cap Value Index captures small cap securities exhibiting overall value style characteristics across 23 Developed Markets (DM) countries* and 26 Emerging Markets (EM) countries.

 

 

Semi-Annual Report | October 31, 2019 3

 

 

Grandeur Peak Funds® Shareholder Letter

 

October 31, 2019 (Unaudited)

 

difference is especially stark between the US and non-US markets as shown in Exhibit 2 which breaks the analysis into US and non-US markets as measured by the MSCI USA, the MSCI Europe, Australasia and the Far East (EAFE), and the MSCI Emerging Markets (EM) Indices.8

 

Exhibit 2: Total Return of the MSCI USA, EAFE, and EM Growth and Value Indices9

 

 

 

Source: MSCI (data from 12/31/2018 - 9/30/2019)

 

Past performance does not guarantee future results

 

The bottom line is that we believe that our investment process, using a Quality, Value and fundamental Momentum framework can continue to deliver attractive long-term results, even if in the short run we’re pretty cautious about the current market environment.

 

Portfolio Commentary

 

Overall performance for equity markets and Grandeur Peak strategies has been lackluster the last several months, but zooming out to a year-to-date view, the numbers are much more interesting. Of particular note for us, while the emerging market indices continue to lag, our Emerging Markets Opportunities Fund has been able to outperform the MSCI ACWI Emerging Markets SMID Cap benchmark by more than 1200 basis points

 

 

8The MSCI USA Index is designed to measure the performance of the large and mid cap segments of the US market. With 640 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in the US. The MSCI Europe Index captures large and mid cap representation across 15 Developed Markets (DM) countries in Europe. The MSCI Europe, Australasia and the Far East (EAFE) Index is a stock market index that is designed to measure the equity market performance of developed markets outside of the U.S. & Canada. The MSCI Emerging Markets (EM) Index captures large and mid cap representation across 26 Emerging Markets countries.
9The MSCI U.S. Large Cap Growth Index refers to a composite that includes large cap companies located in the United States with favorable growth profiles. The MSCI USA Value Index captures large and mid cap US securities exhibiting overall value style characteristics. The value investment style characteristics for index construction are defined using three variables: book value to price, 12-month forward earnings to price and dividend yield. The MSCI US Small Cap Value Index captures small cap US securities exhibiting overall value style characteristics. The value investment style characteristics for index construction are defined using three variables: book value to price, 12- month forward earnings to price and dividend yield. The MSCI EAFE Growth Index captures large and mid cap securities exhibiting overall growth style characteristics across Developed Markets countries* around the world, excluding the US and Canada. The MSCI EAFE Large Cap Index is an equity index which captures large cap representation across Developed Markets countries* around the world, excluding the US and Canada. With 396 constituents, the index covers approximately 70% of the free float-adjusted market capitalization in each country. The MSCI EAFE Small Cap Value Index captures small cap securities exhibiting overall value style characteristics across Developed Markets countries* around the world, excluding the US and Canada. The MSCI Emerging Markets Growth Index captures large and mid cap securities exhibiting overall growth style characteristics across 26 Emerging Markets (EM) countries. The MSCI Emerging Markets Value Index captures large and mid cap securities exhibiting overall value characteristics across 26 Emerging Markets (EM) countries. The MSCI Emerging Markets (EM) Small Cap Value Index captures small cap securities exhibiting overall value style characteristics across 26 Emerging Markets (EM) countries.

 

 

4 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

Grandeur Peak Funds® Shareholder Letter

 

October 31, 2019 (Unaudited)

 

year-to-date.10 Only the Global Micro Cap Fund lagged its primary benchmark year-to-date, as it continued to face strong micro-cap headwinds vs its small-cap benchmark. As we look under the hood of our portfolios, not every name is working out as we envisioned, but we are encouraged by the work we’re doing and with the companies in which we are investing.

 

At a company, geography, and sector level, our team is continually evaluating the dynamism of our QVM positioning. Technology is an area where we are focusing to get Value right. The market is not patient; software companies without perfect execution are being severely penalized. We continue to trim as names get expensive and add when we think there is nice upside potential.

 

Within industrials, energy, and materials, our team has not been willing to take any chances on lower Quality companies, and has thoughtfully become defensively positioned as we pay attention to cyclicality. Owning better balance sheets and reducing exposure to levered names has been a priority. We see timid customers and supply chain disruptions across the globe. Purchasing Managers’ Index11 data is trending in the wrong direction and has become particularly concerning in Germany, where the Q3 reading came in at 41.7 (on a scale of 1 to 100), the lowest reading since 2009, where anything below 50 signals contraction in the manufacturing sector. See Exhibit 3 on next page. This trend of softening leads us to focus on strength of management in our companies. We look for leaders who will not have to deleverage in a downturn, and who will be able to engage in strategic mergers and acquisitions (M&A) activity in an opportune environment. For ease of identifying large moves away from 50, the data are highlighted where the index has moved at least 5 points away from center.

 

 

101200 basis points is equivalent to 12 percentage points. Basis points refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 1/100th of 1%, or 0.01%, or 0.0001, and is used to denote the percentage change in a financial instrument. The relationship between percentage changes and basis points can be summarized as follows: 1% change = 100 basis points and 0.01% = 1 basis point.

11The Purchasing Managers’ Index is a diffusion index that summarizes whether market conditions, as viewed by purchasing managers, are expanding, staying the same, or contracting. Index data is compiled based on a survey of over 400 companies in each country where purchasing managers are required to answer a series of questions based on a variety of economic data points, relative to the prior month. The possible responses of “increase,” “decrease.” or “no change,” are aggregated to create a diffusion index, where the index is a sum of the percentage of “increase” responses and half of the percentage of “no change” responses for each variable. The resulting score ranges from 1 to 100 with a score greater than 50 indicating an increase or expansion and a score below 50 indicating a contraction. For ease of interpreting trends, the data are colored to indicate the monthly changes over time, >55: dark green; 50.1-54.9: light green; 45.1-50.0: light red; <44.9: dark red

 

 

Semi-Annual Report | October 31, 2019 5

 

 

Grandeur Peak Funds® Shareholder Letter

 

October 31, 2019 (Unaudited)

 

Exhibit 3: Global Purchasing Managers’ Index – Monthly Data

 

 

Source: IHS Markit, Global Purchasing Managers’ Index, 1/31/2017-9/30/19

 

In healthcare, our tilt towards Quality and Momentum has seen nice results in China in recent months. This is a market historically driven by generic drugs, where increasing inflows of private equity dollars and government pricing pressure on generics have stimulated aggressive research and development. There is a definite case of a rising tide lifting all boats, but we can do better than just rely on the tide. Not wanting the binary risks of biotech, our focus remains on life sciences companies. These are firms like contract research organizations (CROs), which provide outsourced research, diagnostics, and other services. We are willing to pay up for Quality in this space, as we believe there is still plenty of headroom, while always watching valuation carefully.

 

No mention of China can avoid the topic of trade wars. Across healthcare, tech, and other sectors, we are connecting important global dots that we feel position us well, with a few examples listed here: 1) Chinese companies that target a domestic customer base are greatly benefiting from closing borders; 2) mainland exporters are accelerating the move of production to neighboring Southeast Asian countries to not only avoid potential tariffs but also as a cost reduction measure; 3) companies in other developed international countries are benefitting from Chinese importers looking for new non-US counterparts. While we continue to be bottom up investors, we are constantly aware that the economy is truly global and all events can create opportunities and risks.

 

Elsewhere in the portfolio, we are trying to take advantage of the blending of technology and consumer. Every visit to your local shopping mall (if you still go these days) seems to spark reflections on the drastic shift taking place in brick and mortar retail. The world is undergoing serious changes in consumer behavior, with buyers demanding more choices, real-time results, and customization (see Global e-Commerce Growth graph below). We continue to like companies that play into this trend. We find that consumer companies that are sophisticated in their use of technology, with advanced customer data and loyalty programs, are able to streamline supply chains and provide rapid online adaptation. These companies feel head and shoulders above their competition due to the nimbleness and knowledge of customer base that technology provides. As a somewhat related aside, if you haven’t heard of digital fashion, you need to google it…. mind blowing. Perhaps a foreshadowing of things to come in the marrying of technology and retail?

 

 

6 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

Grandeur Peak Funds® Shareholder Letter

 

October 31, 2019 (Unaudited)

 

Exhibit 4: Global eCommerce growth (ex-travel) ($ millions)

 

 

y/y means year-over-year

 

Other pieces of our consumer portfolio include drug stores (ageing population theme), the athleisure trend’s effects on fast fashion and traditional retail, and education platforms/technology. We are also closely watching Indian consumer companies, but despite recent sell-offs, they remain extremely expensive. We aim to own strong brands that are adapting well, crossing borders, and increasing standards of living.

 

Within the Financials sector, we are looking for beneficiaries of the “passivization” of public equity management and the “privatization” of active equity management. Private asset managers are appealing to us due to their recurring revenue profiles and opportunities to consolidate large markets that are expanding through rising alternatives allocations. Historically, financials exposure at Grandeur Peak has been heavy on banks and light on real estate, as real estate investment trusts (REITS) generally do not fit our best-in-class growth profile. As a result, we have tended to do better when rates are rising and worse when they are falling. We are finding that the addition of private asset managers to the portfolio helps us to balance out that sensitivity to the monetary cycle, given their high yields and growing real estate exposures. To round this out we have selectively been able to add REITS in areas like self-storage and data centers that are more in our strike zone.

 

The High Quality, High Momentum positioning of our Stalwarts portfolios has been in vogue for several years, but is showing some signs of movement lately. While Stalwarts is higher beta12, it is also fairly balanced in terms of having meaningful Value exposure. In attempting to achieve a good equilibrium, we anticipate there is more we can do in defensive positioning while also using current volatility to selectively double down on high quality growth. Stalwarts is reducing some opportunistic exposure at the top end of its market cap, and plans to use the liquidity to increase position sizes in our highest conviction companies.

 

While these thoughts in no way encapsulate all of the work we are doing on the research side, we do hope that this commentary will help you to have a feel for what we are working on as we approach the end of 2019.

 

 

12Beta is a statistical measure of volatility, or systematic risk of an individual stock or mutual fund compared to the unsystematic risk of the entire market.

 

 

Semi-Annual Report | October 31, 2019 7

 

 

Grandeur Peak Funds® Shareholder Letter

 

October 31, 2019 (Unaudited)

 

Notes from the Road

Research analysts Spencer Randall and Miranda Jacobs recently traveled to Malaysia. Here are a few of Spencer’s thoughts from their trip.

 

Malaysia is a melting pot of different cultures and ideas. There are major influences from Australian, Japanese, Chinese, and Middle Eastern cultures. The languages, food, religions, and people are rich and diverse. This was the first visit to Malaysia for both me and Miranda. We spent much of our time in between research meetings pounding the pavement and soaking in every drop of culture that we could.

 

Our first day, we traveled to the island of Penang in the north. Everyone we talked to referred to Penang as the “Silicon Valley” of Asia due to the abundance of tech companies with offices or factories on the island. The rest of our time was spent visiting with management teams in and around the capital city of Kuala Lumpur. The traffic in the capital and sheer number of motorcycles zipping through the streets is dizzying. I don’t think we would have been able to navigate or survive without our gracious driver, Mr. Din. Kuala Lumpur’s skyline is framed by numerous skyscrapers including the beautiful Petronas Twin Towers. While the giant towers are a sight to see, we were equally impressed by the number of cranes dotting the skyline as the city prepares for a surge in tourism through the government’s Visit Malaysia 2020 initiative.

 

Mall culture is alive and well in Malaysia with a massive mall seemingly located on every other corner. We were amazed to see the crowds of locals and tourist packed into each mall. The hot, humid climate is certainly a factor driving foot traffic indoors. We’ll be the first to admit that we took advantage of air conditioning whenever and wherever possible. While the stores appeared full, we were surprised at the various entertainment options available. We saw movie theatres, numerous restaurants, indoor parks, and even an aquarium. Mr. Din informed us that when he isn’t working, he spends a lot of his time with his family at the malls instead of staying home where the air conditioning bill can ramp up quickly.

 

A big talking point in each of our research meetings was labor. Almost every management team that we met with told us that their biggest challenge is finding enough of the right kind of workers to hire. The government has been limiting the number of foreign workers allowed into the country, but many companies aren’t able to meet demand using only local labor. In efforts to attract workers, companies are focused on improving their company culture and revamping compensation packages. One company that we were particularly impressed with was a large convenience store operator. We witnessed a group of new employees participating in new-hire training surrounded by executives and managers at the company headquarters. We were impressed to see the connection and unity created between executives and the lower level employees.

 

While Malaysia may be less mainstream than some of the other Asian markets, we feel it is important to visit these types of countries frequently and to keep up with the economic and political developments that they are undergoing. There really is no substitute for seeing it firsthand.

 

Business Update

This semi-annual reports marks eight years since we launched our first mutual funds and provides us a chance to reflect on a few milestones. When we launched the initial Funds, we had eight employees. Our goal to cover the globe at that time meant Randy Pearce covered all Financials, Amy Hu Sunderland led the Consumer coverage and Robert Gardiner and Blake Walker straddled both Healthcare and Technology. Today, our team of over 25 research analysts has collectively touched over 10,000 companies, and our process to screen, track and understand these opportunities has continued to evolve.

 

As mentioned earlier, in September we launched our eighth fund, the Grandeur Peak Global Contrarian Fund, which will leverage the research of the entire team. Mark Madsen and Keefer Babbitt have been named as portfolio managers on the Fund, with Robert Gardiner as Guardian Portfolio Manager. The Fund aims to take larger and broader positions in out-of-favor and undervalued companies, sectors and geographies.

 

As part of our culture, we value strong work ethic, personal responsibility, collaboration and being process driven. Brad Barth and Juliette Douglas are strong culture carriers at Grandeur Peak and have been given additional responsibilities which reflect their passion and leadership within the firm. In these newly created positions, Brad has been named Deputy Chief Investment Officer and Juliette Douglas has been named Deputy Director of Research. They will work closely with Chief Investment Officer, Randy Pearce, and Director of Research, Rob Green, in tackling a number of exciting projects we hope will strengthen our global research process.

 

As always, please feel free to reach out any time with any questions, requests or comments. We appreciate the opportunity to work on your behalf.

 

Sincerely,

 

Your Grandeur Peak Team

 

 

8 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

Grandeur Peak Funds® Shareholder Letter

 

October 31, 2019 (Unaudited)

 

The objective of all Grandeur Peak Funds is long-term growth of capital.

 

RISKS: Investing in small and micro-cap funds will be more volatile and loss of principal could be greater than investing in large cap or more diversified funds. Investing in foreign securities entails special risks, such as currency fluctuations and political uncertainties, which are described in more detail in the prospectus. Investments in emerging markets are subject to the same risks as other foreign securities and may be subject to greater risks than investments in foreign countries with more established economies and securities markets.

 

Must be proceeded by or accompanied by a prospectus.

 

The views and information discussed in this commentary are as of the date of publication, are subject to change, and may not reflect the writer's current views. The views expressed represent an assessment of market conditions at a specific point in time, are opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. Such information does not constitute a recommendation to buy or sell specific securities or investment vehicles. It should not be assumed that any investment will be profitable or will equal the performance of the Funds or any securities or any sectors mentioned herein. The subject matter contained herein has been derived from several sources believed to be reliable and accurate at the time of compilation. The Funds do not accept any liability for losses either direct or consequential caused by the use of this information.

 

Past performance does not guarantee future results.

 

Eric Huefner, Amy Hone and Dustin Brown are registered representatives of ALPS Distributors, Inc.

 

ALPS Distributors, Inc. is the Distributor for the Grandeur Peak Funds.

 

Grandeur Peak Global Advisors and ALPS Distributors, Inc. are not affiliated.

 

 

Semi-Annual Report | October 31, 2019 9

 

 

Grandeur Peak Emerging Markets Opportunities Fund Performance Update

 

October 31, 2019 (Unaudited)

 

Annualized Total Return Performance for the periods ended October 31, 2019

 

          Since Expense Ratio(b)
  6 Months 1 Year 3 Years 5 Years Inception(a) Gross Net(c)
Grandeur Peak Emerging Markets Opportunities Fund – Investor (GPEOX) 3.72% 18.89% 4.75% 3.54% 4.85% 1.78% 1.77%
Grandeur Peak Emerging Markets Opportunities Fund – Institutional (GPEIX) 3.87% 19.10% 4.99% 3.76% 5.08% 1.53% 1.52%
MSCI Emerging Markets SMid Cap Index(d) -1.77% 10.85% 4.57% 1.56% 2.37%    
MSCI Emerging Markets IMI Index(e) -1.46% 12.05% 7.25% 3.08% 3.57%    

 

Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. The Fund imposes a 2.00% redemption fee on shares held for less than 60 days. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data, please call 1-855-377-PEAK (7325).

 

The table does not reflect the deduction of taxes a shareholder would pay on Fund distributions or redemption of Fund shares.

 

Subject to investment risks, including possible loss of the principal amount invested.

 

Returns for periods less than 1 year are cumulative.

 

(a)Fund inception date of December 16, 2013.
(b)Ratios as of the Prospectus dated August 31, 2019 and may differ from the ratios presented in the Financial Highlights.
(c)Grandeur Peak Global Advisors, LLC (the “Adviser”), has agreed to waive and/or reimburse fees or expenses in order to limit Total Annual Fund Operating Expenses After Fee Waiver/Expense Reimbursement (excluding acquired fund fees and expenses, brokerage expenses, interest expenses, taxes and extraordinary expenses) to 1.95% and 1.70% of the Fund’s average daily net assets for the Fund’s Investor Class Shares and Institutional Class Shares, respectively. This agreement (the “Expense Agreement”) is in effect through August 31, 2020. The Adviser will be permitted to recover, on a class- by-class basis, expenses it has borne through the Expense Agreement to the extent that a Fund’s expenses in later periods fall below annual rates set forth in the Expense Agreement; provided, however, that such recapture payments do not cause the Fund’s expense ratio (after recapture) to exceed the lesser of (i) the expense cap in effect at the time of the waiver and (ii) the expense cap in effect at the time of the recapture. Notwithstanding the foregoing, the Fund will not be obligated to pay any such deferred fees and expenses more than three years after the date on which the fee and expenses was deferred. The Expense Agreement may not be terminated or modified prior to August 31, 2020 except with the approval of the Fund’s Board of Trustees.
(d)The MSCI Emerging Markets SMID Cap Index is designed to measure the equity market performance of small and mid-cap companies across emerging markets. The Adviser made this recommendation to the Board because the Russell indices are being decommissioned and the Advisor believes the MSCI index most closely aligns to the Fund’s investment strategies and investment restrictions. Information on both indices will be shown for a one-year transition period. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly into the Index.
(e)The MSCI Emerging Markets IMI Index is designed to measure the equity market performance of large, mid, and small-cap companies across emerging markets. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly into the Index.

 

 

10 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

Grandeur Peak Emerging Markets Opportunities Fund Performance Update

 

October 31, 2019 (Unaudited)

 

Growth of $10,000 for the period ended October 31, 2019

 

 

 

The chart shown above represent a hypothetical investment of $ 10,000 in the Fund’s Investor Class shares for the period from inception to October 31, 2019. All returns reflect reinvested dividends, but do not reflect the deduction of taxes that an investor would pay on distributions or redemptions.

 

Investing in the Fund is subject to investment risks, including possible loss of the principal amount invested.

 

The Fund also offers Institutional Class shares, performance for which is not reflected in the graphs above. The performance of Institutional Class shares may be higher or lower than the performance of the Investor Class shares shown in the graphs above based upon differences in fees paid by shareholders investing in the Investor Class shares and Institutional Class shares.

 

 

Semi-Annual Report | October 31, 2019 11

 

 

Grandeur Peak Emerging Markets Opportunities Fund Performance Update

 

October 31, 2019 (Unaudited)

 

Regional Allocation (as a % of Net Assets)*  
Asia ex Japan 65.3%
Latin America 10.0%
Europe 7.3%
Africa/Middle East 6.6%
North America 4.7%
Cash, Cash Equivalents, & Other Net Assets 6.1%
Total 100.0%

 

Industry Sector Allocation (as a % of Net Assets)*  
Consumer 29.0%
Technology 21.6%
Financials 18.8%
Health Care 13.4%
Industrials 7.4%
Energy & Materials 3.7%
Cash, Cash Equivalents, & Other Net Assets 6.1%
Total 100.0%

 

Top 10 Holdings (as a % of Net Assets)*  
WNS Holdings, Ltd. 2.4%
Bajaj Finance, Ltd. 2.3%
Silergy Corp. 2.3%
Fleury SA 2.0%
Genpact, Ltd. 1.7%
Metropolis Healthcare, Ltd. 1.6%
Dino Polska SA 1.4%
Pagseguro Digital, Ltd. 1.3%
New Oriental Education & Technology Group, Inc. 1.3%
Value Partners Group, Ltd. 1.3%
Total 17.6%

 

*Holdings are subject to change, and may not reflect the current or future position of the portfolio.

 

 

12 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

 

Grandeur Peak Global Contrarian Fund Performance Update

 

October 31, 2019 (Unaudited)

 

Annualized Total Return Performance for the periods ended October 31, 2019

 

      Expense Ratio(b)
  1 Month Since Inception(a) Gross Net(c)
Grandeur Peak Global Contrarian Fund – Institutional (GPGCX) 2.32% 1.60% 1.90% 1.35%
MSCI All Country World Index Small Cap(d) 2.89% 1.27%    
MSCI All Country World Index Small Cap Value(e) 3.04% 1.83%    

 

Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. The Fund imposes a 2.00% redemption fee on shares held for less than 60 days. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data, please call 1-855-377-PEAK (7325).

 

The table does not reflect the deduction of taxes a shareholder would pay on Fund distributions or redemption of Fund shares.

 

Subject to investment risks, including possible loss of the principal amount invested.

 

Returns for periods less than 1 year are cumulative.

 

(a)Fund inception date of September 17, 2019.
(b)Ratios as of the Prospectus dated September 12, 2019 and may differ from the ratios presented in the Financial Highlights.
(c)Grandeur Peak Global Advisors, LLC (the “Adviser”), has agreed to waive and/or reimburse fees or expenses in order to limit Total Annual Fund Operating Expenses After Fee Waiver/Expense Reimbursement (excluding acquired fund fees and expenses, brokerage expenses, interest expenses, taxes and extraordinary expenses) to 1.35% of the Fund’s average daily net assets for the Fund’s Institutional Class Shares. This agreement (the “Expense Agreement”) is in effect through August 31, 2021. The Adviser will be permitted to recover, on a class- by-class basis, expenses it has borne through the Expense Agreement to the extent that a Fund’s expenses in later periods fall below annual rates set forth in the Expense Agreement; provided, however, that such recapture payments do not cause the Fund’s expense ratio (after recapture) to exceed the lesser of (i) the expense cap in effect at the time of the waiver and (ii) the expense cap in effect at the time of the recapture. Notwithstanding the foregoing, the Fund will not be obligated to pay any such deferred fees and expenses more than three years after the date on which the fee and expenses was deferred. The Expense Agreement may not be terminated or modified prior to August 31, 2021 except with the approval of the Fund’s Board of Trustees.

(d)The MSCI ACWI Small Cap Index is designed to measure the equity market performance of performance of small-cap companies across developed and emerging markets globally. The Adviser made this recommendation to the Board because the Russell indices are being decommissioned and the Advisor believes the MSCI index most closely aligns to the Fund’s investment strategies and investment restrictions. Information on both indices will be shown for a one-year transition period. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly into the Index.
(e)The MSCI ACWI Small Cap Value Index is designed to measure small cap companies exhibiting overall value style characteristics across developed and emerging markets globally. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly into the Index.

 

 

Semi-Annual Report | October 31, 2019 13

 

 

Grandeur Peak Global Contrarian Fund Performance Update

 

October 31, 2019 (Unaudited)

 

Growth of $10,000 for the period ended October 31, 2019

 

 

 

The chart shown above represent a hypothetical investment of $10,000 in the Fund’s Institutional Class shares for the period from inception to October 31, 2019. All returns reflect reinvested dividends, but do not reflect the deduction of taxes that an investor would pay on distributions or redemptions.

 

Investing in the Fund is subject to investment risks, including possible loss of the principal amount invested.

 

 

14 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

 

Grandeur Peak Global Contrarian Fund Performance Update

 

October 31, 2019 (Unaudited)

 

Regional Allocation (as a % of Net Assets)*  
Europe 30.9%
Asia ex Japan 29.9%
North America 17.9%
Japan 12.0%
Australia/New Zealand 5.0%
Africa/Middle East 2.2%
Latin America 1.6%
Cash, Cash Equivalents, & Other Net Assets 0.5%
Total 100.0%

 

Industry Sector Allocation (as a % of Net Assets)*  
Financials 22.5%
Consumer 22.0%
Industrials 21.9%
Technology 14.3%
Health Care 12.8%
Energy & Materials 6.0%
Cash, Cash Equivalents, & Other Net Assets 0.5%
Total 100.0%

 

Top 10 Holdings (as a % of Net Assets)*
Fiducian Group, Ltd. 2.3%
Bioteque Corp. 2.2%
BBI Life Sciences Corp. 2.1%
Plover Bay Technologies, Ltd. 2.1%
Hackett Group, Inc. 1.8%
KNOW IT AB 1.8%
Selamat Sempurna Tbk PT 1.7%
Central Automotive Products, Ltd. 1.7%
Parex Resources, Inc. 1.6%
Riverstone Holdings, Ltd./Singapore 1.6%
Total 18.9%

 

*Holdings are subject to change, and may not reflect the current or future position of the portfolio.

 

 

Semi-Annual Report | October 31, 2019 15

 

 

Grandeur Peak Global Micro Cap Fund Performance Update

 

October 31, 2019 (Unaudited)

 

Annualized Total Return Performance for the periods ended October 31, 2019

 

        Since Expense Ratio(b)
  6 Months 1 Year 3 Years Inception(a) Gross Net(c)
Grandeur Peak Global Micro Cap Fund – Institutional (GPMCX) 2.83% 7.75% 6.99% 7.82% 2.05% 2.00%
MSCI All Country World Index Small Cap(d) 0.71% 8.54% 9.76% 8.44%    
MSCI World Micro Cap Index(e) 0.08% 1.40% 6.85% 7.22%    

 

Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. The Fund imposes a 2.00% redemption fee on shares held for less than 60 days. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data, please call 1-855-377-PEAK (7325).

 

The table does not reflect the deduction of taxes a shareholder would pay on Fund distributions or redemption of Fund shares.

 

Subject to investment risks, including possible loss of the principal amount invested.

 

Returns for periods less than 1 year are cumulative.

 

(a)Fund inception date of October 20, 2015.
(b)Ratios as of the Prospectus dated August 31, 2019 and may differ from the ratios presented in the Financial Highlights.
(c)Grandeur Peak Global Advisors, LLC (the “Adviser”), has agreed to waive and/or reimburse fees or expenses in order to limit Total Annual Fund Operating Expenses After Fee Waiver/ Expense Reimbursement (excluding acquired fund fees and expenses, brokerage expenses, interest expenses, taxes and extraordinary expenses) to 2.00% of the Fund’s average daily net assets for the Fund’s Institutional Class Shares. This agreement is in effect through August 31, 2020. The Adviser will be permitted to recover expenses it has borne through this agreement to the extent that a Fund’s expenses in later periods fall below annual rates set forth in the Expense Agreement; provided, however, that such recapture payments do not cause the Fund’s expense ratio (after recapture) to exceed the lesser of (i) the expense cap in effect at the time of the waiver and (ii) the expense cap in effect at the time of the recapture. Notwithstanding the foregoing, the Fund will not be obligated to pay any such deferred fees and expenses more than three years after the date on which the fee and expenses was deferred . This agreement may not be terminated or modified prior to August 31, 2020 except with the approval of the Fund’s Board of Trustees.
(d)The MSCI ACWI Small Cap Index is designed to measure the equity market performance of performance of small-cap companies across developed and emerging markets globally. The Adviser made this recommendation to the Board because the Russell indices are being decommissioned and the Advisor believes the MSCI index most closely aligns to the Fund’s investment strategies and investment restrictions. Information on both indices will be shown for a one-year transition period. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly into the Index.
(e)The MSCI World Micro Cap Index is designed to measure the equity market performance of micro-cap companies across developed markets globally. It does not include emerging markets. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly into the Index.

 

 

16 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

Grandeur Peak Global Micro Cap Fund Performance Update

 

October 31, 2019 (Unaudited)

 

Growth of $10,000 for the period ended October 31, 2019

 

 

 

The chart shown above represent a hypothetical investment of $10,000 in the Fund’s Institutional Class shares for the period from inception to October 31, 2019. All returns reflect reinvested dividends, but do not reflect the deduction of taxes that an investor would pay on distributions or redemptions.

 

Investing in the Fund is subject to investment risks, including possible loss of the principal amount invested.

 

 

Semi-Annual Report | October 31, 2019 17

 

 

Grandeur Peak Global Micro Cap Fund Performance Update

 

October 31, 2019 (Unaudited)

 

Regional Allocation (as a % of Net Assets)*  
Europe 31.1%
Asia ex Japan 28.4%
Japan 15.4%
Australia/New Zealand 11.5%
North America 10.7%
Africa/Middle East 1.1%
Latin America 0.6%
Cash, Cash Equivalents, & Other Net Assets 1.2%
Total 100.0%

 

Industry Sector Allocation (as a % of Net Assets)*  
Consumer 24.1%
Financials 21.7%
Health Care 18.6%
Industrials 17.0%
Technology 14.2%
Energy & Materials 3.2%
Cash, Cash Equivalents, & Other Net Assets 1.2%
Total 100.0%

 

Top 10 Holdings (as a % of Net Assets)*  
National Veterinary Care, Ltd. 2.5%
M&A Capital Partners Co., Ltd. 2.5%
Sarantis SA 2.4%
Fiducian Group, Ltd. 2.1%
Kogan.com, Ltd. 2.0%
BBI Life Sciences Corp. 1.9%
Self Storage Group ASA 1.7%
Pacific Hospital Supply Co., Ltd. 1.6%
Bioteque Corp. 1.6%
Vaibhav Global, Ltd. 1.6%
Total 19.9%

 

*Holdings are subject to change, and may not reflect the current or future position of the portfolio.

 

 

18 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

Grandeur Peak Global Opportunities Fund Performance Update

 

October 31, 2019 (Unaudited)

 

Annualized Total Return Performance for the periods ended October 31, 2019

 

          Since Expense Ratio(b)
  6 Months 1 Year 3 Years 5 Years Inception(a) Gross Net(c)
Grandeur Peak Global Opportunities Fund – Investor (GPGOX) 2.01% 13.34% 9.88% 7.48% 12.48% 1.62% 1.58%
Grandeur Peak Global Opportunities Fund – Institutional (GPGIX) 2.27% 13.76% 10.16% 7.71% 12.78% 1.37% 1.33%
MSCI All Country World Index Small Cap(d) 0.71% 8.54% 9.76% 7.02% 10.37%    
MSCI All Country World Index IMI(e) 2.92% 12.62% 11.66% 7.59% 10.36%    

 

Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. The Fund imposes a 2.00% redemption fee on shares held for less than 60 days. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data, please call 1-855-377-PEAK (7325).

 

The table does not reflect the deduction of taxes a shareholder would pay on Fund distributions or redemption of Fund shares.

 

Subject to investment risks, including possible loss of the principal amount invested.

 

Returns for periods less than 1 year are cumulative.

 

(a)Fund inception date of October 17, 2011.
(b)Ratios as of the Prospectus dated August 31, 2019 and may differ from the ratios presented in the Financial Highlights.
(c)Grandeur Peak Global Advisors, LLC (the “Adviser”), has agreed to waive and/or reimburse fees or expenses in order to limit Total Annual Fund Operating Expenses After Fee Waiver/ Expense Reimbursement (excluding acquired fund fees and expenses, brokerage expenses, interest expenses, taxes and extraordinary expenses) to 1.75% and 1.50% of the Fund’s average daily net assets for the Fund’s Investor Class Shares and Institutional Class Shares, respectively. This agreement (the “Expense Agreement”) is in effect through August 31, 2020. The Adviser will be permitted to recover, on a class- by-class basis, expenses it has borne the Expense Agreement to the extent that a Fund’s expenses in later periods fall below annual rates set forth in the Expense Agreement; provided, however, that such recapture payments do not cause the Fund’s expense ratio (after recapture) to exceed the lesser of (i) the expense cap in effect at the time of the waiver and (ii) the expense cap in effect at the time of the recapture . Notwithstanding the foregoing, the Fund will not be obligated to pay any such deferred fees and expenses more than three years after the date on which the fee and expenses was deferred. The Expense Agreement may not be terminated or modified prior to August 31, 2020 except with the approval of the Fund’s Board of Trustees.
(d)The MSCI ACWI Small Cap Index is designed to measure the equity market performance of performance of small-cap companies across developed and emerging markets globally. The Adviser made this recommendation to the Board because the Russell indices are being decommissioned and the Advisor believes the MSCI index most closely aligns to the Fund’s investment strategies and investment restrictions. Information on both indices will be shown for a one-year transition period. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly into the Index.
(e)The MSCI ACWI IMI Index is designed to measure the equity market performance of large, mid, and small-cap companies across developed and emerging markets globally. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly into the Index.

 

 

Semi-Annual Report | October 31, 2019 19

 

 

Grandeur Peak Global Opportunities Fund Performance Update

 

October 31, 2019 (Unaudited)

 

Growth of $10,000 for the period ended October 31, 2019

 

 

 

The chart shown above represent a hypothetical investment of $ 10,000 in the Fund’s Investor Class shares for the period from inception to October 31, 2019. All returns reflect reinvested dividends, but do not reflect the deduction of taxes that an investor would pay on distributions or redemptions.

 

Investing in the Fund is subject to investment risks, including possible loss of the principal amount invested.

 

The Fund also offers Institutional Class shares, performance for which is not reflected in the graphs above. The performance of Institutional Class shares may be higher or lower than the performance of the Investor Class shares shown in the graphs above based upon differences in fees paid by shareholders investing in the Investor Class shares and Institutional Class shares.

 

 

20 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

Grandeur Peak Global Opportunities Fund Performance Update

 

October 31, 2019 (Unaudited)

 

Regional Allocation (as a % of Net Assets)*  
Europe 34.3%
North America 28.1%
Asia ex Japan 17.1%
Japan 12.7%
Latin America 2.3%
Australia/New Zealand 1.7%
Africa/Middle East 1.1%
Cash, Cash Equivalents, & Other Net Assets 2.7%
Total 100.0%

 

Industry Sector Allocation (as a % of Net Assets)*  
Technology 23.8%
Industrials 19.2%
Financials 18.4%
Consumer 17.7%
Health Care 17.1%
Energy & Materials 1.1%
Cash, Cash Equivalents, & Other Net Assets 2.7%
Total 100.0%

 

Top 10 Holdings (as a % of Net Assets)*  
Power Integrations, Inc. 2.0%
First Republic Bank 1.7%
Dechra Pharmaceuticals PLC 1.7%
Silergy Corp. 1.7%
EPAM Systems, Inc. 1.6%
B&M European Value Retail SA 1.5%
WNS Holdings, Ltd. 1.3%
Bajaj Finance, Ltd. 1.3%
Lululemon Athletica, Inc. 1.3%
CVS Group PLC 1.3%
Total 15.4%

 

*Holdings are subject to change, and may not reflect the current or future position of the portfolio.

 

 

Semi-Annual Report | October 31, 2019 21

 

 

Grandeur Peak Global Reach Fund Performance Update

 

October 31, 2019 (Unaudited)

 

Annualized Total Return Performance for the periods ended October 31, 2019

 

          Since Expense Ratio(b)
  6 Months 1 Year 3 Years 5 Years Inception(a) Gross Net(c)
Grandeur Peak Global Reach Fund – Investor (GPROX) 2.00% 13.17% 10.10% 7.34% 9.94% 1.52% 1.52%
Grandeur Peak Global Reach Fund – Institutional (GPRIX) 2.13% 13.51% 10.37% 7.60% 10.20% 1.27% 1.27%
MSCI All Country World Small Cap Index(d) 0.71% 8.54% 9.76% 7.02% 8.21%    
MSCI All Country World IMI Index(e) 2.92% 12.62% 11.66% 7.59% 8.78%    

 

Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. The Fund imposes a 2.00% redemption fee on shares held for less than 60 days. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data, please call 1-855-377-PEAK (7325).

 

The table does not reflect the deduction of taxes a shareholder would pay on Fund distributions or redemption of Fund shares.

 

Subject to investment risks, including possible loss of the principal amount invested.

 

Returns for periods less than 1 year are cumulative.

 

(a)Fund inception date of June 19, 2013.
(b)Ratios as of the Prospectus dated August 31, 2019 and may differ from the ratios presented in the Financial Highlights.
(c)Grandeur Peak Global Advisors, LLC (the “Adviser”), has agreed to waive and/or reimburse fees or expenses in order to limit Total Annual Fund Operating Expenses After Fee Waiver/Expense Reimbursement (excluding acquired fund fees and expenses, brokerage expenses, interest expenses, taxes and extraordinary expenses) to 1.60% and 1.35% of the Fund’s average daily net assets for the Fund’s Investor Class Shares and Institutional Class Shares, respectively. This agreement (the “Expense Agreement”) is in effect through August 31, 2020. The Adviser will be permitted to recover, on a class- by-class basis, expenses it has borne through the Expense Agreement to the extent that a Fund’s expenses in later periods fall below annual rates set forth in the Expense Agreement; provided, however, that such recapture payments do not cause the Fund’s expense ratio (after recapture) to exceed the lesser of (i) the expense cap in effect at the time of the waiver and (ii) the expense cap in effect at the time of the recapture . Notwithstanding the foregoing, the Fund will not be obligated to pay any such deferred fees and expenses more than three years after the date on which the fee and expenses was deferred. The Expense Agreement may not be terminated or modified prior to August 31, 2020 except with the approval of the Fund’s Board of Trustees.
(d)The MSCI ACWI Small Cap Index is designed to measure the equity market performance of performance of small-cap companies across developed and emerging markets globally. The Adviser made this recommendation to the Board because the Russell indices are being decommissioned and the Advisor believes the MSCI index most closely aligns to the Fund’s investment strategies and investment restrictions. Information on both indices will be shown for a one-year transition period. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly into the Index.

(e)The MSCI ACWI IMI Index is designed to measure the equity market performance of large, mid, and small-cap companies across developed and emerging markets globally. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly into the Index.

 

 

22 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

Grandeur Peak Global Reach Fund Performance Update

 

October 31, 2019 (Unaudited)

 

Growth of $10,000 for the period ended October 31, 2019

 

 

 

The chart shown above represent a hypothetical investment of $ 10,000 in the Fund’s Investor Class shares for the period from inception to October 31, 2019. All returns reflect reinvested dividends, but do not reflect the deduction of taxes that an investor would pay on distributions or redemptions.

 

Investing in the Fund is subject to investment risks, including possible loss of the principal amount invested.

 

The Fund also offers Institutional Class shares, performance for which is not reflected in the graphs above. The performance of Institutional Class shares may be higher or lower than the performance of the Investor Class shares shown in the graphs above based upon differences in fees paid by shareholders investing in the Investor Class shares and Institutional Class shares.

 

 

Semi-Annual Report | October 31, 2019 23

 

 

Grandeur Peak Global Reach Fund Performance Update

 

October 31, 2019 (Unaudited)

 

Regional Allocation (as a % of Net Assets)*  
Europe 29.3%
North America 28.2%
Asia ex Japan 21.7%
Japan 8.0%
Australia/New Zealand 4.4%
Latin America 3.7%
Africa/Middle East 3.0%
Cash, Cash Equivalents, & Other Net Assets 1.7%
Total 100.0%

 

Industry Sector Allocation (as a % of Net Assets)*  
Technology 21.9%
Consumer 21.7%
Financials 21.4%
Industrials 17.5%
Health Care 12.2%
Energy & Materials 3.6%
Cash, Cash Equivalents, & Other Net Assets 1.7%
Total 100.0%

 

Top 10 Holdings (as a % of Net Assets)*  
First Republic Bank 2.0%
WNS Holdings, Ltd. 1.2%
B&M European Value Retail SA 1.1%
EPAM Systems, Inc. 1.0%
Parex Resources, Inc. 1.0%
Silergy Corp. 0.9%
NV5 Global, Inc. 0.9%
Fastenal Co. 0.9%
Sanne Group PLC 0.9%
Wix.com, Ltd. 0.8%
Total 10.7%

 

*Holdings are subject to change, and may not reflect the current or future position of the portfolio.

 

 

24 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

Grandeur Peak Global Stalwarts Fund Performance Update

 

October 31, 2019 (Unaudited)

 

Annualized Total Return Performance for the periods ended October 31, 2019

 

        Since Expense Ratio(b)
  6 Months 1 Year 3 Years Inception(a) Gross Net(c)
Grandeur Peak Global Stalwarts Fund – Investor (GGSOX) 0.20% 14.96% 11.26% 11.29% 1.27% 1.27%
Grandeur Peak Global Stalwarts Fund – Institutional (GGSYX) 0.27% 15.22% 11.50% 11.56% 1.02% 1.02%
MSCI All Country World Mid Cap Index(d) 2.81% 12.74% 10.15% 9.29%    
MSCI All Country World Small Cap Index(e) 0.71% 8.54% 9.76% 9.20%    

 

Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. The Fund imposes a 2.00% redemption fee on shares held for less than 60 days. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data, please call 1-855-377-PEAK (7325).

 

The table does not reflect the deduction of taxes a shareholder would pay on Fund distributions or redemption of Fund shares.

 

Subject to investment risks, including possible loss of the principal amount invested.

 

Returns for periods less than 1 year are cumulative.

 

(a)Fund inception date of September 1, 2015.
(b)Ratios as of the Prospectus dated August 31, 2019 and may differ from the ratios presented in the Financial Highlights.
(c)Grandeur Peak Global Advisors, LLC (the “Adviser”), has agreed to waive and/or reimburse fees or expenses in order to limit Total Annual Fund Operating Expenses After Fee Waiver/ Expense Reimbursement (excluding acquired fund fees and expenses, brokerage expenses, interest expenses, taxes and extraordinary expenses) to 1.35% and 1.10% of the Fund’s average daily net assets for the Fund’s Investor Class Shares and Institutional Class Shares, respectively. This agreement is in effect through August 31, 2020. The Adviser will be permitted to recover, on a class-by-class basis, expenses it has borne through this agreement to the extent that a Fund’s expenses in later periods fall below annual rates set forth in the Expense Agreement; provided, however, that such recapture payments do not cause the Fund’s expense ratio (after recapture) to exceed the lesser of (i) the expense cap in effect at the time of the waiver and (ii) the expense cap in effect at the time of the recapture . Notwithstanding the foregoing, the Fund will not be obligated to pay any such deferred fees and expenses more than three years after the date on which the fee and expenses was deferred. This agreement may not be terminated or modified prior to August 31, 2020 except with the approval of the Fund’s Board of Trustees.
(d)The MSCI ACWI Mid Cap Index is designed to measure the equity market performance of performance of mid-cap companies across developed and emerging markets globally. The Adviser made this recommendation to the Board because the Russell indices are being decommissioned and the Advisor believes the MSCI index most closely aligns to the Fund’s investment strategies and investment restrictions. Information on both indices will be shown for a one-year transition period. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly into the Index.
(e)The MSCI ACWI Small Cap Index is designed to measure the equity market performance of small-cap companies across developed and emerging markets globally. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly into the Index.

 

 

Semi-Annual Report | October 31, 2019 25

 

 

Grandeur Peak Global Stalwarts Fund Performance Update

 

October 31, 2019 (Unaudited)

 

Growth of $10,000 for the period ended October 31, 2019

 

 

 

The graphs shown above represent a hypothetical investment of $10,000 in the Fund’s Investor Class shares for the period from inception to October 31, 2019. All returns reflect reinvested dividends, but do not reflect the deduction of taxes that an investor would pay on distributions or redemptions.

 

Investing in the Fund is subject to investment risks, including possible loss of the principal amount invested.

 

The Fund also offers Institutional Class shares, performance for which is not reflected in the graphs above. The performance of Institutional Class shares may be higher or lower than the performance of the Investor Class shares shown in the graphs above based upon differences in fees paid by shareholders investing in the Investor Class shares and Institutional Class shares.

 

 

26 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

Grandeur Peak Global Stalwarts Fund Performance Update

 

October 31, 2019 (Unaudited)

 

Regional Allocation (as a % of Net Assets)*  
North America 36.9%
Europe 31.5%
Asia ex Japan 15.1%
Japan 8.2%
Latin America 2.2%
Australia/New Zealand 1.7%
Africa/Middle East 1.6%
Cash, Cash Equivalents, & Other Net Assets 2.8%
Total 100.0%

 

Industry Sector Allocation (as a % of Net Assets)*  
Financials 26.1%
Technology 24.5%
Consumer 19.7%
Industrials 14.1%
Health Care 12.4%
Energy & Materials 0.4%
Cash, Cash Equivalents, & Other Net Assets 2.8%
Total 100.0%

 

Top 10 Holdings (as a % of Net Assets)*  
First Republic Bank 4.1%
St. James's Place PLC 2.8%
B&M European Value Retail SA 2.3%
Silergy Corp. 2.3%
Power Integrations, Inc. 2.2%
ABIOMED, Inc. 2.2%
Fastenal Co. 2.0%
Lululemon Athletica, Inc. 1.9%
Nihon M&A Center, Inc. 1.8%
Dechra Pharmaceuticals PLC 1.8%
Total 23.4%

 

*Holdings are subject to change, and may not reflect the current or future position of the portfolio.

 

 

Semi-Annual Report | October 31, 2019 27

 

 

Grandeur Peak International Opportunities Fund Performance Update

 

October 31, 2019 (Unaudited)

 

Annualized Total Return Performance for the periods ended October 31, 2019

 

          Since Expense Ratio(b)
  6 Months 1 Year 3 Years 5 Years Inception(a) Gross Net(c)
Grandeur Peak International Opportunities Fund – Investor (GPIOX) 0.60% 10.07% 7.26% 5.70% 11.22% 1.62% 1.57%
Grandeur Peak International Opportunities Fund – Institutional (GPIIX) 0.60% 9.91% 7.51% 5.92% 11.44% 1.37% 1.32%
MSCI All Country World Index ex USA Small Cap Index(d) 2.06% 9.23% 7.39% 5.71% 7.28%    
MSCI All Country World IMI ex USA Index(e) 2.22% 11.48% 8.44% 4.49% 6.38%    

 

Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. The Fund imposes a 2.00% redemption fee on shares held for less than 60 days. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data, please call 1-855-377-PEAK (7325).

 

The table does not reflect the deduction of taxes a shareholder would pay on Fund distributions or redemption of Fund shares.

 

Subject to investment risks, including possible loss of the principal amount invested.

 

Returns for periods less than 1 year are cumulative.

 

(a)Fund inception date of October 17, 2011.
(b)Ratios as of the Prospectus dated August 31, 2019 and may differ from the ratios presented in the Financial Highlights.
(c)Grandeur Peak Global Advisors, LLC (the “Adviser”), has agreed to waive and/or reimburse fees or expenses in order to limit Total Annual Fund Operating Expenses After Fee Waiver/Expense Reimbursements (excluding acquired fund fees and expenses, brokerage expenses, interest expenses, taxes and extraordinary expenses) to 1.75% and 1.50% of the Fund’s average daily net assets for the Fund’s Investor Class Shares and Institutional Class Shares, respectively. This agreement (the “Expense Agreement”) is in effect through August 31, 2020. The Adviser will be permitted to recover, on a class- by-class basis, expenses it has borne through the Expense Agreement to the extent that a Fund’s expenses in later periods fall below annual rates set forth in the Expense Agreement; provided, however, that such recapture payments do not cause the Fund’s expense ratio (after recapture) to exceed the lesser of (i) the expense cap in effect at the time of the waiver and (ii) the expense cap in effect at the time of the recapture . Notwithstanding the foregoing, the Funds will not be obligated to pay any such deferred fees and expenses more than three years after the date on which the fee and expenses was deferred. The Expense Agreement may not be terminated or modified prior to August 31, 2020 except with the approval of the Fund’s Board of Trustees.
(d)The MSCI ACWI ex USA Small Cap Index is designed to measure the equity market performance of small-cap companies across developed and emerging markets globally, excluding the United States. The Adviser made this recommendation to the Board because the Russell indices are being decommissioned and the Advisor believes the MSCI index most closely aligns to the Fund’s investment strategies and investment restrictions. Information on both indices will be shown for a one-year transition period. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly into the Index.
(e)The MSCI ACWI ex USA IMI Index is designed to measure the equity market performance of large, mid, and small-cap companies across developed and emerging markets globally, excluding the United States. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly into the Index.

 

 

28 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

Grandeur Peak International Opportunities Fund Performance Update

 

October 31, 2019 (Unaudited)

 

Growth of $10,000 for the period ended October 31, 2019

 

 

 

The chart shown above represent a hypothetical investment of $10,000 in the Fund’s Investor Class shares for the period from inception to October 31, 2019. All returns reflect reinvested dividends, but do not reflect the deduction of taxes that an investor would pay on distributions or redemptions.

 

Investing in the Fund is subject to investment risks, including possible loss of the principal amount invested.

 

The Fund also offers Institutional Class shares, performance for which is not reflected in the graphs above. The performance of Institutional Class shares may be higher or lower than the performance of the Investor Class shares shown in the graphs above based upon differences in fees paid by shareholders investing in the Investor Class shares and Institutional Class shares.

 

 

Semi-Annual Report | October 31, 2019 29

 

 

Grandeur Peak International Opportunities Fund Performance Update

 

October 31, 2019 (Unaudited)

 

Regional Allocation (as a % of Net Assets)*  
Europe 37.4%
Asia ex Japan 24.9%
Japan 16.9%
North America 9.0%
Australia/New Zealand 3.0%
Latin America 2.9%
Africa/Middle East 2.5%
Cash, Cash Equivalents, & Other Net Assets 3.4%
Total 100.0%

 

Industry Sector Allocation (as a % of Net Assets)*  
Technology 21.9%
Industrials 19.6%
Consumer 19.3%
Financials 17.9%
Health Care 14.9%
Energy & Materials 3.0%
Cash, Cash Equivalents, & Other Net Assets 3.4%
Total 100.0%

 

Top 10 Holdings (as a % of Net Assets)*  
B&M European Value Retail SA 2.0%
EPAM Systems, Inc. 1.8%
Silergy Corp. 1.7%
Aalberts NV 1.7%
WNS Holdings, Ltd. 1.6%
Dechra Pharmaceuticals PLC 1.5%
Bajaj Finance, Ltd. 1.4%
CVS Group PLC 1.4%
Tokyo Century Corp. 1.4%
Seria Co., Ltd. 1.3%
Total 15.8%

 

*Holdings are subject to change, and may not reflect the current or future position of the portfolio.

 

 

30 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

Grandeur Peak International Stalwarts Fund Performance Update

 

October 31, 2019 (Unaudited)

 

Annualized Total Return Performance for the periods ended October 31, 2019

 

        Since Expense Ratio(b)
  6 Months 1 Year 3 Years Inception(a) Gross Net(c)
Grandeur Peak International Stalwarts Fund – Investor (GISOX) 0.75% 13.29% 9.77% 11.01% 1.19% 1.19%
Grandeur Peak International Stalwarts Fund – Institutional (GISYX) 0.88% 13.53% 10.04% 11.26% 0.94% 0.94%
MSCI All Country World ex USA Mid Cap Index(d) 3.01% 11.22% 8.12% 7.56%    
MSCI All Country World ex USA Small Index(e) 2.06% 9.23% 7.39% 7.65%    

 

Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. The Fund imposes a 2.00% redemption fee on shares held for less than 60 days. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data, please call 1-855-377-PEAK (7325).

 

The table does not reflect the deduction of taxes a shareholder would pay on Fund distributions or redemption of Fund shares.

 

Subject to investment risks, including possible loss of the principal amount invested.

 

Returns for periods less than 1 year are cumulative.

 

(a)Fund inception date of September 1, 2015.
(b)Ratios as of the Prospectus dated August 31, 2019 and may differ from the ratios presented in the Financial Highlights.
(c)Grandeur Peak Global Advisors, LLC (the “Adviser”), has agreed to waive and/or reimburse fees or expenses in order to limit Total Annual Fund Operating Expenses After Fee Waiver/ Expense Reimbursements (excluding acquired fund fees and expenses, brokerage expenses, interest expenses, taxes and extraordinary expenses) to 1.35% and 1.10% of the Fund’s average daily net assets for the Fund’s Investor Class Shares and Institutional Class Shares, respectively. This agreement is in effect through August 31, 2020. The Adviser will be permitted to recover, on a class-by-class basis, expenses it has borne through this agreement to the extent that a Fund’s expenses in later periods fall below annual rates set forth in the Expense Agreement; provided, however, that such recapture payments do not cause the Fund’s expense ratio (after recapture) to exceed the lesser of (i) the expense cap in effect at the time of the waiver and (ii) the expense cap in effect at the time of the recapture . Notwithstanding the foregoing, the Funds will not be obligated to pay any such deferred fees and expenses more than three years after the date on which the fee and expenses was deferred This agreement may not be terminated or modified prior to August 31, 2020 except with the approval of the Fund’s Board of Trustees.
(d)The MSCI ACWI ex USA Mid Cap Index is designed to measure the equity market performance of midcap companies across developed and emerging markets globally, excluding the United States. The Adviser made this recommendation to the Board because the Russell indices are being decommissioned and the Advisor believes the MSCI index most closely aligns to the Fund’s investment strategies and investment restrictions. Information on both indices will be shown for a one-year transition period. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly into the Index.
(e)The MSCI ACWI ex USA Small Cap Index is designed to measure the equity market performance of small-cap companies across developed and emerging markets globally, excluding the United States. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly into the Index.

 

 

Semi-Annual Report | October 31, 2019 31

 

 

Grandeur Peak International Stalwarts Fund Performance Update

 

October 31, 2019 (Unaudited)

 

Growth of $10,000 for the period ended October 31, 2019

 

 

 

The chart shown above represent a hypothetical investment of $ 10,000 in the Fund’s Investor Class shares for the period from inception to October 31, 2019. All returns reflect reinvested dividends, but do not reflect the deduction of taxes that an investor would pay on distributions or redemptions.

 

Investing in the Fund is subject to investment risks, including possible loss of the principal amount invested.

 

The Fund also offers Institutional Class shares, performance for which is not reflected in the graphs above. The performance of Institutional Class shares may be higher or lower than the performance of the Investor Class shares shown in the graphs above based upon differences in fees paid by shareholders investing in the Investor Class shares and Institutional Class shares.

 

 

32 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

Grandeur Peak International Stalwarts Fund Performance Update

 

October 31, 2019 (Unaudited)

 

Regional Allocation (as a % of Net Assets)*  
Europe 43.8%
Asia ex Japan 20.5%
Japan 12.3%
North America 11.3%
Latin America 3.2%
Australia/New Zealand 2.6%
Africa/Middle East 1.9%
Cash, Cash Equivalents, & Other Net Assets 4.4%
Total 100.0%

 

Industry Sector Allocation (as a % of Net Assets)*  
Financials 24.0%
Consumer 23.8%
Technology 18.8%
Industrials 15.2%
Health Care 13.2%
Energy & Materials 0.6%
Cash, Cash Equivalents, & Other Net Assets 4.4%
Total 100.0%

 

Top 10 Holdings (as a % of Net Assets)*  
St. James's Place PLC 3.4%
Silergy Corp. 3.0%
B&M European Value Retail SA 2.8%
Nihon M&A Center, Inc. 2.4%
Lululemon Athletica, Inc. 2.3%
Aalberts NV 2.3%
Dechra Pharmaceuticals PLC 2.3%
EPAM Systems, Inc. 2.0%
WNS Holdings, Ltd. 2.0%
DiaSorin SpA 1.9%
Total 24.4%

 

*Holdings are subject to change, and may not reflect the current or future position of the portfolio.

 

 

Semi-Annual Report | October 31, 2019 33

 

 

Grandeur Peak Funds® Disclosure of Fund Expenses

 

October 31, 2019 (Unaudited)

 

As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

 

This example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period of May 1, 2019 through October 31, 2019.

 

Actual Expenses The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

 

Hypothetical Example for Comparison Purposes The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

 

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 

 

34 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

Grandeur Peak Funds® Disclosure of Fund Expenses

 

October 31, 2019 (Unaudited)

 

  Beginning Account Value May 1, 2019 Ending Account Value October 31, 2019 Expense Ratio(a) Expenses Paid During period May 1, 2019 - October 31, 2019(b)
Grandeur Peak Emerging Markets Opportunities Fund        
Investor Class        
Actual $ 1,000.00 $ 1,037.20 1.74% $ 8.91
Hypothetical (5% return before expenses) $ 1,000.00 $ 1,016.39 1.74% $ 8.82
Institutional Class        
Actual $ 1,000.00 $ 1,038.70 1.52% $ 7.79
Hypothetical (5% return before expenses) $ 1,000.00 $ 1,017.50 1.52% $ 7.71
Grandeur Peak Global Contrarian Fund        
Institutional Class        
Actual $ 1,000.00 $ 1,016.00 1.38% $ 6.99
Hypothetical (5% return before expenses) $ 1,000.00 $ 1,018.20 1.38% $ 7.00
Grandeur Peak Global Micro Cap Fund        
Institutional Class        
Actual $ 1,000.00 $ 1,028.30 2.00% $ 10.20
Hypothetical (5% return before expenses) $ 1,000.00 $ 1,015.08 2.00% $ 10.13
Grandeur Peak Global Opportunities Fund        
Investor Class        
Actual $ 1,000.00 $ 1,020.10 1.57% $ 7.97
Hypothetical (5% return before expenses) $ 1,000.00 $ 1,017.24 1.57% $ 7.96
Institutional Class        
Actual $ 1,000.00 $ 1,022.70 1.34% $ 6.81
Hypothetical (5% return before expenses) $ 1,000.00 $ 1,018.40 1.34% $ 6.80
Grandeur Peak Global Reach Fund        
Investor Class        
Actual $ 1,000.00 $ 1,020.00 1.52% $ 7.72
Hypothetical (5% return before expenses) $ 1,000.00 $ 1,017.50 1.52% $ 7.71
Institutional Class        
Actual $ 1,000.00 $ 1,021.30 1.28% $ 6.50
Hypothetical (5% return before expenses) $ 1,000.00 $ 1,018.70 1.28% $ 6.50
Grandeur Peak Global Stalwarts Fund        
Investor Class        
Actual $ 1,000.00 $ 1,002.00 1.25% $ 6.29
Hypothetical (5% return before expenses) $ 1,000.00 $ 1,018.85 1.25% $ 6.34
Institutional Class        
Actual $ 1,000.00 $ 1,002.70 1.00% $ 5.03
Hypothetical (5% return before expenses) $ 1,000.00 $ 1,020.11 1.00% $ 5.08
Grandeur Peak International Opportunities Fund        
Investor Class        
Actual $ 1,000.00 $ 1,006.00 1.58% $ 7.97
Hypothetical (5% return before expenses) $ 1,000.00 $ 1,017.19 1.58% $ 8.01
Institutional Class        
Actual $ 1,000.00 $ 1,006.00 1.34% $ 6.76
Hypothetical (5% return before expenses) $ 1,000.00 $ 1,018.40 1.34% $ 6.80
Grandeur Peak International Stalwarts Fund        
Investor Class        
Actual $ 1,000.00 $ 1,007.50 1.17% $ 5.90
Hypothetical (5% return before expenses) $ 1,000.00 $ 1,019.25 1.17% $ 5.94
Institutional Class        
Actual $ 1,000.00 $ 1,008.80 0.92% $ 4.65
Hypothetical (5% return before expenses) $ 1,000.00 $ 1,020.51 0.92% $ 4.67

 

(a)The Fund's expense ratios have been annualized based on the Fund's most recent fiscal half-year expenses.
(b)Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184)/366 (to reflect the half-year period).

 

 

Semi-Annual Report | October 31, 2019 35

 

 

Grandeur Peak Emerging Markets Opportunities Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
COMMON STOCKS (93.92%)          
Argentina (0.85%)          
Globant SA(a)   41,823   $3,900,413 
           
Bangladesh (0.88%)          
Square Pharmaceuticals, Ltd.   1,455,559    4,036,828 
           
Brazil (6.24%)          
Arco Platform, Ltd., Class A(a)   92,525    3,839,788 
Fleury SA   1,416,100    8,940,444 
Hypera SA   397,400    3,410,674 
Magazine Luiza SA   220,800    2,444,463 
Pagseguro Digital, Ltd., Class A(a)   159,850    5,927,238 
Raia Drogasil SA   144,900    3,972,872 
         28,535,479 
           
China (19.10%)          
51job, Inc., ADR(a)   48,650    3,832,161 
58.com, Inc., ADR(a)   56,525    2,985,085 
AK Medical Holdings, Ltd.(b)(c)   3,499,000    3,991,993 
Alibaba Group Holding, Ltd., Sponsored ADR(a)   21,675    3,829,322 
ANTA Sports Products, Ltd.   524,000    5,135,714 
Baozun, Inc., Sponsored ADR(a)   65,200    2,837,504 
BBI Life Sciences Corp.(c)   9,968,500    3,002,273 
CSPC Pharmaceutical Group, Ltd.   2,192,000    5,636,687 
Ctrip.com International, Ltd., ADR(a)   151,950    5,012,830 
Essex Bio-technology, Ltd.   4,931,000    3,800,846 
Hangzhou Robam Appliances Co., Ltd., Class A   365,200    1,635,650 
Hangzhou Tigermed          
Consulting Co., Ltd., Class A   176,250    1,711,043 
HUYA, Inc., ADR(a)   86,952    1,933,812 
Jiangsu Hengrui Medicine Co., Ltd., Class A   148,800    1,922,129 
Koolearn Technology Holding, Ltd.(a)(b)(c)   1,964,000    4,616,783 
Man Wah Holdings, Ltd.   5,220,400    3,564,232 
New Oriental Education & Technology Group, Inc., Sponsored ADR(a)   48,050    5,864,983 
O2Micro International, Ltd., ADR(a)   462,244    573,183 
Shanghai Haohai Biological Technology Co., Ltd., Class H(b)(c)   538,100    3,110,782 
Silergy Corp.   368,422    10,384,392 
Tencent Holdings, Ltd.   58,900    2,411,337 
WuXi AppTec Co., Ltd., Class H(b)(c)   378,000    4,568,253 
Wuxi Biologics Cayman, Inc.(a)(b)(c)   231,000    2,726,855 

 

   Shares   Value (Note 2) 
China (continued)        
Yum China Holdings, Inc.   53,475   $2,272,688 
         87,360,537 
           
Colombia (1.31%)          
Amerisur Resources PLC(a)   6,493,622    1,604,921 
Parex Resources, Inc.(a)   324,731    4,400,918 
         6,005,839 
           
Egypt (1.14%)          
African Export-Import Bank, GDR   500,000    2,070,000 
Integrated Diagnostics Holdings PLC(b)(c)   371,100    1,751,592 
Obour Land For Food Industries   4,233,886    1,377,193 
         5,198,785 
           
Georgia (2.04%)          
Bank of Georgia Group PLC   185,712    3,124,910 
Georgia Capital PLC(a)   115,112    1,450,848 
Georgia Healthcare Group PLC(b)(c)   356,781    784,512 
TBC Bank Group PLC   240,293    3,984,184 
         9,344,454 
           
Greece (2.14%)          
JUMBO SA   227,400    4,438,335 
Sarantis SA   603,670    5,332,322 
         9,770,657 
           
Hong Kong (3.34%)          
Jacobson Pharma Corp., Ltd.(c)   10,222,000    1,539,311 
Plover Bay Technologies, Ltd.(c)   8,956,000    1,268,661 
TK Group Holdings, Ltd.   6,362,000    3,004,026 
Value Partners Group, Ltd.   10,871,800    5,743,943 
Vitasoy International Holdings, Ltd.   916,383    3,730,577 
         15,286,518 
           
India (13.96%)          
Bajaj Finance, Ltd.   185,000    10,504,862 
City Union Bank, Ltd.   1,202,575    3,592,699 
Cyient, Ltd.   668,095    3,831,276 
Gulf Oil Lubricants India, Ltd.   168,535    2,091,933 
HDFC Asset Management Co., Ltd.(b)(c)   80,858    3,413,469 
HDFC Bank, Ltd.   246,000    4,267,185 
HDFC Life Insurance Co., Ltd.(b)(c)   370,000    3,266,574 
Hero MotoCorp, Ltd.   61,000    2,325,661 
Hexaware Technologies, Ltd.   358,000    1,679,495 
Kovai Medical Center and Hospital   50,167    474,555 

 

See Notes to Financial Statements.

 

36 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

Grandeur Peak Emerging Markets Opportunities Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
India (continued)        
L&T Technology Services, Ltd.(b)(c)   161,040   $3,413,958 
Metropolis Healthcare, Ltd.(a)(b)(c)   367,701    7,502,156 
Mindtree, Ltd.   186,000    1,869,211 
Time Technoplast, Ltd.   2,390,721    2,123,475 
Vaibhav Global, Ltd.   225,319    2,587,736 
WNS Holdings, Ltd., ADR(a)   175,986    10,882,974 
         63,827,219 
           
Indonesia (4.15%)          
Ace Hardware Indonesia Tbk PT   22,574,100    2,717,833 
Arwana Citramulia Tbk PT   45,188,500    1,603,183 
Bank Central Asia Tbk PT   1,169,000    2,619,153 
Hexindo Adiperkasa Tbk PT   3,557,100    884,397 
Indonesia Pondasi Raya Tbk PT   14,738,400    403,188 
Link Net Tbk PT   7,350,500    2,304,068 
Panin Sekuritas Tbk PT   7,155,500    810,518 
Selamat Sempurna Tbk PT   52,028,900    5,467,167 
Ultrajaya Milk Industry & Trading Co. Tbk PT   20,171,600    2,184,287 
         18,993,794 
           
Kenya (0.70%)          
Safaricom PLC   11,096,600    3,195,778 
           
Malaysia (1.72%)          
AEON Credit Service M Bhd   1,430,114    5,236,507 
My EG Services Bhd   3,821,900    1,042,711 
Mynews Holdings Bhd   2,292,100    729,566 
Scicom MSC Bhd   3,545,500    856,995 
         7,865,779 
           
Mexico (2.29%)          
Credito Real SAB de CV SOFOM ER   1,448,154    1,793,207 
Grupo Herdez SAB de CV   1,762,360    3,590,409 
Regional SAB de CV   952,000    5,068,689 
         10,452,305 
           
Oman (0.28%)          
Tethys Oil AB   171,623    1,304,631 
           
Pakistan (0.39%)          
Akzo Nobel Pakistan, Ltd.   496,500    312,710 
Meezan Bank, Ltd.   2,914,067    1,463,497 
         1,776,207 
           
Peru (1.55%)          
Alicorp SAA   999,553    2,740,425 
Credicorp, Ltd.   20,325    4,350,363 
         7,090,788 

 

   Shares   Value (Note 2) 
Philippines (3.99%)        
Altus San Nicolas Corp.(a)(d)   71,561   $7,014 
Concepcion Industrial Corp.   1,861,792    1,119,020 
D&L Industries, Inc.   11,306,000    1,900,486 
Philippine Seven Corp.   917,000    2,692,541 
Puregold Price Club, Inc.   4,121,100    3,317,508 
Robinsons Land Corp.   3,716,762    1,864,057 
Robinsons Retail Holdings, Inc.   1,464,000    2,188,282 
Wilcon Depot, Inc.   15,904,900    5,171,561 
        18,260,469 
           
Poland (2.40%)          
CCC SA   30,600    893,816 
Dino Polska SA(a)(b)(c)   168,413    6,567,871 
LiveChat Software SA   239,800    2,378,763 
PGS Software SA   426,467    1,116,216 
         10,956,666 
           
Russia (0.73%)          
HeadHunter Group PLC, ADR   96,125    1,678,342 
TCS Group Holding PLC, GDR(c)   86,700    1,649,034 
         3,327,376 
           
South Africa (3.10%)          
ARB Holdings, Ltd.   1,134,108    258,562 
Capitec Bank Holdings, Ltd.   23,200    2,108,014 
City Lodge Hotels, Ltd.   57,892    306,155 
Clicks Group, Ltd.   177,900    2,893,634 
Italtile, Ltd.   3,636,472    3,369,221 
Shoprite Holdings, Ltd.   83,700    750,062 
Transaction Capital, Ltd.   3,071,128    4,481,544 
         14,167,192 
           
South Korea (4.70%)          
Douzone Bizon Co., Ltd.   62,500    3,943,014 
Hy-Lok Corp.   18,500    272,702 
Koh Young Technology, Inc.   18,244    1,475,577 
LEENO Industrial, Inc.   99,700    4,558,890 
LG Household & Health Care, Ltd.   4,825    5,229,554 
NAVER Corp.   27,560    3,884,860 
Tokai Carbon Korea Co., Ltd.   46,000    2,115,261 
         21,479,858 
           
Taiwan (8.22%)          
ASPEED Technology, Inc.   95,000    2,490,432 
Bioteque Corp.   667,000    2,859,464 
FineTek Co., Ltd.   409,500    1,146,151 
Gourmet Master Co., Ltd.   372,760    1,702,128 
LandMark Optoelectronics Corp.   210,000    1,776,416 
M31 Technology Corp.   41,000    515,185 
Poya International Co., Ltd.   342,000    4,701,861 
Rafael Microelectronics, Inc.   312,000    1,885,909 
Sinmag Equipment Corp.   972,502    3,290,606 

 

See Notes to Financial Statements.

 

Semi-Annual Report | October 31, 2019 37

 

 

Grandeur Peak Emerging Markets Opportunities Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
Taiwan (continued)        
Sporton International, Inc.   696,760   $4,348,956 
Tehmag Foods Corp.   145,200    1,063,701 
Test Research, Inc.   1,626,000    2,724,200 
TSC Auto ID Technology Co., Ltd.   228,800    1,871,559 
TTFB Co., Ltd.   179,000    1,570,047 
Voltronic Power Technology Corp.   254,100    5,634,517 
         37,581,132 
           
Thailand (1.64%)          
Muangthai Capital PCL   2,120,000    4,353,039 
TOA Paint Thailand PCL   2,107,000    3,140,089 
         7,493,128 
           
Turkey (0.32%)          
DP Eurasia NV(a)(b)(c)   1,646,300    1,471,453 
           
United Arab Emirates (0.98%)          
Aramex PJSC   2,626,419    2,803,230 
Network International Holdings PLC(a)(b)(c)   236,400    1,656,659 
         4,459,889 
           
United States (2.41%)          
FirstCash, Inc.   33,570    2,832,972 
Frontage Holdings Corp.(a)(b)(c)   333,000    226,081 
Genpact, Ltd.   202,850    7,945,635 
         11,004,688 
           
Vietnam (3.35%)          
FPT Corp.   1,364,611    3,405,205 
Ho Chi Minh City Development Joint Stock Commercial Bank(a)   2,240,203    2,843,338 
Lix Detergent JSC   437,310    780,271 
Vietnam Dairy Products JSC   892,665    5,001,356 
Vietnam Technological & Commercial Joint Stock Bank(a)   3,207,629    3,276,335 
         15,306,505 
           
TOTAL COMMON STOCKS          
(Cost $352,282,793)        429,454,367 
           
TOTAL INVESTMENTS (93.92%)          
(Cost $352,282,793)       $429,454,367 
           
Other Assets In Excess Of Liabilities (6.08%)        27,813,729 
           
NET ASSETS (100.00%)       $457,268,096 

 

(a)Non-Income Producing Security.
(b)Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. As of October 31, 2019, these securities had a total aggregate market value of $49,068,991 representing 10.73% of net assets.
(c)Security was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts securities offered and sold outside of the United States from registration. Such security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. The security has been deemed liquid under guidelines approved by the Fund's Board of Trustees. As of October 31, 2019, the aggregate market value of these securities was $56,528,270, representing 12.36% of net assets.
(d)As a result of the use of significant unobservable inputs to determine fair value, these investments have been classified as level 3 assets. See also Note 2 to the financial statements for additional information.

 

For Fund compliance purposes, the Fund's geographical classifications refer to any one or more of the country sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine sub-classifications for reporting ease. Geographical regions are shown as a percentage of net assets.

 

See Notes to Financial Statements.

 

38 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

Grandeur Peak Global Contrarian Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
COMMON STOCKS (99.49%)          
Australia (4.11%)          
Fiducian Group, Ltd.   28,580   $106,389 
Lycopodium, Ltd.   9,557    36,432 
National Storage REIT   38,969    49,966 
         192,787 
           
Belgium (0.74%)          
X-Fab Silicon Foundries SE(a)(b)(c)   7,729    34,825 
           
Bermuda (0.86%)          
Bank of NT Butterfield & Son, Ltd.   1,224    40,331 
           
Britain (9.46%)          
B&M European Value Retail SA   10,489    50,312 
City of London Investment Group PLC   6,408    35,277 
Close Brothers Group PLC   1,880    33,680 
CVS Group PLC   4,132    51,784 
K3 Capital Group PLC   26,619    49,653 
LoopUp Group PLC(a)   64,000    53,472 
River & Mercantile Group PLC   10,693    34,213 
Sabre Insurance Group PLC(b)(c)   12,757    48,748 
Senior PLC   21,807    52,174 
Volution Group PLC   13,363    34,533 
         443,846 
           
Canada (2.57%)          
Biosyent, Inc.(a)   10,654    48,534 
Guardian Capital Group, Ltd.   3,655    72,317 
         120,851 
           
China (6.40%)          
BBI Life Sciences Corp.(c)   332,500    100,141 
Essex Bio-technology, Ltd.   61,000    47,019 
Hangzhou Robam Appliances Co., Ltd., Class A   10,000    44,788 
Man Wah Holdings, Ltd.   53,600    36,595 
O2Micro International, Ltd., ADR(a)   28,900    35,836 
Xin Point Holdings, Ltd.(c)   168,000    36,233 
         300,612 
           
Colombia (1.62%)          
Parex Resources, Inc.(a)   5,602    75,921 
           
France (1.99%)          
Thermador Groupe   872    53,879 
Vetoquinol SA   605    39,406 
         93,285 

 

   Shares   Value (Note 2) 
Georgia (1.79%)        
Bank of Georgia Group PLC   2,996   $50,412 
TBC Bank Group PLC   2,034    33,725 
         84,137 
           
Germany (2.87%)          
Aroundtown SA   4,500    37,973 
Grand City Properties SA   2,159    50,470 
Norma Group SE   1,256    46,171 
         134,614 
           
Greece (1.54%)          
JUMBO SA   1,900    37,083 
Sarantis SA   4,000    35,333 
         72,416 
           
Hong Kong (5.12%)          
Jacobson Pharma Corp., Ltd.(c)   382,000    57,525 
Plover Bay Technologies, Ltd.(c)   704,000    99,725 
TK Group Holdings, Ltd.   74,000    34,942 
Value Partners Group, Ltd.   91,000    48,078 
         240,270 
           
India (2.36%)          
Cyient, Ltd.   10,500    60,214 
Time Technoplast, Ltd.   57,000    50,628 
         110,842 
           
Indonesia (1.73%)          
Selamat Sempurna Tbk PT   772,100    81,132 
           
Ireland (1.93%)          
Hostelworld Group PLC(b)(c)   31,425    47,545 
Irish Residential Properties REIT PLC   22,000    43,086 
         90,631 
           
Italy (2.41%)          
Freni Brembo SpA   4,085    43,441 
Piovan SpA(b)(c)   11,328    69,741 
         113,182 
           
Japan (11.99%)          
Beenos, Inc.   2,800    34,225 
Central Automotive Products, Ltd.   4,000    78,452 
Create SD Holdings Co., Ltd.   2,200    54,862 
Japan Lifeline Co., Ltd.   2,200    34,246 
Medikit Co., Ltd.   700    44,402 
Naigai Trans Line, Ltd.   3,600    51,005 
Seria Co., Ltd.   2,700    68,156 
Sundrug Co., Ltd.   2,200    73,239 
Tokyo Century Corp.   1,100    51,338 

 

See Notes to Financial Statements.

 

Semi-Annual Report | October 31, 2019 39

 

 

Grandeur Peak Global Contrarian Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
Japan (continued)        
Trancom Co., Ltd.   1,100   $72,933 
         562,858 
           
Malaysia (0.73%)          
AEON Credit Service M Bhd   9,300    34,053 
           
Mexico (2.78%)          
Credito Real SAB de CV SOFOM ER   42,800    52,998 
Grupo Herdez SAB de CV   18,000    36,671 
Regional SAB de CV   7,700    40,997 
         130,666 
           
Netherlands (1.45%)          
Aalberts NV   1,687    67,847 
           
New Zealand (0.92%)          
Kathmandu Holdings, Ltd.   21,562    43,409 
           
Norway (1.60%)          
Sbanken ASA(b)(c)   4,524    32,124 
Webstep AS(b)(c)   17,397    42,754 
         74,878 
           
Philippines (1.96%)          
Concepcion Industrial Corp.   96,800    58,181 
Pryce Corp.   317,700    33,808 
         91,989 
           
Poland (1.74%)          
Benefit Systems SA(a)   210    38,475 
PGS Software SA   16,456    43,071 
         81,546 
           
Singapore (1.61%)          
Riverstone Holdings, Ltd./Singapore   105,700    75,753 
           
South Africa (1.05%)          
Italtile, Ltd.   53,296    49,379 
           
South Korea (0.85%)          
Tokai Carbon Korea Co., Ltd.   864    39,730 
           
Sweden (3.38%)          
Hoist Finance AB(a)(b)(c)   6,790    37,165 
KNOW IT AB   4,181    82,271 
TF Bank AB(c)   3,256    39,454 
         158,890 
           
Taiwan (6.20%)          
Bioteque Corp.   24,000    102,889 
FineTek Co., Ltd.   12,000    33,587 
Rafael Microelectronics, Inc.   7,000    42,312 

 

   Shares   Value (Note 2) 
Taiwan (continued)        
Sinmag Equipment Corp.   9,000   $30,453 
Taiwan Sakura Corp.   24,000    37,963 
TTFB Co., Ltd.   5,000    43,856 
         291,060 
           
Turkey (1.05%)          
DP Eurasia NV(a)(b)(c)   55,331    49,455 
           
United Arab Emirates (1.11%)          
Aramex PJSC   49,000    52,299 
           
United States (11.64%)          
Carnival Corp.   1,188    50,953 
CH Robinson Worldwide, Inc.   816    61,722 
Core Laboratories NV   839    36,949 
Hackett Group, Inc.   4,915    83,113 
HD Supply Holdings, Inc.(a)   900    35,586 
Hingham Institution for Savings   216    41,038 
MSC Industrial Direct Co., Inc., Class A   681    49,856 
RPC, Inc.   8,113    33,588 
Systemax, Inc.   2,974    64,358 
TriMas Corp.(a)   1,070    34,582 
Virtusa Corp.(a)   1,468    54,727 
         546,472 
           
Vietnam (1.93%)          
Ho Chi Minh City          
Development Joint Stock          
Commercial Bank(a)   30,500    38,712 
Hoa Phat Group JSC(a)   55,000    51,674 
         90,386 
           
TOTAL COMMON STOCKS          
(Cost $4,606,276)        4,670,352 
           
TOTAL INVESTMENTS (99.49%)          
(Cost $4,606,276)       $4,670,352 
           
Other Assets In Excess Of Liabilities (0.51%)        23,866 
           
NET ASSETS (100.00%)       $4,694,218 

 

(a)Non-Income Producing Security.
(b)Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. As of October 31, 2019, these securities had a total aggregate market value of $362,357 representing 7.72% of net assets.

 

See Notes to Financial Statements.

 

40 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

Grandeur Peak Global Contrarian Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

(c)Security was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts securities offered and sold outside of the United States from registration. Such security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. The security has been deemed liquid under guidelines approved by the Fund's Board of Trustees. As of October 31, 2019, the aggregate market value of these securities was $695,435, representing 14.81% of net assets.

 

For Fund compliance purposes, the Fund's geographical classifications refer to any one or more of the country sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine sub-classifications for reporting ease. Geographical regions are shown as a percentage of net assets.

 

See Notes to Financial Statements.

 

Semi-Annual Report | October 31, 2019 41

 

 

Grandeur Peak Global Micro Cap Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
COMMON STOCKS (98.79%)        
Australia (11.09%)        
Australian Ethical Investment, Ltd.   41,500   $78,672 
Fiducian Group, Ltd.   190,828    710,356 
Kogan.com, Ltd.   144,289    673,383 
Lycopodium, Ltd.   43,026    164,020 
Mainstream Group Holdings, Ltd.   465,778    178,202 
National Storage REIT   358,861    460,129 
National Veterinary Care, Ltd.   524,152    831,047 
People Infrastructure, Ltd.   74,514    174,645 
PWR Holdings, Ltd.   60,900    199,412 
Temple & Webster Group, Ltd.(a)   177,000    279,415 
         3,749,281 
           
Brazil (0.18%)          
Arco Platform, Ltd., Class A(a)   1,475    61,213 
           
Britain (12.37%)          
AB Dynamics PLC   6,614    179,917 
City of London Investment Group PLC   40,547    223,221 
Curtis Banks Group PLC   78,479    294,808 
CVS Group PLC   31,500    394,775 
dotdigital group PLC   152,400    180,632 
Impax Asset Management Group PLC   111,598    378,744 
JTC PLC(b)(c)   51,800    242,229 
K3 Capital Group PLC   143,979    268,565 
LoopUp Group PLC(a)   110,133    92,016 
On the Beach Group PLC(b)(c)   43,800    254,293 
Oxford Immunotec Global PLC(a)   28,042    434,931 
Premier Asset Management Group PLC   50,268    117,207 
River & Mercantile Group PLC   61,300    196,131 
Sanne Group PLC   59,000    403,529 
Tracsis PLC   19,300    150,002 
Volution Group PLC   86,601    223,797 
XPS Pensions Group PLC(c)   90,380    146,343 
         4,181,140 
           
China (2.76%)          
BBI Life Sciences Corp.(c)   2,155,000    649,034 
Essex Bio-technology, Ltd.   186,000    143,370 
O2Micro International, Ltd., ADR(a)   112,655    139,692 
         932,096 
           
Colombia (0.39%)          
Amerisur Resources PLC(a)   536,017    132,478 

 

   Shares   Value (Note 2) 
Egypt (0.36%)        
Obour Land For Food Industries   372,774   $121,256 
           
Finland (0.27%)          
Siili Solutions Oyj   10,200    89,871 
           
France (2.02%)          
Esker SA   3,500    321,262 
Thermador Groupe   5,874    362,940 
         684,202 
           
Georgia (1.06%)          
Georgia Healthcare Group PLC(b)(c)   60,281    132,550 
TBC Bank Group PLC   13,650    226,324 
         358,874 
           
Germany (0.50%)          
Marley Spoon AG(a)   150,636    44,132 
Nexus AG   3,500    124,133 
         168,265 
           
Greece (2.43%)          
Sarantis SA   92,942    820,973 
           
Hong Kong (2.48%)          
Jacobson Pharma Corp., Ltd.(c)   859,000    129,355 
Plover Bay Technologies, Ltd.(c)   3,747,000    530,780 
TK Group Holdings, Ltd.   381,000    179,902 
         840,037 
           
India (5.12%)          
Cyient, Ltd.   23,640    135,567 
Gulf Oil Lubricants India, Ltd.   21,500    266,868 
Kovai Medical Center and Hospital   1,084    10,254 
Metropolis Healthcare, Ltd.(a)(b)(c)   18,316    373,699 
Time Technoplast, Ltd.   65,971    58,596 
Vaibhav Global, Ltd.   48,170    553,221 
Westlife Development, Ltd.(a)   67,000    331,275 
         1,729,480 
           
Indonesia (2.62%)          
Arwana Citramulia Tbk PT   7,920,100    280,987 
Hexindo Adiperkasa Tbk PT   557,000    138,486 
Selamat Sempurna Tbk PT   4,434,000    465,922 
         885,395 
           
Ireland (1.10%)          
Irish Residential Properties REIT PLC   137,000    268,310 

 

See Notes to Financial Statements

 

42 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

Grandeur Peak Global Micro Cap Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
Ireland (continued)        
Uniphar PLC(a)   77,700   $103,817 
         372,127 
           
Italy (0.86%)          
Piovan SpA(b)(c)   47,181    290,468 
           
Japan (15.44%)          
Atrae, Inc.(a)   4,500    133,554 
BayCurrent Consulting, Inc.   3,700    187,415 
Beenos, Inc.   9,500    116,122 
Central Automotive Products, Ltd.   16,500    323,613 
eGuarantee, Inc.   22,000    311,084 
Future Corp.   19,900    326,353 
M&A Capital Partners Co., Ltd.(a)   12,400    830,188 
MarkLines Co., Ltd.   9,100    179,152 
Medikit Co., Ltd.   2,000    126,864 
Naigai Trans Line, Ltd.   37,300    528,466 
Open Door, Inc.(a)   19,300    372,096 
SBI FinTech Solutions Co., Ltd.   14,215    120,958 
Silver Life Co., Ltd.(a)   7,400    212,427 
Strike Co., Ltd.   3,700    133,795 
Synchro Food Co., Ltd.(a)   32,700    152,008 
System Information Co., Ltd.   12,000    109,343 
Syuppin Co., Ltd.   23,100    201,502 
Trancom Co., Ltd.   2,700    179,017 
Vega Corp. Co., Ltd.(a)   27,500    137,513 
YAKUODO Holdings Co., Ltd.   22,100    536,384 
         5,217,854 
           
Malaysia (1.33%)          
AEON Credit Service M Bhd   76,769    281,098 
Mynews Holdings Bhd   535,000    170,288 
         451,386 
           
Netherlands (1.02%)          
Shop Apotheke Europe NV(a)(b)(c)   7,875    343,415 
           
New Zealand (0.37%)          
CBL Corp., Ltd.(a)(d)   159,993    0 
NZX, Ltd.   151,700    125,468 
         125,468 
           
Norway (4.67%)          
Infront ASA(a)   220,833    552,314 
Medistim ASA   9,989    168,363 
Sbanken ASA(b)(c)   24,431    173,479 
Self Storage Group ASA(a)   227,748    577,038 
Webstep AS(b)(c)   43,352    106,540 
         1,577,734 

 

   Shares   Value (Note 2) 
Oman (0.51%)        
Tethys Oil AB   22,717   $172,688 
           
Philippines (1.98%)          
Concepcion Industrial Corp.   334,770    201,212 
Pryce Corp.   4,395,000    467,691 
         668,903 
           
Poland (0.94%)          
LiveChat Software SA   18,500    183,516 
PGS Software SA   51,047    133,608 
         317,124 
           
Singapore (0.42%)          
Riverstone Holdings, Ltd./Singapore   197,800    141,758 
           
South Africa (0.27%)          
ARB Holdings, Ltd.   400,143    91,228 
           
South Korea (0.65%)          
LEENO Industrial, Inc.   4,800    219,485 
           
Sweden (3.91%)          
Absolent Group AB   4,788    207,771 
KNOW IT AB   19,150    376,824 
OEM International AB, Class B   5,685    120,109 
SwedenCare AB(a)   36,978    295,650 
Vitec Software Group AB, Class B   22,600    323,001 
         1,323,355 
           
Taiwan (9.10%)          
Bioteque Corp.   130,000    557,317 
FineTek Co., Ltd.   87,150    243,924 
Gourmet Master Co., Ltd.   34,000    155,254 
Pacific Hospital Supply Co., Ltd.   210,000    557,415 
Poya International Co., Ltd.   25,000    343,703 
Rafael Microelectronics, Inc.   32,000    193,426 
Sporton International, Inc.   51,725    322,851 
Tehmag Foods Corp.   30,300    221,971 
TSC Auto ID Technology Co., Ltd.   29,700    242,943 
TTFB Co., Ltd.   27,000    236,823 
         3,075,627 
           
Turkey (0.80%)          
DP Eurasia NV(a)(b)(c)   301,284    269,286 
           
United States (10.67%)          
BioDelivery Sciences International, Inc.(a)   35,225    203,600 
Castle Biosciences, Inc.(a)   8,925    210,095 
Coastal Financial Corp.(a)   12,400    186,620 
DXP Enterprises, Inc.(a)   3,350    115,642 

 

See Notes to Financial Statements.

 

Semi-Annual Report | October 31, 2019 43

 

 

Grandeur Peak Global Micro Cap Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
United States (continued)        
Esquire Financial Holdings, Inc.(a)   14,510   $352,593 
Hackett Group, Inc.   21,100    356,801 
Heska Corp.(a)   2,216    179,540 
Hingham Institution for Savings   1,415    268,836 
Kinsale Capital Group, Inc.   1,625    171,795 
MaxCyte, Inc.(a)   74,400    108,903 
NV5 Global, Inc.(a)   3,750    271,613 
Seacoast Commerce Banc Holdings   15,325    278,915 
STAAR Surgical Co.(a)   8,300    272,074 
Systemax, Inc.   7,450    161,218 
Transcat, Inc.(a)   6,466    202,644 
Veracyte, Inc.(a)   11,529    264,360 
         3,605,249 
           
Vietnam (1.10%)          
Lix Detergent JSC   208,790    372,534 
           
TOTAL COMMON STOCKS          
(Cost $28,385,793)        33,390,250 
           
TOTAL INVESTMENTS (98.79%)          
(Cost $28,385,793)       $33,390,250 
           
Other Assets In Excess Of Liabilities (1.21%)        409,632 
           
NET ASSETS (100.00%)       $33,799,882 

 

(a)Non-Income Producing Security.
(b)Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. As of October 31, 2019, these securities had a total aggregate market value of $2,185,959 representing 6.47% of net assets.
(c)Security was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts securities offered and sold outside of the United States from registration. Such security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. The security has been deemed liquid under guidelines approved by the Fund's Board of Trustees. As of October 31, 2019, the aggregate market value of these securities was $3,641,471, representing 10.77% of net assets.
(d)As a result of the use of significant unobservable inputs to determine fair value, these investments have been classified as level 3 assets. See also Note 2 to the financial statements for additional information.

 

For Fund compliance purposes, the Fund's geographical classifications refer to any one or more of the country sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine sub-classifications for reporting ease. Geographical regions are shown as a percentage of net assets.

 

See Notes to Financial Statements.

 

44 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

Grandeur Peak Global Opportunities Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
COMMON STOCKS (96.98%)          
Argentina (0.31%)          
Globant SA(a)   21,650   $2,019,079 
           
Australia (1.68%)          
Corporate Travel          
Management, Ltd.   256,900    3,122,172 
Fiducian Group, Ltd.   181,000    673,772 
Kogan.com, Ltd.   569,012    2,655,525 
National Storage REIT   1,872,856    2,401,362 
National Veterinary Care, Ltd.   1,405,859    2,228,999 
         11,081,830 
           
Austria (0.49%)          
Palfinger AG   112,934    3,224,455 
           
Bangladesh (0.19%)          
Square Pharmaceuticals, Ltd.   442,421    1,227,005 
           
Belgium (0.62%)          
Melexis NV   58,193    4,075,885 
           
Bermuda (0.63%)          
Bank of NT Butterfield & Son, Ltd.   126,225    4,159,114 
           
Brazil (1.96%)          
Arco Platform, Ltd., Class A(a)   17,864    741,356 
Fleury SA   773,800    4,885,330 
Pagseguro Digital, Ltd., Class A(a)   196,125    7,272,315 
         12,899,001 
           
Britain (13.93%)          
AB Dynamics PLC   3,000    81,607 
Ascential PLC(b)(c)   1,249,100    5,650,147 
B&M European Value Retail SA   2,107,600    10,109,513 
boohoo Group PLC(a)   1,894,900    6,480,053 
City of London Investment Group PLC   73,063    402,230 
Clipper Logistics PLC   643,195    1,832,963 
Curtis Banks Group PLC   196,200    737,030 
CVS Group PLC   658,817    8,256,654 
Dechra Pharmaceuticals PLC   324,000    11,037,967 
Endava PLC, ADR(a)   119,857    5,155,050 
FDM Group Holdings PLC   182,400    1,708,250 
Impax Asset Management Group PLC   199,020    675,439 
Intermediate Capital Group PLC   92,500    1,780,528 
JTC PLC(b)(c)   596,738    2,790,482 
K3 Capital Group PLC   523,900    977,236 
On the Beach Group PLC(b)(c)   687,605    3,992,080 
Oxford Immunotec Global PLC(a)   407,658    6,322,776 

 

   Shares   Value (Note 2) 
Britain (continued)          
Premier Asset Management Group PLC   427,969   $997,868 
River & Mercantile Group PLC   499,300    1,597,522 
Sabre Insurance Group PLC(b)(c)   837,400    3,199,951 
Sanne Group PLC   642,700    4,395,725 
Softcat PLC   253,300    3,085,903 
St. James's Place PLC   420,717    5,673,213 
Ted Baker PLC   47,343    249,351 
Ultra Electronics Holdings PLC   151,000    3,814,169 
Volution Group PLC   291,700    753,820 
         91,757,527 
           
Canada (3.70%)          
Biosyent, Inc.(a)   142,800    650,520 
Gildan Activewear, Inc.   173,000    4,419,900 
Lululemon Athletica, Inc.(a)   40,625    8,298,469 
Richelieu Hardware, Ltd.   276,865    5,684,025 
Ritchie Bros Auctioneers, Inc.   52,550    2,160,856 
Stantec, Inc.   146,612    3,127,930 
         24,341,700 
           
China (3.68%)          
BBI Life Sciences Corp.(c)   13,832,000    4,165,866 
Ctrip.com International, Ltd., ADR(a)   109,850    3,623,951 
Hangzhou Tigermed Consulting Co., Ltd., Class A   174,800    1,696,967 
O2Micro International, Ltd., ADR(a)   954,611    1,183,718 
Silergy Corp.   386,852    10,903,862 
WuXi AppTec Co., Ltd., Class H(b)(c)   218,200    2,637,018 
         24,211,382 
           
Denmark (0.66%)          
Ambu A/S, Class B   275,699    4,329,661 
           
Egypt (0.09%)          
Integrated Diagnostics Holdings PLC(b)(c)   131,600    621,152 
           
France (2.25%)          
Alten SA   28,581    3,138,230 
BioMerieux 42,200        3,452,265 
Esker SA   34,078    3,127,991 
Neurones   39,608    923,253 
Thermador Groupe   67,778    4,187,840 
         14,829,579 
           
Georgia (0.75%)          
Bank of Georgia Group PLC   102,600    1,726,414 
Georgia Capital PLC(a)   112,900    1,422,968 

 

See Notes to Financial Statements.

 

Semi-Annual Report | October 31, 2019 45

 

 

Grandeur Peak Global Opportunities Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
Georgia (continued)        
TBC Bank Group PLC   109,179   $1,810,245 
         4,959,627 
           
Germany (3.62%)          
Dermapharm Holding SE   179,900    7,036,530 
Grand City Properties SA   134,223    3,137,688 
GRENKE AG   20,700    1,958,907 
Nexus AG   94,624    3,355,985 
Norma Group SE   138,468    5,090,122 
PATRIZIA AG   160,113    3,280,404 
         23,859,636 
           
Hong Kong (0.77%)          
Jacobson Pharma Corp., Ltd.(c)   6,659,000    1,002,765 
Value Partners Group, Ltd.   7,703,000    4,069,758 
         5,072,523 
           
India (5.19%)          
Bajaj Finance, Ltd.   146,250    8,304,519 
Cyient, Ltd.   558,616    3,203,455 
Gulf Oil Lubricants India, Ltd.   138,167    1,714,992 
HDFC Bank, Ltd.   201,000    3,486,602 
Kovai Medical Center and Hospital   25,501    241,227 
L&T Technology Services, Ltd.(b)(c)   64,348    1,364,142 
Metropolis Healthcare, Ltd.(a)(b)(c)   301,291    6,147,201 
Time Technoplast, Ltd.   1,305,759    1,159,795 
WNS Holdings, Ltd., ADR(a)   138,025    8,535,466 
         34,157,399 
           
Indonesia (1.41%)          
Arwana Citramulia Tbk PT   59,516,800    2,111,517 
Selamat Sempurna Tbk PT   55,961,200    5,880,371 
Ultrajaya Milk Industry & Trading Co. Tbk PT   11,829,000    1,280,907 
         9,272,795 
           
Ireland (1.27%)          
Irish Residential Properties          
REIT PLC   2,586,846    5,066,250 
Keywords Studios PLC   228,100    3,279,719 
         8,345,969 
           
Israel (0.43%)          
Wix.com, Ltd.(a)   23,234    2,836,174 
           
Italy (3.08%)          
DiaSorin SpA   65,588    7,388,178 
FinecoBank Banca Fineco SpA   412,145    4,642,619 
Freni Brembo SpA   287,111    3,053,248 
Interpump Group SpA   157,145    4,304,478 

 

   Shares   Value (Note 2) 
Italy (continued)          
Piovan SpA(b)(c)   144,291   $888,321 
         20,276,844 
           
Japan (12.73%)          
AIT Corp.   360,900    3,094,670 
BayCurrent Consulting, Inc.   72,600    3,677,396 
Cosmos Pharmaceutical Corp.   9,900    2,047,106 
Create SD Holdings Co., Ltd.   283,000    7,057,311 
Future Corp.   182,400    2,991,299 
Japan Lifeline Co., Ltd.   396,600    6,173,577 
M&A Capital Partners Co., Ltd.(a)   39,100    2,617,770 
MarkLines Co., Ltd.   61,200    1,204,845 
Medikit Co., Ltd.   25,200    1,598,482 
MISUMI Group, Inc.   144,700    3,676,792 
MonotaRO Co., Ltd.   145,300    4,446,861 
Naigai Trans Line, Ltd.   80,400    1,139,106 
Nihon M&A Center, Inc.   156,300    4,790,749 
Open Door, Inc.(a)   120,600    2,325,115 
Seria Co., Ltd.   234,300    5,914,453 
Strike Co., Ltd.   70,300    2,542,101 
Sundrug Co., Ltd.   102,100    3,398,921 
Synchro Food Co., Ltd.(a)   410,300    1,907,312 
Systena Corp.   229,700    3,322,450 
Syuppin Co., Ltd.   215,200    1,877,196 
Tokyo Century Corp.   99,900    4,662,432 
Trancom Co., Ltd.   77,270    5,123,189 
Tsuruha Holdings, Inc.   50,000    5,662,562 
YAKUODO Holdings Co., Ltd.   107,100    2,599,399 
         83,851,094 
           
Malaysia (0.49%)          
AEON Credit Service M Bhd   883,444    3,234,819 
           
Mexico (0.79%)          
Grupo Herdez SAB de CV   1,553,200    3,164,292 
Regional SAB de CV   378,034    2,012,749 
         5,177,041 
           
Netherlands (2.55%)          
Aalberts NV   179,122    7,203,876 
QIAGEN NV(a)   123,200    3,672,592 
Shop Apotheke Europe NV(a)(b)(c)   68,600    2,991,524 
Takeaway.com NV(a)(b)(c)   36,300    2,955,432 
         16,823,424 
           
New Zealand (0.00%)(d)          
CBL Corp., Ltd.(a)(e)   1,107,672    1 
           
Norway (1.01%)          
Medistim ASA   106,000    1,786,617 
Sbanken ASA(b)(c)   685,110    4,864,828 
         6,651,445 

 

See Notes to Financial Statements.

 

46 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

Grandeur Peak Global Opportunities Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
Philippines (0.70%)          
Concepcion Industrial Corp.   1,035,152   $622,172 
Puregold Price Club, Inc.   4,918,000    3,959,017 
         4,581,189 
           
Poland (0.87%)          
Dino Polska SA(a)(b)(c)   138,697    5,408,989 
PGS Software SA   120,487    315,357 
         5,724,346 
           
Singapore (0.40%)          
Riverstone Holdings, Ltd./Singapore   3,665,000    2,626,613 
           
South Africa (0.24%)          
Italtile, Ltd.   1,723,941    1,597,245 
           
South Korea (0.60%)          
Hy-Lok Corp.   47,641    702,259 
LEENO Industrial, Inc.   71,000    3,246,551 
         3,948,810 
           
Sweden (2.82%)          
AddTech AB, Class B   78,727    2,189,194 
EQT AB(a)   181,100    1,737,534 
Hexpol AB   439,500    3,914,475 
Indutrade AB   53,300    1,640,560 
KNOW IT AB   99,400    1,955,943 
Nibe Industrier AB, Class B   276,600    3,781,311 
OEM International AB, Class B   15,188    320,883 
Sweco AB, Class B   85,885    3,020,656 
         18,560,556 
           
Switzerland (0.40%)          
Partners Group Holding AG   2,550    1,988,302 
VZ Holding AG   2,335    650,912 
         2,639,214 
           
Taiwan (1.91%)          
Bioteque Corp.   967,000    4,145,579 
FineTek Co., Ltd.   127,050    355,601 
Poya International Co., Ltd.   171,000    2,350,930 
Rafael Microelectronics, Inc.   273,000    1,650,170 
Sporton International, Inc.   648,671    4,048,800 
         12,551,080 
           
Turkey (0.05%)          
DP Eurasia NV(a)(b)(c)   403,911    361,013 
           
United Arab Emirates (0.38%)          
Aramex PJSC   2,330,645    2,487,544 
           
United States (22.65%)          
ABIOMED, Inc.(a)   24,964    5,182,027 

 

   Shares   Value (Note 2) 
United States (continued)          
BioDelivery Sciences International, Inc.(a)   851,374   $4,920,942 
Burford Capital, Ltd.   326,600    3,720,834 
CH Robinson Worldwide, Inc.   22,575    1,707,573 
Core Laboratories NV   13,000    572,520 
EPAM Systems, Inc.(a)   59,775    10,518,009 
Esquire Financial Holdings, Inc.(a)   17,086    415,190 
ExlService Holdings, Inc.(a)   52,700    3,669,501 
Fastenal Co.   217,175    7,805,269 
First Republic Bank   104,350    11,098,666 
Genpact, Ltd.   199,400    7,810,498 
Hackett Group, Inc.   182,025    3,078,043 
Hamilton Lane, Inc., Class A   28,467    1,697,203 
Heska Corp.(a)   42,913    3,476,811 
Hingham Institution for Savings   16,645    3,162,384 
Inphi Corp.(a)   97,125    6,981,345 
Knight-Swift Transportation Holdings, Inc.   85,436    3,114,997 
Littelfuse, Inc.   12,475    2,190,236 
Microchip Technology, Inc.   50,470    4,758,816 
Monro, Inc.   51,725    3,626,440 
MSC Industrial Direct Co., Inc., Class A   43,325    3,171,823 
New Relic, Inc.(a)   55,275    3,540,916 
NV5 Global, Inc.(a)   82,950    6,008,068 
Old Dominion Freight Line, Inc.   7,550    1,374,704 
Paycom Software, Inc.(a)   25,200    5,330,556 
Pluralsight, Inc., Class A(a)   190,714    3,448,109 
Power Integrations, Inc.   145,750    13,279,282 
Qualys, Inc.(a)   62,175    5,305,393 
Revolve Group, Inc.(a)   41,645    864,550 
Silicon Laboratories, Inc.(a)   20,240    2,150,298 
STAAR Surgical Co.(a)   63,225    2,072,516 
SVB Financial Group(a)   20,275    4,490,507 
Systemax, Inc.   207,020    4,479,913 
TriMas Corp.(a)   128,594    4,156,158 
         149,180,097 
           
Vietnam (1.68%)          
Ho Chi Minh City Development Joint Stock Commercial Bank(a)   1,602,160    2,033,513 
Vietnam Dairy Products JSC   756,440    4,238,124 
Vietnam Technological & Commercial Joint Stock Bank(a)   3,191,904    3,260,274 
Vincom Retail JSC   1,051,930    1,505,154 
         11,037,065 
           
TOTAL COMMON STOCKS          
(Cost $492,736,792)        638,590,933 

 

See Notes to Financial Statements.

 

Semi-Annual Report | October 31, 2019 47

 

 

Grandeur Peak Global Opportunities Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
PREFERRED STOCKS (0.29%)        
United States (0.29%)          
Dataminr, Inc.(a)(e)   96,640   $1,923,136 
           
TOTAL PREFERRED STOCKS          
(Cost $1,923,136)        1,923,136 
           
TOTAL INVESTMENTS (97.27%)          
(Cost $494,659,928)       $640,514,069 
           
Other Assets In Excess Of Liabilities (2.73%)        17,989,224 
           
NET ASSETS (100.00%)       $658,503,293 

 

(a)Non-Income Producing Security.
(b)Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. As of October 31, 2019, these securities had a total aggregate market value of $43,872,280 representing 6.66% of net assets.
(c)Security was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts securities offered and sold outside of the United States from registration. Such security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. The security has been deemed liquid under guidelines approved by the Fund's Board of Trustees. As of October 31, 2019, the aggregate market value of these securities was $49,040,911, representing 7.45% of net assets.
(d)Less than 0.005%.
(e)As a result of the use of significant unobservable inputs to determine fair value, these investments have been classified as level 3 assets. See also Note 2 to the financial statements for additional information.

 

For Fund compliance purposes, the Fund's geographical classifications refer to any one or more of the country sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine sub-classifications for reporting ease. Geographical regions are shown as a percentage of net assets.

 

See Notes to Financial Statements.

 

48 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

Grandeur Peak Global Reach Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
COMMON STOCKS (97.97%)        
Argentina (0.41%)          
Globant SA(a)   13,563   $1,264,885 
           
Australia (4.07%)          
Appen, Ltd.   55,042    829,819 
Australian Ethical Investment, Ltd.   487,800    924,730 
Corporate Travel Management, Ltd.   27,881    338,845 
Domino's Pizza Enterprises, Ltd.   38,800    1,364,355 
Kogan.com, Ltd.   264,508    1,234,434 
Lycopodium, Ltd.   181,976    693,713 
Mainstream Group Holdings, Ltd.   2,531,035    968,348 
National Storage REIT   1,113,721    1,428,005 
National Veterinary Care, Ltd.   720,900    1,142,992 
Netwealth Group, Ltd.   243,326    1,479,440 
People Infrastructure, Ltd.   303,330    710,943 
PWR Holdings, Ltd.   167,100    547,155 
Temple & Webster Group, Ltd.(a)   493,000    778,256 
         12,441,035 
           
Austria (0.21%)          
Palfinger AG   22,948    655,204 
           
Belgium (0.22%)          
Melexis NV   9,497    665,178 
           
Bermuda (0.58%)          
Bank of NT Butterfield & Son, Ltd.   53,900    1,776,005 
           
Brazil (1.91%)          
Arco Platform, Ltd., Class A(a)   36,350    1,508,525 
Fleury SA   191,700    1,210,284 
Pagseguro Digital, Ltd., Class A(a)   54,175    2,008,809 
Raia Drogasil SA   41,000    1,124,139 
         5,851,757 
           
Britain (11.81%)          
AB Dynamics PLC   36,676    997,676 
Alpha FX Group PLC(b)   57,400    765,839 
Ascential PLC(b)(c)   101,100    457,313 
B&M European Value Retail SA   674,000    3,232,972 
boohoo Group PLC(a)   409,800    1,401,407 
Curtis Banks Group PLC   278,800    1,047,319 
CVS Group PLC   99,700    1,249,495 
Dechra Pharmaceuticals PLC   51,400    1,751,085 
dotdigital group PLC   1,212,256    1,436,825 
Endava PLC, ADR(a)   48,423    2,082,673 
FDM Group Holdings PLC   49,500    463,588 

 

   Shares   Value (Note 2) 
Britain (continued)          
First Derivatives PLC   14,850   $437,619 
Gamma Communications PLC   34,400    530,266 
Horizon Discovery Group PLC(a)   233,200    496,614 
Impax Asset Management Group PLC   550,165    1,867,164 
Intermediate Capital Group PLC   47,300    910,475 
Intertek Group PLC   11,400    790,331 
JTC PLC(b)(c)   438,093    2,048,622 
K3 Capital Group PLC   170,800    318,595 
LoopUp Group PLC(a)   378,449    316,195 
On the Beach Group PLC(b)(c)   275,700    1,600,652 
Oxford Immunotec Global PLC(a)   60,225    934,090 
Sabre Insurance Group PLC(b)(c)   415,800    1,588,894 
Sanne Group PLC   381,373    2,608,388 
Softcat PLC   71,799    874,713 
St. James's Place PLC   159,538    2,151,311 
Trainline PLC(a)(b)(c)   205,700    1,109,782 
Volution Group PLC   346,347    895,040 
XPS Pensions Group PLC(b)   1,094,928    1,772,899 
         36,137,842 
           
Canada (1.97%)          
Biosyent, Inc.(a)   93,300    425,025 
Gildan Activewear, Inc.   28,700    733,243 
Lululemon Athletica, Inc.(a)   10,350    2,114,195 
Richelieu Hardware, Ltd.   53,300    1,094,246 
Ritchie Bros Auctioneers, Inc.   40,750    1,675,640 
         6,042,349 
           
China (5.15%)          
58.com, Inc., ADR(a)   12,475    658,805 
BBI Life Sciences Corp.(b)   7,001,500    2,108,684 
CSPC Pharmaceutical Group, Ltd.   597,000    1,535,174 
Essex Bio-technology, Ltd.   1,207,000    930,363 
Hangzhou Tigermed Consulting Co., Ltd., Class A   36,750    356,771 
Hop Hing Group Holdings, Ltd.   6,196,000    87,769 
HUYA, Inc., ADR(a)   21,488    477,893 
Koolearn Technology Holding, Ltd.(a)(b)(c)   494,000    1,161,248 
Man Wah Holdings, Ltd.   1,608,400    1,098,136 
O2Micro International, Ltd., ADR(a)   292,039    362,128 
Shanghai Haohai Biological Technology Co., Ltd., Class H(b)(c)   65,700    379,815 
Silergy Corp.   98,925    2,788,313 
WuXi AppTec Co., Ltd., Class H(b)(c)   197,400    2,385,643 

 

See Notes to Financial Statements.

 

Semi-Annual Report | October 31, 2019 49

 

 

Grandeur Peak Global Reach Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
China (continued)          
Yum China Holdings, Inc.   33,325   $1,416,313 
         15,747,055 
           
Colombia (1.38%)          
Amerisur Resources PLC(a)   5,260,978    1,300,269 
Parex Resources, Inc.(a)   215,961    2,926,812 
         4,227,081 
           
Denmark (0.14%)          
Ambu A/S, Class B   27,656    434,318 
           
Egypt (0.42%)          
African Export-Import Bank, GDR   200,000    828,000 
Integrated Diagnostics Holdings PLC(b)(c)   95,137    449,047 
         1,277,047 
           
France (2.46%)          
Alten SA   10,400    1,141,933 
BioMerieux   8,000    654,458 
Bureau Veritas SA   31,962    815,965 
Esker SA   21,509    1,974,293 
Infotel SA   21,060    869,064 
Neurones   17,282    402,839 
Thermador Groupe   26,908    1,662,581 
         7,521,133 
           
Georgia (0.20%)          
Georgia Healthcare Group PLC(b)(c)   284,198    624,912 
           
Germany (3.84%)          
CANCOM SE   15,800    843,024 
Dermapharm Holding SE   30,400    1,189,052 
FUCHS PETROLUB SE   15,500    661,752 
Grand City Properties SA   69,400    1,622,342 
GRENKE AG   8,900    842,235 
Marley Spoon AG(a)   1,162,278    340,517 
Nexus AG   23,085    818,745 
Norma Group SE   28,260    1,038,845 
PATRIZIA AG   99,904    2,046,839 
Puma SE   21,800    1,639,948 
Wirecard AG   5,496    696,026 
         11,739,325 
           
Greece (0.79%)          
JUMBO SA   33,700    657,748 
Sarantis SA   199,040    1,758,155 
         2,415,903 
           
Hong Kong (1.01%)          
Jacobson Pharma Corp., Ltd.(b)   5,581,000    840,432 
Plover Bay Technologies, Ltd.(b)   2,930,000    415,048 

 

   Shares   Value (Note 2) 
Hong Kong (continued)          
TK Group Holdings, Ltd.   1,720,000   $812,154 
Vitasoy International Holdings, Ltd.   254,000    1,034,029 
         3,101,663 
India (6.06%)          
Bajaj Finance, Ltd.   38,000    2,157,756 
Cyient, Ltd.   181,100    1,038,541 
Gulf Oil Lubricants India, Ltd.   68,300    847,771 
HDFC Bank, Ltd.   112,000    1,942,783 
HDFC Life Insurance Co., Ltd.(b)(c)   110,000    971,144 
Hero MotoCorp, Ltd.   23,831    908,571 
IndiaMart InterMesh, Ltd.(a)(b)(c)   22,969    601,890 
L&T Technology Services, Ltd.(b)(c)   21,000    445,188 
Metropolis Healthcare, Ltd.(a)(b)(c)   83,879    1,711,372 
Poly Medicure, Ltd.   242,220    702,461 
TCI Express, Ltd.   133,959    1,466,341 
Time Technoplast, Ltd.   712,756    633,081 
Vaibhav Global, Ltd.   77,947    895,203 
Westlife Development, Ltd.(a)   126,000    622,994 
WNS Holdings, Ltd., ADR(a)   58,075    3,591,358 
         18,536,454 
           
Indonesia (2.08%)          
Arwana Citramulia Tbk PT   26,137,200    927,287 
Bank Central Asia Tbk PT   571,500    1,280,450 
Bank Tabungan Pensiunan Nasional Syariah Tbk PT(a)   3,448,500    943,381 
Hexindo Adiperkasa Tbk PT   1,636,900    406,980 
Indonesia Pondasi Raya Tbk PT   4,149,800    113,523 
Selamat Sempurna Tbk PT   20,026,300    2,104,352 
Ultrajaya Milk Industry & Trading Co. Tbk PT   5,474,800    592,840 
         6,368,813 
           
Ireland (1.22%)          
Irish Residential Properties          
REIT PLC   871,726    1,707,246 
Keywords Studios PLC   40,800    586,640 
Uniphar PLC(a)   1,074,600    1,435,804 
         3,729,690 
           
Israel (0.82%)          
Wix.com, Ltd.(a)   20,627    2,517,938 
           
Italy (1.38%)          
DiaSorin SpA   8,212    925,043 
FinecoBank Banca Fineco SpA   94,698    1,066,728 
Freni Brembo SpA   43,093    458,268 

 

See Notes to Financial Statements.

 

50 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

Grandeur Peak Global Reach Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
Italy (continued)          
Interpump Group SpA   32,697   $895,628 
Piovan SpA(b)(c)   140,839    867,069 
         4,212,736 
           
Japan (7.96%)          
AIT Corp.   79,700    683,417 
Asics Corp.   26,200    453,205 
BayCurrent Consulting, Inc.   26,100    1,322,039 
Cosmos Pharmaceutical Corp.   3,200    661,691 
Create SD Holdings Co., Ltd.   37,500    935,156 
eGuarantee, Inc.   29,200    412,894 
Future Corp.   69,300    1,136,497 
Japan Lifeline Co., Ltd.   66,100    1,028,929 
MarkLines Co., Ltd.   36,300    714,638 
Medikit Co., Ltd.   7,800    494,768 
MISUMI Group, Inc.   29,800    757,211 
MonotaRO Co., Ltd.   32,100    982,410 
Naigai Trans Line, Ltd.   59,150    838,036 
Nihon M&A Center, Inc.   39,200    1,201,519 
Open Door, Inc.(a)   53,100    1,023,745 
Pigeon Corp.   30,500    1,502,547 
SBI FinTech Solutions Co., Ltd.   75,000    638,188 
Seria Co., Ltd.   35,600    898,654 
Sundrug Co., Ltd.   19,900    662,473 
Synchro Food Co., Ltd.(a)   113,400    527,149 
System Information Co., Ltd.   49,100    447,397 
Systena Corp.   51,200    740,572 
Syuppin Co., Ltd.   147,200    1,284,030 
Trancom Co., Ltd.   18,300    1,213,335 
Tsuruha Holdings, Inc.   10,500    1,189,138 
Unicharm Corp.   23,600    806,189 
Vega Corp. Co., Ltd.(a)   130,900    654,561 
YAKUODO Holdings Co., Ltd.   47,200    1,145,580 
         24,355,968 
           
Kenya (0.17%)          
Safaricom PLC   1,836,500    528,905 
           
Malaysia (0.19%)          
Mynews Holdings Bhd   1,818,000    578,662 
           
Mexico (0.29%)          
Grupo Herdez SAB de CV   235,790    480,368 
Regional SAB de CV   74,857    398,558 
         878,926 
           
Netherlands (1.17%)          
Aalberts NV   43,782    1,760,812 
           
Shop Apotheke Europe          
NV(a)(b)(c)   32,100    1,399,824 
Takeaway.com NV(a)(b)(c)   5,000    407,084 
         3,567,720 
           
New Zealand (0.33%)          
CBL Corp., Ltd.(a)(d)   819,006    0 

 

   Shares   Value (Note 2) 
New Zealand (continued)          
NZX, Ltd.   1,230,372   $1,017,619 
         1,017,619 
           
Norway (1.32%)          
Infront ASA(a)   190,066    475,364 
Medistim ASA   25,541    430,491 
Sbanken ASA(b)(c)   101,000    717,181 
Self Storage Group ASA(a)   777,569    1,970,102 
Webstep AS(b)(c)   175,000    430,071 
         4,023,209 
           
Oman (0.28%)          
Tethys Oil AB   112,700    856,715 
           
Philippines (1.61%)          
Concepcion Industrial Corp.   1,793,920    1,078,226 
Pryce Corp.   6,894,800    733,706 
Puregold Price Club, Inc.   1,332,700    1,072,831 
Wilcon Depot, Inc.   6,270,400    2,038,853 
         4,923,616 
           
Poland (1.11%)          
Dino Polska SA(a)(b)(c)   60,618    2,364,017 
LiveChat Software SA   68,104    675,576 
PGS Software SA   138,887    363,517 
         3,403,110 
           
Singapore (0.15%)          
Riverstone Holdings, Ltd./Singapore   652,800    467,845 
           
South Africa (0.75%)          
ARB Holdings, Ltd.   2,093,266    477,238 
Clicks Group, Ltd.   64,000    1,040,993 
Italtile, Ltd.   822,600    762,145 
         2,280,376 
           
South Korea (0.53%)          
Koh Young Technology, Inc.   7,493    606,035 
LG Household & Health Care, Ltd.   500    541,923 
Tokai Carbon Korea Co., Ltd.   10,000    459,839 
         1,607,797 
           
Spain (0.00%)(e)          
Let's GOWEX SA(a)(d)   10,700    0 
           
Sweden (2.74%)          
Epiroc AB, Class B   63,300    688,350 
EQT AB(a)   112,400    1,078,403 
Hexpol AB   106,900    952,122 
KNOW IT AB   74,700    1,469,909 
Nibe Industrier AB, Class B   93,000    1,271,373 
OEM International AB, Class B   13,943    294,580 
Sweco AB, Class B   18,300    643,628 

 

See Notes to Financial Statements.

 

Semi-Annual Report | October 31, 2019 51

 

 

Grandeur Peak Global Reach Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
Sweden (continued)          
SwedenCare AB(a)   148,604   $1,188,130 
Vitec Software Group AB, Class B   55,500    793,210 
         8,379,705 
           
Switzerland (0.72%)          
Partners Group Holding AG   2,835    2,210,524 
           
Taiwan (2.93%)          
Bioteque Corp.   271,000    1,161,791 
FineTek Co., Ltd.   155,400    434,949 
Gourmet Master Co., Ltd.   94,000    429,231 
Pacific Hospital Supply Co., Ltd.   449,000    1,191,807 
Poya International Co., Ltd.   98,000    1,347,317 
Sporton International, Inc.   212,859    1,328,599 
Test Research, Inc.   409,440    685,976 
TSC Auto ID Technology Co., Ltd.   78,060    638,522 
TTFB Co., Ltd.   148,000    1,298,139 
Voltronic Power Technology Corp.   19,950    442,379 
         8,958,710 
           
Thailand (0.32%)          
TOA Paint Thailand PCL   648,000    965,723 
           
Turkey (0.32%)          
DP Eurasia NV(a)(b)(c)   1,086,201    970,840 
           
United Arab Emirates (0.53%)          
Aramex PJSC   1,518,033    1,620,227 
           
United States (25.04%)          
8x8, Inc.(a)   50,400    973,728 
ABIOMED, Inc.(a)   3,875    804,372 
Accenture PLC, Class A   2,125    394,018 
Adaptive Biotechnologies Corp.(a)   10,800    281,502 
Amazon.com, Inc.(a)   950    1,687,827 
Apollo Global Management, Inc., Class A   55,225    2,273,061 
BioDelivery Sciences International, Inc.(a)   198,750    1,148,775 
Blackline, Inc.(a)   15,450    722,133 
Blackstone Group, Inc., Class A   32,075    1,705,107 
Burford Capital, Ltd.   103,200    1,175,720 
Cactus, Inc., Class A(a)   39,650    1,178,398 
Castle Biosciences, Inc.(a)   57,025    1,342,368 
CH Robinson Worldwide, Inc.   18,100    1,369,084 
CoreSite Realty Corp.   15,075    1,771,312 
DexCom, Inc.(a)   3,450    532,128 
DXP Enterprises, Inc.(a)   53,525    1,847,683 
Edwards Lifesciences Corp.(a)   1,425    339,691 

 

   Shares   Value (Note 2) 
United States (continued)          
EPAM Systems, Inc.(a)   16,800   $2,956,128 
Equinix, Inc.   2,325    1,317,763 
Esquire Financial Holdings, Inc.(a)   65,162    1,583,437 
ExlService Holdings, Inc.(a)   18,350    1,277,710 
Fastenal Co.   75,897    2,727,738 
Fastly, Inc., Class A(a)   27,500    550,550 
First Republic Bank   57,525    6,118,359 
Focus Financial Partners, Inc., Class A(a)   11,775    257,637 
Frontage Holdings Corp.(a)(b)(c)   685,000    465,062 
Genpact, Ltd.   55,750    2,183,728 
Goosehead Insurance, Inc., Class A   30,610    1,566,620 
Hackett Group, Inc.   28,025    473,903 
Hannon Armstrong Sustainable Infrastructure Capital, Inc.   37,025    1,105,566 
HD Supply Holdings, Inc.(a)   24,000    948,960 
HealthEquity, Inc.(a)   12,725    722,653 
Heska Corp.(a)   10,075    816,276 
I3 Verticals, Inc., Class A(a)   26,875    549,594 
Inphi Corp.(a)   20,525    1,475,337 
Kinsale Capital Group, Inc.   14,525    1,535,583 
Knight-Swift Transportation Holdings, Inc.   24,300    885,978 
LGI Homes, Inc.(a)   10,500    824,040 
Littelfuse, Inc.   3,100    544,267 
Microchip Technology, Inc.   9,650    909,898 
Monro, Inc.   13,350    935,969 
MSC Industrial Direct Co., Inc., Class A   8,150    596,661 
New Relic, Inc.(a)   30,925    1,981,056 
NV5 Global, Inc.(a)   38,300    2,774,069 
NVIDIA Corp.   2,575    517,627 
Old Dominion Freight Line, Inc.   3,350    609,968 
Palo Alto Networks, Inc.(a)   2,700    613,953 
Paycom Software, Inc.(a)   9,150    1,935,500 
Pluralsight, Inc., Class A(a)   108,264    1,957,413 
Power Integrations, Inc.   17,365    1,582,125 
Qualys, Inc.(a)   22,000    1,877,260 
Revolve Group, Inc.(a)   68,375    1,419,465 
Silicon Laboratories, Inc.(a)   6,900    733,056 
STAAR Surgical Co.(a)   9,979    327,112 
SVB Financial Group(a)   7,850    1,738,618 
Systemax, Inc.   79,088    1,711,464 
Transcat, Inc.(a)   35,752    1,120,468 
Veracyte, Inc.(a)   18,597    426,429 
Virtusa Corp.(a)   39,675    1,479,084 
Watsco, Inc.   5,375    947,613 
         76,628,604 
           
Vietnam (1.38%)          
Vietnam Dairy Products JSC   365,929    2,050,199 

 

See Notes to Financial Statements.

 

52 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

Grandeur Peak Global Reach Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
Vietnam (continued)          
Vietnam Technological & Commercial Joint Stock Bank(a)   2,138,281   $2,184,082 
         4,234,281 
           
TOTAL COMMON STOCKS          
(Cost $237,523,813)        299,747,405 
           
PREFERRED STOCKS (0.30%)          
United States (0.30%)          
Dataminr, Inc.(a)(d)   45,833    912,077 
           
TOTAL PREFERRED STOCKS          
(Cost $912,077)        912,077 
           
TOTAL INVESTMENTS (98.27%)          
(Cost $238,435,890)       $300,659,482 
           
Other Assets In Excess Of Liabilities (1.73%)        5,306,859 
           
NET ASSETS (100.00%)       $305,966,341 

 

(a)Non-Income Producing Security.
(b)Security was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts securities offered and sold outside of the United States from registration. Such security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. The security has been deemed liquid under guidelines approved by the Fund's Board of Trustees. As of October 31, 2019, the aggregate market value of these securities was $29,059,572, representing 9.50% of net assets.
(c)Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. As of October 31, 2019, these securities had a total aggregate market value of $23,156,670 representing 7.57% of net assets.
(d)As a result of the use of significant unobservable inputs to determine fair value, these investments have been classified as level 3 assets. See also Note 2 to the financial statements for additional information.
(e)Less than 0.005%.

 

For Fund compliance purposes, the Fund's geographical classifications refer to any one or more of the country sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine sub-classifications for reporting ease. Geographical regions are shown as a percentage of net assets.

 

See Notes to Financial Statements.

 

Semi-Annual Report | October 31, 2019 53

 

 

Grandeur Peak Global Stalwarts Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
COMMON STOCKS (96.98%)        
Argentina (0.59%)          
Globant SA(a)   11,875   $1,107,463 
           
Australia (1.72%)          
Appen, Ltd.   44,500    670,887 
Corporate Travel Management, Ltd.   70,700    859,235 
Domino's Pizza Enterprises, Ltd.   28,800    1,012,717 
Netwealth Group, Ltd.   112,000    680,969 
         3,223,808 
           
Bangladesh (0.32%)          
Square Pharmaceuticals, Ltd.   219,463    608,656 
           
Belgium (0.85%)          
Melexis NV   22,596    1,582,642 
           
Bermuda (0.84%)          
Bank of NT Butterfield & Son, Ltd.   47,760    1,573,692 
           
Brazil (1.61%)          
Fleury SA   182,000    1,149,044 
Pagseguro Digital, Ltd., Class A(a)   29,625    1,098,495 
Raia Drogasil SA   27,800    762,221 
         3,009,760 
           
Britain (12.47%)          
Ascential PLC(b)(c)   186,300    842,705 
B&M European Value Retail SA   910,600    4,367,870 
boohoo Group PLC(a)   486,600    1,664,042 
Close Brothers Group PLC   39,455    706,826 
Dechra Pharmaceuticals PLC   96,900    3,301,170 
Endava PLC, ADR(a)   24,225    1,041,917 
Intermediate Capital Group PLC   39,000    750,709 
Intertek Group PLC   14,200    984,448 
Sanne Group PLC   401,420    2,745,499 
Softcat PLC   69,140    842,319 
St. James's Place PLC   386,489    5,211,661 
Trainline PLC(a)(b)(c)   161,100    869,158 
         23,328,324 
           
Canada (3.44%)          
Gildan Activewear, Inc.   49,567    1,266,365 
Lululemon Athletica, Inc.(a)   17,375    3,549,191 
Ritchie Bros Auctioneers, Inc.   39,350    1,618,072 
         6,433,628 
           
China (5.39%)          
Baozun, Inc., Sponsored ADR(a)   15,350    668,032 

 

   Shares   Value (Note 2) 
China (continued)          
CSPC Pharmaceutical Group, Ltd.   297,000   $763,730 
Ctrip.com International, Ltd., ADR(a)   30,475    1,005,370 
Hangzhou Tigermed Consulting Co., Ltd., Class A   70,700    686,359 
Silergy Corp.   153,000    4,312,478 
Sonoscape Medical Corp., Class A   34,400    103,561 
WuXi AppTec Co., Ltd., Class H(b)(c)   87,400    1,056,257 
Yum China Holdings, Inc.   34,875    1,482,188 
         10,077,975 
           
Denmark (0.56%)          
Ambu A/S, Class B   67,021    1,052,518 
           
France (2.62%)          
Alten SA   19,732    2,166,598 
BioMerieux   11,793    964,753 
Bureau Veritas SA   39,950    1,019,892 
Eurofins Scientific SE   1,485    752,255 
         4,903,498 
           
Georgia (0.54%)          
Bank of Georgia Group PLC   59,562    1,002,229 
           
Germany (4.81%)          
Dermapharm Holding SE   53,600    2,096,487 
Grand City Properties SA   75,300    1,760,264 
GRENKE AG   12,100    1,145,062 
Norma Group SE   35,590    1,308,298 
PATRIZIA AG   78,815    1,614,766 
Puma SE   14,200    1,068,223 
         8,993,100 
           
Hong Kong (1.43%)          
Value Partners Group, Ltd.   2,548,900    1,346,671 
Vitasoy International Holdings, Ltd.   325,500    1,325,104 
         2,671,775 
           
India (4.63%)          
Bajaj Finance, Ltd.   52,570    2,985,084 
HDFC Bank, Ltd.   59,500    1,032,104 
HDFC Life Insurance Co., Ltd.(b)(c)   147,500    1,302,215 
L&T Technology Services, Ltd.(b)(c)   34,757    736,829 
WNS Holdings, Ltd., ADR(a)   42,125    2,605,010 
         8,661,242 

 

See Notes to Financial Statements.

 

54 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

Grandeur Peak Global Stalwarts Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
Indonesia (0.49%)          
Bank Central Asia Tbk PT   410,500   $919,728 
Israel (0.80%)          
Wix.com, Ltd.(a)   12,250    1,495,358 
Italy (3.28%)          
DiaSorin SpA   20,696    2,331,307 
FinecoBank Banca Fineco SpA   138,996    1,565,724 
Freni Brembo SpA   93,921    998,792 
Interpump Group SpA   45,592    1,248,845 
         6,144,668 
           
Japan (8.22%)          
Cosmos Pharmaceutical Corp.   3,500    723,724 
Create SD Holdings Co., Ltd.   36,100    900,244 
Japan Lifeline Co., Ltd.   93,900    1,461,672 
MISUMI Group, Inc.   36,800    935,079 
MonotaRO Co., Ltd.   41,800    1,279,276 
Nihon M&A Center, Inc.   111,800    3,426,780 
Pigeon Corp.   21,500    1,059,172 
Seria Co., Ltd.   51,900    1,310,116 
Systena Corp.   89,500    1,294,555 
Tokyo Century Corp.   19,500    910,084 
Tsuruha Holdings, Inc.   11,900    1,347,690 
Unicharm Corp.   21,700    741,284 
         15,389,676 
           
Mexico (0.55%)          
Regional SAB de CV   192,000    1,022,257 
           
Netherlands (2.52%)          
Aalberts NV   80,585    3,240,944 
QIAGEN NV(a)   26,975    804,125 
Takeaway.com NV(a)(b)(c)   8,150    663,547 
         4,708,616 
           
Philippines (0.84%)          
Philippine Seven Corp.   259,000    760,489 
Puregold Price Club, Inc.   1,006,000    809,835 
         1,570,324 
           
Poland (0.86%)          
Dino Polska SA(a)(b)(c)   41,334    1,611,968 
           
South Korea (0.33%)          
LG Household & Health Care, Ltd.   575    623,211 
           
Sweden (2.19%)          
AddTech AB, Class B   25,600    711,870 
EQT AB(a)   85,500    820,315 
Hexpol AB   89,600    798,036 
Nibe Industrier AB, Class B   52,408    716,453 

 

   Shares   Value (Note 2) 
Sweden (continued)          
Sweco AB, Class B   29,700   $1,044,577 
         4,091,251 
           
Switzerland (0.85%)          
Partners Group Holding AG   2,050    1,598,439 
           
United Arab Emirates (0.80%)          
Aramex PJSC   757,000    807,961 
Network International Holdings PLC(a)(b)(c)   99,200    695,180 
         1,503,141 
           
United States (31.80%)          
ABIOMED, Inc.(a)   19,550    4,058,189 
Accenture PLC, Class A   3,425    635,064 
Apollo Global Management, Inc., Class A   36,350    1,496,166 
Axos Financial, Inc.(a)   15,975    464,074 
Bank of Hawaii Corp.   7,250    632,997 
Blackline, Inc.(a)   15,975    746,671 
Burford Capital, Ltd.   64,100    730,268 
CH Robinson Worldwide, Inc.   11,575    875,533 
CoreSite Realty Corp.   10,200    1,198,500 
Edwards Lifesciences Corp.(a)   3,350    798,573 
EPAM Systems, Inc.(a)   18,375    3,233,265 
ExlService Holdings, Inc.(a)   16,225    1,129,747 
Fastenal Co.   104,825    3,767,410 
First Republic Bank   71,950    7,652,602 
Genpact, Ltd.   60,402    2,365,946 
Goosehead Insurance, Inc., Class A   14,750    754,905 
Hannon Armstrong Sustainable Infrastructure Capital, Inc.   37,600    1,122,736 
HD Supply Holdings, Inc.(a)   18,350    725,559 
HealthEquity, Inc.(a)   20,557    1,167,432 
Inphi Corp.(a)   23,500    1,689,180 
Kinsale Capital Group, Inc.   6,825    721,539 
Knight-Swift Transportation Holdings, Inc.   24,000    875,040 
LGI Homes, Inc.(a)   10,375    814,230 
Littelfuse, Inc.   3,725    653,998 
Microchip Technology, Inc.   20,075    1,892,872 
Monro, Inc.   35,250    2,471,377 
New Relic, Inc.(a)   16,250    1,040,975 
NVIDIA Corp.   2,075    417,116 
Old Dominion Freight Line, Inc.   5,425    987,784 
Palo Alto Networks, Inc.(a)   3,375    767,441 
Paycom Software, Inc.(a)   9,975    2,110,012 
Pluralsight, Inc., Class A(a)   125,134    2,262,423 
Power Integrations, Inc.   45,150    4,113,617 
Qualys, Inc.(a)   18,975    1,619,137 
Revolve Group, Inc.(a)   30,150    625,914 
Silicon Laboratories, Inc.(a)   8,175    868,512 

 

See Notes to Financial Statements.

 

Semi-Annual Report | October 31, 2019 55

 

 

Grandeur Peak Global Stalwarts Fund Portfolio of Investments

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
United States (continued)          
STAAR Surgical Co.(a)   325   $10,654 
SVB Financial Group(a)   9,010    1,995,535 
         59,492,993 
           
Vietnam (1.63%)          
Ho Chi Minh City Development Joint Stock Commercial Bank(a)   544,106    690,597 
Vietnam Dairy Products JSC   255,454    1,431,238 
Vietnam Technological & Commercial Joint Stock Bank(a)   909,095    928,568 
         3,050,403 
           
TOTAL COMMON STOCKS          
(Cost $149,378,557)        181,452,343 
           
PREFERRED STOCKS (0.26%)          
United States (0.26%)          
Dataminr, Inc.(a)(d)   24,262    482,814 
           
TOTAL PREFERRED STOCKS          
(Cost $482,814)        482,814 
           
TOTAL INVESTMENTS (97.24%)          
(Cost $149,861,371)       $181,935,157 
           
Other Assets In Excess Of Liabilities (2.76%)        5,162,798 
           
NET ASSETS (100.00%)       $187,097,955 

 

(a)Non-Income Producing Security.
(b)Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. As of October 31, 2019, these securities had a total aggregate market value of $7,777,859 representing 4.16% of net assets.
(c)Security was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts securities offered and sold outside of the United States from registration. Such security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. The security has been deemed liquid under guidelines approved by the Fund's Board of Trustees. As of October 31, 2019, the aggregate market value of these securities was $7,777,859, representing 4.16% of net assets.
(d)As a result of the use of significant unobservable inputs to determine fair value, these investments have been classified as level 3 assets. See also Note 2 to the financial statements for additional information.

 

For Fund compliance purposes, the Fund's geographical classifications refer to any one or more of the country sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine sub-classifications for reporting ease. Geographical regions are shown as a percentage of net assets.

 

See Notes to Financial Statements.

 

56 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

Grandeur Peak International Opportunities Fund Portfolio of Investments

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
COMMON STOCKS (96.62%)        
Argentina (0.49%)        
Globant SA(a)   33,625   $3,135,868 
           
Australia (3.00%)          
Appen, Ltd.   175,300    2,642,841 
Corporate Travel Management, Ltd.   255,300    3,102,726 
Fiducian Group, Ltd.   201,848    751,378 
Kogan.com, Ltd.   842,722    3,932,904 
National Storage REIT   3,563,717    4,569,372 
National Veterinary Care, Ltd.   1,102,500    1,748,022 
PWR Holdings, Ltd.   777,500    2,545,859 
         19,293,102 
Austria (0.40%)          
Palfinger AG   90,939    2,596,460 
           
Bangladesh (0.61%)          
Square Pharmaceuticals, Ltd.   1,406,080    3,899,604 
           
Belgium (0.81%)          
Melexis NV   74,368    5,208,796 
           
Bermuda (1.25%)          
Bank of NT Butterfield & Son, Ltd.   243,209    8,013,737 
           
Brazil (1.28%)          
Arco Platform, Ltd., Class A(a)   28,925    1,200,387 
Fleury SA   521,100    3,289,927 
Pagseguro Digital, Ltd., Class A(a)   100,000    3,708,000 
         8,198,314 
           
Britain (13.89%)          
Ascential PLC(b)(c)   557,600    2,522,234 
B&M European Value Retail SA   2,690,900    12,907,425 
boohoo Group PLC(a)   2,121,900    7,256,332 
Clinigen Group PLC   215,373    2,318,359 
CVS Group PLC   728,400    9,128,706 
Dechra Pharmaceuticals PLC   284,400    9,688,882 
Endava PLC, ADR(a)   77,688    3,341,361 
FDM Group Holdings PLC   236,800    2,217,728 
First Derivatives PLC   77,400    2,280,923 
Impax Asset Management Group PLC   770,147    2,613,745 
Intertek Group PLC   32,900    2,280,869 
JTC PLC(b)(c)   789,799    3,693,279 
K3 Capital Group PLC   373,600    696,879 
On the Beach Group PLC(b)(c)   675,850    3,923,833 
Oxford Immunotec Global PLC(a)   340,440    5,280,224 
River & Mercantile Group PLC   508,500    1,626,958 
Sanne Group PLC   1,004,106    6,867,550 

 

   Shares   Value (Note 2) 
Britain (continued)        
Softcat PLC   192,483   $2,344,982 
St. James's Place PLC   348,934    4,705,246 
Trainline PLC(a)(b)(c)   175,200    945,230 
Volution Group PLC   996,500    2,575,185 
         89,215,930 
           
Canada (3.95%)          
Biosyent, Inc.(a)   239,100    1,089,211 
Gildan Activewear, Inc.   114,200    2,917,645 
Lululemon Athletica, Inc.(a)   32,850    6,710,270 
Richelieu Hardware, Ltd.   301,050    6,180,542 
Ritchie Bros Auctioneers, Inc.   124,400    5,115,328 
Stantec, Inc.   159,110    3,394,572 
         25,407,568 
           
China (5.08%)          
BBI Life Sciences Corp.(c)   15,551,500    4,683,738 
CSPC Pharmaceutical Group, Ltd.   1,810,000    4,654,381 
Ctrip.com International, Ltd., ADR(a)   105,425    3,477,971 
Man Wah Holdings, Ltd.   6,824,000    4,659,091 
O2Micro International, Ltd., ADR(a)   1,054,233    1,307,249 
Silergy Corp.   396,199    11,167,318 
WuXi AppTec Co., Ltd., Class H(b)(c)   221,200    2,673,274 
         32,623,022 
           
Colombia (1.09%)          
Amerisur Resources PLC(a)   5,398,603    1,334,283 
Parex Resources, Inc.(a)   419,301    5,682,578 
         7,016,861 
France (3.50%)          
Alten SA   41,900    4,600,673 
Bureau Veritas SA   208,100    5,312,629 
Esker SA   60,443    5,548,012 
Infotel SA   16,113    664,921 
Neurones   50,872    1,185,814 
Thermador Groupe   83,436    5,155,310 
         22,467,359 
           
Georgia (1.10%)          
Bank of Georgia Group PLC   144,411    2,429,952 
Georgia Capital PLC(a)   163,711    2,063,379 
TBC Bank Group PLC   155,946    2,585,667 
         7,078,998 
Germany (5.84%)          
CANCOM SE   109,400    5,837,139 
Dermapharm Holding SE   185,500    7,255,565 
Grand City Properties SA   236,056    5,518,206 
GRENKE AG   28,800    2,725,436 
Nexus AG   63,706    2,259,431 

 

See Notes to Financial Statements.

Semi-Annual Report | October 31, 2019 57

 
 

 

Grandeur Peak International Opportunities Fund Portfolio of Investments

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
Germany (continued)        
Norma Group SE   125,703  $4,620,877 
PATRIZIA AG   350,050    7,171,844 
Wirecard AG   16,644    2,107,834 
         37,496,332 
Greece (0.14%)          
Sarantis SA   100,600    888,617 
           
Hong Kong (1.89%)          
Jacobson Pharma Corp., Ltd.(c)   4,138,000    623,133 
TK Group Holdings, Ltd.   4,684,000    2,211,704 
Value Partners Group, Ltd.   11,454,000    6,051,540 
Vitasoy International Holdings, Ltd.   804,338    3,274,444 
         12,160,821 
           
           
India (6.50%)          
Bajaj Finance, Ltd.   161,760    9,185,224 
Cyient, Ltd.   615,912    3,532,026 
Gulf Oil Lubricants India, Ltd.   131,478    1,631,965 
IndiaMart InterMesh, Ltd.(a)(b)(c)   57,699    1,511,971 
L&T Technology Services, Ltd.(b)(c)   105,618    2,239,043 
Metropolis Healthcare, Ltd.(a)(b)(c)   398,000    8,120,342 
TCI Express, Ltd.   217,000    2,375,325 
Time Technoplast, Ltd.   3,187,734    2,831,394 
WNS Holdings, Ltd., ADR(a)   166,975    10,325,734 
         41,753,024 
           
Indonesia (2.44%)          
Arwana Citramulia Tbk PT   63,783,500    2,262,890 
Indonesia Pondasi Raya Tbk PT   19,093,100    522,316 
Link Net Tbk PT   8,897,400    2,788,955 
Panin Sekuritas Tbk PT   8,494,000    962,133 
Selamat Sempurna Tbk PT   63,313,800    6,652,978 
Ultrajaya Milk Industry & Trading Co. Tbk PT   22,958,000    2,486,012 
         15,675,284 
           
Ireland (2.18%)          
Irish Residential Properties REIT PLC   3,253,518    6,371,905 
Keywords Studios PLC   256,446    3,687,290 
Uniphar PLC(a)   2,939,700    3,927,818 
         13,987,013 
Israel (0.61%)          
Wix.com, Ltd.(a)   31,983    3,904,165 
           
Italy (3.46%)          
DiaSorin SpA   50,201    5,654,905 
FinecoBank Banca Fineco SpA   423,798    4,773,884 

 

   Shares   Value (Note 2) 
Italy (continued)        
Freni Brembo SpA   418,082   $4,446,044 
Interpump Group SpA   169,144    4,633,152 
Piovan SpA(b)(c)   445,548    2,742,996 
         22,250,981 
Japan (16.91%)          
AIT Corp.   446,600    3,829,536 
BayCurrent Consulting, Inc.   98,700    4,999,435 
Cosmos Pharmaceutical Corp.   11,300    2,336,596 
Create SD Holdings Co., Ltd.   165,500    4,127,155 
eGuarantee, Inc.   31,300    442,588 
Future Corp.   362,200    5,939,959 
Japan Lifeline Co., Ltd.   384,400    5,983,669 
M&A Capital Partners Co., Ltd.(a)   37,300    2,497,259 
Macromill, Inc.   164,100    1,475,517 
Matsumotokiyoshi Holdings Co., Ltd.   21,000    743,819 
MISUMI Group, Inc.   130,400    3,313,433 
MonotaRO Co., Ltd.   128,400    3,929,642 
Naigai Trans Line, Ltd.   88,500    1,253,866 
Nihon M&A Center, Inc.   163,400    5,008,371 
Open Door, Inc.(a)   173,600    3,346,932 
SBI FinTech Solutions Co., Ltd.   233,500    1,986,892 
Seria Co., Ltd.   337,500    8,519,539 
SMS Co., Ltd.   211,100    5,234,983 
Strike Co., Ltd.   97,200    3,514,825 
Sundrug Co., Ltd.   81,200    2,703,158 
Synchro Food Co., Ltd.(a)   556,500    2,586,934 
System Information Co., Ltd.   381,800    3,478,944 
Systena Corp.   300,000    4,339,291 
Syuppin Co., Ltd.   274,300    2,392,727 
Tokyo Century Corp.   194,300    9,068,173 
Trancom Co., Ltd.   92,890    6,158,833 
Tsuruha Holdings, Inc.   55,100    6,240,143 
YAKUODO Holdings Co., Ltd.   131,400    3,189,179 
         108,641,398 
           
Malaysia (0.91%)          
AEON Credit Service M Bhd   1,019,937    3,734,603 
My EG Services Bhd   4,672,400    1,274,748 
Scicom MSC Bhd   3,549,500    857,962 
         5,867,313 
           
Mexico (0.55%)          
Credito Real SAB de CV          
SOFOM ER   462,900    573,196 
Regional SAB de CV   560,065    2,981,928 
         3,555,124 
           
Netherlands (2.25%)          
Aalberts NV   267,576    10,761,293 
QIAGEN NV(a)   123,000    3,666,630 
         14,427,923 

 

See Notes to Financial Statements.

58 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 
 

 

Grandeur Peak International Opportunities Fund Portfolio of Investments

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
New Zealand (0.00%)(d)        
CBL Corp., Ltd.(a)(e)   1,542,256   $1 
           
Norway (1.45%)          
Medistim ASA   103,811    1,749,722 
Sbanken ASA(b)(c)   902,229    6,406,546 
Self Storage Group ASA(a)   465,034    1,178,242 
        9,334,510 
           
Oman (0.29%)          
Tethys Oil AB   245,008    1,862,484 
           
Philippines (1.21%)          
Concepcion Industrial Corp.   3,070,600    1,845,567 
Puregold Price Club, Inc.   5,645,000    4,544,256 
Robinsons Retail Holdings, Inc.   911,060    1,361,787 
         7,751,610 
          
Poland (0.82%)          
Dino Polska SA(a)(b)(c)   105,062    4,097,271 
LiveChat Software SA   85,000    843,181 
PGS Software SA   130,778    342,293 
         5,282,745 
           
Singapore (0.68%)          
Riverstone Holdings, Ltd./Singapore   6,057,000    4,340,898 
          
South Africa (0.61%)          
Italtile, Ltd.   4,209,423    3,900,064 
           
          
South Korea (1.05%)          
Hy-Lok Corp.   84,332    1,243,108 
Koh Young Technology, Inc.   19,883    1,608,140 
           
LEENO Industrial, Inc.   85,000    3,886,716 
         6,737,964 
          
Sweden (1.62%)          
Epiroc AB, Class B   295,500    3,213,387 
EQT AB(a)   8,900    85,390 
Hexpol AB   304,600    2,712,967 
HIQ International AB   124,653    617,088 
KNOW IT AB   135,300    2,662,365 
Nibe Industrier AB, Class B   82,700    1,130,565 
         10,421,762 
Taiwan (2.77%)          
Bioteque Corp.   908,000    3,892,643 
M31 Technology Corp.   34,000    427,227 
Poya International Co., Ltd.   24,000    329,955 
Sinmag Equipment Corp.   796,158    2,693,920 
Sporton International, Inc.   876,003    5,467,735 
Test Research, Inc.   2,238,252    3,749,966 

 

   Shares   Value (Note 2) 
Taiwan (continued)        
TSC Auto ID Technology Co., Ltd.   151,800   $1,241,708 
         17,803,154 
           
Turkey (0.09%)          
DP Eurasia NV(a)(b)(c)   635,340    567,863 
United Arab Emirates (1.01%)          
Aramex PJSC   4,066,125    4,339,857 
Network International Holdings PLC(a)(b)(c)   307,300    2,153,516 
         6,493,373 
           
United States (3.23%)          
Core Laboratories NV   69,100    3,043,164 
EPAM Systems, Inc.(a)   64,375    11,327,425 
Genpact, Ltd.   162,450    6,363,166 
         20,733,755 
           
Vietnam (1.66%)          
Ho Chi Minh City          
Development Joint Stock          
Commercial Bank(a)   2,161,861    2,743,904 
Vietnam Dairy Products JSC   758,516    4,249,756 
Vietnam Technological &          
Commercial Joint Stock Bank(a)   3,570,063    3,646,532 
         10,640,192 
           
TOTAL COMMON STOCKS          

(Cost $498,560,480)

        620,633,989 
           
TOTAL INVESTMENTS (96.62%)          

(Cost $498,560,480)

       $620,633,989 
           
Other Assets In Excess Of Liabilities (3.38%)        21,730,758 
           
NET ASSETS (100.00%)       $642,364,747 

 

See Notes to Financial Statements.

Semi-Annual Report | October 31, 2019 59

 

 
 

 

Grandeur Peak International Opportunities Fund Portfolio of Investments

October 31, 2019 (Unaudited)

 

(a)Non-Income Producing Security.
(b)Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. As of October 31, 2019, these securities had a total aggregate market value of $41,597,398 representing 6.48% of net assets.
(c)Security was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts securities offered and sold outside of the United States from registration. Such security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. The security has been deemed liquid under guidelines approved by the Fund's Board of Trustees. As of October 31, 2019, the aggregate market value of these securities was $46,904,269, representing 7.30% of net assets.
(d)Less than 0.005%.
(e)As a result of the use of significant unobservable inputs to determine fair value, these investments have been classified as level 3 assets. See also Note 2 to the financial statements for additional information.

 

For Fund compliance purposes, the Fund's geographical classifications refer to any one or more of the country sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine sub-classifications for reporting ease. Geographical regions are shown as a percentage of net assets.

 

See Notes to Financial Statements.

60 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 
 

 

Grandeur Peak International Stalwarts Fund Portfolio of Investments

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
COMMON STOCKS (95.65%)        
Argentina (0.82%)          
Globant SA(a)   61,875   $5,770,463 
           
Australia (2.56%)          
Appen, Ltd.   250,400    3,775,056 
Corporate Travel          
Management, Ltd.   419,000    5,092,214 
Domino's Pizza Enterprises, Ltd.   140,800    4,951,062 
Netwealth Group, Ltd.   690,600    4,198,900 
         18,017,232 
Bangladesh (0.43%)          
Square Pharmaceuticals, Ltd.   1,098,613    3,046,879 
           
Belgium (1.10%)          
Melexis NV   110,098    7,711,354 
           
Bermuda (1.10%)          
Bank of NT Butterfield & Son, Ltd.   234,582    7,729,477 
           
Brazil (2.35%)          
Fleury SA   955,100    6,029,955 
Pagseguro Digital, Ltd., Class A(a)   155,550    5,767,794 
Raia Drogasil SA   171,700    4,707,675 
         16,505,424 
Britain (16.56%)          
Ascential PLC(b)(c)   1,184,300    5,357,033 
B&M European Value Retail SA   4,115,900    19,742,714 
boohoo Group PLC(a)   2,527,314    8,642,740 
Close Brothers Group PLC   244,588    4,381,730 
Dechra Pharmaceuticals PLC   472,900    16,110,662 
Endava PLC, ADR(a)   120,775    5,194,533 
Intermediate Capital Group PLC   219,900    4,232,845 
Intertek Group PLC   105,800    7,334,831 
Sanne Group PLC   1,719,100    11,757,727 
Softcat PLC   332,932    4,056,044 
St. James's Place PLC   1,786,742    24,093,556 
Trainline PLC(a)(b)(c)   1,051,600    5,673,537 
         116,577,952 
Canada (4.75%)          
Gildan Activewear, Inc.   272,434    6,960,294 
Lululemon Athletica, Inc.(a)   79,725    16,285,426 
Ritchie Bros Auctioneers, Inc.   164,175    6,750,876 
Stantec, Inc.   160,889    3,432,527 
         33,429,123 
           
China (8.50%)          
51job, Inc., ADR(a)   28,225    2,223,283 

 

   Shares   Value(Note 2) 
China (continued)        
58.com, Inc., ADR(a)   37,475   $1,979,055 
Baozun, Inc., Sponsored ADR(a)   84,625    3,682,880 
CSPC Pharmaceutical Group, Ltd.   1,599,000    4,111,799 
Ctrip.com International, Ltd., ADR(a)   160,800    5,304,792 
Hangzhou Tigermed Consulting Co., Ltd., Class A   418,950    4,067,187 
Silergy Corp.   742,200    20,919,748 
Sonoscape Medical Corp., Class A   200,000    602,098 
WuXi AppTec Co., Ltd., Class H(b)(c)   444,400    5,370,718 
Wuxi Biologics Cayman, Inc.(a)(b)(c)   241,000    2,844,901 
Yum China Holdings, Inc.   205,700    8,742,250 
         59,848,711 
           
Denmark (0.73%)          
Ambu A/S, Class B   325,736    5,115,458 
           
France (3.89%)          
Alten SA   100,864    11,074,994 
BioMerieux   64,800    5,301,108 
Bureau Veritas SA   214,650    5,479,845 
Eurofins Scientific SE   10,859    5,500,834 
         27,356,781 
           
Georgia (0.86%)          
Bank of Georgia Group PLC   278,100    4,679,490 
Georgia Capital PLC(a)   108,500    1,367,511 
         6,047,001 
           
Germany (6.62%)          
Dermapharm Holding SE   229,634    8,981,803 
Grand City Properties SA   411,500    9,619,505 
GRENKE AG   57,650    5,455,603 
Norma Group SE   190,750    7,012,023 
PATRIZIA AG   450,380    9,227,410 
Puma SE   84,200    6,334,110 
         46,630,454 
           
Hong Kong (1.92%)          
Value Partners Group, Ltd.   12,701,000    6,710,372 
Vitasoy International Holdings, Ltd.   1,677,000    6,827,034 
         13,537,406 
           
India (6.09%)          
Bajaj Finance, Ltd.   234,930    13,340,039 
HDFC Bank, Ltd.   330,000    5,724,273 
HDFC Life Insurance Co., Ltd.(b)(c)   703,000    6,206,490 

 

See Notes to Financial Statements.

Semi-Annual Report | October 31, 2019 61

 

 
 

 

Grandeur Peak International Stalwarts Fund Portfolio of Investments

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
India (continued)          
L&T Technology Services, Ltd.(b)(c)   173,598   $3,680,181 
WNS Holdings, Ltd., ADR(a)   225,595    13,950,795 
         42,901,778 
           
Indonesia (0.68%)          
Bank Central Asia Tbk PT   2,144,000    4,803,647 
           
Israel (0.98%)          
Wix.com, Ltd.(a)   56,500    6,896,955 
           
Italy (5.06%)          
DiaSorin SpA   119,720    13,485,892 
FinecoBank Banca Fineco SpA   901,198    10,151,569 
Freni Brembo SpA   600,857    6,389,743 
Interpump Group SpA   204,827    5,610,572 
         35,637,776 
Japan (12.34%)          
Cosmos Pharmaceutical Corp.   16,900    3,494,555 
Create SD Holdings Co., Ltd.   197,500    4,925,155 
Japan Lifeline Co., Ltd.   552,700    8,603,470 
MISUMI Group, Inc.   208,600    5,300,476 
MonotaRO Co., Ltd.   312,500    9,563,964 
Nihon M&A Center, Inc.   543,100    16,646,551 
Pigeon Corp.   131,800    6,492,972 
Seria Co., Ltd.   329,800    8,325,167 
Systena Corp.   484,500    7,007,954 
Tokyo Century Corp.   137,300    6,407,927 
Tsuruha Holdings, Inc.   56,100    6,353,394 
Unicharm Corp.   109,500    3,740,582 
         86,862,167 
Mexico (0.74%)          
Regional SAB de CV   982,150    5,229,215 
           
Netherlands (3.37%)          
Aalberts NV   402,158    16,173,872 
QIAGEN NV(a)   133,025    3,965,475 
Takeaway.com NV(a)(b)(c)   44,000    3,582,343 
         23,721,690 
Philippines (0.60%)          
Puregold Price Club, Inc.   5,236,200    4,215,169 
           
Poland (1.09%)          
Dino Polska SA(a)(b)(c)   196,772    7,673,832 
           
South Korea (0.47%)          
LG Household & Health Care, Ltd.   3,050    3,305,729 
           
Sweden (3.30%)          
AddTech AB, Class B   161,500    4,490,897 
EQT AB(a)   494,100    4,740,560 

 

   Shares   Value (Note 2) 
Sweden (continued)        
Hexpol AB   435,400   $3,877,958 
Nibe Industrier AB, Class B   301,800    4,125,812 
Sweco AB, Class B   170,500    5,996,644 
         23,231,871 
           
Switzerland (1.27%)          
Partners Group Holding AG   11,490    8,959,055 
           
United Arab Emirates (0.96%)          
Aramex PJSC   2,889,000    3,083,488 
Network International Holdings PLC(a)(b)(c)   524,400    3,674,923 
         6,758,411 
           
United States (4.70%)          
Accenture PLC, Class A   22,750    4,218,305 
Burford Capital, Ltd.   341,900    3,895,142 
EPAM Systems, Inc.(a)   79,725    14,028,411 
Genpact, Ltd.   279,975    10,966,621 
         33,108,479 
           
Vietnam (1.81%)          
Ho Chi Minh City          
Development Joint Stock          
Commercial Bank(a)   1,946,248    2,470,241 
Vietnam Dairy Products JSC   1,148,910    6,437,025 
Vietnam Technological & Commercial Joint Stock Bank(a)   3,771,617    3,852,404 
         12,759,670 
TOTAL COMMON STOCKS          
(Cost $578,531,454)        673,389,159 
           
TOTAL INVESTMENTS (95.65%)          
(Cost $578,531,454)       $673,389,159 
           
Other Assets In Excess Of Liabilities (4.35%)        30,659,117 
           
NET ASSETS (100.00%)       $704,048,276 

 

See Notes to Financial Statements.

62 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 
 

 

Grandeur Peak International Stalwarts Fund Portfolio of Investments

October 31, 2019 (Unaudited)

(a)Non-Income Producing Security.

(b)Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. As of October 31, 2019, these securities had a total aggregate market value of $44,063,958 representing 6.26% of net assets.

(c)Security was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts securities offered and sold outside of the United States from registration. Such security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. The security has been deemed liquid under guidelines approved by the Fund's Board of Trustees. As of October 31, 2019, the aggregate market value of these securities was $44,063,958, representing 6.26% of net assets.

 

For Fund compliance purposes, the Fund's geographical classifications refer to any one or more of the country sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine sub-classifications for reporting ease. Geographical regions are shown as a percentage of net assets.

 

See Notes to Financial Statements.

Semi-Annual Report | October 31, 2019 63

 

 
 

 

Grandeur Peak Funds® Statements of Assets and Liabilities

October 31, 2019 (Unaudited)

 

   Grandeur Peak Emerging Markets Opportunities Fund  Grandeur Peak Global Contrarian Fund  Grandeur Peak Global Micro Cap  Fund  Grandeur Peak Global Opportunities Fund
ASSETS            
Investments, at value (Cost - see below)  $429,454,367   $4,670,352   $33,390,250   $640,514,069 
Cash   29,396,615        435,848    18,940,434 
Foreign cash, at value (Cost $1,617, $43,513, $9,385 and $28,222, respectively)   1,619    43,520    9,454    28,346 
Dividends and interest receivable   359,118    6,604    24,762    802,204 
Receivable for investments sold           88,776    522,458 
Receivable for fund shares subscribed   25,440    976    60    45,655 
Receivable due from advisor       18,213         
Deferred offering cost       59,416         
Prepaid and other assets   11,708    42    1,419    11,332 
Total assets   459,248,867    4,799,123    33,950,569    660,864,498 
                     
LIABILITIES                    
Payable to custodian       6,263         
Payable for investments purchased   12,405            480,293 
Foreign capital gains tax   1,233,448        48,072    647,374 
Payable for fund shares redeemed   13,207    6,344        339,830 
Advisory fees payable   507,810        38,439    662,800 
Administration fees payable   37,561    6,057    15,313    47,774 
Custodian fees payable   115,159    9,016    12,897    75,934 
Payable for trustee fees and expenses   8,238    101    656    11,571 
Payable for chief compliance officer fee   1,473    32    122    2,023 
Payable for principal financial officer fees   278    7    24    383 
Distribution and service fees payable   2,714            24,905 
Payable for transfer agency fees   7,146    4,165    7,047    14,560 
Accrued expenses and other liabilities   41,332    72,920    28,117    53,758 
Total liabilities   1,980,771    104,905    150,687    2,361,205 
NET ASSETS  $457,268,096   $4,694,218   $33,799,882   $658,503,293 
                     
NET ASSETS CONSISTS OF                    
Paid-in capital (Note 5)  $392,195,529   $4,612,862   $28,754,190   $475,625,151 
Total distributable earnings   65,072,567    81,356    5,045,692    182,878,142 
NET ASSETS  $457,268,096   $4,694,218   $33,799,882   $658,503,293 
                     
INVESTMENTS, AT COST  $352,282,793   $4,606,276   $28,385,793   $494,659,928 
                     
PRICING OF SHARES                    
Investor Class                    
Net Assets  $13,109,405   $   $   $119,907,829 
Net Asset Value, offering and redemption price per share  $12.26   $   $   $3.55 
Shares of beneficial interest outstanding   1,069,222            33,778,003 
Institutional Class                  
Net Assets  $444,158,691   $4,694,218   $33,799,882   $538,595,464 
Net Asset Value, offering and redemption price per share  $12.34   $10.16   $11.63   $3.60 
Shares of beneficial interest outstanding   35,986,232    461,898    2,905,529    149,575,959 

 

See Notes to Financial Statements.

64 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 
 

 

Grandeur Peak Funds® Statements of Assets and Liabilities

October 31, 2019 (Unaudited)

 

   Grandeur Peak Global Reach Fund  Grandeur Peak Global Stalwarts Fund  Grandeur Peak International Opportunities Fund  Grandeur Peak International Stalwarts Fund
ASSETS            
Investments, at value (Cost - see below)  $300,659,482   $181,935,157   $620,633,989   $673,389,159 
Cash   4,283,084    6,353,279    21,635,839    31,859,736 
Foreign cash, at value (Cost $5,316, $–, $12,298 and $–, respectively)   5,318         12,298      
Dividends and interest receivable   225,032    188,218    929,653    811,814 
Receivable for investments sold   1,556,459    103,982    2,110,895    527,757 
Receivable for fund shares subscribed   230,082    380,280    130,654    558,781 
Prepaid and other assets   23,297    21,162    12,388    32,790 
Total assets   306,982,754    188,982,078    645,465,716    707,180,037 
                     
LIABILITIES                    
Payable for investments purchased   7,007    1,316,614    1,167,931    860,785 
Foreign capital gains tax   295,419    296,306    666,418    1,307,158 
Payable for fund shares redeemed   265,493    33,060    389,166    282,810 
Advisory fees payable   283,474    123,396    656,604    473,141 
Administration fees payable   37,392    17,816    48,518    43,616 
Custodian fees payable   54,874    26,343    95,496    61,762 
Payable for trustee fees and expenses   5,842    3,479    12,123    11,113 
Payable for chief compliance officer fee   1,042    632    2,210    1,850 
Payable for principal financial officer fees   196    119    413    354 
Distribution and service fees payable   11,244    17,782    10,962    15,390 
Payable for transfer agency fees   11,553    13,163    7,773    25,613 
Accrued expenses and other liabilities   42,877    35,413    43,355    48,169 
Total liabilities   1,016,413    1,884,123    3,100,969    3,131,761 
NET ASSETS  $305,966,341   $187,097,955   $642,364,747   $704,048,276 
                     
NET ASSETS CONSISTS OF                    
Paid-in capital (Note 5)  $235,501,540   $152,134,993   $496,550,207   $610,867,492 
Total distributable earnings   70,464,801    34,962,962    145,814,540    93,180,784 
NET ASSETS  $305,966,341   $187,097,955   $642,364,747   $704,048,276 
                     
INVESTMENTS, AT COST  $238,435,890   $149,861,371   $498,560,480   $578,531,454 
                     
PRICING OF SHARES                    
Investor Class                    
Net Assets  $54,261,834   $86,313,443   $52,129,696   $74,794,319 
Net Asset Value, offering and redemption price per share  $15.28   $14.86   $3.36   $14.81 
Shares of beneficial interest outstanding   3,550,504    5,807,559    15,515,619    5,050,158 
Institutional Class                    
Net Assets  $251,704,507   $100,784,512   $590,235,051   $629,253,957 
Net Asset Value, offering and redemption price per share  $15.36   $14.97   $3.38   $14.87 
Shares of beneficial interest outstanding   16,388,190    6,731,216    174,445,354    42,302,929 

 

See Notes to Financial Statements.

Semi-Annual Report | October 31, 2019 65

 

 
 

 

Grandeur Peak Funds® Statements of Operations

For the Six Months Ended October 31, 2019 (Unaudited)

 

   Grandeur Peak Emerging Markets Opportunities Fund  Grandeur Peak Global Contrarian Fund  Grandeur Peak Global Micro Cap Fund  Grandeur Peak Global Opportunities Fund
INVESTMENT INCOME            
Dividends  $5,878,408   $13,085   $474,467   $5,571,481 
Interest   7,377        2,178    5,527 
Foreign taxes withheld   (535,649)   (1,048)   (55,117)   (477,194)
Total investment income   5,350,136    12,037    421,528    5,099,814 
EXPENSES                    
Investment advisor fees (Note 6)   3,030,696    4,470    259,122    4,027,621 
Administrative fees   87,745    6,057    20,237    117,957 
Distribution and service fees - Investor Class   14,631            145,264 
Transfer agent fees   19,511    4,165    18,882    33,499 
Professional fees   22,608    4,426    16,388    21,946 
Printing fees   5,834    642    1,241    15,129 
Registration fees   17,559        9,918    17,281 
Custodian fees   233,678    9,016    30,181    143,779 
Trustee fees and expenses   8,019    101    637    11,439 
Chief compliance officer fees   5,160    32    408    7,314 
Principal financial officer fees   780    7    63    1,105 
Offering costs       7,868         
Other expenses   7,761    436    2,909    11,143 
Total expenses   3,453,982    37,220    359,986    4,553,477 
Voluntary waiver of investment advisory fees (Note 6)   (35,105)           (106,265)
Less fees waived/ reimbursed by investment advisor (Note 6)       (31,116)   (14,605)    
Total net expenses   3,418,877    6,104    345,381    4,447,212 
NET INVESTMENT INCOME   1,931,259    5,933    76,147    652,602 
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS                    
Net realized gain/(loss) on investments   (3,165,857)   15,465    192,816    18,631,889 
Net realized loss on foreign currency transactions   (102,485)   (4,160)   (8,878)   (90,466)
Net realized gain/(loss)   (3,268,342)   11,305    183,938    18,541,423 
Net change in unrealized appreciation/(depreciation) on investments (net of change in foreign capital gains tax of $641,217, $0, $40,635 and $363,613, respectively)   17,593,233    64,076    671,414    (5,575,644)
Net change in unrealized appreciation on translation of assets and liabilities in foreign currencies   8,171    42     574     7,068 
Net change in unrealized appreciation/(depreciation)   17,601,404    64,118    671,988    (5,568,576)
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS   14,333,062    75,423    855,926    12,972,847 
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS  $16,264,321   $81,356   $932,073   $13,625,449 

 

See Notes to Financial Statements.

66 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 
 

 

Grandeur Peak Funds® Statements of Operations

For the Six Months Ended October 31, 2019 (Unaudited)

 

   Grandeur Peak Global Reach Fund  Grandeur Peak Global Stalwarts Fund  Grandeur Peak International Opportunities Fund  Grandeur Peak International Stalwarts Fund
INVESTMENT INCOME            
Dividends  $3,128,591   $1,418,518   $7,036,139   $5,558,657 
Interest   11,148        7,360     
Foreign taxes withheld   (289,353)   (94,918)   (720,805)   (423,706)
Total investment income   2,850,386    1,323,600    6,322,694    5,134,951 
EXPENSES                    
Investment advisor fees (Note 6)   1,767,140    747,961    4,131,302    2,678,523 
Administrative fees   72,787    40,982    120,848    116,157 
Distribution and service fees - Investor Class   65,888    106,131    65,338    90,332 
Transfer agent fees   27,842    31,391    20,116    57,408 
Professional fees   19,523    18,700    20,102    22,465 
Printing fees   9,183    5,753    10,741    13,467 
Registration fees   14,790    17,454    18,014    22,341 
Custodian fees   118,691    64,276    189,186    147,056 
Trustee fees and expenses   5,834    3,402    12,149    11,465 
Chief compliance officer fees   3,716    2,185    7,760    7,227 
Principal financial officer fees   561    330    1,171    1,092 
Other expenses   7,955    4,536    11,297    8,381 
Total expenses   2,113,910    1,043,101    4,608,024    3,175,914 
Voluntary waiver of investment advisory fees (Note 6)           (118,707)    
Total net expenses   2,113,910    1,043,101    4,489,317    3,175,914 
NET INVESTMENT INCOME   736,476    280,499    1,833,377    1,959,037 
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS                    
Net realized gain on investments   5,243,634    1,201,889    20,105,067    297,380 
Net realized loss on foreign currency transactions   (64,228)   (10,499)   (103,085)   (73,182)
Net realized gain   5,179,406    1,191,390    20,001,982    224,198 
Net change in unrealized appreciation/(depreciation) on investments (net of change in foreign capital gains tax of $133,095, $103,281, $518,619 and $578,337, respectively)   332,962    (1,426,029)   (18,127,163)   6,261,064 
Net change in unrealized appreciation on translation of assets and liabilities in foreign currencies   3,406    4,677    12,085    16,912 
Net change in unrealized appreciation/(depreciation)   336,368    (1,421,352)   (18,115,078)   6,277,976 
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS   5,515,774    (229,962)   1,886,904    6,502,174 
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS  $6,252,250   $50,537   $3,720,281   $8,461,211 

 

See Notes to Financial Statements.

Semi-Annual Report | October 31, 2019 67

 

 
 

 

Grandeur Peak Emerging Markets Opportunities Fund Statements of Changes in Net Assets

 

   For the Six Months Ended October 31, 2019 (Unaudited)  For the Year Ended April 30, 2019
OPERATIONS      
Net investment income  $1,931,259   $1,227,659 
Net realized loss   (3,268,342)   (9,273,234)
Net change in unrealized appreciation/(depreciation)   17,601,404    (30,664,882)
Net increase/(decrease) in net assets resulting from operations   16,264,321    (38,710,457)
           
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)          
Investor Class       (127,582)
Institutional Class       (4,727,858)
Net decrease in net assets from distributions       (4,855,440)
           
CAPITAL SHARE TRANSACTIONS (NOTE 5)          
Investor Class          
Proceeds from sales of shares   94,443    1,059,350 
Distributions reinvested       125,079 
Cost of shares redeemed   (1,307,694)   (4,014,777)
Redemption fees       7 
Net decrease from capital shares transactions   (1,213,251)   (2,830,341)
           
Institutional Class          
Proceeds from sales of shares   17,347,099    90,993,584 
Distributions reinvested       4,442,600 
Cost of shares redeemed   (41,528,871)   (72,570,056)
Redemption fees   222    668 
Net increase/(decrease) from capital shares transactions   (24,181,550)   22,866,796 
Net decrease in net assets   (9,130,480)   (23,529,442)
           
NET ASSETS          
Beginning of period   466,398,576    489,928,018 
End of period  $457,268,096   $466,398,576 
           
OTHER INFORMATION          
Shares Transactions          
Investor Class          
Issued   8,005    93,074 
Issued to shareholders in reinvestment of distributions       12,299 
Redeemed   (112,264)   (362,466)
Net decrease in share transactions   (104,259)   (257,093)
           
Institutional Class          
Issued   1,468,411    8,122,212 
Issued to shareholders in reinvestment of distributions       434,697 
Redeemed   (3,560,053)   (6,406,798)
Net increase/(decrease) in share transactions   (2,091,642)   2,150,111 

 

See Notes to Financial Statements.

68 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 
 

 

Grandeur Peak Global Contrarian Fund Statements of Changes in Net Assets

 

   For the Period September 17, 2019 (Inception) to October 31, 2019
OPERATIONS   
Net investment income  $5,933 
Net realized gain   11,305 
Net change in unrealized appreciation   64,118 
Net increase in net assets resulting from operations   81,356 
      
CAPITAL SHARE TRANSACTIONS (NOTE 5)     
Institutional Class     
Proceeds from sales of shares   4,930,050 
Cost of shares redeemed   (317,188)
Net increase from capital shares transactions   4,612,862 
Net increase in net assets   4,694,218 
      
NET ASSETS     
Beginning of period    
End of period  $4,694,218 
      
OTHER INFORMATION     
Shares Transactions     
Institutional Class     
Issued   493,118 
Redeemed   (31,220)
Net increase in share transactions   461,898 

 

See Notes to Financial Statements.

Semi-Annual Report | October 31, 2019 69

 

 
 

 

Grandeur Peak Global Micro Cap Fund Statements of Changes in Net Assets

 

   For the Six Months Ended October 31, 2019 (Unaudited)  For the Year Ended April 30, 2019
OPERATIONS      
Net investment income/(loss)  $76,147   $(22,768)
Net realized gain   183,938    213,901 
Net change in unrealized appreciation/(depreciation)   671,988    (3,433,311)
Net increase/(decrease) in net assets resulting from operations   932,073    (3,242,178)
           
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)          
Institutional Class       (2,218,023)
Net decrease in net assets from distributions       (2,218,023)
           
CAPITAL SHARE TRANSACTIONS (NOTE 5)          
Institutional Class          
Proceeds from sales of shares   401,921    1,235,898 
Distributions reinvested       2,094,860 
Cost of shares redeemed   (3,188,595)   (3,925,444)
Redemption fees   2    18 
Net decrease from capital shares transactions   (2,786,672)   (594,668)
Net decrease in net assets   (1,854,599)   (6,054,869)
           
NET ASSETS          
Beginning of period   35,654,481    41,709,350 
End of period  $33,799,882   $35,654,481 
           
OTHER INFORMATION          
Shares Transactions          
Institutional Class          
Issued   35,580    107,279 
Issued to shareholders in reinvestment of distributions       207,617 
Redeemed   (282,904)   (341,842)
Net decrease in share transactions   (247,324)   (26,946)

 

See Notes to Financial Statements.

70 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 
 

 

Grandeur Peak Global Opportunities Fund Statements of Changes in Net Assets

 

   For the Six Months Ended October 31, 2019 (Unaudited)  For the Year Ended April 30, 2019
OPERATIONS      
Net investment income  $652,602   $535,030 
Net realized gain   18,541,423    48,492,349 
Net change in unrealized depreciation   (5,568,576)   (76,714,505)
Net increase/(decrease) in net assets resulting from operations   13,625,449    (27,687,126)
           
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)          
Investor Class       (13,296,063)
Institutional Class       (47,299,225)
Net decrease in net assets from distributions       (60,595,288)
           
CAPITAL SHARE TRANSACTIONS (NOTE 5)          
Investor Class          
Proceeds from sales of shares   3,632,191    12,071,234 
Distributions reinvested       12,221,920 
Cost of shares redeemed   (16,643,077)   (60,190,701)
Redemption fees   60    1,633 
Net decrease from capital shares transactions   (13,010,826)   (35,895,914)
Institutional Class          
Proceeds from sales of shares   29,293,203    44,492,723 
Distributions reinvested       44,606,172 
Cost of shares redeemed   (26,011,964)   (90,165,710)
Redemption fees   1    3,396 
Net increase/(decrease) from capital shares transactions   3,281,240    (1,063,419)
Net increase/(decrease) in net assets   3,895,863    (125,241,747)
           
NET ASSETS          
Beginning of period   654,607,430    779,849,177 
End of period  $658,503,293   $654,607,430 
           
OTHER INFORMATION          
Shares Transactions          
Investor Class          
Issued   1,061,202    3,435,546 
Issued to shareholders in reinvestment of distributions       4,243,722 
Redeemed   (4,873,639)   (17,770,409)
Net decrease in share transactions   (3,812,437)   (10,091,141)
           
Institutional Class          
Issued   8,392,248    12,712,597 
Issued to shareholders in reinvestment of distributions       15,328,581 
Redeemed   (7,478,943)   (27,328,207)
Net increase in share transactions   913,305    712,971 

 

See Notes to Financial Statements.

Semi-Annual Report | October 31, 2019 71

 

 
 

 

Grandeur Peak Global Reach Fund Statements of Changes in Net Assets

 

   For the Six Months Ended October 31, 2019 (Unaudited)  For the Year Ended April 30, 2019
OPERATIONS      
Net investment income  $736,476   $844,408 
Net realized gain   5,179,406    20,115,164 
Net change in unrealized appreciation/(depreciation)   336,368    (30,255,494)
Net increase/(decrease) in net assets resulting from operations   6,252,250    (9,295,922)
           
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)          
Investor Class       (5,034,062)
Institutional Class       (24,526,234)
Net decrease in net assets from distributions       (29,560,296)
           
CAPITAL SHARE TRANSACTIONS (NOTE 5)          
Investor Class          
Proceeds from sales of shares   1,526,223    6,349,549 
Distributions reinvested       4,744,648 
Cost of shares redeemed   (4,566,401)   (13,942,928)
Redemption fees   4    126 
Net decrease from capital shares transactions   (3,040,174)   (2,848,605)
Institutional Class          
Proceeds from sales of shares   11,546,929    16,753,765 
Distributions reinvested       22,514,921 
Cost of shares redeemed   (37,843,094)   (36,706,628)
Redemption fees   559    213 
Net increase/(decrease) from capital shares transactions   (26,295,606)   2,562,271 
Net decrease in net assets   (23,083,530)   (39,142,552)
           
NET ASSETS          
Beginning of period   329,049,871    368,192,423 
End of period  $305,966,341   $329,049,871 
           
OTHER INFORMATION          
Shares Transactions          
Investor Class          
Issued   104,001    410,809 
Issued to shareholders in reinvestment of distributions       381,403 
Redeemed   (311,656)   (918,342)
Net decrease in share transactions   (207,655)   (126,130)
Institutional Class          
Issued   781,973    1,076,282 
Issued to shareholders in reinvestment of distributions       1,804,077 
Redeemed   (2,529,547)   (2,500,050)
Net increase/(decrease) in share transactions   (1,747,574)   380,309 

 

See Notes to Financial Statements.

72 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 
 

 

Grandeur Peak Global Stalwarts Fund Statements of Changes in Net Assets

 

   For the Six Months Ended October 31, 2019 (Unaudited)  For the Year Ended April 30, 2019
OPERATIONS      
Net investment income  $280,499   $318,633 
Net realized gain   1,191,390    4,096,782 
Net change in unrealized depreciation   (1,421,352)   (1,425,050)
Net increase in net assets resulting from operations   50,537    2,990,365 
           
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)          
Investor Class       (2,285,402)
Institutional Class       (2,952,434)
Net decrease in net assets from distributions       (5,237,836)
           
CAPITAL SHARE TRANSACTIONS (NOTE 5)          
Investor Class          
Proceeds from sales of shares   5,322,282    32,838,523 
Distributions reinvested       2,227,413 
Cost of shares redeemed   (9,458,555)   (36,091,435)
Redemption fees   2,492    10,751 
Net decrease from capital shares transactions   (4,133,781)   (1,014,748)
Institutional Class          
Proceeds from sales of shares   8,409,414    37,702,923 
Distributions reinvested       2,636,334 
Cost of shares redeemed   (16,562,316)   (25,830,716)
Redemption fees   14    3,063 
Net increase/(decrease) from capital shares transactions   (8,152,888)   14,511,604 
Net increase/(decrease) in net assets   (12,236,132)   11,249,385 
           
NET ASSETS          
Beginning of period   199,334,087    188,084,702 
End of period  $187,097,955   $199,334,087 
           
OTHER INFORMATION          
Shares Transactions          
Investor Class          
Issued   370,807    2,290,756 
Issued to shareholders in reinvestment of distributions       187,493 
Redeemed   (657,294)   (2,529,238)
Net decrease in share transactions   (286,487)   (50,989)
Institutional Class          
Issued   581,408    2,668,874 
Issued to shareholders in reinvestment of distributions       220,614 
Redeemed   (1,148,377)   (1,899,776)
Net increase/(decrease) in share transactions   (566,969)   989,712 

 

See Notes to Financial Statements.

Semi-Annual Report | October 31, 2019 73

 

 
 

 

Grandeur Peak International Opportunities Fund Statements of Changes in Net Assets

 

   For the Six Months Ended October 31, 2019 (Unaudited)  For the Year Ended April 30, 2019
OPERATIONS      
Net investment income  $1,833,377   $2,792,585 
Net realized gain   20,001,982    37,319,295 
Net change in unrealized depreciation   (18,115,078)   (114,461,975)
Net increase/(decrease) in net assets resulting from operations   3,720,281    (74,350,095)
           
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)          
Investor Class       (6,654,430)
Institutional Class       (62,445,383)
Net decrease in net assets from distributions       (69,099,813)
           
CAPITAL SHARE TRANSACTIONS (NOTE 5)          
Investor Class          
Proceeds from sales of shares   1,854,291    13,888,009 
Distributions reinvested       6,248,519 
Cost of shares redeemed   (8,024,488)   (27,708,151)
Redemption fees   7    3,291 
Net decrease from capital shares transactions   (6,170,190)   (7,568,332)
Institutional Class          
Proceeds from sales of shares   21,944,331    98,259,521 
Distributions reinvested       56,560,067 
Cost of shares redeemed   (88,442,192)   (184,500,982)
Redemption fees   882    2,687 
Net decrease from capital shares transactions   (66,496,979)   (29,678,707)
Net decrease in net assets   (68,946,888)   (180,696,947)
           
NET ASSETS          
Beginning of period   711,311,635    892,008,582 
End of period  $642,364,747   $711,311,635 
           
OTHER INFORMATION          
Shares Transactions          
Investor Class          
Issued   566,677    3,846,422 
Issued to shareholders in reinvestment of distributions       2,231,614 
Redeemed   (2,454,436)   (7,851,116)
Net decrease in share transactions   (1,887,759)   (1,773,080)
Institutional Class          
Issued   6,636,433    29,904,063 
Issued to shareholders in reinvestment of distributions       20,056,761 
Redeemed   (26,835,543)   (52,526,853)
Net decrease in share transactions   (20,199,110)   (2,566,029)

 

See Notes to Financial Statements.

74 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 
 

 

Grandeur Peak International Stalwarts Fund Statements of Changes in Net Assets

 

   For the Six Months Ended October 31, 2019 (Unaudited)  For the Year Ended April 30, 2019
OPERATIONS      
Net investment income  $1,959,037   $2,724,996 
Net realized gain/(loss)   224,198    (306,903)
Net change in unrealized appreciation/(depreciation)   6,277,976    (17,935,986)
Net increase/(decrease) in net assets resulting from operations   8,461,211    (15,517,893)
           
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)          
Investor Class       (1,361,964)
Institutional Class       (12,223,593)
Net decrease in net assets from distributions       (13,585,557)
           
CAPITAL SHARE TRANSACTIONS (NOTE 5)          
Investor Class          
Proceeds from sales of shares   14,116,197    35,814,499 
Distributions reinvested       1,177,844 
Cost of shares redeemed   (12,203,345)   (15,609,386)
Redemption fees   1,361    4,368 
Net increase from capital shares transactions   1,914,213    21,387,325 
Institutional Class          
Proceeds from sales of shares   127,125,718    195,348,183 
Distributions reinvested       11,176,627 
Cost of shares redeemed   (66,759,940)   (114,352,225)
Redemption fees   2,981    11,165 
Net increase from capital shares transactions   60,368,759    92,183,750 
Net increase in net assets   70,744,183    84,467,625 
           
NET ASSETS          
Beginning of period   633,304,093    548,836,468 
End of period  $704,048,276   $633,304,093 
           
OTHER INFORMATION          
Shares Transactions          
Investor Class          
Issued   989,328    2,579,877 
Issued to shareholders in reinvestment of distributions       98,154 
Redeemed   (851,905)   (1,144,985)
Net increase in share transactions   137,423    1,533,046 
Institutional Class          
Issued   8,883,267    13,577,287 
Issued to shareholders in reinvestment of distributions       929,063 
Redeemed   (4,638,104)   (8,335,344)
Net increase in share transactions   4,245,163    6,171,006 

 

See Notes to Financial Statements.

Semi-Annual Report | October 31, 2019 75

 

 
 

 

Grandeur Peak Emerging Markets Opportunities Fund Financial Highlights

For a Share Outstanding Throughout the Periods Presented

 

Investor Class  For the Six Months Ended October 31, 2019 (Unaudited)  Year Ended April 30, 2019  Year Ended April 30, 2018  Year Ended April 30, 2017  Year Ended April 30, 2016  Year Ended April 30, 2015
NET ASSET VALUE, BEGINNING OF PERIOD  $11.82   $13.05   $11.55   $9.82   $11.51   $10.53 
                               
INCOME FROM INVESTMENT OPERATIONS                              
Net investment income(a)   0.04    0.01    0.03    0.02    0.07    0.02 
Net realized and unrealized gain/(loss) on investments   0.40    (1.13)   1.47    1.75    (1.41)   1.22 
Total income/(loss) from investment operations   0.44    (1.12)   1.50    1.77    (1.34)   1.24 
                               
DISTRIBUTIONS                              
From net investment income       (0.02)       (0.04)       (0.01)
From net realized gain on investments       (0.09)           (0.35)   (0.25)
Total distributions       (0.11)       (0.04)   (0.35)   (0.26)
                               
REDEMPTION FEES ADDED TO PAID-IN CAPITAL       0.00(b)       0.00(b)   0.00(b)   0.00(b)
INCREASE/DECREASE IN NET ASSET VALUE   0.44    (1.23)   1.50    1.73    (1.69)   0.98 
NET ASSET VALUE, END OF PERIOD  $12.26   $11.82   $13.05   $11.55   $9.82   $11.51 
                               
TOTAL RETURN   3.72%(c)   (8.48)%   12.99%   18.08%   (11.62)%   12.06%
                               
RATIOS AND SUPPLEMENTAL DATA                              
Net assets, end of period (in 000s)  $13,109   $13,869   $18,668   $18,074   $20,548   $39,896 
                               
RATIOS TO AVERAGE NET ASSETS                              
Expenses (excluding fees waived/reimbursed by investment advisor)   1.75%(d)   1.77%   1.79%   1.76%   1.77%   1.82%
Expenses (including fees waived/reimbursed by investment advisor)   1.74%(d)   1.76%   1.78%   1.76%   1.77%   1.82%
Net investment income   0.66%(d)   0.11%   0.26%   0.21%   0.69%   0.22%
PORTFOLIO TURNOVER RATE   8%(c)   34%   33%   42%   40%   53%

 

(a)Per share numbers have been calculated using the average shares method.
(b)Less than $0.005 or ($0.005) per share.
(c)Not Annualized.
(d)Annualized.

 

See Notes to Financial Statements.

76 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 
 

 

Grandeur Peak Emerging Markets Opportunities Fund Financial Highlights

For a Share Outstanding Throughout the Periods Presented

 

Institutional Class  For the Six Months Ended October 31, 2019 (Unaudited)  Year Ended April 30, 2019  Year Ended April 30, 2018  Year Ended April 30, 2017  Year Ended April 30, 2016  Year Ended April 30, 2015
NET ASSET VALUE, BEGINNING OF PERIOD  $11.88   $13.12   $11.60   $9.85   $11.52   $10.54 
INCOME FROM INVESTMENT OPERATIONS                              
Net investment income(a)   0.05    0.03    0.06    0.04    0.08    0.05 
Net realized and unrealized gain/(loss) on investments   0.41    (1.14)   1.48    1.77    (1.40)   1.21 
Total income/(loss) from investment operations   0.46    (1.11)   1.54    1.81    (1.32)   1.26 
                               
DISTRIBUTIONS                              
From net investment income       (0.04)   (0.02)   (0.06)       (0.03)
From net realized gain on investments       (0.09)           (0.35)   (0.25)
Total distributions       (0.13)   (0.02)   (0.06)   (0.35)   (0.28)
                               
REDEMPTION FEES ADDED TO PAID-IN CAPITAL   0.00(b)   0.00(b)   0.00(b)   0.00(b)   0.00(b)   0.00(b)
                               
INCREASE/DECREASE IN NET ASSET VALUE   0.46    (1.24)   1.52    1.75    (1.67)   0.98 
NET ASSET VALUE, END OF PERIOD  $12.34   $11.88   $13.12   $11.60   $9.85   $11.52 
                               
TOTAL RETURN   3.87%(c)   (8.32)%   13.24%   18.42%   (11.44)%   12.22%
                               
RATIOS AND SUPPLEMENTAL DATA                              
Net assets, end of period (in 000s)  $444,159   $452,530   $471,260   $398,891   $349,493   $428,048 
                               
RATIOS TO AVERAGE NET ASSETS                              
Expenses (excluding fees waived/reimbursed by investment advisor)   1.53%(d)   1.53%   1.55%   1.55%   1.55%   1.58%
Expenses (including fees waived/reimbursed by investment advisor)   1.52%(d)   1.52%   1.54%   1.55%   1.55%   1.58%
Net investment income   0.87%(d)   0.29%   0.49%   0.35%   0.75%   0.43%
PORTFOLIO TURNOVER RATE   8%(c)   34%   33%   42%   40%   53%

 

(a)Per share numbers have been calculated using the average shares method.
(b)Less than $0.005 or ($0.005) per share.
(c)Not Annualized.
(d)Annualized.

 

See Notes to Financial Statements.

Semi-Annual Report | October 31, 2019 77

 

 
 

 

Grandeur Peak Global Contrarian Fund Financial Highlights

For a Share Outstanding Throughout the Period Presented

 

Institutional Class  For the Period September 17, 2019 (Inception) to October 31, 2019
NET ASSET VALUE, BEGINNING OF PERIOD  $10.00 
      
INCOME FROM INVESTMENT OPERATIONS     
Net investment income(a)   0.02 
Net realized and unrealized gain on investments   0.14 
Total income from investment operations   0.16 
      
REDEMPTION FEES ADDED TO PAID-IN CAPITAL    
      
INCREASE IN NET ASSET VALUE   0.16 
NET ASSET VALUE, END OF PERIOD  $10.16 
      
TOTAL RETURN   1.60%(b)
      
RATIOS AND SUPPLEMENTAL DATA     
Net assets, end of period (in 000s)  $4,694 
      
RATIOS TO AVERAGE NET ASSETS     
Expenses (excluding fees waived/ reimbursed by investment advisor)   8.42%(c)
Expenses (including fees waived/ reimbursed by investment advisor)   1.38%(c)
Net investment income   1.34%(c)
      
PORTFOLIO TURNOVER RATE   9%(b)

 

(a)Per share numbers have been calculated using the average shares method.
(b)Not Annualized.
(c)Annualized.

 

See Notes to Financial Statements.

78 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 
 

 

Grandeur Peak Global Micro Cap Fund Financial Highlights

For a Share Outstanding Throughout the Periods Presented

 

Institutional Class  For the Six Months Ended October 31, 2019 (Unaudited)  Year Ended April 30, 2019  Year Ended April 30, 2018  Year Ended April 30, 2017  For the Period October 21, 2015 (Commencement of Operations) to April 30, 2016
NET ASSET VALUE, BEGINNING OF PERIOD  $11.31   $13.12   $11.98   $10.38   $10.00 
                          
INCOME FROM INVESTMENT OPERATIONS                         
Net investment income/(loss)(a)   0.03    (0.01)   (0.00)(b)   0.01    (0.02)
Net realized and unrealized gain/(loss) on investments   0.29    (1.08)   2.12    1.72    0.40 
Total income/(loss) from investment operations   0.32    (1.09)   2.12    1.73    0.38 
                          
DISTRIBUTIONS                         
From net investment income           (0.06)   (0.02)    
From net realized gain on investments       (0.72)   (0.92)   (0.11)    
Total distributions       (0.72)   (0.98)   (0.13)    
                          
REDEMPTION FEES ADDED TO PAID-IN CAPITAL   0.00(b)   0.00(b)   0.00(b)   0.00(b)   0.00(b)
INCREASE/DECREASE IN NET ASSET VALUE   0.32    (1.81)   1.14    1.60    0.38 
NET ASSET VALUE, END OF PERIOD  $11.63   $11.31   $13.12   $11.98   $10.38 
                          
TOTAL RETURN   2.83%(c)   (7.67)%   17.68%   16.81%   3.80%(c)
RATIOS AND SUPPLEMENTAL DATA                         
Net assets, end of period (in 000s)  $33,800   $35,654   $41,709   $36,620   $30,735 
RATIOS TO AVERAGE NET ASSETS                         
Expenses (excluding fees waived/ reimbursed by investment advisor)   2.08%(d)   2.05%   2.06%   2.17%   2.30%(d)(e)
Expenses (including fees waived/ reimbursed by investment advisor)   2.00%(d)   2.00%   2.00%   2.00%   2.00%(d)(e)
Net investment income/(loss)   0.44%(d)   (0.06)%   0.00%(f)   0.11%   (0.41)%(d)
PORTFOLIO TURNOVER RATE   15%(c)   37%   46%   37%   8%(c)

 

(a)Per share numbers have been calculated using the average shares method.
(b)Less than $0.005 or ($0.005) per share.
(c)Not Annualized.
(d)Annualized.
(e)Expense ratios during startup periods may not be representative of longer term operating periods.
(f)Less than 0.005% of average net assets.

 

See Notes to Financial Statements.

Semi-Annual Report | October 31, 2019 79

 

 
 

 

Grandeur Peak Global Opportunities Fund Financial Highlights

For a Share Outstanding Throughout the Periods Presented

 

Investor Class  For the Six Months Ended October 31, 2019 (Unaudited)  Year Ended April 30, 2019  Year Ended April 30, 2018  Year Ended April 30, 2017  Year Ended April 30, 2016  Year Ended April 30, 2015
NET ASSET VALUE, BEGINNING OF PERIOD  $3.48   $3.95   $3.52   $3.01   $3.43   $3.31 
                               
INCOME FROM INVESTMENT                              
OPERATIONS                              
Net investment income/(loss)(a)   0.00(b)   (0.00)(b)   0.00(b)   (0.00)(b)(c)   0.00(b)   0.00(b)
Net realized and unrealized gain/(loss) on investments   0.07    (0.14)   0.65    0.51    (0.18)   0.35 
Total income/(loss) from investment operations   0.07    (0.14)   0.65    0.51    (0.18)   0.35 
                               
DISTRIBUTIONS                              
From net investment income       (0.00)(b)           (0.00)(b)   (0.01)
From net realized gain on investments       (0.33)   (0.22)   (0.00)(b)   (0.24)   (0.22)
Total distributions       (0.33)   (0.22)   (0.00)(b)   (0.24)   (0.23)
REDEMPTION FEES ADDED TO PAID-IN CAPITAL   0.00(b)   0.00(b)   0.00(b)   0.00(b)   0.00(b)   0.00(b)
INCREASE/DECREASE IN NET ASSET VALUE   0.07    (0.47)   0.43    0.51    (0.42)   0.12 
NET ASSET VALUE, END OF PERIOD  $3.55   $3.48   $3.95   $3.52   $3.01   $3.43 
TOTAL RETURN   2.01%(d)   (1.83)%   18.41%   17.09%   (5.03)%   11.09%
RATIOS AND SUPPLEMENTAL DATA                              
Net assets, end of period (in 000s)  $119,908   $130,745   $188,379   $166,284   $173,156   $201,462 
RATIOS TO AVERAGE NET ASSETS                              
Expenses (excluding fees waived/ reimbursed by investment advisor)   1.60%(e)   1.61%   1.61%   1.61%   1.62%   1.62%
Expenses (including fees waived/ reimbursed by investment advisor)   1.57%(e)   1.57%   1.55%   1.59%   1.62%   1.62%
Net investment income/(loss)   0.02%(e)   (0.12)%   0.03%   (0.06)%   0.06%   0.12%
PORTFOLIO TURNOVER RATE   20%(d)   38%   29%   30%   32%   37%

 

 

(a)Per share numbers have been calculated using the average shares method.
(b)Less than $0.005 or ($0.005) per share.
(c)The per share amount does not correspond to activity reflected in the Statement of Operations due to class specific expenses during the period.
(d)Not Annualized.
(e)Annualized.

 

See Notes to Financial Statements.

80 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 
 

 

Grandeur Peak Global Opportunities Fund Financial Highlights

For a Share Outstanding Throughout the Periods Presented

 

Institutional Class  For the Six Months Ended October 31, 2019 (Unaudited)  Year Ended April 30, 2019  Year Ended April 30, 2018  Year Ended April 30, 2017  Year Ended April 30, 2016  Year Ended April 30, 2015
NET ASSET VALUE, BEGINNING OF PERIOD  $3.52   $4.00   $3.56   $3.03   $3.46   $3.34 
                               
INCOME FROM INVESTMENT OPERATIONS                              
Net investment income(a)   0.00(b)   0.00(b)   0.01    0.01    0.01    0.01 
Net realized and unrealized gain/(loss) on investments   0.08    (0.14)   0.65    0.52    (0.19)   0.34 
Total income/(loss) from investment operations   0.08    (0.14)   0.66    0.53    (0.18)   0.35 
                               
DISTRIBUTIONS                              
From net investment income       (0.01)   (0.00)(b)   (0.00)(b)   (0.01)   (0.01)
From net realized gain on investments       (0.33)   (0.22)   (0.00)(b)   (0.24)   (0.22)
Total distributions       (0.34)   (0.22)   (0.00)(a)   (0.25)   (0.23)
                               
REDEMPTION FEES ADDED TO PAID-IN CAPITAL   0.00(b)   0.00(b)   0.00(b)   0.00(b)   0.00(b)   0.00(b)
                               
INCREASE/DECREASE IN NET ASSET VALUE   0.08    (0.48)   0.44    0.53    (0.43)   0.12 
NET ASSET VALUE, END OF PERIOD  $3.60   $3.52   $4.00   $3.56   $3.03   $3.46 
                               
TOTAL RETURN   2.27%(c)   (1.84)%   18.62%   17.81%   (5.12)%   11.20%
                               
RATIOS AND SUPPLEMENTAL DATA                              
Net assets, end of period (in 000s)  $538,595   $523,862   $591,470   $532,946   $452,030   $526,394 
                               
RATIOS TO AVERAGE NET ASSETS                              
Expenses (excluding fees waived/ reimbursed by investment advisor)   1.37%(d)   1.37%   1.36%   1.37%   1.38%   1.38%
Expenses (including fees waived/ reimbursed by investment advisor)   1.34%(d)   1.33%   1.31%   1.35%   1.38%   1.38%
Net investment income   0.24%(d)   0.13%   0.28%   0.18%   0.30%   0.35%
                               
PORTFOLIO TURNOVER RATE   20%(c)   38%   29%   30%   32%   37%

 

(a)Per share numbers have been calculated using the average shares method.
(b)Less than $0.005 or ($0.005) per share.
(c)Not Annualized.
(d)Annualized.

 

See Notes to Financial Statements.

Semi-Annual Report | October 31, 2019 81

 

 

 

Grandeur Peak Global Reach Fund Financial Highlights

For a Share Outstanding Throughout the Periods Presented

 

Investor Class  For the Six Months Ended October 31, 2019 (Unaudited)  Year Ended April 30, 2019  Year Ended April 30, 2018  Year Ended April 30, 2017  Year Ended April 30, 2016  Year Ended April 30, 2015
NET ASSET VALUE, BEGINNING OF PERIOD  $14.98   $16.97   $14.52   $12.31   $13.65   $12.43 
                               
INCOME FROM INVESTMENT OPERATIONS                              
Net investment income(a)   0.02    0.01    0.01    0.01    0.01    0.00(b)
Net realized and unrealized gain/(loss) on investments   0.28    (0.58)   2.66    2.22    (0.89)   1.37 
Total income/(loss) from investment operations   0.30    (0.57)   2.67    2.23    (0.88)   1.37 
                               
DISTRIBUTIONS                              
From net investment income       (0.00)       (0.02)   (0.01)   (0.01)
From net realized gain on investments       (1.42)   (0.22)       (0.45)   (0.14)
Total distributions       (1.42)   (0.22)   (0.02)   (0.46)   (0.15)
                               
REDEMPTION FEES ADDED TO PAID-IN CAPITAL   0.00(b)   0.00(b)   0.00(b)   0.00(b)   0.00(b)   0.00(b)
                               
INCREASE/DECREASE IN NET ASSET VALUE   0.30    (1.99)   2.45    2.21    (1.34)   1.22 
NET ASSET VALUE, END OF PERIOD  $15.28   $14.98   $16.97   $14.52   $12.31   $13.65 
                               
TOTAL RETURN   2.00%(c)   (1.61)%   18.44%   18.11%   (6.45)%   11.09%
                               
RATIOS AND SUPPLEMENTAL DATA                              
Net assets, end of period (in 000s)  $54,262   $56,307   $65,923   $67,574   $66,984   $87,354 
                               
RATIOS TO AVERAGE NET ASSETS                              
Expenses (excluding fees waived/reimbursed by investment advisor)   1.52%(d)   1.52%   1.52%   1.52%   1.60%   1.60%
Expenses (including fees waived/reimbursed by investment advisor)   1.52%(d)   1.52%   1.52%   1.52%   1.60%   1.60%
Net investment income   0.25%(d)   0.05%   0.06%   0.07%   0.10%   0.03%
                               
PORTFOLIO TURNOVER RATE   16%(c)   50%   43%   42%   46%   46%

 

(a)Per share numbers have been calculated using the average shares method.
(b)Less than $0.005 or ($0.005) per share.
(c)Not Annualized.
(d)Annualized.

 

See Notes to Financial Statements.

82 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

 

Grandeur Peak Global Reach Fund Financial Highlights

For a Share Outstanding Throughout the Periods Presented

 

Institutional Class  For the Six Months Ended October 31, 2019 (Unaudited)  Year Ended April 30, 2019  Year Ended April 30, 2018  Year Ended April 30, 2017  Year Ended April 30, 2016  Year Ended April 30, 2015
NET ASSET VALUE, BEGINNING OF PERIOD  $15.04   $17.02   $14.55   $12.33   $13.66   $12.42 
                               
INCOME FROM INVESTMENT OPERATIONS                              
Net investment income(a)   0.04    0.05    0.04    0.04    0.04    0.03 
Net realized and unrealized gain/(loss) on investments   0.28    (0.58)   2.67    2.22    (0.89)   1.37 
Total income/(loss) from investment operations   0.32    (0.53)   2.71    2.26    (0.85)   1.40 
                               
DISTRIBUTIONS                              
From net investment income       (0.03)   (0.02)   (0.04)   (0.03)   (0.02)
From net realized gain on investments       (1.42)   (0.22)       (0.45)   (0.14)
Total distributions       (1.45)   (0.24)   (0.04)   (0.48)   (0.16)
                               
REDEMPTION FEES ADDED TO PAID-IN CAPITAL   0.00(b)   0.00(b)   0.00(b)   0.00(b)   0.00(b)   0.00(b)
                               
INCREASE/DECREASE IN NET ASSET VALUE   0.32    (1.98)   2.47    2.22    (1.33)   1.24 
NET ASSET VALUE, END OF PERIOD  $15.36   $15.04   $17.02   $14.55   $12.33   $13.66 
                               
TOTAL RETURN   2.13%(c)   (1.33)%   18.69%   18.36%   (6.18)%   11.41%
                               
RATIOS AND SUPPLEMENTAL DATA                              
Net assets, end of period (in 000s)  $251,705   $272,743   $302,269   $258,683   $221,759   $260,239 
                               
RATIOS TO AVERAGE NET ASSETS                              
Expenses (excluding fees waived/reimbursed by investment advisor)   1.28%(d)   1.27%   1.28%   1.29%   1.35%   1.35%
Expenses (including fees waived/reimbursed by investment advisor)   1.28%(d)   1.27%   1.28%   1.29%   1.35%   1.35%
Net investment income   0.50%(d)   0.29%   0.27%   0.28%   0.34%   0.23%
                               
PORTFOLIO TURNOVER RATE   16%(c)   50%   43%   42%   46%   46%

 

(a)Per share numbers have been calculated using the average shares method.
(b)Less than $0.005 or ($0.005) per share.
(c)Not Annualized.
(d)Annualized.

 

See Notes to Financial Statements.

Semi-Annual Report | October 31, 2019 83

 

 

 

Grandeur Peak Global Stalwarts Fund Financial Highlights

For a Share Outstanding Throughout the Periods Presented

 

Investor Class  For the Six Months Ended October 31, 2019 (Unaudited)  Year Ended April 30, 2019  Year Ended April 30, 2018  Year Ended April 30, 2017  For the Period September 2, 2015 (Commencement of Operations) to April 30, 2016
NET ASSET VALUE, BEGINNING OF PERIOD  $14.83   $15.06   $12.76   $10.85   $10.00 
                          
INCOME FROM INVESTMENT OPERATIONS                         
Net investment income/(loss)(a)   0.01    0.01    (0.00)(b)   (0.03)   0.00(b)
Net realized and unrealized gain on investments   0.02    0.16    2.52    1.95    0.85 
Total income from investment operations   0.03    0.17    2.52    1.92    0.85 
                          
DISTRIBUTIONS                       
From net investment income               (0.01)   (0.00)(b)
From net realized gain on investments       (0.40)   (0.22)       (0.00)(b)
Total distributions       (0.40)   (0.22)   (0.01)   (0.00)(a)
                          
REDEMPTION FEES ADDED TO PAID-IN CAPITAL   0.00(b)   0.00(b)   0.00(b)   0.00(b)   0.00(b)
                          
INCREASE/DECREASE IN NET ASSET VALUE   0.03    (0.23)   2.30    1.91    0.85 
NET ASSET VALUE, END OF PERIOD  $14.86   $14.83   $15.06   $12.76   $10.85 
                          
TOTAL RETURN   0.20%(c)   1.78%   19.79%   17.70%   8.55%(c)
                          
RATIOS AND SUPPLEMENTAL DATA                         
Net assets, end of period (in 000s)  $86,313   $90,400   $92,552   $61,212   $19,131 
                          
RATIOS TO AVERAGE NET ASSETS                         
Expenses (excluding fees waived/ reimbursed by investment advisor)   1.25%(d)   1.27%   1.35%   1.41%   2.06%(d)(e)
Expenses (including fees waived/ reimbursed by investment advisor)   1.25%(d)   1.27%   1.35%   1.35%   1.35%(d)(e)
Net investment income/(loss)   0.16%(d)   0.05%   (0.03)%   (0.23)%   0.00%(d)(f)
                          
PORTFOLIO TURNOVER RATE   21%(c)   52%   30%   32%   24%(c)

 

(a)Per share numbers have been calculated using the average shares method.
(b)Less than $0.005 or ($0.005) per share.
(c)Not Annualized.
(d)Annualized.
(e)Expense ratios during startup periods may not be representative of longer term operating periods.
(f)Less than 0.005% of average net assets.

 

See Notes to Financial Statements.

84 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

 

Grandeur Peak Global Stalwarts Fund Financial Highlights

For a Share Outstanding Throughout the Periods Presented

 

Institutional Class  For the Six Months Ended October 31, 2019 (Unaudited)  Year Ended April 30, 2019  Year Ended April 30, 2018  Year Ended April 30, 2017  For the Period September 2, 2015 (Commencement of Operations) to April 30, 2016
NET ASSET VALUE, BEGINNING OF PERIOD  $14.93   $15.14   $12.79   $10.87   $10.00 
                          
INCOME FROM INVESTMENT OPERATIONS                         
Net investment income(a)   0.03    0.04    0.03    0.01(b)   0.02 
Net realized and unrealized gain on investments   0.01    0.17    2.54    1.93    0.85 
Total income from investment operations   0.04    0.21    2.57    1.94    0.87 
                          
DISTRIBUTIONS                       
From net investment income       (0.02)       (0.02)   (0.00)(c)
From net realized gain on investments       (0.40)   (0.22)       (0.00)(c)
Total distributions       (0.42)   (0.22)   (0.02)   (0.00)(a)
                          
REDEMPTION FEES ADDED TO PAID-IN CAPITAL   0.00(c)   0.00(c)   0.00(c)   0.00(c)   0.00(c)
                          
INCREASE/DECREASE IN NET ASSET VALUE   0.04    (0.21)   2.35    1.92    0.87 
NET ASSET VALUE, END OF PERIOD  $14.97   $14.93   $15.14   $12.79   $10.87 
                          
TOTAL RETURN   0.27%(d)   2.08%   20.14%   17.92%   8.76%(d)
                          
RATIOS AND SUPPLEMENTAL DATA                         
Net assets, end of period (in 000s)  $100,785   $108,934   $95,533   $47,811   $17,562 
                          
RATIOS TO AVERAGE NET ASSETS                         
Expenses (excluding fees waived/ reimbursed by investment advisor)   1.00%(e)   1.02%   1.10%   1.17%   1.86%(e)(f)
Expenses (including fees waived/ reimbursed by investment advisor)   1.00%(e)   1.02%   1.10%   1.10%   1.10%(e)(f)
Net investment income   0.42%(e)   0.27%   0.24%   0.05%   0.22%(e)
                          
PORTFOLIO TURNOVER RATE   21%(d)   52%   30%   32%   24%(d)

 

(a)Per share numbers have been calculated using the average shares method.
(b)The per share amount does not correspond to activity reflected in the Statement of Operations due to class specific expenses during the period.
(c)Less than $0.005 or ($0.005) per share.
(d)Not Annualized.
(e)Annualized.
(f)Expense ratios during startup periods may not be representative of longer term operating periods.

 

See Notes to Financial Statements.

Semi-Annual Report | October 31, 2019 85

 

 

 

Grandeur Peak International Opportunities Fund Financial Highlights

For a Share Outstanding Throughout the Periods Presented

 

Investor Class  For the Six Months Ended October 31, 2019 (Unaudited)  Year Ended April 30, 2019  Year Ended April 30, 2018  Year Ended April 30, 2017  Year Ended April 30, 2016  Year Ended April 30, 2015
NET ASSET VALUE, BEGINNING OF PERIOD  $3.34   $4.10   $3.55   $3.09   $3.42   $3.41 
                               
INCOME FROM INVESTMENT OPERATIONS                              
Net investment income(a)   0.01    0.00(b)   0.01    0.01    0.01    0.01 
Net realized and unrealized gain/(loss) on investments   0.01    (0.38)   0.68    0.52    (0.20)   0.21 
Total income/(loss) from investment operations   0.02    (0.38)   0.69    0.53    (0.19)   0.22 
                               
DISTRIBUTIONS                              
From net investment income       (0.01)   (0.01)   (0.02)   (0.01)   (0.01)
From net realized gain on investments       (0.37)   (0.13)   (0.05)   (0.13)   (0.20)
Total distributions       (0.38)   (0.14)   (0.07)   (0.14)   (0.21)
                               
REDEMPTION FEES ADDED TO PAID-IN CAPITAL   0.00(b)   0.00(b)   0.00(b)   0.00(b)   0.00(b)   0.00(b)
                               
INCREASE/DECREASE IN NET ASSET VALUE   0.02    (0.76)   0.55    0.46    (0.33)   0.01 
NET ASSET VALUE, END OF PERIOD  $3.36   $3.34   $4.10   $3.55   $3.09   $3.42 
                               
TOTAL RETURN   0.60%(c)   (7.40)%   19.30%   17.50%   (5.53)%   7.25%
                               
RATIOS AND SUPPLEMENTAL DATA                              
Net assets, end of period (in 000s)  $52,130   $58,070   $78,686   $78,403   $123,922   $173,842 
                               
RATIOS TO AVERAGE NET ASSETS                              
Expenses (excluding fees waived/ reimbursed by investment advisor)   1.61%(d)   1.62%   1.61%   1.61%   1.62%   1.62%
Expenses (including fees waived/ reimbursed by investment advisor)   1.58%(d)    1.57%   1.55%   1.58%   1.62%   1.62%
Net investment income   0.34%(d)   0.11%   0.31%   0.16%   0.45%   0.37%
                               
PORTFOLIO TURNOVER RATE   14%(c)   34%   26%   30%   34%   36%

 

(a)Per share numbers have been calculated using the average shares method.
(b)Less than $0.005 or ($0.005) per share.
(c)Not Annualized.
(d)Annualized.

 

See Notes to Financial Statements.

86 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

 

Grandeur Peak International Opportunities Fund Financial Highlights

For a Share Outstanding Throughout the Periods Presented

 

Institutional Class  For the Six Months Ended October 31, 2019 (Unaudited)  Year Ended April 30, 2019  Year Ended April 30, 2018  Year Ended April 30, 2017  Year Ended April 30, 2016  Year Ended April 30, 2015
NET ASSET VALUE, BEGINNING OF PERIOD  $3.36   $4.12   $3.57   $3.11   $3.43   $3.42 
                               
INCOME FROM INVESTMENT OPERATIONS                              
Net investment income(a)   0.01    0.01    0.02    0.01    0.02    0.02 
Net realized and unrealized gain/(loss) on investments   0.01    (0.38)   0.67    0.52    (0.20)   0.21 
Total income/(loss) from investment operations   0.02    (0.37)   0.69    0.53    (0.18)   0.23 
                               
DISTRIBUTIONS                              
From net investment income       (0.02)   (0.01)   (0.02)   (0.01)   (0.02)
From net realized gain on investments       (0.37)   (0.13)   (0.05)   (0.13)   (0.20)
Total distributions       (0.39)   (0.14)   (0.07)   (0.14)   (0.22)
                               
REDEMPTION FEES ADDED TO PAID- IN CAPITAL   0.00(b)   0.00(b)   0.00(b)   0.00(b)   0.00(b)   0.00(b)
                               
INCREASE/DECREASE IN NET ASSET VALUE   0.02    (0.76)   0.55    0.46    (0.32)   0.01 
NET ASSET VALUE, END OF PERIOD  $3.38   $3.36   $4.12   $3.57   $3.11   $3.43 
                               
TOTAL RETURN   0.60%(c)   (7.19)%   19.38%   17.59%   (5.02)%   7.41%
                               
RATIOS AND SUPPLEMENTAL DATA                              
Net assets, end of period (in 000s)  $590,235   $653,241   $813,322   $698,504   $579,371   $682,364 
                               
RATIOS TO AVERAGE NET ASSETS                              
Expenses (excluding fees waived/ reimbursed by investment advisor)   1.38%(d)   1.37%   1.37%   1.37%   1.38%   1.38%
Expenses (including fees waived/ reimbursed by investment advisor)   1.34%(d)   1.32%   1.30%   1.34%   1.38%   1.38%
Net investment income   0.57%(d)   0.41%   0.54%   0.42%   0.65%   0.61%
                               
PORTFOLIO TURNOVER RATE   14%(c)   34%   26%   30%   34%   36%

 

(a)Per share numbers have been calculated using the average shares method.
(b)Less than $0.005 or ($0.005) per share.
(c)Not Annualized.
(d)Annualized.

 

See Notes to Financial Statements.

Semi-Annual Report | October 31, 2019 87

 

 

 

Grandeur Peak International Stalwarts Fund Financial Highlights

For a Share Outstanding Throughout the Periods Presented

 

Investor Class  For the Six Months Ended October 31, 2019 (Unaudited)  Year Ended April 30, 2019  Year Ended April 30, 2018  Year Ended April 30, 2017  For the Period September 2, 2015 (Commencement of Operations) to April 30, 2016
NET ASSET VALUE, BEGINNING OF PERIOD  $14.70   $15.53   $13.04   $11.02   $10.00 
                          
INCOME FROM INVESTMENT OPERATIONS                         
Net investment income(a)   0.03    0.04    0.05    0.02    0.03 
Net realized and unrealized gain/(loss) on investments   0.08    (0.53)   2.62    2.03    0.99 
Total income/(loss) from investment operations   0.11    (0.49)   2.67    2.05    1.02 
                          
DISTRIBUTIONS                         
From net investment income       (0.05)       (0.03)    
From net realized gain on investments       (0.29)   (0.18)        
Total distributions       (0.34)   (0.18)   (0.03)    
                          
REDEMPTION FEES ADDED TO PAID-IN CAPITAL   0.00(b)   0.00(b)   0.00(b)   0.00(b)   0.00(b)
                          
INCREASE/DECREASE IN NET ASSET VALUE   0.11    (0.83)   2.49    2.02    1.02 
NET ASSET VALUE, END OF PERIOD  $14.81   $14.70   $15.53   $13.04   $11.02 
                          
TOTAL RETURN   0.75%(c)   (2.69)%   20.50%   18.68%   10.20%(c)
                          
RATIOS AND SUPPLEMENTAL DATA                         
Net assets, end of period (in 000s)  $74,794   $72,204   $52,478   $31,045   $22,028 
                          
RATIOS TO AVERAGE NET ASSETS                         
Expenses (excluding fees waived/ reimbursed by investment advisor)   1.17%(d)   1.19%   1.19%   1.27%   1.45%(d)(e)
Expenses (including fees waived/ reimbursed by investment advisor)   1.17%(d)   1.19%   1.19%   1.27%   1.35%(d)(e)
Net investment income   0.37%(d)   0.26%   0.33%   0.19%   0.44%(d)
                          
PORTFOLIO TURNOVER RATE   18%(c)   42%   24%   37%   59%(c)

 

(a)Per share numbers have been calculated using the average shares method.
(b)Less than $0.005 or ($0.005) per share.
(c)Not Annualized.
(d)Annualized.
(e)Expense ratios during startup periods may not be representative of longer term operating periods.

 

See Notes to Financial Statements.

88 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

 

Grandeur Peak International Stalwarts Fund Financial Highlights

For a Share Outstanding Throughout the Periods Presented

 

Institutional Class  For the Six Months Ended October 31, 2019 (Unaudited)  Year Ended April 30, 2019  Year Ended April 30, 2018  Year Ended April 30, 2017  For the Period September 2, 2015 (Commencement of Operations) to April 30, 2016
NET ASSET VALUE, BEGINNING OF PERIOD  $14.74   $15.57   $13.06   $11.03   $10.00 
                          
INCOME FROM INVESTMENT OPERATIONS                         
Net investment income(a)   0.04    0.07    0.08    0.04    0.04 
Net realized and unrealized gain/(loss) on investments   0.09    (0.54)   2.63    2.04    0.99 
Total income/(loss) from investment operations   0.13    (0.47)   2.71    2.08    1.03 
                          
DISTRIBUTIONS                       
From net investment income       (0.07)   (0.02)   (0.05)   (0.00)(b)
From net realized gain on investments       (0.29)   (0.18)        
Total distributions       (0.36)   (0.20)   (0.05)   (0.00)(b)
                          
REDEMPTION FEES ADDED TO PAID-IN CAPITAL   0.00(b)   0.00(b)   0.00(b)   0.00(b)   0.00(b)
                          
INCREASE/DECREASE IN NET ASSET VALUE   0.13    (0.83)   2.51    2.03    1.03 
NET ASSET VALUE, END OF PERIOD  $14.87   $14.74   $15.57   $13.06   $11.03 
                          
TOTAL RETURN   0.88%(c)   (2.50)%   20.79%   18.96%   10.34%(c)
                          
RATIOS AND SUPPLEMENTAL DATA                         
Net assets, end of period (in 000s)  $629,254   $561,100   $496,358   $265,393   $119,070 
                          
RATIOS TO AVERAGE NET ASSETS                         
Expenses (excluding fees waived/ reimbursed by investment advisor)   0.92%(d)   0.94%   0.94%   1.02%   1.20%(d)(e)
Expenses (including fees waived/ reimbursed by investment advisor)   0.92%(d)   0.94%   0.94%   1.02%   1.10%(d)(e)
Net investment income   0.61%(d)   0.51%   0.57%   0.37%   0.60%(d)
                          
PORTFOLIO TURNOVER RATE   18%(c)   42%   24%   37%   59%(c)

 

(a)Per share numbers have been calculated using the average shares method.
(b)Less than $0.005 or ($0.005) per share.
(c)Not Annualized.
(d)Annualized.
(e)Expense ratios during startup periods may not be representative of longer term operating periods.

 

See Notes to Financial Statements.

Semi-Annual Report | October 31, 2019 89

 

 

 

Grandeur Peak Funds® Notes to Financial Statements

October 31, 2019 (Unaudited)

 

1. ORGANIZATION

 

 

Financial Investors Trust (the “Trust”), a Delaware statutory trust, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (“1940 Act”). As of October 31, 2019, the Trust consists of multiple separate portfolios or series. This semi-annual report describes the Grandeur Peak Emerging Markets Opportunities Fund, Grandeur Peak Global Contrarian Fund, Grandeur Peak Global Micro Cap Fund, Grandeur Peak Global Opportunities Fund, Grandeur Peak Global Reach Fund, Grandeur Peak Global Stalwarts Fund, Grandeur Peak International Opportunities Fund, and Grandeur Peak International Stalwarts Fund (individually a “Fund” and collectively, the “Funds”). The Funds seek long-term growth of capital. The Funds offer Investor Class (except the Grandeur Peak Global Contrarian Fund and Grandeur Peak Global Micro Cap Fund) and Institutional Class shares.

 

2. SIGNIFICANT ACCOUNTING POLICIES

 

 

The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. The Funds are considered an investment company for financial reporting purposes under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946. The following is a summary of significant accounting policies consistently followed by the Funds in preparation of their financial statements.

 

Investment Valuation: The Funds generally value their securities based on market prices determined at the close of regular trading on the New York Stock Exchange (“NYSE”), normally 4:00 p.m. Eastern Time, on each day the NYSE is open for trading.

 

For equity securities and mutual funds that are traded on an exchange, the market price is usually the closing sale or official closing price on that exchange. In the case of equity securities not traded on an exchange, or if such closing prices are not otherwise available, the securities are valued at the mean of the most recent bid and ask prices on such day. Redeemable securities issued by open-end registered investment companies are valued at the investment company’s applicable net asset value, with the exception of exchange-traded open-end investment companies, which are priced as equity securities.

 

Equity securities that are primarily traded on foreign securities exchanges are valued at the closing values of such securities on their respective foreign exchanges, except when an event occurs subsequent to the close of the foreign exchange and the close of the NYSE that was likely to have changed such value. In such an event, the fair value of those securities are determined in good faith through consideration of other factors in accordance with procedures established by and under the general supervision of the Board of Trustees of the Trust (the “Board” or the “Trustees”). The Funds will use a fair valuation model provided by an independent pricing service, which is intended to reflect fair value when a security’s value or a meaningful portion of each Fund’s portfolio is believed to have been materially affected by a valuation event that has occurred between the close of the exchange or market on which the security is traded and the close of the regular trading day on the NYSE. The Funds’ valuation procedures set forth certain triggers which instruct when to use the fair valuation model.

 

Corporate bonds are valued using market models that consider trade data, quotations from dealers and active market makers, relevant yield curve and spread data, creditworthiness, trade data or market information on comparable securities, and other relevant security specific information.

 

Forward currency exchange contracts have a fair value determined by the prevailing foreign currency exchange daily rates and current foreign currency exchange forward rates. The foreign currency exchange forward rates are calculated using an automated system that estimates rates on the basis of the current day foreign currency exchange rates and forward foreign currency exchange rates supplied by a pricing service.

 

When such prices or quotations are not available, or when Grandeur Peak Global Advisors, LLC (the “Adviser” or “Grandeur Peak”) believes that they are unreliable, securities may be priced using fair value procedures approved by the Board.

 

Fair Value Measurements: The Funds disclose the classification of their fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.

 

90 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

 

Grandeur Peak Funds® Notes to Financial Statements

October 31, 2019 (Unaudited)

 

Various inputs are used in determining the value of the Funds’ investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments. These inputs are categorized in the following hierarchy under applicable financial accounting standards:

 

Level 1 – Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that the Funds have the ability to access at the measurement date;

 

Level 2 – Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and

 

Level 3 – Significant unobservable prices or inputs (including the Funds’ own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date.

 

The following is a summary of each Fund’s investments in the fair value hierarchy as of October 31, 2019:

 

Investments in Securities at Value  Level 1 - Quoted and Unadjusted Prices  Level 2 - Other Significant Observable Inputs  Level 3 - Significant Unobservable Inputs  Total
Grandeur Peak Emerging Markets Opportunities Fund                    
Common Stocks                    
Philippines  $18,253,455   $   $7,014   $18,260,469 
Other*   411,193,898            411,193,898 
Total  $429,447,353   $   $7,014   $429,454,367 

 

Investments in Securities at Value  Level 1 - Quoted and Unadjusted Prices  Level 2 - Other Significant Observable Inputs  Level 3 - Significant Unobservable Inputs  Total
Grandeur Peak Global Contrarian Fund            
Common Stocks*  $4,670,352   $   $   $4,670,352 
Total  $4,670,352   $   $   $4,670,352 

 

Investments in Securities at Value  Level 1 - Quoted and Unadjusted Prices  Level 2 - Other Significant Observable Inputs  Level 3 - Significant Unobservable Inputs  Total
Grandeur Peak Global Micro Cap Fund            
Common Stocks                    
New Zealand  $125,468   $   $   $125,468 
Other*   33,264,782            33,264,782 
Total  $33,390,250   $   $   $33,390,250 

 

Investments in Securities at Value  Level 1 - Quoted and Unadjusted Prices  Level 2 - Other Significant Observable Inputs  Level 3 - Significant Unobservable Inputs  Total
Grandeur Peak Global Opportunities Fund            
Common Stocks                    
New Zealand  $   $   $1   $1 
Other*   638,590,932            638,590,932 
Preferred Stocks*  $   $   $1,923,136   $1,923,136 
Total  $638,590,932   $   $1,923,137   $640,514,069 

 

Semi-Annual Report | October 31, 2019 91

 

 

 

Grandeur Peak Funds® Notes to Financial Statements

October 31, 2019 (Unaudited)

 

Investments in Securities at Value  Level 1 - Quoted and Unadjusted Prices  Level 2 - Other Significant Observable Inputs  Level 3 - Significant Unobservable Inputs  Total
Grandeur Peak Global Reach Fund            
Common Stocks                    
New Zealand  $1,017,619   $   $   $1,017,619 
Spain                
Other*   298,729,786            298,729,786 
Preferred Stocks*  $   $   $912,077   $912,077 
Total  $299,747,405   $   $912,077   $300,659,482 

 

Investments in Securities at Value  Level 1 - Quoted and Unadjusted Prices  Level 2 - Other Significant Observable Inputs  Level 3 - Significant Unobservable Inputs  Total
Grandeur Peak Global Stalwarts Fund            
Common Stocks*  $181,452,343   $   $   $181,452,343 
Preferred Stocks*           482,814    482,814 
Total  $181,452,343   $   $482,814   $181,935,157 

 

Investments in Securities at Value  Level 1 - Quoted and Unadjusted Prices  Level 2 - Other Significant Observable Inputs  Level 3 - Significant Unobservable Inputs  Total
Grandeur Peak International Opportunities Fund                    
Common Stocks                    
New Zealand  $   $   $1   $1 
Other*   620,633,988            620,633,988 
Total  $620,633,988   $   $1   $620,633,989 

 

Investments in Securities at Value  Level 1 - Quoted and Unadjusted Prices  Level 2 - Other Significant Observable Inputs  Level 3 - Significant Unobservable Inputs  Total
Grandeur Peak International Stalwarts Fund                    
Common Stocks*  $673,389,159   $   $   $673,389,159 
Total  $673,389,159   $   $   $673,389,159 

 

*For a detailed country breakdown, see the accompanying Portfolio of Investments.

 

92 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

 

Grandeur Peak Funds® Notes to Financial Statements

October 31, 2019 (Unaudited)

 

The following is a reconciliation of the investments in which significant unobservable inputs (Level 3) were used in determining fair value:

 

Grandeur Peak Emerging Markets Opportunities  Common Stocks  Preferred Stocks  Total
Balance as of April 30, 2019  $   $   $ 
Accrued Discount/Premium            
Return of Capital            
Realized Gain/(Loss)            
Change in Unrealized Appreciation/(Depreciation)   7,014        7,014 
Purchases            
Sales Proceeds            
Transfer into Level 3            
Transfer out of Level 3            
Balance as of October 31, 2019  $7,014   $   $7,014 
Net change in unrealized Appreciation/(Depreciation) attributable to Level 3 investments held at October 31, 2019  $7,014   $-   $7,014 

 

Grandeur Peak Global Opportunities  Common Stocks  Preferred Stocks  Total
Balance as of April 30, 2019  $1   $1,923,136   $1,923,137 
Accrued Discount/Premium            
Return of Capital            
Realized Gain/(Loss)            
Change in Unrealized Appreciation/(Depreciation)            
Purchases            
Sales Proceeds            
Transfer into Level 3            
Transfer out of Level 3            
Balance as of October 31, 2019  $1   $1,923,136   $1,923,137 
Net change in unrealized Appreciation/(Depreciation) attributable to Level 3 investments held at October 31, 2019  $   $   $ 

 

Grandeur Peak Global Reach Fund  Common Stocks  Preferred Stocks  Total
Balance as of April 30, 2019  $1   $912,077   $912,078 
Accrued Discount/Premium            
Return of Capital            
Realized Gain/(Loss)            
Change in Unrealized Appreciation/(Depreciation)   1        1 
Purchases            
Sales Proceeds   (1)       (1)
Transfer into Level 3            
Transfer out of Level 3            
Balance as of October 31, 2019  $1   $912,077   $912,078 
Net change in unrealized Appreciation/(Depreciation) attributable to Level 3 investments held at October 31, 2019  $1   $   $1

 

Grandeur Peak Global Stalwarts Fund  Common Stocks  Preferred Stocks  Total
Balance as of April 30, 2019  $   $482,814   $482,814 
Accrued Discount/Premium            
Return of Capital            
Realized Gain/(Loss)            
Change in Unrealized Appreciation/(Depreciation)            
Purchases            
Sales Proceeds            
Transfer into Level 3            
Transfer out of Level 3            
Balance as of October 31, 2019  $   $482,814   $482,814 
Net change in unrealized Appreciation/(Depreciation) attributable to Level 3 investments held at October 31, 2019  $   $   $ 

 

Semi-Annual Report | October 31, 2019 93

 

 

 

Grandeur Peak Funds® Notes to Financial Statements

October 31, 2019 (Unaudited)

 

Grandeur Peak International Opportunities   Common Stocks   Preferred Stocks   Total
Balance as of April 30, 2019   $ 1     $ -     $ 1  
Accrued Discount/Premium                  
Return of Capital                  
Realized Gain/(Loss)                  
Change in Unrealized Appreciation/(Depreciation)                  
Purchases                  
Sales Proceeds                  
Transfer into Level 3                  
Transfer out of Level 3                  
Balance as of October 31, 2019   $ 1     $     $ 1  
Net change in unrealized Appreciation/(Depreciation) attributable to Level 3 investments held at October 31, 2019   $     $     $  

 

Change in unrealized appreciation/depreciation on Level 3 securities is included on the Statements of Operations under Net change in unrealized appreciation/(depreciation) on investments. Realized gain/(loss) on Level 3 securities is included on the Statements of Operations under Net realized gain/(loss) on investments.

 

The table below provides additional information about the Level 3 Fair Value Measurements as of October 31, 2019:

 

Quantitative Information about Level 3 Fair Value Measurements

 

Asset Class  Fair Value (USD) at 10/31/2019  Valuation Technique  Unobservable Inputs(a)  Value (USD)
Common Stock  $7,014   Recommended price  Cost  $0.10 

 

Grandeur Peak Global Opportunities Fund

 

Asset Class  Fair Value (USD) at 10/31/2019  Valuation Technique  Unobservable Inputs(a)  Value (USD)
Preferred Stock  $1,923,136   Purchase price  Cost  $19.90 

 

Grandeur Peak Global Reach Fund

 

Asset Class  Fair Value (USD) at 10/31/2019  Valuation Technique  Unobservable Inputs(a)  Value (USD)
Preferred Stock  $912,077   Purchase price  Cost  $19.90 

 

Grandeur Peak Global Stalwarts Fund

 

Asset Class  Fair Value (USD) at 10/31/2019  Valuation Technique  Unobservable Inputs(a)  Value (USD)
Preferred Stock  $482,814   Purchase price  Cost  $19.90 

 

(a)A change to the unobservable input may result in a significant change to the value of the investment as follows:

 

Unobservable Input Impact to Value if Input Increases Impact to Value if Input Decreases
Discount Decrease Increase

 

Investment Transactions and Investment Income: Investment transactions are accounted for on the date the investments are purchased or sold (trade date). Realized gains and losses from investment transactions are reported on an identified cost which is the same basis the Fund uses for federal income tax purposes. Interest income, which includes accretion of discounts and amortization of premiums, is accrued and recorded as earned. Dividend income is recognized on the ex-dividend date or for certain foreign securities, as soon as information is available to the Funds. All of the realized and unrealized gains and losses and net investment income, are allocated daily to each class in proportion to its average daily net assets.

 

94 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

 

Grandeur Peak Funds® Notes to Financial Statements

October 31, 2019 (Unaudited)

 

Cash Management Transactions: The Funds subscribe to the Brown Brothers Harriman & Co. (“BBH”) Cash Management Service (“CMS”), whereby cash balances are automatically swept into overnight offshore demand deposits with either the BBH Grand Cayman branch or a branch of a pre-approved commercial bank. This fully automated program allows the Funds to earn interest on cash balances. Excess cash with deposit institutions domiciled outside of the U.S. are subject to sovereign actions in the jurisdiction of the deposit institution including, but not limited to, freeze, seizure or diminution. Cash balances in the BBH CMS are included on the Statements of Assets and Liabilities under Cash and Foreign Cash, at Value. As of October 31, 2019, the Funds had the following cash balances participating in the BBH CMS:

 

Fund   
Grandeur Peak Emerging Markets Opportunities Fund  $29,396,615 
Grandeur Peak Global Contrarian Fund    
Grandeur Peak Global Micro Cap Fund   435,848 
Grandeur Peak Global Opportunities Fund   18,940,434 
Grandeur Peak Global Reach Fund   4,283,084 
Grandeur Peak Global Stalwarts Fund   6,353,279 
Grandeur Peak International Opportunities Fund   21,635,839 
Grandeur Peak International Stalwarts Fund   31,859,736 

 

As of October 31, 2019, the Funds had the following foreign cash balances participating in the BBH CMS (cost and value of foreign cash balances are equal):

 

Fund   
Grandeur Peak Emerging Markets Opportunities Fund  $ 
Grandeur Peak Global Contrarian Fund   9,600 
Grandeur Peak Global Micro Cap Fund    
Grandeur Peak Global Opportunities Fund   11,310 
Grandeur Peak Global Reach Fund   2,177 
Grandeur Peak Global Stalwarts Fund    
Grandeur Peak International Opportunities Fund   12,298 
Grandeur Peak International Stalwarts Fund    

 

Foreign Securities: The Funds may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible reevaluation of currencies, the inability to repatriate foreign currency, less complete financial information about companies and possible future adverse political and economic developments. Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. issuers.

 

Foreign Currency Translation: The books and records of the Funds are maintained in U.S. dollars. Investment valuations and other assets and liabilities initially expressed in foreign currencies are converted each business day into U.S. dollars based upon current exchange rates. Prevailing foreign exchange rates may generally be obtained at the close of the NYSE (normally, 4:00 p.m. Eastern Time). The portion of realized and unrealized gains or losses on investments due to fluctuations in foreign currency exchange rates is not separately disclosed and is included in realized and unrealized gains or losses on investments, when applicable.

 

Foreign Currency Spot Contracts: The Funds may enter into foreign currency spot contracts to facilitate transactions in foreign securities or to convert foreign currency receipts into U.S. dollars. A foreign currency spot contract is an agreement between two parties to buy and sell currencies at the current market rate, for settlement generally within two business days. The U.S. dollar value of the contracts is determined using current currency exchange rates supplied by a pricing service.

 

The contract is marked-to-market daily for settlements beyond one day and any change in market value is recorded as an unrealized gain or loss. When the contract is closed, a realized gain or loss is recorded equal to the difference between the value on the open and close date. Losses may arise from changes in the value of the foreign currency, or if the counterparties do not perform under the contract’s terms. The maximum potential loss from such contracts is the aggregate face value in U.S. dollars at the time the contract was opened.

 

Trust Expenses: Some expenses of the Trust can be directly attributed to the Funds. Expenses which cannot be directly attributed to the Funds are apportioned among all funds in the Trust based on average net assets of each fund.

 

Semi-Annual Report | October 31, 2019 95

 

 

 

Grandeur Peak Funds® Notes to Financial Statements

October 31, 2019 (Unaudited)

 

Fund and Class Expenses: Expenses that are specific to a Fund or class of shares of a Fund, including distribution fees (Rule 12b-1 fees), are charged directly to that Fund or share class. Expenses that are common to all Funds generally are allocated among the Funds in proportion to their average daily net assets.

 

Federal Income Taxes: The Funds comply with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies and intend to distribute substantially all of their net taxable income and net capital gains, if any, each year so that it will not be subject to excise tax on undistributed income and gains. The Funds are not subject to income taxes to the extent such distributions are made.

 

As of and during the six months ended October 31, 2019, the Funds had a liability for unrecognized capital gains tax. These amounts are disclosed as Foreign Capital Gains Tax on the Statements of Assets and Liabilities. The Funds file U.S. federal, state, and local tax returns as required. The Funds’ tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return for federal purposes and four years for most state returns. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.

 

Distributions to Shareholders: Each Fund normally pays dividends and distributes capital gains, if any, on an annual basis. Income dividend distributions are derived from dividends and other income each Fund receives from their investments, including short term capital gains. Long term capital gain distributions are derived from gains realized when each Fund sells a security it has owned for more than a year. Each Fund may make additional distributions and dividends at other times if the portfolio manager believes doing so may be necessary for each Fund to avoid or reduce taxes. The Funds intend to pass through foreign tax credits to shareholders.

 

3.TAX BASIS INFORMATION

 

Tax Basis of Investments: As of October 31, 2019, the aggregate cost of investments, gross unrealized appreciation/(depreciation) and net unrealized appreciation for Federal tax purposes was as follows:

 

Fund  Gross Appreciation (excess of value  over tax cost)  Gross Depreciation (excess of tax cost over value)  Net Unrealized Appreciation/(Depreciation)  Cost of Investments for Income Tax Purposes
Grandeur Peak Emerging Markets Opportunities Fund  $111,575,021   $(34,616,507)  $76,958,514   $352,495,853 
Grandeur Peak Global Contrarian Fund   163,598    (99,541)   64,057    4,606,295 
Grandeur Peak Global Micro Cap Fund   7,702,811    (2,698,354)   5,004,457    28,385,793 
Grandeur Peak Global Opportunities Fund   181,501,001    (36,175,705)   145,325,296    495,188,773 
Grandeur Peak Global Reach Fund   81,215,451    (19,385,900)   61,829,551    238,829,931 
Grandeur Peak Global Stalwarts Fund   40,684,214    (8,976,889)   31,707,325    150,227,832 
Grandeur Peak International Opportunities Fund   163,325,406    (42,227,975)   121,097,431    499,536,558 
Grandeur Peak International Stalwarts Fund   131,269,667    (37,800,444)   93,469,223    579,919,936 

 

Tax Basis of Distributions to Shareholders: The character of distributions made during the year from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or realized gain were recorded by the Funds.

 

96 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

 

Grandeur Peak Funds® Notes to Financial Statements

October 31, 2019 (Unaudited)

 

The tax character of distributions paid by the Funds for the fiscal year ended April 30, 2019 were as follows:

 

Fund  Ordinary Income  Long-Term Capital Gain
Grandeur Peak Emerging Markets Opportunities Fund  $1,399,313   $3,456,127 
Grandeur Peak Global Contrarian Fund        
Grandeur Peak Global Micro Cap Fund   10,964    2,207,059 
Grandeur Peak Global Opportunities Fund   4,541,112    56,054,176 
Grandeur Peak Global Reach Fund   2,440,188    27,120,108 
Grandeur Peak Global Stalwarts Fund   150,604    5,087,232 
Grandeur Peak International Opportunities Fund   6,846,633    62,253,180 
Grandeur Peak International Stalwarts Fund   2,587,918    10,997,639 

 

The amounts and characteristics of tax basis distributions and composition of distributable earnings/(accumulated losses) are finalized at fiscal year-end. Accordingly, tax basis balances have not been determined as of October 31, 2019.

 

4. SECURITIES TRANSACTIONS

 

 

The cost of purchases and proceeds from sales of securities (excluding short term securities) during the six months ended October 31, 2019 were as follows:

 

Fund  Purchases of Securities  Proceeds From Sales of Securities
Grandeur Peak Emerging Markets Opportunities Fund  $35,514,610   $53,898,847 
Grandeur Peak Global Contrarian Fund   4,875,600    281,998 
Grandeur Peak Global Micro Cap Fund   4,964,816    7,897,871 
Grandeur Peak Global Opportunities Fund   122,324,301    128,361,722 
Grandeur Peak Global Reach Fund   51,488,706    82,710,696 
Grandeur Peak Global Stalwarts Fund   37,815,409    50,010,494 
Grandeur Peak International Opportunities Fund   89,748,174    123,892,480 
Grandeur Peak International Stalwarts Fund   173,177,860    110,066,599 

 

5. SHARES OF BENEFICIAL INTEREST

 

 

The capitalization of the Trust consists of an unlimited number of shares of beneficial interest with no par value per share. Holders of the shares of the Funds of the Trust have one vote for each share held and a proportionate fraction of a vote for each fractional share. All shares issued and outstanding are fully paid and are transferable and redeemable at the option of the shareholder. Purchasers of the share do not have any obligation to make payments to the Trust or its creditors solely by reason of the purchasers’ ownership of the shares. Shares have no pre-emptive rights.

 

Shares redeemed within 60 days of purchase may incur a 2% short-term redemption fee deducted from the redemption amount. For the six months ended October 31, 2019 and the year ended April 30, 2019, the redemption fees charged by the Funds are presented in the Statements of Changes in Net Assets.

 

Semi-Annual Report | October 31, 2019 97

 

 

 

Grandeur Peak Funds® Notes to Financial Statements

October 31, 2019 (Unaudited)

 

6. MANAGEMENT AND RELATED-PARTY TRANSACTIONS

 

 

The Adviser, subject to the authority of the Board, is responsible for the overall management and administration of the Funds’ business affairs. The Adviser manages the investments of the Funds in accordance with the Funds’ investment objective, policies and limitations and investment guidelines established jointly by the Adviser and the Trustees. Pursuant to the Advisory Agreement, (the “Advisory Agreement”), each Fund pays the Adviser an annual management fee based on each Fund’s average daily net assets. The management fee is paid on a monthly basis. The following table reflects the Funds’ advisory fee rates.

 

Fund Advisory Fee
Grandeur Peak Emerging Markets Opportunities Fund 1.35%
Grandeur Peak Global Contrarian Fund 1.00%
Grandeur Peak Global Opportunities Fund 1.25%
Grandeur Peak Global Reach Fund 1.10%
Grandeur Peak Global Stalwarts Fund 0.80%
Grandeur Peak International Opportunities Fund 1.25%
Grandeur Peak International Stalwarts Fund 0.80%

 

The Adviser has contractually agreed to limit certain of each Fund’s expenses (excluding acquired fund fees and expenses, brokerage expenses, interest expenses, taxes and extraordinary expenses). The following table reflects the Funds’ expense cap.

 

Fund Expense Cap Term of Expense Limit Agreements
Grandeur Peak Emerging Markets Opportunities Fund    
Investor Class  1.95% September 1, 2019 – August 31, 2020 /
Institutional Class 1.70% September 1, 2018 – August 31, 2019
     
Grandeur Peak Global Contrarian Fund    
Institutional Class 1.35% September 12, 2019 – August 31, 2021
     
Grandeur Peak Global Micro Cap Fund    
Institutional Class 2.00% September 1, 2019 – August 31, 2020 /
    September 1, 2018 – August 31, 2019
Grandeur Peak Global Opportunities Fund    
Investor Class 1.75% September 1, 2019 – August 31, 2020 /
Institutional Class 1.50% September 1, 2018 – August 31, 2019
     
Grandeur Peak Global Reach Fund    
Investor Class 1.60% September 1, 2019 – August 31, 2020 /
Institutional Class 1.35% September 1, 2018 – August 31, 2019
     
Grandeur Peak Global Stalwarts Fund    
Investor Class 1.35% September 1, 2019 – August 31, 2020 /
Institutional Class 1.10% September 1, 2018 – August 31, 2019
     
Grandeur Peak International Opportunities Fund    
Investor Class 1.75% September 1, 2019 – August 31, 2020 /
Institutional Class 1.50% September 1, 2018 – August 31, 2019
     
Grandeur Peak International Stalwarts Fund    
Investor Class 1.35% September 1, 2019 – August 31, 2020 /
Institutional Class 1.10% September 1, 2018 – August 31, 2019

 

98 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

 

Grandeur Peak Funds® Notes to Financial Statements

October 31, 2019 (Unaudited)

 

Pursuant to these agreements, each Fund will reimburse the Adviser for any previous fee waivers and expense reimbursements made by the Adviser, provided that any such reimbursements made by the Funds to the Adviser will not cause the Funds’ expense limitation to exceed expense limitations in existence at the time the expense was incurred, or at the time of the reimbursement, whichever is lower, and the reimbursement is made within three years after the expenses were incurred. Fees waived/reimbursed by the Adviser for the six months ended October 31, 2019 are disclosed in the Statements of Operations.

 

In addition to the foregoing contractual arrangements, the Adviser has voluntarily agreed, effective September 1, 2016, to waive, with respect to the Grandeur Peak Global Opportunities Fund and the Grandeur Peak International Opportunities Fund, annual management fees to the extent such fees exceed 1.10% on assets above $500 million (the annual management fee rate with respect to such funds will remain 1.25% on the first $500 million in assets). The Adviser has also voluntarily agreed, effective January 1, 2018, to waive, with respect to the Grandeur Peak Emerging Markets Opportunities Fund, annual management fees to the extent such fees exceed 1.20% on all assets above $400 million (the annual management fee rate with respect to the Fund will remain 1.35% on the first $400 million in assets). These voluntary arrangements may be terminated at any time by the Adviser. Voluntary waivers are not subject to recoupment by the Adviser. Voluntary fees waived by the Adviser for the six months ended October 31, 2019 are disclosed in the Statements of Operations.

 

For the six months ended October 31, 2019, the fee waivers/reimbursements and/or recoupments were as follows:

 

Fund  Fees Waived/Reimbursed By Adviser  Recoupment of Previously Waived Fees By Adviser
Grandeur Peak Emerging Markets Opportunities Fund      
Investor Class  $   $ 
Institutional Class        
Grandeur Peak Global Contrarian Fund          
Institutional Class  $31,116   $ 
Grandeur Peak Global Micro Cap Fund          
Institutional Class  $14,605   $ 
Grandeur Peak Global Opportunities Fund          
Investor Class  $   $ 
Institutional Class        
Grandeur Peak Global Reach Fund          
Investor Class  $   $ 
Institutional Class        
Grandeur Peak Global Stalwarts Fund          
Investor Class  $   $ 
Institutional Class        
Grandeur Peak International Opportunities Fund          
Investor Class  $   $ 
Institutional Class        
Grandeur Peak International Stalwarts Fund          
Investor Class  $   $ 
Institutional Class        

 

Semi-Annual Report | October 31, 2019 99

 

 

 

Grandeur Peak Funds® Notes to Financial Statements

October 31, 2019 (Unaudited)

 

As of October 31, 2019, the balances of recoupable expenses for each Fund were as follows:

 

Fund  Expires 2020  Expires 2021  Expires 2022  Expires 2023  Total
Grandeur Peak Emerging Markets Opportunities Fund            
Investor Class  $   $   $   $   $ 
Institutional Class                    
Grandeur Peak Global Contrarian Fund                         
Institutional Class  $   $   $   $31,116   $31,116 
Grandeur Peak Global Micro Cap Fund                         
Institutional Class  $55,827   $27,510   $25,568   $14,605   $123,510 
Grandeur Peak Global Opportunities Fund                         
Investor Class  $   $   $   $   $ 
Institutional Class                    
Grandeur Peak Global Reach Fund                         
Investor Class  $   $   $   $   $ 
Institutional Class                    
Grandeur Peak Global Stalwarts Fund                         
Investor Class  $   $   $   $   $ 
Institutional Class                    
Grandeur Peak International Opportunities Fund                         
Investor Class  $   $   $   $   $ 
Institutional Class                    
Grandeur Peak International Stalwarts Fund                         
Investor Class  $   $   $   $   $ 
Institutional Class                    

 

Administrator Fees and Expenses: ALPS Fund Services, Inc. (“ALPS”) serves as administrator to the Funds and the Funds have agreed to pay expenses incurred in connection with their administrative activities. Pursuant to an Administration Agreement, ALPS provides operational services to the Funds including, but not limited to, fund accounting and fund administration and generally assists in the Funds’ operations. Officers of the Trust are employees of ALPS. The Funds’ administration fee is accrued on a daily basis and paid monthly. Administration fees paid by the Funds for the six months ended October 31, 2019 are disclosed in the Statements of Operations.

 

ALPS is reimbursed by the Funds for certain out-of-pocket expenses.

 

Transfer Agent: ALPS serves as transfer, dividend paying and shareholder servicing agent for the Funds. ALPS receives an annual minimum fee, a fee based upon the number of shareholder accounts, and is also reimbursed by the Funds for certain out-of-pocket expenses. Transfer agent fees paid by the Funds for the six months ended October 31, 2019 are disclosed in the Statements of Operations.

 

Compliance Services: ALPS provides services that assist the Trust’s chief compliance officer in monitoring and testing the policies and procedures of the Trust in conjunction with requirements under Rule 38a-1 under the 1940 Act and receives an annual base fee. ALPS is reimbursed for certain out-of-pocket expenses by the Funds. Compliance service fees paid by the Funds for the six months ended October 31, 2019 are disclosed in the Statements of Operations.

 

Principal Financial Officer: ALPS receives an annual fee for providing principal financial officer services to the Funds. Principal financial officer fees paid by the Fund for the six months ended October 31, 2019 are disclosed in the Statements of Operations.

 

Trustees: The fees and expenses of the independent Trustees of the Board are presented in the Statements of Operations.

 

Distributor: ALPS Distributors, Inc. (“ADI” or the “Distributor”) (an affiliate of ALPS) acts as the distributor of the Funds’ shares pursuant to a Distribution Agreement with the Trust. Shares are sold on a continuous basis by ADI as agent for the Funds, and ADI has agreed to use its best efforts to solicit orders for the sale of Funds’ shares, although it is not obliged to sell any particular amount of shares. ADI is not entitled to any compensation for its services as Distributor. ADI is registered as a broker-dealer with the U.S. Securities and Exchange Commission.

 

100 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

 

Grandeur Peak Funds® Notes to Financial Statements

October 31, 2019 (Unaudited)

 

Each Fund has adopted a Distribution and Services (Rule 12b-1) Plan pursuant to Rule 12b-1 of the 1940 Act (the “Plan”) for its Investor Class shares. The Plan allows the Funds to use Investor Class assets to pay fees in connection with the distribution and marketing of Investor Class shares and/or the provision of shareholder services to Investor Class shareholders. The Plan permits payment for services in connection with the administration of plans or programs that use Investor Class shares of each Fund as their funding medium and for related expenses. The recipients of such payments may include the Distributor, other affiliates of the Adviser, broker-dealers, financial institutions, plan sponsors and administrators and other financial intermediaries through which investors may purchase shares of the Fund. The Plan permits the Funds to make total payments at an annual rate of up to 0.25% of each Fund’s average daily net assets attributable to its Investor Class shares. The expenses of the Plan are reflected as distribution and service fees in the Statements of Operations.

 

7. INDEMNIFICATIONS

 

 

Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that may contain general indemnification clauses, which may permit indemnification to the extent permissible under applicable law. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred.

 

8. SUBSEQUENT EVENT

 

 

Subsequent events after the date of the Statements of Assets and Liabilities have been evaluated through the date the financial statements were issued.

 

Semi-Annual Report | October 31, 2019 101

 

 

 

Grandeur Peak Funds® Disclosure Regarding Approval of
Fund Advisory Agreement

 

On September 10, 2019, the Trustees met in person to discuss, among other things, the approval of the Investment Advisory Agreement between the Financial Investors Trust (the “Trust”), with respect to the Grandeur Peak Emerging Markets Opportunities Fund, the Grandeur Peak Global Micro Cap Fund, the Grandeur Peak Global Opportunities Fund, the Grandeur Peak Global Reach Fund, the Grandeur Peak Global Stalwarts Fund, the Grandeur Peak International Opportunities Fund, and the Grandeur Peak International Stalwarts Fund (collectively, the “Grandeur Peak Funds”) and Grandeur Peak Global Advisors, LLC (“Grandeur Peak”), in accordance with Section 15(c) of the 1940 Act. In renewing and approving the Investment Advisory Agreement with Grandeur Peak, on behalf of the Grandeur Peak Funds, the Trustees, including the Trustees, considered the following factors with respect to the Grandeur Peak Funds:

 

Investment Advisory Fee Rate: The Trustees reviewed and considered the contractual annual advisory fees paid by the Trust, on behalf of the Grandeur Peak Funds, to Grandeur Peak, of 1.25% of the Grandeur Peak Global Opportunities Fund’s and Grandeur Peak International Opportunities Fund’s daily net assets, 1.10% of the Grandeur Peak Global Reach Fund’s daily net assets, 1.35% of the Grandeur Peak Emerging Markets Opportunities Fund’s daily net assets, 0.80% of the Grandeur Peak Global Stalwarts Fund’s and Grandeur Peak International Stalwarts Fund’s daily net assets, and 1.50% of the Grandeur Peak Global Micro Cap Fund’s daily net assets, in light of the extent and quality of the advisory services provided by Grandeur Peak to each of the Grandeur Peak Funds.

 

The Board received and considered information including a comparison of the Investor Class and Institutional Class, as applicable, of each Grandeur Peak Fund’s contractual advisory fee rate with those of funds in the peer group and universe of funds provided by an independent provider of investment company data (the “Data Provider”). The Trustees noted that the contractual advisory fee rate of the Investor Class and Institutional Class, as applicable, of each of the Grandeur Peak Funds was above the Data Provider peer group and universe medians, except for the Grandeur Peak Global Stalwarts Fund and the Grandeur Peak International Stalwarts Fund.

 

Total Net Expense Ratios: The Trustees further reviewed and considered that the total net expense ratio of the Investor Class and Institutional Class, as applicable, of each of the Grandeur Peak Funds was above the Data Provider peer group and universe medians, except for the Grandeur Peak Global Stalwarts Fund and the Grandeur Peak International Stalwarts Fund.

 

Nature, Extent, and Quality of the Services under the Investment Advisory Agreement: The Trustees received and considered information regarding the nature, extent, and quality of services provided to the Grandeur Peak Funds under the Investment Advisory Agreement. The Trustees reviewed certain background materials supplied by Grandeur Peak in its presentation, including its Form ADV.

 

The Trustees reviewed and considered Grandeur Peak’s investment advisory personnel, its history as an asset manager, and its performance and the amount of assets currently under management by Grandeur Peak and its affiliated entities. The Trustees also reviewed the research and decision-making processes utilized by Grandeur Peak, including the methods adopted to seek to achieve compliance with the investment objectives, policies, and restrictions of the Grandeur Peak Funds.

 

The Trustees considered the background and experience of Grandeur Peak’s management in connection with the Grandeur Peak Funds, including reviewing the qualifications, backgrounds, and responsibilities of the management team primarily responsible for the day-to-day portfolio management of each Grandeur Peak Fund and the extent of the resources devoted to research and analysis of actual and potential investments. The Trustees also reviewed, among other things, Grandeur Peak’s insider trading policies and procedures and its Code of Ethics.

 

Performance: The Trustees reviewed performance information of the Investor Class and Institutional Class, as applicable, of each of the Grandeur Peak Funds for the 3-month, 1-year, 3-year, and 5-year periods, as applicable, ended June 30, 2019. That review included a comparison of each Grandeur Peak Fund’s performance to the performance of a group of comparable funds selected by the Data Provider. The Trustees noted that the performance of both classes of each of the Grandeur Peak Emerging Markets Opportunities Fund and the Grandeur Peak International Opportunities Fund was generally above the Data Provider universe median for the 3-month and 5-year periods and below the Data Provider universe median for the 1-year and 3-year periods, the performance of the Institutional Class of the Grandeur Peak Global Micro Cap Fund was at or above the Data Provider universe median for the 3-month and 3-year periods and below the Data Provider universe median for the 1-year period, the performance of both classes of each of the Grandeur Peak Global Opportunities Fund and the Grandeur Peak Global Reach Fund was at or above the Data Provider universe median for the 3-month, 3-year, and 5-year periods and below the Data Provider universe median for the 1-year period, the performance of both classes of the Grandeur Peak Global Stalwarts Fund was below the Data Provider universe median for the 3-month and 1-year periods and at or above the Data Provider universe median for the 3-year period, and the performance of both classes of the Grandeur Peak International Stalwarts Fund was above the Data Provider universe median for the 3-month, 1-year, and 3-year periods. The Trustees also considered Grandeur Peak’s discussion of its reputation generally and its investment techniques, risk management controls, and decision-making processes.

 

Comparable Accounts: The Trustees noted certain information provided by Grandeur Peak regarding fees charged to its other clients utilizing a strategy similar to that employed by the Grandeur Peak Funds.

 

102 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

 

Grandeur Peak Funds® Disclosure Regarding Approval of
Fund Advisory Agreement

 

Profitability: The Trustees received and considered a retrospective and projected profitability analysis prepared by Grandeur Peak based on the fees payable under the Investment Advisory Agreement with respect to the Grandeur Peak Funds. The Trustees considered the profits, if any, anticipated to be realized by Grandeur Peak in connection with the operation of the Grandeur Peak Funds. The Board then reviewed Grandeur Peak’s income statement and balance sheet for the years ended December 31, 2011 through December 31, 2018 in order to analyze the financial condition, stability, and profitability of Grandeur Peak.

 

Economies of Scale: The Trustees considered whether economies of scale in the provision of services to the Grandeur Peak Funds will be passed along to the shareholders under the proposed agreements.

 

Other Benefits to the Adviser: The Trustees reviewed and considered any other incidental benefits derived or to be derived by Grandeur Peak from its relationship with the Grandeur Peak Funds, including whether soft dollar arrangements were used.

 

In renewing Grandeur Peak as the Grandeur Peak Funds’ investment adviser and renewing the Investment Advisory Agreement and the fees charged under the Investment Advisory Agreement, the Trustees concluded that no single factor reviewed by the Trustees was identified by the Trustees to be determinative as the principal factor in whether to renew the Investment Advisory Agreement. Further, the Independent Trustees were advised by separate independent legal counsel throughout the process. The Trustees, including all of the Independent Trustees, concluded that:

 

the contractual advisory fee rate of the Investor Class and Institutional Class, as applicable, of each of the Grandeur Peak Funds was above, but within an acceptable range of, the respective Data Provider peer group and universe medians, except for the Grandeur Peak Global Stalwarts Fund and the Grandeur Peak International Stalwarts Fund, whose contractual advisory fee rates were below their peer group and universe medians;

the total net expense ratio of the Investor Class and Institutional Class, as applicable, of each of the Grandeur Peak Funds was above, but within an acceptable range of, the respective Data Provider peer group and universe medians, except for the Grandeur Peak Global Stalwarts Fund and the Grandeur Peak International Stalwarts Fund, whose total net expense ratios were below their peer group and universe medians;

the nature, extent and quality of services rendered by Grandeur Peak under the Investment Advisory Agreement with respect to each Grandeur Peak Fund were adequate;

for the period ended June 30, 2019, the performance of both classes of each of the Grandeur Peak Emerging Markets Opportunities Fund and the Grandeur Peak International Opportunities Fund was generally above the Data Provider universe median for the 3-month and 5-year periods and below the Data Provider universe median for the 1-year and 3-year periods, the performance of the Institutional Class of the Grandeur Peak Global Micro Cap Fund was at or above the Data Provider universe median for the 3-month and 3-year periods and below the Data Provider universe median for the 1-year period, the performance of both classes of each of the Grandeur Peak Global Opportunities Fund and the Grandeur Peak Global Reach Fund was at or above the Data Provider universe median for the 3-month, 3-year, and 5-year periods and below the Data Provider universe median for the 1-year period, the performance of both classes of the Grandeur Peak Global Stalwarts Fund was below the Data Provider universe median for the 3-month and 1-year periods and at or above the Data Provider universe median for the 3-year period, and the performance of both classes of the Grandeur Peak International Stalwarts Fund was above the Data Provider universe median for the 3-month, 1-year, and 3-year periods;

bearing in mind the limitations of comparing different types of managed accounts and the different levels of service typically associated with such accounts, the fee structures applicable to Grandeur Peak’s other clients employing a comparable strategy to any of the Grandeur Peak Funds were not indicative of any unreasonableness with respect to the advisory fee payable by the Grandeur Peak Funds;

the profit, if any, realized by Grandeur Peak in connection with the operation of any of the Grandeur Peak Funds is not unreasonable; and

there were no material economies of scale or other incidental benefits accruing to Grandeur Peak in connection with its relationship with any of the Grandeur Peak Funds.

 

Based on the Trustees’ deliberations and their evaluation of the information described above, the Trustees, including all of the Independent Trustees, concluded that Grandeur Peak’s compensation for investment advisory services is consistent with the best interests of each of the Grandeur Peak Funds and their shareholders.

 

Semi-Annual Report | October 31, 2019 103

 

 

 

Grandeur Peak Funds® Disclosure Regarding Approval of
Fund Advisory Agreement

 

New Grandeur Peak Fund 

On September 10, 2019, the Trustees met in person to discuss, among other things, the approval of the Investment Advisory Agreement between the Financial Investors Trust (the “Trust”), with respect to the Grandeur Peak Global Contrarian Fund (the “New Grandeur Peak Fund”) and Grandeur Peak Global Advisors, LLC (“Grandeur Peak”), in accordance with Section 15(c) of the 1940 Act. In approving the Investment Advisory Agreement with Grandeur Peak, on behalf of the New Grandeur Peak Fund, the Trustees, including the Independent Trustees, considered the following factors with respect to the Fund:

 

Investment Advisory Fee Rate: The Trustees reviewed and considered the contractual annual advisory fee to be paid by the Trust, on behalf of the New Grandeur Peak Fund, of 1.00% of such Fund’s daily average net assets, to Grandeur Peak, in light of the extent and quality of the advisory services provided by Grandeur Peak to the New Grandeur Peak Fund.

 

The Board received and considered information including a comparison of the New Grandeur Peak Fund’s contractual advisory fees with those of funds in the peer group and universe of funds provided by an independent provider of investment company data (the “Data Provider”). The Trustees noted that the contractual advisory fee rate for Institutional Class shares of the New Grandeur Peak Fund was above its Data Provider peer group and universe medians.

 

Total Net Expense Ratios: The Trustees further reviewed and considered the total net expense ratio of 1.35% for the Institutional Class shares of the New Grandeur Peak Fund. The Trustees noted that the total net expense ratio of Institutional Class shares of the New Grandeur Peak Fund was above its Data Provider peer group and universe medians.

 

Nature, Extent, and Quality of the Services under the Investment Advisory Agreement: The Trustees received and considered information regarding the nature, extent, and quality of services to be provided to the New Grandeur Peak Fund under the Investment Advisory Agreement. The Trustees reviewed certain background materials supplied by Grandeur Peak in its presentation, including its Form ADV.

 

The Trustees reviewed and considered Grandeur Peak’s investment advisory personnel, history as an asset manager, performance, and the amount of assets currently under management. The Trustees also reviewed the research and decision-making processes utilized by Grandeur Peak, including the methods adopted to seek to achieve compliance with the investment objective, policies, and restrictions of the New Grandeur Peak Fund.

 

The Trustees considered the background and experience of Grandeur Peak’s management in connection with the New Grandeur Peak Fund, including reviewing the qualifications, backgrounds, and responsibilities of the management team primarily responsible for the day-to-day portfolio management of the Fund and the extent of the resources devoted to research and analysis of actual and potential investments.

 

The Trustees also reviewed, among other things, Grandeur Peak’s insider trading policy and procedures and Code of Ethics.

 

Performance: The Trustees noted that since the New Grandeur Peak Fund has not yet begun operations, there is no performance to be reviewed or analyzed at this time. The Trustees further considered the reputation of Grandeur Peak’s personnel generally and its investment techniques, risk management controls, and decision-making processes.

 

Comparable Accounts: The Trustees noted that Grandeur Peak has no other comparable clients to the New Grandeur Peak Fund.

 

Profitability: The Trustees received and considered a projected profitability analysis prepared by Grandeur Peak based on the fees to be paid under the Investment Advisory Agreement with respect to the New Grandeur Peak Fund. The Trustees considered the profits, if any, anticipated to be realized by Grandeur Peak in connection with the operation of the New Grandeur Peak Fund. The Board then reviewed Grandeur Peak’s income statement and balance sheet for the years ended December 31, 2011 through December 31, 2018 in order to analyze the financial condition, stability, and profitability of Grandeur Peak.

 

Economies of Scale: The Trustees considered whether economies of scale in the provision of services to the New Grandeur Peak Fund will be passed along to the shareholders under the agreement.

 

Other Benefits to the Adviser: The Trustees reviewed and considered any other incidental benefits to be derived by Grandeur Peak from its relationship with the New Grandeur Peak Fund, including whether soft dollar arrangements would be used.

 

In approving Grandeur Peak as the New Grandeur Peak Fund’s investment adviser and the fees to be charged under the Investment Advisory Agreement, the Trustees concluded that no single factor reviewed by the Trustees was identified by the Trustees to be determinative as the

 

104 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

 

Grandeur Peak Funds® Disclosure Regarding Approval of
Fund Advisory Agreement

 

principal factor in whether to approve the Agreement. Further, the Independent Trustees were advised by separate independent legal counsel throughout the process. The Trustees, including all of the Independent Trustees, concluded that:

 

the contractual advisory fee rate for Institutional Class shares of the New Grandeur Peak Fund was above its Data Provider peer group and universe medians;

the total net expense ratio of Institutional Class shares of the New Grandeur Peak Fund was above its Data Provider peer group and universe medians;

the nature, extent and quality of services to be rendered by Grandeur Peak under the Investment Advisory Agreement with respect to the New Grandeur Peak Fund were adequate;

since the New Grandeur Peak Fund had not yet begun operations, there was no performance to be reviewed or analyzed at this time;

there were no directly comparable accounts managed by Grandeur Peak for the Board to consider;

the profit, if any, anticipated to be realized by Grandeur Peak in connection with the operation of the New Grandeur Peak Fund is not unreasonable; and

there were no material economies of scale or other incidental benefits accruing to Grandeur Peak in connection with its relationship with the New Grandeur Peak Fund.

 

Based on the Trustees’ deliberations and their evaluation of the information described above, the Trustees, including all of the Independent Trustees, concluded that Grandeur Peak’s compensation for investment advisory services is consistent with the best interests of the New Grandeur Peak Fund and its shareholders.

 

Semi-Annual Report | October 31, 2019 105

 

 

 

Grandeur Peak Funds® Additional Information

October 31, 2019 (Unaudited)

 

1. FUND HOLDINGS

 

 

The Funds’ portfolio holdings are made available semi-annually in shareholder reports within 60 days after the close of the period for which the report is being made, as required by federal securities laws. The Funds also file monthly portfolio holdings on Form N-PORT on a quarterly basis, with the schedule of portfolio holdings filed on Form N-PORT for the third month of each Fund’s fiscal quarter made publicly available 60 days after the end of the Funds’ fiscal quarter.

 

2. FUND PROXY VOTING POLICIES, PROCEDURES AND SUMMARIES

 

 

The Funds’ policies and procedures used in determining how to vote proxies and information regarding how the Funds voted proxies relating to portfolio securities during the most recent prior 12-month period ending June 30 are available without charge, (1) upon request, by calling (toll-free) 855-377-PEAK(7325) and (2) on the SEC’s website at http://www.sec.gov.

 

106 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

 

Grandeur Peak Funds® Privacy Policy

October 31, 2019 (Unaudited)

 

Who We Are  
Who is providing this notice? Grandeur Peak Global Opportunities Fund, Grandeur Peak International Opportunities Fund, Grandeur Peak Global Reach Fund, Grandeur Peak Emerging Markets Opportunities Fund, Grandeur Peak Global Micro Cap Fund, Grandeur Peak Global Stalwarts Fund, and Grandeur Peak International Stalwarts Fund.
What We Do  
How do the Funds protect my personal information? To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings.
How do the Funds collect my personal information?

We collect your personal information, for example, when you

 

     open an account

     provide account information or give us your contact information

     make a wire transfer or deposit money

Why can't I limit all sharing?

Federal law gives you the right to limit only

 

     sharing for affiliates’ everyday business purposes-information about your creditworthiness

     affiliates from using your information to market to you

     sharing for non-affiliates to market to you

 

State laws and individual companies may give you additional rights to limit sharing.

Definitions  
Affiliates Companies related by common ownership or control. They can be financial and nonfinancial companies.
Non-affiliates

Companies not related by common ownership or control. They can be financial and nonfinancial companies.

 

     The Funds does not share with non-affiliates so they can market to you.

Joint marketing

A formal agreement between non-affiliated financial companies that together market financial products or services to you.

 

     The Funds does not jointly market.

Other Important Information  
California Residents If your account has a California home address, your personal information will not be disclosed to nonaffiliated third parties except as permitted by applicable California law, and we will limit sharing such personal information with our affiliates to comply with California privacy laws that apply to us.
Vermont Residents The State of Vermont requires financial institutions to obtain your consent prior to sharing personal information that they collect about you with affiliated companies and nonaffiliated third parties other than in certain limited circumstances. Except as permitted by law, we will not share personal information we collect about you with nonaffiliated third parties or other affiliated companies unless you provide us with your written consent to share such information.

 

Semi-Annual Report | October 31, 2019 107

 

 

 

Grandeur Peak Funds® Privacy Policy

October 31, 2019 (Unaudited)

 

FACTS WHAT DO THE FUNDS DO WITH YOUR PERSONAL INFORMATION?
Why? Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.
What?

The types of personal information we collect and share depend on the product or service you have with us. This information can include:

 

     Social Security number and account transactions

     Account balances and transaction history

     Wire transfer instructions

How? All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons the Funds choose to share; and whether you can limit this sharing.

 

Reasons we can share your personal information Do the Funds share: Can you limit this sharing?
For our everyday business purposes — such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus Yes No
For our marketing purposes — to offer our products and services to you No We do not share.
For joint marketing with other financial companies No We do not share.
For our affiliates’ everyday business purposes — information about your transactions and experiences Yes No
For our affiliates’ everyday business purposes — information about your creditworthiness No We do not share.
For nonaffiliates to market to you No We do not share.

 

108 1.855.377.7325 | www.GrandeurPeakGlobal.com

 

 

 

 

 

 

 

SEMI-ANNUAL October 31, 2019

 

Highland Resolute Fund

 

Class I RMRGX

 

 

 

Highland Resolute Fund Table of Contents

 

  PAGE
Shareholder Letter 2
Performance Update 7
Consolidated Disclosure of Fund Expenses 9
Consolidated Schedule of Investments 10
Consolidated Statement of Assets and Liabilities 23
Consolidated Statement of Operations 24
Consolidated Statements of Changes in Net Assets 25
Consolidated Financial Highlights 26
Notes to Consolidated Financial Statements 27
Disclosure Regarding Approval of Fund Advisory Agreements 37
Additional Information 39
Shareholder Proxy Voting 40
Privacy Policy 41

 

1

 

 

Highland Resolute Fund Shareholder Letter

 

  October 31, 2019 (Unaudited)

 

PERFORMANCE:

 

October 31, 2019

 

The Highland Resolute Fund (the “Fund”) underperformed the HFRX Global Hedge Index(1) by about 81 basis points(2) YTD ending October 31, 2019. The Fund historically has strong up market capture with down market capture in line with the index. Since inception, the Fund has outperformed the HFRX Global Index by roughly 148 basis points annualized. This is due primarily to a higher level of net equity exposure than the benchmark to be able to keep up with strong equity markets.

 

When compared to the peer group (Morningstar Multi-Alternative Universe)(3), the Fund has underperformed the Universe over the last fiscal year but has outperformed the Universe materially over longer time horizons – by about 156 basis points annualized since inception. As with the HFRX Global Index, the Universe is very diverse and contains a number of market-neutral and other low net equity strategies that cause the average net equity exposure for the Universe to be considerably less than our Fund. So, we anticipate outperforming the Universe in up markets and underperforming in down markets - recent performance has been consistent with our expectations.

 

Long/Short Equity – Long/Short equity underperformed the HFRX Equity Hedge Index(4) for 2019. The best performer was a U.S. focused generalist, which was the worst performer in 2019. Our European manager also has contributed significantly year-to-date.

 

Macro – The sole Macro manager has underperformed the HFRX Macro Index(5) over the last 6 months. This sector is a small allocation and is held as a risk-off return contributor.

 

Credit/Global Tactical Asset Allocation – Our credit strategies outperformed the overall HFRX Fixed Income – Credit Index(6) year-to-date.

 

Relative Value – The Relative Value sleeve outperformed the HFRX Relative Value Arbitrage Index(7) year-to-date. The sole strategy is a multi- strategy manager that benefited to a position in risk parity.

 

Event Driven – The Event Driven sleeve underperformed the HFRX Event Driven Index(8) over the year-to-date time frame. A merger arbitrage focused manager has been the best performer in the sleeve with a few large mergers being responsible for most of the gains. A quantitative strategy struggled in many of its equity-oriented strategies and offset some of the outperformance in the sleeve.

 

Past performance is no guarantee of future results.

 

2

 

 

 

Highland Resolute Fund Shareholder Letter

 

  October 31, 2019 (Unaudited)

 

HIGHLAND RESOLUTE FUND

 

Table 1 notes the performance for the Fund as of quarter end under standard reporting (since inception) as well as of October 31st.

 

Table 1 (1)(3)(9)(10)(11)

 

Performance (amounts greater than one year are annualized)

 

  Standardized Performance Data Non-Standardized Performance Data
  as of September 30, 2019 as of October 31, 2019
          Since Inception         Since Inception
  YTD 1-Year 3-Year 5-Year (12/30/11) YTD 1-Year 3-Year 5-Year (12/30/11)
Highland Resolute Fund – II Class 5.41% -1.25% 2.26% 2.02% 3.20% 5.41% 2.95% 2.45% 1.94% 3.16%
Morningstar Multi-Alternative Universe 5.80% 0.90% 2.00% 1.00% 1.60% 6.00% 3.90% 2.40% 1.00% 1.60%
HFRX Global Hedge Fund Index 5.90% 0.01% 1.93% 0.32% 1.66% 6.22% 3.53% 2.23% 0.65% 1.68%
S&P 500® Index 20.55% 4.30% 13.40% 10.80% 14.12% 23.16% 14.33% 14.91% 10.78% 14.26%

 

  Gross Expense
Ratio
Less Expense
Waivers
Net Expense
Ratio
Net Ratio ex Dividend & Short Expense
Highland Resolute Fund 2.38% -0.95% 1.43% 1.24%

 

Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please call 1-855-268-2242.

 

The Fund has a redemption fee of 2.00% for shares redeemed within the first 90 days of purchase. Performance shown at NAV does not include these sales charges and would have been lower had it been taken into account.

 

The Adviser has agreed to waive the portion of its 1.50% Management Fee in excess of any sub-advisory fees paid by the Adviser to sub-advisors in connection with the Fund (“Sub-Advisory Fees”). This agreement (the “Expense Agreement”) is in effect through August 31, 2020. The Adviser may not discontinue this agreement to waive fees prior to August 31, 2020 without the approval by the Fund’s Board of Trustees.

 

Net Ratio ex Dividend & Short Expense is the Net Expense Ratio less any Dividend and Interest Expense on Securities Sold Short.

 

Non-standardized performance is any performance period that doesn’t fall on a quarter end.

 

Portfolio Changes:

 

During the period, a credit fund was added.

 

Closing:

 

We continue to add value both in our allocation and manager selection decisions. We appreciate your investment in our Highland Resolute Fund, please feel free to contact us with any questions.

 

Sincerely,

 

R. Scott Graham, CFA & Michael T. Lytle, CFA

 Portfolio Managers(12)

 

Semi-Annual Report | October 31, 2019 3

 

 

Highland Resolute Fund Shareholder Letter

 

  October 31, 2019 (Unaudited)

 

Underlying Allocation Weights:

 

Figure 1 lists the long-term target asset allocation for the Fund as well as the allocation as of October 31st, 2019.

 

 

Holdings and allocations subject to change and may not reflect the current or future position of the portfolio.

 

 

4

 

 

Highland Resolute Fund Shareholder Letter

 

  October 31, 2019 (Unaudited)

 

IMPORTANT NOTES AND DISCLOSURES

 

Past performance does not guarantee future results.

 

Fund prices fluctuate as the underlying assets have exposure to market fluctuations and other risks, as described in the Fund’s prospectus. Please call 1-855-268-2242 to obtain current performance information and for the current prospectus and statement of additional information. This material must be preceded or accompanied by a prospectus. Please read the prospectus carefully before investing.

 

The views of Highland Associates, Inc. and the information discussed in this commentary are as of the date of publication, are subject to change, and may not reflect the writers’ current views. The views expressed are those of the Fund’s adviser only, and represent an assessment of market conditions at a specific point in time, are opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. Such information does not constitute a recommendation to buy or sell specific securities or investment vehicles. It should not be assumed that any investment will be profitable or will equal the performance of the portfolios or any securities or any sectors mentioned in this letter. The subject matter contained in this letter has been derived from several sources believed to be reliable and accurate at the time of compilation. Neither Highland Associates, Inc. nor the Fund accepts any liability for losses either direct or consequential caused by the use of this information.

 

The Highland Resolute Fund is distributed by ALPS Distributors, Inc.

 

The Fund is subject to investment risks, including possible loss of the principal amount invested and therefore is not suitable for all investors. The Fund may not achieve its objectives.

 

Diversification does not eliminate the risk of experiencing investment losses.

 

RISKS:

 

The Fund’s strategy may expose it to the risks of investments in Swap Contracts and Other Investment Companies. These risks include, but are not limited to higher expenses, allocation risk, underlying fund risk, transparency risk, and underlying fund managed portfolio risk. Investments which focus on alternative strategies are subject to increased risk and loss of principal and are not suitable for all investors. Swap Risk involves swap agreements and are subject to counterparty default risk and may not perform as intended. Derivatives Risk involves the exercise of skill and judgment. Derivatives may expire worthless or not perform as expected. Equity risk may cause the value of the securities held by the Fund to fall due to general market and economic conditions, perceptions regarding the industries in which the issuers of securities held by the Fund participate, or factors relating to specific companies in which the Fund invest.

 

The Fund’s investments in non-U.S. issuers may be even more volatile and may present more risks than investments in U.S. issuers.

 

Commodity Risk may subject the Funds to greater volatility than traditional investments because of global supply and demand, changes in interest rates, commodity index volatility, and factors affecting a particular industry or commodity. Commodity-linked investments may not move in the same direction and to the same extent as the underlying commodities.

 

(1)The HFRX Global Hedge Fund Index is designed to be representative of the overall composition of the hedge fund universe, and includes convertible arbitrage, distressed securities, equity hedge, equity market neutral, event driven, macro, merger arbitrage, and relative value strategies. The index returns are updated periodically and are subject to change. The returns were accurate as of the date of this publication. Investors cannot invest directly in an index.
(2)Basis point is a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 1/100th of 1% or 0.01%(.0001).

(3)The Morningstar Multi-Alternative Universe is designed to represent the exposure to alternative investment tactics. Funds in this category have the majority of their assets exposed to alternative strategies. An investor’s exposure to different tactics may change slightly over time in response to market movements. Funds in this category include both funds with static allocations to alternative strategies and funds tactically allocating among alternative strategies and asset classes. The gross short exposure is greater than 20%.
(4)The HFRX Equity Hedge Index is designed to be representative of a subset of the overall composition of the hedge fund universe. Equity Hedge strategies maintain positions both long and short in primarily equity and equity derivative securities. The index returns are updated periodically and are subject to change. The returns were accurate as of the date of this publication. The index figures do not reflect any fees, expense, or taxes. Investors cannot invest directly in an index.

(5)The HFRX Macro Index is designed to be representative of a subset of the overall composition of the hedge fund universe. Macro strategy managers trade a broad range of strategies in which the investment process is predicated on movements in underlying economic variables and the impact these have on equity, fixed income, hard currency and commodity markets. Managers employ a variety of techniques, both discretionary and systematic analysis, combinations of top down and bottom up theses, quantitative and fundamental approaches and long and short-term holding periods. The index returns are updated periodically and are subject to change. The returns were accurate as of the date of this publication. The index figures do not reflect any fees, expense, or taxes. Investors cannot invest directly in an index.

 

Semi-Annual Report | October 31, 2019 5

 

 

Highland Resolute Fund Shareholder Letter

 

  October 31, 2019 (Unaudited)

 

(6)The HFRX Fixed Income – Credit Index is designed to be representative of a subset of the overall composition of the hedge fund universe. It includes strategies with exposure to credit across a broad continuum of credit sub-strategies, including Corporate, Sovereign, Distressed, Convertible, Asset Backed, Capital Structure Arbitrage, Multi-Strategy and other Relative Value and Event Driven sub-strategies. The index returns are updated periodically and are subject to change. The returns were accurate as of the date of this publication. The index figures do not reflect any fees, expense, or taxes. Investors cannot invest directly in an index.
(7)The HFRX Relative Value Arbitrage Index is designed to be representative of a subset of the overall composition of the hedge fund universe. Relative Value investment managers who maintain positions in which the investment thesis is predicated on realization of a valuation discrepancy in the relationship between multiple securities. Managers employ a variety of fundamental and quantitative techniques to establish investment theses, and security types range broadly across equity, fixed income, derivative or other security types. The index returns are updated periodically and are subject to change. The returns were accurate as of the date of this publication. The index figures do not reflect any fees, expense, or taxes. Investors cannot invest directly in an index.

(8)The HFRX Event Driven Index maintains positions in companies currently or prospectively involved in corporate transactions of a wide variety including but not limited to mergers, restructurings, financial distress, tender offers, shareholder buybacks, debt exchanges, security issuance or other capital structure adjustments. Security types can range from most senior in the capital structure to most junior or subordinated, and frequently involve additional derivative securities. Event Driven exposure includes a combination of sensitivities to equity markets, credit markets and idiosyncratic, company specific developments. The index returns are updated periodically and are subject to change. The returns were accurate as of the date of this publication. The index figures do not reflect any fees, expense, or taxes. Investors cannot invest directly in an index.

(9)The S&P 500® Index is an unmanaged index of 500 common stocks chosen for market size, liquidity, and industry group representation. It is a market value weighted index. The S&P 500® Index figures do not reflect any fees, expenses, or taxes. Investors cannot invest directly in this index.

(10)Highland Associates, Inc. has agreed to waive the portion of its 1.50% Management Fee in excess of any sub-advisory fees paid by the Adviser to sub-advisors in connection with the Highland Resolute Fund. This agreement is in effect through August 31, 2020. The Adviser may not discontinue this agreement to waive fees without the approval by the Fund’s Board of Trustees.
(11)Ratios as of the Prospectus dated August 31, 2019 and may differ from the ratios presented in the Financial Highlights.
(12)R. Scott Graham and Michael T. Lytle are registered representatives of ALPS Distributors, Inc. CFA Institute Marks are trademarks owned by the CFA Institute.

 

6

 

 

Highland Resolute Fund Performance Update

 

  October 31, 2019 (Unaudited)

 

Performance (for the period ended October 31, 2019)

 

Highland Resolute Fund

 

Cumulative Total Return            
(for the period ended October 31, 2019) 6 Months 1 Year 3 Year 5 Year Since Inception* Gross Ratio(a) Net Ratio(a)
Highland Resolute Fund - Class I - NAV -1.65% 2.95% 2.45% 1.94% 3.16% 2.38% 1.43%
S&P 500® Index(b) 4.16% 14.33% 14.91% 10.78% 14.26%    
Dow Jones U.S. Select Dividend Index(c) 2.97% 10.67% 10.73% 9.47% 12.58%    
HFRX Global Hedge Fund Index(d) 2.85% 3.53% 2.23% 0.65% 1.68%    

 

Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please call 1-855-268-2242.

 

The Fund has a redemption fee of 2.00% for shares redeemed within the first 90 days of purchase. Performance shown at NAV does not include these sales charges and would have been lower had it been taken into account.

 

The Adviser has agreed to waive the portion of its 1.50% Management Fee in excess of any sub-advisory fees paid by the Adviser to sub-advisors in connection with the Fund (“Sub-Advisory Fees”). This agreement (the “Expense Agreement”) is in effect through August 31, 2020. The Adviser may not discontinue this agreement to waive fees prior to August 31, 2020 without the approval by the Fund’s Board of Trustees.

 

*Fund inception date of 12/30/11.
(a)Ratios as of the Prospectus dated August 31, 2019 and may differ from the ratios presented in the Financial Highlights.
(b)The S&P 500® Index is the Standard & Poor's composite index of 500 stocks, a widely recognized, unmanaged index of common stock prices. The index is not actively managed and does not reflect any deduction of fees, expenses or taxes. An investor may not invest directly in an index.

(c)The Dow Jones U.S. Select Dividend Index is an additional index, and represents the country’s top stocks by dividend yield, selected annually and subject to screening and buffering criteria. The index is not actively managed and does not reflect any deductions of fees, expenses or taxes. An investor may not invest directly in an index.

(d)The HFRX Global Hedge Fund Index is an additional index, and is designed to be representative of the overall composition of the hedge fund universe and includes convertible arbitrage, distressed securities, equity hedge, equity market neutral, event driven, macro, merger arbitrage and relative value strategies. The index returns are updated periodically and are subject to change. The returns were accurate as of the date of this publication. The index is not actively managed and does not reflect any deduction of fees, expenses or taxes. An investor may not invest directly in an index.

 

The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

 

Top Ten Holdings**

(for the period ended October 31, 2019)

 

As a percentage of Net Assets 

PIMCO Short-Term Fund,  
Institutional Class 30.68%
PSAM Highland 16.55%
PIMCO Income Fund,  
Institutional Class 12.42%
Long/Short Segregated Portfolio 12.05%
WABR 11.86%
Melchior Segregated Portfolio 10.89%
BHDG Systematic Trading  
Segregated Portfolio 5.60%
Harland Clarke Holdings Corp. 2.18%
AQR Multi Strategy Alternative Fund 2.02%
Mohegan Tribal Gaming 1.32%
Top Ten Holdings 104.57%

 

**Holdings are subject to change, and may not reflect the current or future position of the portfolio.

 

Semi-Annual Report | October 31, 2019 7

 

 

Highland Resolute Fund Performance Update

 

  October 31, 2019 (Unaudited)

 

Performance of $10,000 Initial Investment (for the period ended October 31, 2019)

 

Comparison of change in value of a $10,000 investment

 

 

The chart represents historical performance of a hypothetical investment of $10,000 in the Fund since inception. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

 

Investing in the Fund is subject to investment risks, including possible loss of the principal amount invested.

 

8

 

 

 

Highland Resolute Fund Consolidated Disclosure of Fund Expenses

 

  October 31, 2019 (Unaudited)

 

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including applicable sales charges (loads), redemption fees; and (2) ongoing costs, including management fees, distribution and service (12b-1) fees, shareholder services fees and other Fund operating expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

 

This example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period of May 1, 2019 to October 31, 2019.

 

Actual Expenses. The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line of the table below under the heading titled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

 

Hypothetical Example for Comparison Purposes. The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

 

Please note that the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as applicable sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table below is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 

Highland Resolute Fund BEGINNING
ACCOUNT VALUE
05/01/19
ENDING
ACCOUNT VALUE
10/31/19
EXPENSE
RATIO(a)
EXPENSES PAID
DURING THE
PERIOD
05/01/19-10/31/19(b)
Class I        
Actual $ 1,000.00 $ 983.50 0.70% $ 3.49
Hypothetical (5% return before expenses) $ 1,000.00 $1,021.62 0.70% $ 3.56

 

(a)Annualized, based on the Fund's most recent fiscal half year expenses.
(b)Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184)/366 (to reflect the half-year period).

 

Semi-Annual Report | October 31, 2019 9

 

 

Highland Resolute Fund Consolidated Schedule of Investments

 

  October 31, 2019 (Unaudited)

 

       Value 
Description  Shares   (Note 2)
COMMON STOCKS (13.65%)          
AEROSPACE & DEFENSE (0.83%)          
The Boeing Co.   7,349   $2,497,998 
           
COMMERCIAL SERVICES (1.61%)          
ASGN, Inc.(a)   21,233    1,350,207 
Global Payments, Inc.   13,579    2,297,295 
Opal Acquisition(a)   3,209    384,930 
PayPal Holdings, Inc.(a)   8,001    832,904 
         4,865,336 
DIVERSIFIED FINANCIAL SERVICES (0.93%)          
Mastercard, Inc., Class A   3,460    957,762 
Visa, Inc., Class A(b)   10,395    1,859,250 
         2,817,012 
ELECTRIC (0.26%)          
PG&E Corp.(a)   125,471    774,156 
           
HOTELS, RESTAURANTS & LEISURE (0.86%)          
Wyndham Hotels & Resorts, Inc.   48,338    2,608,802 
           
INTERNET (5.13%)          
Alibaba Group Holding, Ltd., Sponsored ADR(a)(b)   13,623    2,406,776 
Alphabet, Inc., Class A(a)(b)   1,839    2,314,933 
Amazon.com, Inc.(a)(b)   1,390    2,469,557 
ANGI Homeservices, Inc., Class A(a)   124,746    854,510 
Facebook, Inc., Class A(a)(b)   13,707    2,626,947 
IAC/InterActiveCorp(a)   10,891    2,474,980 
TripAdvisor, Inc.(a)   57,076    2,305,870 
         15,453,573 
PIPELINES (0.63%)          
Energy Transfer LP   150,886    1,899,655 
           
SOFTWARE (3.40%)          
Adobe Systems, Inc.(a)   9,398    2,611,986 
Fidelity National Information Services, Inc.(b)   18,864    2,485,521 
Fiserv, Inc.(a)(b)   23,459    2,489,938 
SS&C Technologies Holdings, Inc.(b)   50,890    2,646,789 
         10,234,234 
TOTAL COMMON STOCKS          
(Cost $39,811,528)        41,150,766 
OPEN-END MUTUAL FUNDS (45.12%)          
AQR Multi Strategy Alternative Fund, Class I(a)   861,126    6,088,161 
PIMCO Income Fund, Institutional Class   3,127,288    37,433,632 
PIMCO Short-Term Fund, Institutional Class   9,452,780    92,448,188 
         135,969,981 
TOTAL OPEN-END MUTUAL FUNDS          
(Cost $137,500,917)        135,969,981 

 

See Notes to Financial Statements.

10

 

 

 

Highland Resolute Fund Consolidated Schedule of Investments

 

  October 31, 2019 (Unaudited)

 

        Value 
Description   Shares   (Note 2) 
PREFERRED STOCK (0.77%)         
Opal Acquisition(a)  19,341   $2,320,175 
TOTAL PREFERRED STOCK         
(Cost $906,621)        2,320,175 

 

Description     Principal Amount    Value
(Note 2)
 
CORPORATE BONDS (7.50%)         
COMMERCIAL SERVICES (0.99%)         
RR Donnelley & Sons Co.          
6.00%, 04/01/2024  $1,291,000    1,339,412 
6.50%, 11/15/2023   920,000    950,250 
7.00%, 02/15/2022   680,000    705,500 
           2,995,162 
COMPUTERS (2.59%)          
Harland Clarke Holdings Corp.         
8.38%, 08/15/2022(c)   1,568,000    1,258,320 
9.25%, 03/01/2021(c)   7,021,500    6,556,325 
           7,814,645 
             
DISTRIBUTION & WHOLESALE (0.27%)         
American News Co. LLC          
8.50% (10.00%), 09/01/2026(c)(d)   758,398    806,746 
             
ENTERTAINMENT (1.32%)         
Mohegan Tribal Gaming          
7.88%, 10/15/2024(c)   4,137,000    3,966,349 
             
HEALTHCARE-SERVICES (0.78%)         
One Call Corp.          
7.50%, 07/01/2024(c)   2,374,412    2,350,668 
             
PUBLISHING & BROADCASTING (1.55%)         
McClatchy Co.          
6.88%, 07/15/2031(c)   2,198,000    2,005,675 
9.00%, 07/15/2026   2,866,000    2,672,545 
           4,678,220 
TOTAL CORPORATE BONDS         
(Cost $23,804,618)        22,611,790 

 

See Notes to Financial Statements.

Semi-Annual Report | October 31, 2019 11

 

 

Highland Resolute Fund Consolidated Schedule of Investments

 

  October 31, 2019 (Unaudited)

 

       Value 
Description  Shares   (Note 2) 
Short-Term Investments (8.81%)          
MONEY MARKET FUNDS (8.81%)          
Dreyfus Treasury Cash Management Fund, Institutional Class, 7-day yield, 1.677%(b)   26,551,301   $26,551,301 
TOTAL SHORT-TERM INVESTMENTS          
(Cost $26,551,301)        26,551,301 
TOTAL INVESTMENTS (75.85%)          
(Cost $228,574,985)       $228,604,013 
           
SEGREGATED CASH WITH BROKERS (27.23%)(e)        82,062,406 
           
SECURITIES SOLD SHORT (-3.17%)          
(Proceeds $8,642,833)       $(9,546,879)
           
OTHER ASSETS IN EXCESS OF LIABILITIES (0.09%)        256,766 
NET ASSETS (100.00%)       $301,376,306 

 

SCHEDULE OF SECURITIES SOLD SHORT

 

Description  Shares   Value
(Note 2)
 
EXCHANGE TRADED FUNDS (-3.17%)          
Consumer Discretionary Select Sector SPDR® Fund   (1,220)  $(147,437)
Consumer Staples Select Sector SPDR® Fund   (4,946)   (302,497)
Health Care Select Sector SPDR® Fund   (15,405)   (1,459,624)
Industrial Select Sector SPDR® Fund   (11,702)   (918,724)
iShares® 20+ Year Treasury Bond ETF   (3,980)   (562,135)
iShares® MSCI United Kingdom ETF   (14,675)   (477,378)
SPDR® S&P Retail ETF   (44,118)   (1,903,692)
Utilities Select Sector SPDR® Fund   (9,524)   (611,917)
VanEck Vectors® Pharmaceutical ETF   (15,346)   (909,711)
Vanguard® FTSE Europe ETF   (23,953)   (1,333,464)
Vanguard® Total Stock Market ETF   (5,969)   (920,300)
         (9,546,879)
TOTAL EXCHANGE TRADED FUNDS (-3.17%)          
(Proceeds $8,642,833)        (9,546,879)
TOTAL SECURITIES SOLD SHORT          
(Proceeds $8,642,833)       $(9,546,879)

 

(a)Non-income producing security.
(b)Security position either entirely or partially held in a segregated account as collateral for securities sold short and total return swaps. Aggregate total fair value of $10,481,240.
(c)Security exempt from registration under rule 144A of the Securities Act of 1933. This security may be resold in transactions exempt from registration, normally to qualified institutional buyers. At period end, the fair value of those securities held in long positions was $16,944,083, representing 5.62% of the Fund's net assets.
(d)Pay-in-kind securities - Rate paid in-kind is shown in parenthesis.
(e)Includes cash which is being held as collateral for securities sold short and total return swap contracts.

 

See Notes to Financial Statements.

12 

 

 

 

Highland Resolute Fund Consolidated Schedule of Investments

 

  October 31, 2019 (Unaudited)

 

TOTAL RETURN SWAP CONTRACTS*

 

Counterparty  Reference Obligation  Notional Amount   Value   Rate Paid by the Fund  Termination Date 

Unrealized Appreciation/ (Depreciation)

 
Morgan Stanley  BHDG Systematic Trading Segregated Portfolio(a)  $16,862,464   $16,862,474   1-Month LIBOR BBA  09/13/2023  $10 
Morgan Stanley  Long/Short Segregated Portfolio(b)   36,302,334    36,302,336   1-Month LIBOR BBA  03/19/2021   2 
Morgan Stanley  Melchior Segregated Portfolio(c)   32,806,954    32,806,958   1-Month LIBOR BBA  03/19/2021   4 
Morgan Stanley  PSAM Highland(d)   49,892,758    49,892,756   1-Month EURIBOR  06/03/2021   (2)
Morgan Stanley  WABR(e)   35,746,666    35,746,676   1-Month LIBOR BBA  09/01/2020   10 
      $171,611,176   $171,611,200         $24 

 

*For the long positions, the Fund receives payments based on any positive return of the Reference Obligation less the rate paid by the Fund. The Fund makes payments on any negative return of such Reference Obligation plus the rate paid by the Fund. For short positions, the Fund receives payments based on any negative return of the Reference Obligation less the rate paid by the fund. The Fund makes payments on any positive return of such Reference Obligation plus the rate paid by the Fund. Payments are made monthly.
(a)BHDG Systematic Trading Segregated Portfolio is a quantitative trend following strategy that uses futures. BHDG will employ some short, medium, and long term signals. Interest rate, commodity, equity, and sovereign debt futures will be used. Any asset class may have net long or short exposure, and exposures in aggregate may be net long or short.

(b)Long/Short Segregated Portfolio is a European equity long/short strategy that employs a flexible, low-net strategy (0% to 50%), and long exposure will vary between 60% and 100%. The portfolio is primarily comprised of large and mid-cap stocks listed on European exchanges.

(c)Melchior Segregated Portfolio is a global equity long/short strategy that uses a long-biased strategy that is focused on cyclical sectors. The strategy has a net exposure that ranges between 50% and 80%, and long exposure varies between 80% and 100%. The strategy is comprised of large cap stocks listed on exchanges of developed and emerging market countries.

(d)PSAM Highland employs an event driven strategy. The fund will primarily make investments in equity special situations and merger arbitrage. The strategy will also opportunistically allocate to liquid high yield credit positions when trading at stressed levels. The strategy will employ gross long exposure of up to 120%, and net exposure will typically vary from 40% to 80%.

(e)WABR incorporates an absolute return oriented approach within a risk parity framework. Active absolute return strategies include fundamental long/short equity, credit relative value, discretionary macro, and equity market neutral strategies. The strategy also maintains a passive risk weighted allocation to equities and fixed income, but each of the three allocations is equally risk weighted subject to a 40% limit on the absolute return allocation. Gross equity long exposure will typically be 140% or less, and net equity exposure will vary between 5% and 35%.

 

See Notes to Financial Statements.

Semi-Annual Report | October 31, 2019 13

 

 

Highland Resolute Fund Consolidated Schedule of Investments

 

  October 31, 2019 (Unaudited)

 

BHDG SYSTEMATIC TRADING SEGREGATED PORTFOLIO

 

           Percentage 
Description  Contracts/Shares   Value   of Value 
LONG SECURITIES               
OUTSTANDING FORWARD FOREIGN CURRENCY CONTRACTS               
AUD TO JPY FORWARD SD : 18-Dec-2019   3,269,044   $2,256,107    13.39%
AUD TO USD FORWARD SD : 18-Dec-2019   4,605,524    3,178,469    18.86%
CAD TO USD FORWARD SD : 18-Dec-2019   5,816,513    4,419,205    26.23%
CHF TO USD FORWARD SD : 18-Dec-2019   2,723,157    2,769,903    16.44%
EUR TO USD FORWARD SD : 18-Dec-2019   4,442,386    4,969,708    29.49%
GBP TO USD FORWARD SD : 18-Dec-2019   2,315,311    3,003,356    17.82%
ILS TO USD FORWARD SD : 18-Dec-2019   5,502,786    1,564,779    9.29%
INR TO USD FORWARD SD : 18-Dec-2019   110,294,143    1,547,389    9.18%
JPY TO AUD FORWARD SD : 18-Dec-2019   208,243,766    1,933,706    11.48%
JPY TO USD FORWARD SD : 18-Dec-2019   296,196,684    2,750,418    16.32%
KRW TO USD FORWARD SD : 18-Dec-2019   2,800,654,287    2,395,726    14.22%
MXN TO USD FORWARD SD : 18-Dec-2019   49,230,165    2,542,013    15.09%
PLN TO EUR FORWARD SD : 18-Dec-2019   10,898,904    2,853,565    16.93%
PLN TO USD FORWARD SD : 18-Dec-2019   6,393,772    1,674,026    9.93%
SGD TO USD FORWARD SD : 18-Dec-2019   4,881,604    3,589,763    21.30%
USD TO AUD FORWARD SD : 18-Dec-2019   3,927,726    3,927,726    23.31%
USD TO CAD FORWARD SD : 18-Dec-2019   2,917,395    2,917,395    17.31%
USD TO CHF FORWARD SD : 18-Dec-2019   2,845,138    2,845,138    16.88%
USD TO EUR FORWARD SD : 18-Dec-2019   5,973,979    5,973,979    35.45%
USD TO GBP FORWARD SD : 18-Dec-2019   2,368,736    2,368,736    14.06%
USD TO JPY FORWARD SD : 18-Dec-2019   3,286,352    3,286,352    19.50%
USD TO KRW FORWARD SD : 18-Dec-2019   1,768,556    1,768,556    10.50%
USD TO NOK FORWARD SD : 18-Dec-2019   2,502,630    2,502,630    14.85%
USD TO SEK FORWARD SD : 18-Dec-2019   1,530,131    1,530,131    9.08%
USD TO SGD FORWARD SD : 18-Dec-2019   2,302,545    2,302,545    13.66%
OUTSTANDING FORWARD FOREIGN CURRENCY CONTRACTS Total   3,544,891,234    70,871,321    420.57%
TOTAL LONG   3,544,891,234   $70,871,321    420.57%
                
SECURITIES SOLD SHORT               
OUTSTANDING FORWARD FOREIGN CURRENCY CONTRACTS               
AUD TO JPY FORWARD SD : 18-Dec-2019   (2,861,197)   (1,974,635)   -11.72%
AUD TO USD FORWARD SD : 18-Dec-2019   (5,760,042)   (3,975,251)   -23.59%
CAD TO USD FORWARD SD : 18-Dec-2019   (3,865,126)   (2,936,602)   -17.43%
CHF TO USD FORWARD SD : 18-Dec-2019   (2,811,001)   (2,859,255)   -16.97%
EUR TO PLN FORWARD SD : 18-Dec-2019   (2,519,056)   (2,818,074)   -16.72%
EUR TO USD FORWARD SD : 18-Dec-2019   (5,389,843)   (6,029,631)   -35.78%
GBP TO USD FORWARD SD : 18-Dec-2019   (1,913,740)   (2,482,449)   -14.73%
JPY TO AUD FORWARD SD : 18-Dec-2019   (240,664,957)   (2,234,762)   -13.26%
JPY TO USD FORWARD SD : 18-Dec-2019   (353,765,734)   (3,284,992)   -19.49%
KRW TO USD FORWARD SD : 18-Dec-2019   (2,108,520,578)   (1,803,664)   -10.70%
NOK TO USD FORWARD SD : 18-Dec-2019   (22,663,696)   (2,465,113)   -14.63%
SEK TO USD FORWARD SD : 18-Dec-2019   (14,776,579)   (1,534,186)   -9.10%
SGD TO USD FORWARD SD : 18-Dec-2019   (3,174,925)   (2,334,730)   -13.86%
USD TO AUD FORWARD SD : 18-Dec-2019   (3,146,945)   (3,146,945)   -18.68%
USD TO CAD FORWARD SD : 18-Dec-2019   (4,428,457)   (4,428,457)   -26.28%
USD TO CHF FORWARD SD : 18-Dec-2019   (2,765,922)   (2,765,922)   -16.41%
USD TO EUR FORWARD SD : 18-Dec-2019   (4,937,628)   (4,937,628)   -29.30%
USD TO GBP FORWARD SD : 18-Dec-2019   (2,932,753)   (2,932,753)   -17.40%
USD TO ILS FORWARD SD : 18-Dec-2019   (1,566,394)   (1,566,394)   -9.30%
USD TO INR FORWARD SD : 18-Dec-2019   (1,540,191)   (1,540,191)   -9.14%
USD TO JPY FORWARD SD : 18-Dec-2019   (2,771,009)   (2,771,009)   -16.44%

 

See Notes to Financial Statements.

14 

 

 

 

Highland Resolute Fund Consolidated Schedule of Investments

 

  October 31, 2019 (Unaudited)

 

           Percentage 
Description  Contracts/Shares   Value   of Value 
OUTSTANDING FORWARD FOREIGN CURRENCY CONTRACTS (CONTINUED)               
USD TO KRW FORWARD SD : 18-Dec-2019   (2,376,969)   (2,376,969)   -14.11%
USD TO MXN FORWARD SD : 18-Dec-2019   (2,520,736)   (2,520,736)   -14.96%
USD TO PLN FORWARD SD : 18-Dec-2019   (1,650,229)   (1,650,229)   -9.79%
USD TO SGD FORWARD SD : 18-Dec-2019   (3,565,812)   (3,565,812)   -21.16%
OUTSTANDING FORWARD FOREIGN CURRENCY CONTRACTS Total   (2,802,889,520)   (70,936,389)   -420.95%
TOTAL SHORT   (2,802,889,520)  $(70,936,389)   -420.95%
                
REMAINING SECURITIES AND CASH       $16,927,542    100.38%
TOTAL VALUE       $16,862,474      

 

LONG/SHORT SEGREGATED PORTFOLIO

 

           Percentage 
Description  Contracts/Shares   Value   of Value 
LONG SECURITIES               
COMMON STOCK               
ADVANCED DRAINAGE SYSTEMS ORD (NYS)   12,033   $445,462    1.23%
BUZZI UNICEM SENZA VINCOLI ORD (MIL)   22,432    541,034    1.49%
CATERPILLAR ORD (NYS)   7,659    1,055,410    2.91%
D R HORTON ORD (NYS)   22,268    1,166,175    3.21%
DELTA AIR LINES ORD (NYS)   26,503    1,459,785    4.02%
DSV PANALPINA ORD (CPH)   22,490    2,181,133    6.01%
FEDEX ORD (NYS)   1,545    235,860    0.65%
FRENI BREMBO ORD (MIL)   33,675    357,872    0.99%
GENERAL DYNAMICS ORD (NYS)   14,540    2,570,672    7.08%
GREENBRIER ORD (NYS)   16,396    480,239    1.32%
KANSAS CITY SOUTHERN ORD (NYS)   10,494    1,477,345    4.07%
KB HOME ORD (NYS)   38,881    1,387,663    3.82%
KION GROUP ORD (GER)   19,523    1,296,423    3.57%
KIRBY ORD (NYS)   18,975    1,502,061    4.14%
LOUISIANA PACIFIC ORD (NYS)   93,845    2,743,089    7.56%
NORFOLK SOUTHERN ORD (NYS)   9,263    1,685,866    4.64%
NVR ORD (NYS)   0,405    1,472,819    4.05%
PACCAR ORD (NMS)   16,734    1,272,788    3.51%
POLARIS INDUSTRIES ORD (NYS)   8,335    822,248    2.27%
STAR BULK CARRIERS ORD (NMS)   66,739    710,770    1.96%
TAKE TWO INTERACTIVE SOFTWARE ORD (NMS)   3,853    463,709    1.28%
TECK RESOURCES CL B ORD (NYS)   148,500    2,350,755    6.48%
UNITED PARCEL SERVICE CL B ORD (NYS)   2,154    248,076    0.68%
VULCAN MATERIALS ORD (NYS)   6,527    932,512    2.57%
COMMON STOCK Total   623,769    28,859,766    79.51%

 

See Notes to Financial Statements.

Semi-Annual Report | October 31, 2019 15

 

 

Highland Resolute Fund Consolidated Schedule of Investments

 

  October 31, 2019 (Unaudited)

 

Description  Contracts/
Shares
   Value   Percentage
of Value
   Swap Counterparty  Floating Rate/
Fixed Rate
Amount paid by Fund
  Floating Rate
Index
  Termination
Date
  Unrealized
Gain
(Loss)
 
EQUITY SWAP                                
KNIGHT SWIFT TRANSPRTATN CL A ORD (NYS) CF   70,510    313,594    0.86%  Morgan Stanley & Co. LLC  50 bps + 1D FEDEF  1D FEDEF  12/3/2019   314,782 
NVR ORD (NYS) CFD   0,406    396,331    1.09%  Morgan Stanley & Co. LLC  50 bps + 1D FEDEF  1D FEDEF  12/3/2019   394,009 
EQUITY SWAP Total   70,916    709,925    1.95%                 
TOTAL LONG   694,685   $29,569,691    81.46%                 
SECURITIES SOLD SHORT                                
COMMON STOCK                                
APPLE ORD (NMS)   (1,613)   (401,250)   -1.11%                 
BOEING ORD (NYS)   (3,159)   (1,073,776)   -2.96%                 
CH ROBINSON                                
WORLDWIDE ORD                                
(NMS)   (5,600)   (423,584)   -1.17%                 
DOW ORD (NYS)   (4,779)   (241,292)   -0.66%                 
GATX ORD (NYS)   (4,096)   (325,837)   -0.90%                 
ILLINOIS TOOL ORD (NYS)   (1,935)   (326,202)   -0.90%                 
KENNAMETAL ORD (NYS)   (23,037)   (712,995)   -1.96%                 
LINCOLN ELECTRIC                                
HOLDINGS ORD (NMS)   (12,560)   (1,125,000)   -3.10%                 
MONDELEZ                                
INTERNATIONAL                                
CL A ORD (NMS)   (4,471)   (234,504)   -0.65%                 
PROCTER & GAMBLE                                
ORD (NYS)   (1,944)   (242,047)   -0.67%                 
SAIA ORD (NMS)   (2,528)   (225,498)   -0.62%                 
SIEMENS N ORD (GER)   (1,890)   (217,601)   -0.60%                 
SITEONE LANDSCAPE                                
SUPPLY ORD (NYS)   (4,746)   (417,933)   -1.15%                 
STADLER RAIL ORD (SWX)   (8,035)   (390,306)   -1.08%                 
STARBUCKS ORD (NMS)   (2,629)   (222,308)   -0.61%                 
TEREX ORD (NYS)   (27,279)   (751,536)   -2.07%                 
TRANSDIGM GROUP                                
ORD (NYS)   (610)   (321,031)   -0.88%                 
XPO LOGISTICS ORD (NYS)   (5,645)   (431,278)   -1.19%                 
COMMON STOCK Total   (116,556)   (8,083,978)   -22.28%                 
TOTAL SHORT   (116,556)   (8,083,978)   -22.28%                 
REMAINING SECURITIES AND CASH       $14,816,623    40.82%                 
TOTAL VALUE       $36,302,336                       

 

See Notes to Financial Statements.

16

 

 

 

Highland Resolute Fund Consolidated Schedule of Investments

 

  October 31, 2019 (Unaudited)

 

MELCHIOR SEGREGATED PORTFOLIO

 

Description 

Contracts/ Shares

   Value  

Percentage of Value

   Swap Counterparty 

Floating Rate/Fixed Rate Amount paid by Fund

 

Floating Rate Index

 

Termination Date

 

Unrealized Gain (Loss)

 
LONG SECURITIES                                
COMMON STOCK                                
GRIFOLS SA-ADR   31,233   $684,305    2.09%                 
COMMON STOCK Total   31,233    684,305    2.09%                 
                                 
EQUITY SWAP                                
APPLUS SERVICES                                
SA(MAD)   115,418    (66,044)   -0.20%  Morgan Stanley & Co. LLC  55 bps + 1M EURIB  1M EURIB  3/26/2020   (154,956)
ASCENTIAL PLC   140,568    (31,661)   -0.10%  Morgan Stanley & Co. LLC  55 bps + 1M LIBOR  1M LIBOR  3/26/2020   (64,400)
ASML HOLDING NV (EOE)   2,606    183,592    0.56%  Morgan Stanley & Co. LLC  55 bps + 1M EURIB  1M EURIB  3/26/2020   426,785 
ASR NEDERLAND NV   19,384    (58,264)   -0.18%  Morgan Stanley & Co. LLC  55 bps + 1M EURIB  1M EURIB  3/26/2020   (136,185)
ASSOCIATED BRITISH FOODS PLC   24,087    (48,845)   -0.15%  Morgan Stanley & Co. LLC  55 bps + 1M LIBOR  1M LIBOR  3/26/2020   (98,415)
AVAST PLC   123,624    69,028    0.21%  Morgan Stanley & Co. LLC  55 bps + 1M LIBOR  1M LIBOR  3/26/2020   138,556 
CERVED GROUP SPA   75,977    59,663    0.18%  Morgan Stanley & Co. LLC  55 bps + 1M EURIB  1M EURIB  3/26/2020   138,411 
COMPASS GROUP PLC   35,280    118,563    0.36%  Morgan Stanley & Co. LLC  55 bps + 1M LIBOR  1M LIBOR  3/26/2020   326,604 
CRH PLC(ISE)   14,604    76,118    0.23%  Morgan Stanley & Co. LLC  55 bps + 1M EURIB  1M EURIB  3/26/2020   176,820 
ERSTE GROUP BANK                                
AG(VIE)   14,849    (26,001)   -0.08%  Morgan Stanley & Co. LLC  55 bps + 1M EURIB  1M EURIB  3/26/2020   (79,231)
FERGUSON PLC   5,790    86,333    0.26%  Morgan Stanley & Co. LLC  55 bps + 1M LIBOR  1M LIBOR  3/26/2020   172,725 
FINECOBANK SPA(MIL)   86,292    75,009    0.23%  Morgan Stanley & Co. LLC  55 bps + 1M EURIB  1M EURIB  3/26/2020   173,835 
FRANCE TELECOM SA   38,205    31,319    0.10%  Morgan Stanley & Co. LLC  55 bps + 1M EURIB  1M EURIB  3/26/2020   72,269 
GOCO GROUP PLC   330,901    43,902    0.13%  Morgan Stanley & Co. LLC  55 bps + 1M LIBOR  1M LIBOR  3/26/2020   88,582 
INFICON HOLDING AG-REG   0,695    111,297    0.34%  Morgan Stanley & Co. LLC  55 bps + 1M LIBOR  1M LIBOR  3/26/2020   284,578 
INMOBILIARIA COLONIAL SOCIMI   65,219    156,124    0.48%  Morgan Stanley & Co. LLC  55 bps + 1M EURIB  1M EURIB  3/26/2020   362,873 
INTERTRUST NV   46,634    35,256    0.11%  Morgan Stanley & Co. LLC  55 bps + 1M EURIB  1M EURIB  3/26/2020   102,220 
JD SPORTS FASHION PLC   33,453    75,939    0.23%  Morgan Stanley & Co. LLC  55 bps + 1M LIBOR  1M LIBOR  3/26/2020   152,939 
LONZA GROUP AG-REG   2,431    71,870    0.22%  Morgan Stanley & Co. LLC  55 bps + 1M LIBOR  1M LIBOR  3/26/2020   246,535 
MAISONS DU MONDE SA   13,911    (102,909)   -0.31%  Morgan Stanley & Co. LLC  55 bps + 1M EURIB  1M EURIB  3/26/2020   (390,746)
MTU AERO ENGINES AG(GER)   2,006    92,647    0.28%  Morgan Stanley & Co. LLC  55 bps + 1M EURIB  1M EURIB  3/25/2020   212,404 
NESTLE SA-REG(VTX)   12,663    139,821    0.43%  Morgan Stanley & Co. LLC  55 bps + 1M LIBOR  1M LIBOR  3/26/2020   356,667 
PIAGGIO & C. S.P.A.   183,348    54,551    0.17%  Morgan Stanley & Co. LLC  55 bps + 1M EURIB  1M EURIB  3/26/2020   140,504 
PROSEGUR CASH SA   360,589    (103,248)   -0.31%  Morgan Stanley & Co. LLC  55 bps + 1M EURIB  1M EURIB  3/26/2020   (240,836)
PRUDENTIAL PLC   40,525    (89,233)   -0.27%  Morgan Stanley & Co. LLC  55 bps + 1M LIBOR  1M LIBOR  3/26/2020   48,472 
ROBERTET SA   2,092    394,152    1.20%  Morgan Stanley & Co. LLC  55 bps + 1M EURIB  1M EURIB  3/26/2020   960,747 
ROCHE HOLDING AG-GENUSSCHEIN(VTX)   4,915    148,455    0.45%  Morgan Stanley & Co. LLC  55 bps + 1M LIBOR  1M LIBOR  3/26/2020   378,413 
RYANAIR HOLDINGS PLC(ISE)   37,174    51,458    0.16%  Morgan Stanley & Co. LLC  55 bps + 1M EURIB  1M EURIB  3/26/2020   119,262 
SBANKEN ASA   51,367    (68,291)   -0.21%  Morgan Stanley & Co. LLC  55 bps + 1M NIBOR  1M NIBOR  4/30/2021   (2,026,226)
SOFTWARE AG   29,485    52,550    0.16%  Morgan Stanley & Co. LLC  55 bps + 1M EURIB  1M EURIB  3/25/2020   131,648 
TEAMVIEWER AG   21,897    (40,193)   -0.12%  Morgan Stanley & Co. LLC  55 bps + 1M EURIB  1M EURIB  3/25/2020   (96,375)
VESTAS WIND SYSTEMS A/S(CPH)   6,024    38,299    0.12%  Morgan Stanley & Co. LLC  55 bps + 1M CIBOR  1M CIBOR  10/30/2020   668,931 
WH SMITH PLC   17,053    28,711    0.09%  Morgan Stanley & Co. LLC  55 bps + 1M LIBOR  1M LIBOR  3/26/2020   57,295 
EQUITY SWAP Total   1,959,068    1,559,968    4.77%                 
TOTAL LONG   1,990,301   $2,244,273    6.86%                 

 

See Notes to Financial Statements.

Semi-Annual Report | October 31, 2019 17

 

 

Highland Resolute Fund Consolidated Schedule of Investments

 

  October 31, 2019 (Unaudited)

 

Description 

Contracts/ Shares

   Value  

Percentage of Value

   Swap Counterparty 

Floating Rate/Fixed Rate Amount paid by Fund

 

Floating Rate Index

 

Termination Date

 

Unrealized Gain (Loss)

 
SECURITIES SOLD SHORT                                
EQUITY SWAP                                
ASTON MARTIN LAGONDA GLOBAL   (99,221)   85,273    0.26%  Morgan Stanley & Co. LLC  1D SONIA - 587.5 bps  1D SONIA  3/26/2020   189,618 
AZIMUT HOLDING SPA   (21,975)   (31,058)   -0.09%  Morgan Stanley & Co. LLC  1D EONIA - 50 bps  1D EONIA  3/26/2020   (76,135)
BEKAERT NV   (18,451)   (27,845)   -0.08%  Morgan Stanley & Co. LLC  1D EONIA - 50 bps  1D EONIA  3/26/2020   (76,150)
BOOHOO GROUP PLC   (137,367)   (37,487)   -0.11%  Morgan Stanley & Co. LLC  1D SONIA - 35 bps  1D SONIA  3/26/2020   (75,281)
BURFORD CAPITAL LTD   (31,050)   (32,177)   -0.10%  Morgan Stanley & Co. LLC  1D SONIA - 35 bps  1D SONIA  3/26/2020   (68,651)
EUROFINS SCIENTIFIC(PAR)   (1,797)   (31,103)   -0.09%  Morgan Stanley & Co. LLC  1D EONIA - 150 bps  1D EONIA  3/26/2020   (73,402)
FIRST DERIVATIVES PLC   (14,297)   128,925    0.39%  Morgan Stanley & Co. LLC  1D SONIA - 162.5 bps  1D SONIA  3/26/2020   257,824 
LANDIS+GYR GROUP AG   (5,386)   (90,954)   -0.28%  Morgan Stanley & Co. LLC  1D SARON - 40 bps  1D SARON  3/26/2020   (233,417)
LEARNING TECHNOLOGIES GROUP   (386,552)   44,338    0.14%  Morgan Stanley & Co. LLC  1D SONIA - 100 bps  1D SONIA  3/26/2020   85,895 
NETCOMPANY GROUP AS   (13,623)   (59,316)   -0.18%  Morgan Stanley & Co. LLC  1W CIBOR - 50 bps  1W CIBOR  10/30/2020   (1,034,934)
PUBLICIS GROUPE   (7,889)   50,082    0.15%  Morgan Stanley & Co. LLC  1D EONIA - 40 bps  1D EONIA  3/26/2020   116,252 
RIB SOFTWARE SE   (11,486)   (38,324)   -0.12%  Morgan Stanley & Co. LLC  1D EONIA - 212.5 bps  1D EONIA  3/25/2020   (89,394)
TATE & LYLE PLC   (53,813)   47,892    0.15%  Morgan Stanley & Co. LLC  1D SONIA - 35 bps  1D SONIA  3/26/2020   95,757 
VARTA AG   (4,311)   (58,551)   -0.18%  Morgan Stanley & Co. LLC  1D EONIA - 40 bps  1D EONIA  3/25/2020   (142,144)
WIRECARD AG   (5,693)   82,029    0.25%  Morgan Stanley & Co. LLC  1D EONIA - 115.5 bps  1D EONIA  3/25/2020   190,113 
EQUITY SWAP Total   (812,910)   31,724    0.11%                 
                                 
FUTURE CONTRACT                                
FTSE/MIB IDX FUT DEC19   (10)   (48,984)   -0.15%                 
FUTURE CONTRACT Total   (10)   (48,984)   -0.15%                 
TOTAL SHORT   (812,919)  $(17,260)   -0.04%                 
                                 
REMAINING SECURITIES AND CASH    30,579,945    93.18%                 
TOTAL VALUE       $32,806,958                       

 

See Notes to Financial Statements.

18

 

 

 

Highland Resolute Fund Consolidated Schedule of Investments

 

  October 31, 2019 (Unaudited)

 

PSAM HIGHLAND

 

Description  Contracts/ Shares   Value   Percentage of Value 
LONG SECURITIES               
COMMON STOCK               
ALLERGAN PLC   10,274   $1,809,403    3.63%
CAESARS ENTERTAINMENT               
CORP COM STK   156,482    1,921,598    3.85%
CAMBREX CORP COM STK   12,265    732,571    1.47%
CBS CORP NEW CL B COM STK   13,420    483,669    0.97%
CELGENE CORP COM STK   47,674    5,150,168    10.32%
CIRCOR INTL INC COM STK   12,328    472,048    0.95%
EL PASO ELECTRIC CO COM STK   12,458    831,106    1.67%
ENERGIAS DE PORTUGAL EUR5 REGD   303,259    1,248,049    2.50%
FOX CORP - CLASS A   21,288    682,059    1.37%
FREDDIE MAC 8.375%PERP PFD   23,453    272,052    0.55%
GANNETT CO INC   30,274    333,320    0.67%
GENESEE & WYO INC CL A COM STK   21,833    2,424,065    4.86%
INTERXION HOLDING NV   7,771    685,572    1.37%
MCKESSON EUROPE AG (GFR LISTING)   66,912    1,970,145    3.95%
MELLANOX TECHNOLOGIES LTD   2,956    333,156    0.67%
MILACRON HOLDINGS CORP CINCIN COM STK   66,635    1,114,141    2.23%
OCCIDENTAL PETE CORP   17,633    714,130    1.43%
OMNOVA SOLUTIONS INC COM STK   37,264    376,737    0.76%
OSRAM LICHT AG NAMENS-AKTIEN (GFR LISTING)   11,681    521,104    1.04%
PIVOTAL SOFTWARE INC - CL A   45,022    673,972    1.35%
PRESIDIO INC   16,755    278,133    0.56%
RIVIERA RESOURCES INC/LINN   31,708    413,468    0.83%
SUNTRUST BKS INC COM STK   36,544    2,497,410    5.01%
TALLGRASS ENERGY LP   34,462    662,022    1.33%
TRINITY INDS INC COM STK   18,236    360,708    0.72%
UNITED TECHNOLOGIES CORP   7,629    1,095,330    2.20%
WABCO HOLDINGS INC   17,303    2,329,335    4.67%
WELLCARE HEALTH PLANS INC COM STK   7,330    2,174,178    4.36%
WESTJET AIRLINE COM STK CAD   100,967    2,349,129    4.71%
ZAYO GROUP HOLDINGS INC   66,268    2,262,375    4.53%
COMMON STOCK Total   1,258,083    37,171,155    74.53%

 

See Notes to Financial Statements.

Semi-Annual Report | October 31, 2019 19

 

 

Highland Resolute Fund Consolidated Schedule of Investments

 

  October 31, 2019 (Unaudited)

 

Description 

Contracts/ Shares

   Value  

Percentage of Value

   Swap Counterparty 

Floating Rate/Fixed Rate Amount paid by Fund

 

Floating Rate Index

 

Termination Date

  

Unrealized Gain (Loss)

 
CORPORATE BONDS                           
CC 6.625 15MAY2023   318,906   $327,154    0.66%                 
FE 6.85 01JUN2034   1,171,032    689,647    1.38%                 
GNW FRN 15NOV2036   648,078    401,005    0.80%                 
ISATLN CB 3.875 09SEP2023   513,329    778,241    1.56%                 
PCG 4.75 15FEB2044   877,151    842,414    1.69%                 
PCG 5.8 01MAR2037   734,702    734,151    1.47%                 
PUERTO RICO ELECTRIC POWER AUTH SER 2013   234,206    181,509    0.36%                 
PUERTO RICO ELECTRIC POWER AUTH SER WW-R   256,664    194,102    0.39%                 
PUERTO RICO ELECTRIC                                
POWER AUTH SER XX-R   988,158    743,589    1.49%                 
CORPORATE BONDS Total   5,742,226    4,891,813    9.80%                 
TOTAL LONG   7,000,309   $42,062,968    84.33%                 
                                 
SECURITIES SOLD SHORT                                
COMMON STOCK                                
ABBVIE INC   (9,146)   (740,256)   -1.48%                 
BB&T CORP COM STK   (47,283)   (2,508,349)   -5.03%                 
BRISTOL MYERS SQUIBB   (47,674)   (2,758,430)   -5.53%                 
CARNIVAL CORP   (11,019)   (472,588)   -0.95%                 
CENTENE CORP DEL COM STK   (24,774)   (1,314,999)   -2.64%                 
ELDORADO RESORTS LLC   (14,026)   (627,947)   -1.26%                 
GENWORTH FINANCIAL INC   (49,781)   (213,061)   -0.43%                 
HILLENBRAND   (11,114)   (342,206)   -0.69%                 
RAYTHEON COMPANY COM   (1,489)   (316,044)   -0.63%                 
CORPORATE BONDS Total   (216,305)   (9,293,880)   -18.64%                 
                                 
CORPORATE BONDS CC 7 15MAY2025   (318,906)   (318,236)   -0.64%                 
CORPORATE BONDS Total   (318,906)   (318,236)   -0.64%                 
                                 
EQUITY SWAP                                
ABBVIE INC   (14,510)   (197,767)   -0.40%  Morgan Stanley & Co. LLC  1D FEDEF - 35 bps  1D FEDEF  6/29/2021   (306,135)
EQUITY SWAP Total   (14,510)   (197,767)   -0.40%                 
TOTAL SHORT   (549,720)  $(9,809,884)   -19.68%                 
                                 
REMAINING SECURITIES AND CASH        17,639,672    35.35%                 
TOTAL VALUE       $49,892,756                       

 

See Notes to Financial Statements.

20

 

 

 

Highland Resolute Fund Consolidated Schedule of Investments

 

  October 31, 2019 (Unaudited)

 

WABR

 

Description  Contracts/Shares   Value   Percentage of Value 
LONG SECURITIES               
COMMON STOCK               
ALLERGAN ORD (NYS)   2,032   $357,856    1.00%
AMERICAN ASSETS REIT ORD (NYS)   4,519    221,250    0.62%
AMERICAN ELECTRIC POWER ORD (NYS)   2,688    253,720    0.71%
APARTMENT INVST MGT CL A REIT ORD (NYS)   3,905    214,306    0.60%
CELGENE ORD (NMS)   3,311    357,687    1.00%
DOUGLAS EMMETT REIT ORD (NYS)   5,747    248,960    0.70%
DUKE REALTY REIT ORD (NYS)   6,281    220,714    0.62%
EQUITY LIFESTYLE PROP REIT ORD (NYS)   4,560    318,926    0.89%
FIRSTENERGY ORD (NYS)   3,946    190,671    0.53%
FOUR CORNERS PROPERTY ORD (NYS)   8,512    243,869    0.68%
HEALTHCAR TRST OF AM CL A REIT ORD (NYS)   8,712    270,072    0.76%
HUDSON PACIFIC PROPERTIES REIT ORD (NYQ)   7,882    283,121    0.79%
INVSC S P 500 EQUAL WEIGHT ETF (PSE)   14,200    1,553,622    4.35%
ISHARES 7-10 YEAR TRSURY BOND ETF (NMS)   1,592    179,116    0.50%
ISHARES IBOXX HIGH YIELD BOND ETF (PSE)   48,321    4,194,746    11.73%
ISHARES IBOXX INVT GRADE BOND ETF (PSE)   32,907    4,202,553    11.76%
NATIONAL HEALTH INVESTORS REIT ORD (NYS)   3,595    308,415    0.86%
NATIONAL RETAIL PROPERTIES REIT ORD (NYS)   6,686    393,872    1.10%
RPT REALTY ORD (NYS)   18,458    267,641    0.75%
SPDR S&P MIDCAP 400 ETF (PSE)   0,808    287,834    0.81%
SPIRIT REALTY CAPITAL REIT ORD (NYS)   6,755    336,669    0.94%
UDR REIT ORD (NYS)   6,741    338,735    0.95%
VICI PPTYS ORD (NYS)   17,152    403,930    1.13%
VIRGIN GALACTIC HOLDINGS CL A ORD (NYS)   29,141    274,217    0.77%
WABCO HOLDINGS ORD (NYS)   1,491    200,718    0.56%
WEINGARTEN RLTY REIT ORD (NYS)   12,481    396,022    1.11%
ZAYO GROUP HOLDINGS ORD (NYS)   9,243    315,556    0.88%
COMMON STOCK Total   271,666    16,834,798    47.10%
                
CORPORATE BONDS               
BESPL EMTN 0.0000% 2020-01-15   700,000    203,653    0.57%
CORPORATE BONDS Total   700,000    203,653    0.57%
TOTAL LONG   971,666   $17,038,451    47.67%
                
SECURITIES SOLD SHORT               
COMMON STOCK               
AMERICAN FIN CL A ORD (NMQ)   (12,723)   (188,300)   -0.53%
AMERICAN HOMES 4 RENT CL A REIT ORD (NYS)   (7,368)   (195,031)   -0.55%
BRANDYWINE REALTY REIT ORD (NYS)   (21,694)   (331,484)   -0.93%
BRISTOL MYERS SQUIBB ORD (NYS)   (3,311)   (189,952)   -0.53%
CAMDEN PROPERTY REIT ORD (NYS)   (2,906)   (332,359)   -0.93%
ESSEX PROPERTY REIT ORD (NYS)   (961)   (314,372)   -0.88%
GAMING AND LEISURE PROPERTIES REIT O (NMQ)   (4,680)   (188,885)   -0.53%
HEALTHCARE REAL REIT ORD (NYS)   (5,164)   (179,552)   -0.50%
INVSC QQQ TRUST SRS 1 ETF (NMS)   (1,014)   (199,839)   -0.56%
ISHARES US TECHNOLOGY ETF (PSE)   (1,144)   (242,539)   -0.68%
KIMCO REALTY REIT ORD (NYS)   (26,155)   (563,902)   -1.58%
MELLANOX TECHNOLOGIES ORD (NMQ)   (2,123)   (239,262)   -0.67%
MGM GROWTH PROPERTIES CL A ORD (NYS)   (7,896)   (246,434)   -0.69%
NEXTERA ENERGY ORD (NYS)   (866)   (206,402)   -0.58%
PROLOGIS REIT (NYS)   (2,554)   (224,139)   -0.63%

 

See Notes to Financial Statements.

Semi-Annual Report | October 31, 2019 21

 

 

Highland Resolute Fund Consolidated Schedule of Investments

 

  October 31, 2019 (Unaudited)

 

Description  Contracts/Shares   Value   Percentage of Value 
COMMON STOCK (CONTINUED)               
REALTY INCOME REIT ORD (NYS)   (4,898)   (400,607)   -1.12%
SL GREEN RLTY REIT ORD (NYS)   (2,395)   (200,222)   -0.56%
SPRINT ORD (NYS)   (36,100)   (224,181)   -0.63%
STORE CAPITAL ORD (NYS)   (10,778)   (436,509)   -1.22%
SUN COMMUNITIES REIT ORD (NYS)   (2,023)   (329,041)   -0.92%
TANGER FACTORY REIT ORD (NYS)   (10,981)   (177,014)   -0.50%
WEC ENERGY GROUP ORD (NYS)   (3,357)   (316,901)   -0.89%
COMMON STOCK Total   (171,091)   (5,926,927)   -16.61%
TOTAL SHORT   (171,091)  $(5,926,927)   -16.61%
                
REMAINING SECURITIES AND CASH       $24,635,152    68.94%
TOTAL VALUE       $35,746,676      

 

Common Abbreviations:

 

AQR - AQR Capital Management LLC.

BBA - British Bankers Association.

EURIBOR - Euro Interbank Offered Rate.

LIBOR - London Interbank Offered Rate.

PIMCO - Pacific Investment Management Company.

S&P - Standard & Poor's.

SPDR - Standard & Poor's Depositary Receipt.

 

Currency Abbreviations:

 

AUD - Australian Dollar

CAD - Canada Dollar

CHF - Franc Switzerland

EUR - Euro

GBP - Great British Pound

INR - India Rupee

JPY - Japan Yen

KRW - South Korea Won

MXN - Mexico Peso

NOK - Norwegian Krone

PLN - Poland Zloty

SEK - Swedish Krona

SGD - Singapore Dollar

USD - United States Dollar

 

See Notes to Financial Statements.

22

 

 

 

Highland Resolute Fund Consolidated Statement of Assets and Liabilities

 

  October 31, 2019 (Unaudited)

 

ASSETS    
Investments, at value  $228,604,013 
Unrealized appreciation on total return swap contracts   26 
Deposits with brokers for total return swap contracts   82,062,406 
Cash   1,938 
Foreign currency, at value (Cost $13)   13 
Receivable for investments sold   1,038,264 
Dividends receivable   361,793 
Interest receivable   416,137 
Receivable for interest on total return swap contracts   1,340,730 
Other assets   15,653 
Total assets   313,840,973 
LIABILITIES     
Securities sold short (Proceeds $8,642,833)   9,546,879 
Unrealized depreciation on total return swap contracts   2 
Investment advisory fees payable   72,359 
Distributions and service fees payable   68,450 
Payable for interest expense on total return swap contracts   1,785,174 
Payable for investments purchased   813,627 
Trustee fees and expenses payable   9,130 
Chief compliance officer fee payable   12,218 
Principal financial officer fees payable   1,694 
Administration fees payable   76,018 
Transfer agent fees payable   15,290 
Professional fees payable   44,566 
Custody fees payable   18,803 
Accrued expenses and other liabilities   457 
Total liabilities   12,464,667 
NET ASSETS  $301,376,306 
NET ASSETS CONSIST OF     
Paid-in capital (Note 6)  $305,655,660 
Total distributable earnings   (4,279,354)
NET ASSETS  $301,376,306 
INVESTMENTS, AT COST  $228,574,985 
PRICING OF SHARES     
Class I:     
Net Asset Value, offering and redemption price per share  $10.13 
Net Assets  $301,376,306 
Shares of beneficial interest outstanding (unlimited number of shares, no par value common stock authorized)   29,742,878 

  

See Notes to Financial Statements.

Semi-Annual Report | October 31, 2019 23

 

 

Highland Resolute Fund Consolidated Statement of Operations

 

  For the Six Months Ended October 31, 2019 (Unaudited)

  

INVESTMENT INCOME     
Dividends  $2,581,833 
Interest   1,551,966 
Foreign taxes withheld   777 
Total investment income   4,134,576 
EXPENSES     
Investment advisory fees (Note 7)   2,293,416 
Investment advisory fee-subsidiary   139,179 
Administration fees   224,226 
Transfer agency fees   37,044 
Distribution and service fees     
Class I   24,204 
Professional fees   37,349 
Custody fees   36,923 
Reports to shareholders and printing fees   2,634 
Trustee fees and expenses   9,460 
Registration/filing fees   12,190 
Chief compliance officer fees   41,051 
Principal financial officer fees   5,027 
Dividend expense on securities sold short   113,438 
Interest expense on securities sold short   26,525 
Other   8,208 
Total expenses before waivers   3,010,874 
Less fees waived/reimbursed by investment adviser (Note 7)     
Class I   (1,808,234)
Waiver of investment advisory fees - subsidiary (Note 7)   (139,179)
Total net expenses   1,063,461 
      
NET INVESTMENT INCOME   3,071,115 
Net realized loss on investments   (4,931,966)
Net realized gain on securities sold short   91,514 
Net realized loss on total return swap contracts   (2,544,565)
Net realized loss on foreign currency transactions   (7,088)
Total net realized loss   (7,392,105)
Net change in unrealized depreciation on investments   (988,387)
Net change in unrealized depreciation on securities sold short   (125,582)
Net change in unrealized appreciation on total return swap contracts   43,266 
Net change in unrealized depreciation on translation of assets and liabilities in foreign currency transactions   (12,074)
Total net change in unrealized depreciation   (1,082,777)
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS   (8,474,882)
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS  $(5,403,767)

 

See Notes to Financial Statements.

24

 

 

 

Highland Resolute Fund Consolidated Statements of Changes in Net Assets

 

   Six Months Ended October 31, 2019 (Unaudited)   For the Year Ended April 30, 2019 
OPERATIONS          
Net investment income  $3,071,115   $6,846,351 
Net realized loss   (7,392,105)   (5,212,697)
Net realized gain distributions from other investment companies       50,001 
Net change in unrealized depreciation   (1,082,777)   (2,199,323)
Net decrease in net assets resulting from operations   (5,403,767)   (515,668)
TOTAL DISTRIBUTIONS (NOTE 4)          
Class I       (15,995,417)
Net decrease in net assets from distributions       (15,995,417)
BENEFICIAL INTEREST TRANSACTIONS (NOTE 6)          
Shares sold          
Class I   8,116,426    9,834,051 
Dividends reinvested          
Class I       15,995,417 
Shares redeemed, net of redemption fees          
Class I   (33,771,290)   (50,748,365)
Net decrease in net assets derived from beneficial interest transactions   (25,654,864)   (24,918,897)
Net decrease in Net Assets   (31,058,631)   (41,429,982)
NET ASSETS:          
Beginning of period   332,434,937    373,864,919 
End of period  $301,376,306   $332,434,937 

 

See Notes to Financial Statements. 

Semi-Annual Report | October 31, 2019 25

 

 

Highland Resolute Fund Consolidated Financial Highlights

 

  For a share outstanding throughout the periods presented

 

    Class I
    For the Six Months Ended October 31, 2019 (Unaudited)    For the Year Ended April 30, 2019    For the Year Ended April 30, 2018(a)    For the Year Ended April 30, 2017(b)    For the Year Ended April 30, 2016    For the Year Ended April 30, 2015 
NET ASSET VALUE, BEGINNING OF PERIOD  $10.30   $10.81   $11.14   $10.75   $11.32   $11.18 
INCOME/(LOSS) FROM OPERATIONS                              
Net investment income(c)   0.10    0.20    0.25    0.09    0.16    0.20 
Net realized and unrealized gain/(loss) on investments   (0.27)   (0.22)   0.38    0.45    (0.39)   0.26 
Total from Investment Operations   (0.17)   (0.02)   0.63    0.54    (0.23)   0.46 
                               
LESS DISTRIBUTIONS                              
Net investment income       (0.15)   (0.77)   (0.13)   (0.18)   (0.24)
Net realized gain on investments       (0.34)   (0.19)   (0.02)   (0.16)   (0.08)
Total Distributions       (0.49)   (0.96)   (0.15)   (0.34)   (0.32)
NET INCREASE/(DECREASE) IN NET ASSET VALUE   (0.17)   (0.51)   (0.33)   0.39    (0.57)   0.14 
NET ASSET VALUE, END OF PERIOD  $10.13   $10.30   $10.81   $11.14   $10.75   $11.32 
TOTAL RETURN(d)   (1.65)%   0.22%   5.51%   5.04%   (2.02)%   4.16%
                               
RATIOS/SUPPLEMENTAL DATA                              
Net assets, End of Period (000s)  $301,376   $332,435   $373,865   $491,811   $686,659   $689,266 
RATIOS TO AVERAGE NET ASSETS:                              
Operating expenses excluding reimbursement/waiver(e)   1.88%(f)(g)(h)   1.89%(g)(h)   1.94%(g)(h)   1.77%(g)(h)   1.69%(g)   1.68%(g)
Operating expenses including reimbursement/waiver(e)   0.70%(f)(g)   0.74%(g)   0.82%(g)   0.52%(g)   0.35%(g)   0.33%(g)
Net investment income including reimbursement/waiver(e)   2.01%(f)   1.95%   2.24%   0.86%   1.49%   1.79%
PORTFOLIO TURNOVER RATE   39%(i)   55%   79%   94%   27%   54%

 

(a)Prior to August 31, 2017 the Highland Resolute Fund was known as the Redmont Resolute Fund.
(b)Prior to August 31, 2016 the Highland Resolute Fund was known as the Redmont Resolute Fund II.
(c)Calculated using the average shares method.
(d)Total investment return is calculated assuming a purchase of a common share at the opening of the first day and a sale at closing on the last day of each period reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Fund's dividend reinvestment plan. Total returns would have been lower had certain expenses not been waived during the period. Total investment returns do not reflect brokerage commissions, if any, and are not annualized.
(e)The ratios exclude the impact of expenses of the underlying funds in which the Fund invests as represented in the Schedule of Investments.
(f)Annualized.
(g)Dividend and interest expense on securities sold short totaled 0.09%, 0.19%, 0.25%, 0.10%, 0.08%, and 0.10% of average net assets for the six months ended October 31, 2019 and for the years ended April 30, 2019, 2018, 2017, 2016, and 2015, respectively.
(h)The ratio of operating expenses excluding fee waiver/reimbursements to average net assets is calculated excluding the waived Subsidiary management fee (See Note 7 for additional detail). The ratio inclusive of that fee would be 1.97%, 1.97%, 2.01% and 1.81% for the six months ended October 31, 2019 and for the years ended April 30, 2019, 2018 and 2017, respectively.

(i)Not Annualized.

 

See Notes to Financial Statements.

26

 

 

 

Highland Resolute Fund Notes to Consolidated Financial Statements

 

  October 31, 2019 (Unaudited)

 

1. ORGANIZATION

 

Financial Investors Trust (the “Trust”), a Delaware statutory trust, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (“1940 Act”). The Trust consists of multiple separate portfolios or series. This semi-annual report describes the Highland Resolute Fund (the “Fund”). Effective August 31, 2017, the Fund changed its name from Redmont Resolute Fund. The Fund seeks to provide long-term total return with reduced volatility and reduced correlation to the conventional stock and bond markets. The Fund offers Class I shares.

 

Basis of Consolidation: Highland Resolute Cayman (the “Subsidiary”), a Cayman Islands exempted company, is a wholly owned subsidiary of the Fund. The Subsidiary’s investment objective is designed to enhance the ability of the Fund to obtain exposure to equities, financial, currency and commodities markets consistent with the limits of the U.S. federal tax law requirements applicable to registered investment companies. The Subsidiary is subject to substantially the same investment policies and investment restrictions as the Fund. The Subsidiary acts as an investment vehicle for the Fund in order to effect certain commodity-related investments on behalf of the Fund. Investments in the Subsidiary are expected to provide the Fund with exposure to the commodity markets within the limitations of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), and recent IRS revenue rulings, as discussed below under “Federal Income Taxes”. The Fund is the sole shareholder of the Subsidiary pursuant to a subscription agreement, and it is intended that the Fund will remain the sole shareholder and will continue to control the Subsidiary. Under the Articles of Association of the Subsidiary, shares issued by the Subsidiary confer upon a shareholder the right to wholly own and vote at general meetings of the Subsidiary and certain rights in connection with any winding-up or repayment of capital, as well as the right to participate in the profits or assets of the Subsidiary. The Fund may invest up to 25% of its total assets in shares of the Subsidiary. As a wholly owned subsidiary of the Fund, all assets and liabilities, income and expenses of the Subsidiary are consolidated in the financial statements and financial highlights of the Fund. All investments held by the Subsidiary are disclosed in the accounts of the Fund. As of October 31, 2019, net assets of the Fund were $301,376,306, of which $17,190,519 or 5.70%, represented the Fund’s ownership of all issued shares and voting rights of the Subsidiary.

 

2. SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. The Fund is considered an investment company for financial reporting purposes under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946. The following is a summary of significant accounting policies consistently followed by the Fund and Subsidiary in preparation of the financial statements.

 

Investment Valuation: The Fund generally values its securities based on market prices determined at the close of regular trading on the New York Stock Exchange (“NYSE”), normally 4:00 p.m. Eastern Time, on each day the NYSE is open for trading.

 

For equity securities and mutual funds that are traded on an exchange, the market price is usually the closing sale or official closing price on that exchange. In the case of equity securities not traded on an exchange, or if such closing prices are not otherwise available, the securities are valued at the mean of the most recent bid and ask prices on such day. Redeemable securities issued by open-end registered investment companies are valued at the investment company’s applicable net asset value, with the exception of exchange-traded open-end investment companies, which are priced as equity securities.

 

The market price for debt obligations is generally the price supplied by an independent third-party pricing service approved by the Board of Trustees of the Trust (the “Board”), which may use a matrix, formula or other objective method that takes into consideration quotations from dealers, market transactions in comparable investments, market indices and yield curves. If vendors are unable to supply a price, or if the price supplied is deemed to be unreliable, the market price may be determined using quotations received from one or more brokers–dealers that make a market in the security. Municipal securities having a remaining maturity of greater than 60 days, are typically valued at the evaluated bid price formulated by an independent pricing service. Corporate Bonds, U.S. Government & Agency, and U.S. Treasury Bonds & Notes are valued using market models that consider trade data, quotations from dealers and active market makers, relevant yield curve and spread data, creditworthiness, trade data or market information on comparable securities, and other relevant security specific information. Mortgage-related and asset-backed securities are valued based on models that consider trade data, prepayment and default projections, benchmark yield and spread data and estimated cash flows of each tranche of the issuer. Publicly traded foreign government debt securities are typically traded internationally in the over-the-counter market and are valued at the mean between the bid and asked prices as of the close of business of that market.

 

Semi-Annual Report | October 31, 2019 27

 

 

Highland Resolute Fund Notes to Consolidated Financial Statements

 

  October 31, 2019 (Unaudited)

 

Futures contracts that are listed or traded on a national securities exchange, commodities exchange, contract market or comparable over the counter market, and that are freely transferrable, are valued at their closing settlement price on the exchange on which they are primarily traded or based upon the current settlement price for a like instrument acquired on the day on which the instrument is being valued. A settlement price may not be used if the market makes a limit move with respect to a particular commodity. Over-the-counter swap contracts for which market quotations are readily available are valued based on quotes received from independent pricing services or one or more dealers that make markets in such securities. Options contracts listed for trading on a securities exchange or board of trade are valued at the last quoted sales price or, in the absence of a sale at the mean of the last bid and asked price.

 

Forward currency exchange contracts have a fair value determined by the current foreign currency exchange forward rates. The foreign currency exchange forward rates are calculated using an automated system that estimates rates on the basis of the current day foreign currency exchange rates and forward foreign currency exchange rates supplied by a pricing service. Foreign exchange rates and forward foreign currency exchange rates may generally be obtained at the close of the NYSE, normally 4:00 p.m. Eastern Time.

 

When such prices or quotations are not available, or when Highland Associates, Inc. (the “Adviser”) believes that they are unreliable, securities may be priced using fair value procedures approved by the Board.

 

Fair Value Measurements: The Fund discloses the classification of its fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.

 

Various inputs are used in determining the value of the Fund’s investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments. These inputs are categorized in the following hierarchy under applicable financial accounting standards:

 

Level 1 – Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that the Fund has the ability to access at the measurement date;

 

Level 2 – Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and

 

Level 3 – Significant unobservable prices or inputs (including the Fund’s own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date.

 

28

 

 

 

Highland Resolute Fund Notes to Consolidated Financial Statements

 

  October 31, 2019 (Unaudited)

 

The following is a summary of the inputs used to value the Fund’s investments as of October 31, 2019:

 

Highland Resolute Fund

 

Investments in Securities at Value  Level 1 - Quoted Prices   Level 2 - Other Significant Observable Inputs   Level 3 - Significant Unobservable Inputs   Total 
Common Stocks                    
Commercial Services  $4,480,406   $   $384,930   $4,865,336 
Other*   36,285,430            36,285,430 
Open-End Mutual Funds  $135,969,981   $   $   $135,969,981 
Preferred Stock           2,320,175    2,320,175 
Corporate Bonds*       22,611,790        22,611,790 
Short-Term Investments                    
Money Market Fund   26,551,301            26,551,301 
Total  $203,287,118   $22,611,790   $2,705,105   $228,604,013 
                     
Other Financial Instruments**                    
Assets:                    
Total Return Swap Contracts  $   $26   $   $26 
Liabilities:                    
Exchange Traded Funds Sold Short   (9,546,879)           (9,546,879)
Total Return Swap Contracts       (2)       (2)
Total  $(9,546,879)  $24   $   $(9,546,855)

 

*For detailed descriptions, see the accompanying Schedule of Investments.

**Other financial instruments are derivative instruments reflected in the Schedule of Investments. The derivatives shown in the table are reported at their unrealized appreciation/(depreciation) at measurement date, which represents the change in the contract’s value from trade date.

 

The changes of the fair value of investments for which the Fund have used Level 3 inputs to determine the fair value are as follows:

 

Asset Type  Balance as of April 30, 2019   Accrued Discount/ Premium   Return of Capital   Realized Gain/ (Loss)   Change in Unrealized Appreciation/ Depreciation   Purchases   Sales Proceeds   Transfer into Level 3   Transfer Out of Level 3   Balance as of October 31, 2019   Net change in unrealized appreciation/ (depreciation) included in the Statements of Operations attributable to Level 3 investments held at October 31, 2019 
Common Stocks  $   $   $   $   $234,516   $150,414   $   $   $   $384,930   $234,516 
Preferred Stocks                   1,413,554    906,621                2,320,175    1,413,554 
   $   $   $   $   $1,648,070   $1,057,035   $   $   $   $2,705,105   $1,648,070 

 

Trust Expenses: Some expenses of the Trust can be directly attributed to the Fund. Expenses which cannot be directly attributed to the Fund are apportioned among all funds in the Trust based on average net assets of the Fund.

 

Federal Income Taxes: The Fund complies with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies and intend to distribute substantially all of their net taxable income and net capital gains, if any, each year so that the Fund will not be subject to excise tax on undistributed income and gains. The Fund is not subject to income taxes to the extent such distributions are made.

 

As of and during the six months ended October 31, 2019, the Fund did not have a liability for any unrecognized tax benefits. The Fund files U.S. federal, state, and local tax returns as required. The Fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return for federal purposes and four years for most state returns. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.

 

Semi-Annual Report | October 31, 2019 29

 

 

Highland Resolute Fund Notes to Consolidated Financial Statements

  October 31, 2019 (Unaudited)

 

Investment Transactions and Investment Income: Investment transactions are accounted for on the date the investments are purchased or sold (trade date basis). Net realized gains and losses from investment transactions are reported on an identified cost basis. Interest income, which includes accretion of discounts and amortization of premiums, is accrued and recorded as earned. Dividend income is recognized on the ex-dividend date or for certain foreign securities, as soon as information is available to the Fund. All of the realized and unrealized gains and losses and net investment income, are allocated daily to each class in proportion its average daily net assets.

 

Short Sales: The Fund may make short sales of securities consistent with its strategies. A short sale is a transaction in which a Fund sells a security it does not own in anticipation that the market price of that security will decline.

 

When a Fund makes a short sale, it must borrow the security sold short and deliver it to the broker dealer through which it made the short sale as collateral for its obligation to deliver the security upon conclusion of the sale. The Fund may have to pay a fee to borrow particular securities and is often obligated to pay over any accrued interest and dividends on such borrowed securities.

 

If the price of the security sold short increases between the time of the short sale and the time that a Fund replaces the borrowed security, the Fund will incur a loss; conversely, if the price declines, the Fund will realize a capital gain. Any gain will be decreased, and any loss increased, by the transaction costs described above. The successful use of short selling may be adversely affected by imperfect correlation between movements in the price of the security sold short and the securities being hedged.

 

To the extent that a Fund engages in short sales, it will provide collateral to the broker-dealer and (except in the case of short sales “against the box”) will maintain additional asset coverage in the form of segregated or “earmarked” assets determined to be liquid in accordance with procedures established by the Board and that is equal to the current market value of the securities sold short, or will ensure that such positions are covered by “offsetting” positions, until the Fund replaces the borrowed security. A short sale is “against the box” to the extent that the Fund contemporaneously owns, or has the right to obtain at no added cost, securities identical to those sold short. The Fund may engage in short selling to the extent permitted by the federal securities laws and rules and interpretations thereunder. To the extent a Fund engages in short selling in foreign (non-U.S.) jurisdictions, the Fund will do so to the extent permitted by the laws and regulations of such jurisdiction.

 

Distributions to Shareholders: The Fund normally pays dividends and distributes capital gains, if any, on an annual basis. Income dividend distributions are derived from interest and dividends and other income the Fund receives from their investments, including distributions of short term capital gains. Capital gain distributions are derived from gains realized when the Fund sells a security it has owned for more than a year. The Fund may make additional distributions and dividends at other times if its portfolio manager or managers believe doing so may be necessary for the Fund to avoid or reduce taxes.

 

3. DERIVATIVE INSTRUMENTS

 

Swap Contracts: The Fund may enter into swap transactions for hedging purposes or to seek to increase total return. At the present time, the Fund primarily enters into swap transactions for the purpose of increasing total return. Risks may arise as a result of the failure of the counterparty to the swap contract to comply with the terms of the swap contract. The loss incurred by the failure of a counterparty is generally limited to the net payment to be received by the Fund and/or the termination value at the end of the contract.

 

Therefore, the Fund considers the creditworthiness of each counterparty to a contract in evaluating potential credit risk. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying reference asset or index. Entering into these agreements involves, to varying degrees, market risk, liquidity risk and elements of credit, legal and documentation risk that are not directly reflected in the amounts recognized in the Statements of Assets and Liabilities.

 

The Fund invests in total return swaps to obtain exposure to a security or market without owning such security or investing directly in that market or to transfer the risk/return of one market (e.g., fixed income) to another market (e.g., equity) (equity risk and/or interest rate risk). Total return swaps are agreements in which there is an exchange of cash flows whereby one party commits to make payments based on the total return (coupons plus capital gains/losses) of an underlying instrument in exchange for fixed or floating rate interest payments. To the extent the total return of the instrument or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty. The Fund may pay or receive cash as collateral on these contracts which may be recorded as an asset and/or liability. The Fund must set aside liquid assets, or engage in other appropriate measures, to cover its obligations under these contracts. Swaps are marked to market daily using either pricing vendor quotations, counterparty prices or model prices and the change in value, if any, is recorded as an unrealized gain or loss. Upfront payments made and/or received by the Fund are recorded as an asset and/or liability and realized gains or losses are recognized ratably over the contract’s term/event, with the exception of forward starting interest rate swaps, whose realized gains or losses are recognized ratably from the effective start date. Periodic payments received or made on swap contracts are recorded as

 

30

 

 

 

Highland Resolute Fund Notes to Consolidated Financial Statements

 

  October 31, 2019 (Unaudited)

 

realized gains or losses. Gains or losses are realized upon termination of a swap contract and are recorded on the Statement of Operations. Swap agreements held at October 31, 2019 are disclosed in the Consolidated Schedule of Investments.

 

International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreements”) govern OTC financial derivative transactions entered into by the Fund and those counterparties. The ISDA Master Agreements maintain provisions for general obligations, representations, agreements, collateral and events of default or termination. Events of termination include conditions that may entitle counterparties to elect to terminate early and cause settlement of all outstanding transactions under the applicable ISDA Master Agreement. Any election to early terminate could be material to the financial statements.

 

Option Contracts: The Fund may enter into options transactions for hedging purposes and for non-hedging purposes such as seeking to enhance return. The Fund may write covered put and call options on any stocks or stock indices, currencies traded on domestic and foreign securities exchanges, or futures contracts on stock indices, interest rates and currencies traded on domestic and, to the extent permitted by the CFTC, foreign exchanges. A call option on an asset written by the Fund obligates the Fund to sell the specified asset to the holder (purchaser) at a stated price (the exercise price) if the option is exercised before a specified date (the expiration date). A put option on an asset written by a Fund obligates the Fund to buy the specified asset from the purchaser at the exercise price if the option is exercised before the expiration date. Premiums received when writing options are recorded as liabilities and are subsequently adjusted to the current value of the options written. Premiums received from writing options that expire are treated as realized gains. Premiums received from writing options, which are either exercised or closed, are offset against the proceeds received or amount paid on the transaction to determine realized gains or losses which are recorded on the Statement of Operations.

 

Futures: The Fund may enter into futures contracts for hedging purposes. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date. Upon entering into a futures contract, the Fund is required to deposit an initial margin with the broker in an amount equal to a certain percentage of the contract amount. The Fund receives from or pays to the broker, on a daily basis, an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as “variation margin,” and are recorded by the Fund as unrealized gains or losses. When the futures contract is closed, the Fund records a gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.

 

The Fund’s potential losses from the use of futures extend beyond its initial investment in such contracts. The use of futures contracts involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statements of Assets and Liabilities. The predominant risk is that the movement of a futures contract’s price may result in a loss, which could render the Fund’s hedging strategy unsuccessful. There is minimal counterparty credit risk since futures contracts are exchange traded and the exchange’s clearinghouse, as counterparty to all exchange traded futures, guarantees the futures against default.

 

Risk Exposure: The following tables disclose the amounts related to the Fund’s use of derivative instruments.

 

The effect of derivatives instruments on the Statements of Assets and Liabilities as of October 31, 2019 was as follows:

 

Risk Exposure  Asset Derivatives Statements of Assets and Liabilities Location  Fair Value   Liability Derivatives Statements of Assets and Liabilities Location  Fair Value 
Highland Resolute Fund                
Equity Contracts (Total Return Swap Contracts)  Unrealized appreciation on total return swap contracts  $26   Unrealized depreciation on total return swap contracts  $2 
Total     $26      $2 

 

Semi-Annual Report | October 31, 2019 31

 

 

Highland Resolute Fund Notes to Consolidated Financial Statements

 

  October 31, 2019 (Unaudited)

 

The effect of derivatives instruments on the Statements of Operations for the six months ended October 31, 2019 was as follows:

 

Risk Exposure  Statement of Operations Location 

Realized Gain/(Loss) on Derivatives Recognized in Income

  

Change in Unrealized Appreciation/(Depreciation) on Derivatives Recognized in Income

 
Highland Resolute Fund             
Equity Contracts(Total Return Swap Contracts)  Net realized gain on total return swap contracts/Net change in unrealized depreciation on total return swap contracts  $(2,544,565)  $43,266 
              
Equity Contracts(Purchased Options)  Net realized loss on investments/Net change in unrealized depreciation on investments   (167,546)   46,741 
Total     $(2,712,111)  $90,007 

 

Volume of Derivative Instruments for the Fund during the six months ended October 31, 2019 was as follows:

 

Derivative Type  Unit of Measurement  Monthly Average 
Highland Resolute Fund        
Equity Contracts (Total Return Swap Contracts)  Notional Quantity   172,087,439 

 

Certain derivative contracts and repurchase agreements are executed under either standardized netting agreements or, for exchange-traded derivatives, the relevant contracts for a particular exchange which contain enforceable netting provisions. A derivative netting arrangement creates an enforceable right of set-off that becomes effective, and affects the realization of settlement on individual assets, liabilities and collateral amounts, only following a specified event of default or early termination. Default events may include the failure to make payments or deliver securities timely, material adverse changes in financial condition or insolvency, the breach of minimum regulatory capital requirements, or loss of license, charter or other legal authorization necessary to perform under the contract.

 

32

 

 

 

Highland Resolute Fund Notes to Consolidated Financial Statements

 

  October 31, 2019 (Unaudited)

 

The following table presents financial instruments that are subject to enforceable netting arrangements or other similar agreements as of October 31, 2019:

 

Highland Resolute Fund

Offsetting of Derivatives Assets

 

              

Gross Amounts Not Offset in the Statement of Assets and Liabilities

 
   Gross Amounts of Recognized Assets   Gross Amounts Offset in the Statement of Assets and Liabilities   Net Amounts Presented in the Statement of Assets and Liabilities   Financial Instruments Available for Offset(a)   Cash Collateral Received(a)   Net Receivable Amount 
Total Return Swap Contracts  $26   $   $26   $(26)  $   $ 
Total  $26   $   $26   $(26)  $   $ 

 

Highland Resolute Fund

Offsetting of Derivatives Liabilities

 

 

               Gross Amounts Not Offset in the Statement of Assets and Liabilities 
   Gross Amounts of Recognized Liabilities   Gross Amounts Offset in the Statement of Financial Position   Net Amounts Presented in the Statement of Financial Position   Financial Instruments Available for Offset(a)   Cash Collateral Pledged(a)   Net Payable Amount 
Total Return Swap Contracts  $2   $   $2   $(26)  $24   $ 
Total  $2   $   $2   $(26)  $24   $ 

 

(a)These amounts are limited to the derivative asset/liability balance and, accordingly, do not include excess collateral received/pledged.

 

4. TAX BASIS INFORMATION

 

Tax Basis of Investments: As of October 31, 2019, the aggregate cost of investments, gross unrealized appreciation/(depreciation) and net unrealized appreciation for Federal tax purposes were as follows:

 

   Gross Appreciation (excess of value over tax cost)   Gross Depreciation (excess of tax cost over value)   Net Unrealized Appreciation/(Depreciation)   Cost of Investments for Income Tax Purposes 
Highland Resolute Fund  $177,461,375   $(178,739,161)  $(1,277,786)  $228,977,777 

 

Tax Basis of Distributions to Shareholders: The character of distributions made during the year from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or realized gain were recorded by the Fund.

 

The tax character of distributions paid by the Fund for the fiscal year ended April 30, 2019, were as follows:

 

   Ordinary Income   Long-Term Capital Gains 
Highland Resolute Fund  $5,227,081   $10,768,336 

 

Semi-Annual Report | October 31, 2019 33

 

 

Highland Resolute Fund Notes to Consolidated Financial Statements

 

  October 31, 2019 (Unaudited)

 

The Fund elects to defer to the period ending April 29, 2020, capital losses recognized during the period November 1, 2018 through April 30, 2019 in the amount of $383,369.

 

The amounts and characteristics of tax basis distributions and composition of distributable earnings/(accumulated losses) are finalized at fiscal year-end. Accordingly, tax basis balances have not been determined as of October 31, 2019.

 

5. SECURITIES TRANSACTIONS

 

Purchases and sales of securities, excluding short-term securities and U.S. Government Obligations during the six months ended October 31, 2019 were as follows:

 

Fund  Purchases of Securities   Proceeds From Sales of Securities 
Highland Resolute Fund  $81,182,530   $111,078,101 

 

6. BENEFICIAL SHARE TRANSACTIONS

 

The capitalization of the Trust consists of an unlimited number of shares of beneficial interest with no par value per share. Holders of the shares of the Fund of the Trust have one vote for each share held and a proportionate fraction of a vote for each fractional share. All shares issued and outstanding are fully paid and are transferable and redeemable at the option of the shareholder. Purchasers of the shares do not have any obligation to make payments to the Trust or its creditors solely by reason of the purchasers’ ownership of the shares. Shares have no pre-emptive rights.

 

Transactions in common shares were as follows:

 

Highland Resolute Fund

 

Class I:  For the Six Months Ended October 31, 2019 (Unaudited)   For the Year Ended April 30, 2019 
Common Shares Outstanding - Beginning of Period   32,287,022    34,589,249 
Common Shares Sold   800,042    935,962 
Common Shares Issued as Reinvestment of Dividends       1,669,668 
Common Shares Redeemed   (3,344,186)   (4,907,857)
Common Shares Outstanding - End of Period   29,742,878    32,287,022 

 

Shares redeemed within 30 days of purchase may incur a 2% short-term redemption fee deducted from the redemption amount. Redemption fees are reflected in the “Shares redeemed, net of redemption fees” in the Statements of Changes in Net Assets. For the six months ended October 31, 2019 and the year ended April 30, 2019, the Fund retained fees as follows:

 

Fund  For the Six Months Ended October 31, 2019 (Unaudited)   For the Year Ended April 30, 2019 
Highland Resolute Fund  $16   $337 

 

34

 

 

 

Highland Resolute Fund Notes to Consolidated Financial Statements

 

  October 31, 2019 (Unaudited)

 

7. MANAGEMENT AND RELATED PARTY TRANSACTIONS

 

Investment Advisory

 

The Adviser, subject to the authority of the Board, is responsible for the overall management and administration of the Fund’s business affairs. Pursuant to the Investment Advisory Agreement (the “Advisory Agreement”), the Adviser is entitled to an investment advisory fee, computed daily and payable monthly of 1.50% of the average daily net assets for the Fund. The management fee is paid on a monthly basis.

 

The Subsidiary has entered into a separate advisory agreement (the “Subsidiary Advisory Agreement”) with the Adviser for the management of the Subsidiary’s portfolio pursuant to which the Subsidiary is obligated to pay the Adviser a management fee at the same rate that the Fund pays the Adviser for investment advisory services provided to the Fund. The Adviser has agreed to waive the advisory fee it receives from the Fund in an amount equal to the management fee paid by the Subsidiary. This waiver may not be terminated or modified without the consent of the Board. This agreement may not be terminated or modified prior to this date except with the approval of the Board. For the six months ended October 31, 2019, this amount equaled $139,179 and is disclosed in the Consolidated Statement of Operations.

 

The Adviser entered into an Investment Sub-Advisory Agreements with Incline Global Management, LLC. (“Incline”), Chatham Asset Management, LLC (“Chatham”) and Parametric Portfolio Associates, LLC (“Parametric”). The Investment Sub-Advisory Agreements are in accordance with the Fund’s investment objective, policies and limitations and investment guidelines established jointly by the Adviser and the Board. The Adviser determines the allocation of the Fund’s assets among Incline, Chatham and Parametric (collectively the “Sub-Advisers”) and other open-end investment companies. The Fund is not required to invest with any minimum number of sub-advisers or open-end investment companies, and does not have minimum or maximum limitations with respect to allocations of assets to the Sub-Advisers, investment strategy or market sector. Highland may change the allocation of the Fund’s assets among the available investment options, and may add or remove sub-advisers, at any time. Each Sub-Adviser is responsible for the day-to-day management of its allocated portion of Fund assets. Highland has ultimate responsibility, subject to the oversight of the Board of the Fund, to oversee the Sub-Advisers, and to recommend their hiring, termination and replacement.

 

Pursuant to each Investment Sub-Advisory Agreement, the Adviser pays the Sub-Advisers an annual sub-advisory management fee which is based on the Fund’s average quarterly market value of the assets managed by the Sub-Advisers. The Adviser is required to pay all fees due to Sub-Advisers out of the management fee the Adviser receives from the Fund. The following table reflects the Fund’s contractual sub-advisory fee rates.

 

Sub-Advisers  Contractual Sub-Advisory Fee
Incline Global Management, LLC   1.25%
Chatham Asset Management, LLC   1.00%
Parametric Portfolio Associates, LLC   0.30%

 

The Adviser has agreed, with respect to the Fund’s Class I shares, to waive the portion of its 1.50% management fee in excess of any sub-advisory fees (as defined in the Prospectus) less (ii) third-party administrative costs charged to the Adviser in connection with the non-recurring addition of a new investment sub-adviser for the Fund or removal of an existing investment sub-adviser to the Fund. This agreement is in effect September 1, 2019 through August 31, 2020. The prior agreement was in effect from September 1, 2018 through August 31, 2019. The Adviser may not discontinue this agreement to waive fees prior to August 31, 2020 without the approval of the Fund’s Board of Trustees. The Adviser is not permitted to recoup any amounts waived or reimbursed to the extent actual fees and expenses for a fiscal period are less than the expense limitation cap. Fees waived/reimbursed by adviser for the six months ended October 31, 2019 are disclosed in the Consolidated Statement of Operations.

 

For the six months ended October 31, 2019, the fee waivers and/or reimbursements were as follows:

 

   Fees Waived/ Reimbursed By Adviser 
Highland Resolute Fund - Class I  $(1,808,234)

 

Administrator Fees and Expenses

 

ALPS Fund Services, Inc. (“ALPS”) serves as administrator to the Fund, and the Fund has agreed to pay expenses incurred in connection with its administrative activities. Pursuant to an Administration Agreement, ALPS provides operational services to the Fund including, but not limited to, fund accounting and fund administration and generally assists in the Fund’s operations. Officers of the Trust are employees of ALPS. The Fund’s administration fee is accrued on a daily basis and paid monthly. Administration fees paid by the Fund for the six months ended October 31, 2019 are disclosed in the Consolidated Statement of Operations.

 

ALPS is reimbursed by the Fund for certain out-of-pocket expenses.

 

Semi-Annual Report | October 31, 2019 35

 

 

Highland Resolute Fund Notes to Consolidated Financial Statements

 

  October 31, 2019 (Unaudited)

 

Transfer Agent

ALPS serves as transfer, dividend paying and shareholder servicing agent for the Fund. ALPS receives an annual minimum fee, a fee based upon the number of shareholder accounts and is also reimbursed by the Fund for certain out-of-pocket expenses. Transfer agent fees paid by the Fund for the six months ended October 31, 2019 are disclosed in the Consolidated Statement of Operations.

 

Compliance Services

ALPS provides services that assist the Fund’s chief compliance officer in monitoring and testing the policies and procedures of the Fund in conjunction with requirements under Rule 38a-1 under the 1940 Act and receives an annual base fee. ALPS is reimbursed for certain out-of-pocket expenses by the Fund. Compliance service fees paid by the Fund for the six months ended October 31, 2019 are disclosed in the Consolidated Statement of Operations.

 

Principal Financial Officer

ALPS receives an annual fee for providing principal financial officer services to the Fund. Principal financial officer fees paid by the Fund for the six months ended October 31, 2019 are disclosed in the Consolidated Statement of Operations.

 

Distributor

ALPS Distributors, Inc. (“ADI” or the “Distributor”) (an affiliate of ALPS) acts as the distributor of the Fund’s shares pursuant to a Distribution Agreement with the Trust on behalf of the Fund. Shares are sold on a continuous basis by ADI as agent for the Fund, and ADI has agreed to use its best efforts to solicit orders for the sale of Fund’s shares, although it is not obliged to sell any particular amount of shares. ADI is not entitled to any compensation for its services as Distributor. ADI is registered as a broker-dealer with the U.S. Securities and Exchange Commission.

 

Shareholder Services Plan

Effective December 12, 2017, the Fund has adopted a Shareholder Services Plan (the “Plan”) with respect to its Class I shares. Under the Plan, the Fund is authorized to pay banks and its affiliates and other institutions, including broker-dealers and Fund affiliates which may include the Distributor, Adviser and/or the transfer agent (“Participating Organizations”), an aggregate fee in an amount not to exceed on an annual basis 0.10% of the average daily net asset value of Class I shares of the Fund attributable to or held in the name of the Participating Organizations for its clients as compensation for providing shareholder service activities, which do not include distribution services pursuant to an agreement with Participating Organizations. Any amount of such payment not paid to the Participating Organizations during the Fund’s fiscal year for such service activities shall be reimbursed to the Fund as soon as practicable. Plan fees are included with distribution and service fees in the Statement of Operations. Fees recaptured pursuant to the Plan for the six months ended October 31, 2019 are included as an offset to distribution and service fees as disclosed in the Consolidated Statement of Operations.

 

Trustees

The fees and expenses of the independent Trustees of the Board are presented in the Consolidated Statement of Operations.

 

8. INDEMNIFICATIONS

 

Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that may contain general indemnification clauses which may permit indemnification to the extent permissible under applicable law. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred.

 

9. SUBSEQUENT EVENT

 

Effective December 10, 2019, the Board of Trustees appointed, upon recommendation of the Audit Committee, Cohen & Company, Ltd. (“Cohen”) as the Fund’s independent registered public accounting firm. Cohen provides audit services, tax return review and assistance. Cohen is located at 1350 Euclid Ave., Suite 800, Cleveland, Ohio 44115.

 

Subsequent events after the date of the Statement of Assets and Liabilities have been evaluated through the date the financial statements were issued.

 

36

 

 

 

Highland Resolute Fund Disclosure Regarding Approval of
Fund Advisory Agreements

 

  October 31, 2019 (Unaudited)

 

On June 11-12, 2019, the Trustees met in person to discuss, among other things, the approval of an Interim Investment Advisory Agreement (the “Interim Highland Agreement”) and a new Investment Advisory Agreement between Financial Investors Trust (the “Trust”), with respect to the Highland Resolute Fund (the “Highland Fund”), and Highland Associates, Inc. (“Highland”) and new Investment Sub-Advisory Agreements with each of Chatham Asset Management, LLC (“Chatham”), Incline Global Management, LLC (“Incline”), and Parametric Portfolio Associates LLC (“Parametric”) in accordance with Section 15(c) of the 1940 Act. The Independent Trustees met with independent legal counsel during executive session and discussed the Interim Highland Agreement and the new Investment Advisory Agreement and new Investment Sub-Advisory Agreements (collectively, the “New Agreements”) and other related materials. In approving the agreements, the Trustees, including the Independent Trustees, considered the following factors with respect to the Highland Fund:

 

Nature, Extent, and Quality of the Services: The Trustees recalled their recent renewal of the current investment advisory and sub-advisory agreements during which they evaluated the nature, extent and quality of services provided to the Highland Fund. The Trustees reviewed and considered the personnel of Highland, Incline, Chatham, and Parametric (each, a “Highland Fund Adviser” and collectively, the “Highland Fund Advisers”), their history as asset managers and their performance. The Trustees discussed the research and decision-making processes utilized by them, including the methods adopted to seek to achieve compliance with the investment objectives, policies and restrictions of the Highland Fund.

 

The Trustees reviewed the background and experience of each of the Highland Fund Adviser’s management relating to the Highland Fund, including the qualifications, backgrounds and responsibilities of the management team primarily responsible for the day-to-day portfolio management of the Fund, and noted that Region Bank’s acquisition of Highland (the “Transaction”) would not result in a change in portfolio managers and that there is not expected to be any diminution in the nature, quality and extent of services provided to the Fund as a result of the Transaction. They also discussed the resources of each of the Highland Fund Advisers devoted to research and analysis of actual and potential investments. The Trustees also reviewed, among other things, Codes of Ethics of the Highland Fund Advisers.

 

Performance: The Trustees recalled their discussion of performance of the Highland Fund when the current investment advisory and sub-advisory agreements were recently renewed. The Trustees reviewed performance information for the Highland Fund for the 3-month, 1-year, 3-year, 5-year, and since inception periods ended September 30, 2018. That review included a comparison of the Highland Fund’s performance to the performance of a group of comparable funds selected by an independent provider of investment company data (the “Data Provider”). The Trustees noted that the performance of the Highland Fund was above its Data Provider universe median for the 1-year, 3-year, 5-year, and since inception periods ended September 30, 2018. The Trustees also considered Highland’s discussion of the Fund’s underlying portfolio diversification categories, its top contributors and top detractors, as well as each Highland Fund Adviser’s performance and reputation generally and their investment techniques, risk management controls, and decision-making processes. The Trustees also reviewed updated performance information provided by Highland regarding the Highland Fund’s performance since the last renewal.

 

Investment Advisory Fee Rate: The Trustees reviewed and considered the proposed annual advisory fee to be paid by the Trust on behalf of the Fund to Highland Fund of 1.50% of the Fund’s daily average net assets, in light of the extent and quality of the advisory services provided by Highland to the Fund, noting that the fees would not change as a result of the Transaction. The Trustees also reviewed and considered the contractual annual sub-advisory fee to be paid by Highland to Chatham of 1.00%, Incline of 1.25%, Parametric of 0.30%, and Solus of 1.50% of the Highland Fund’s daily average net assets allocated to each sub-adviser.

 

The Trustees considered the information they received when the current investment advisory and sub-advisory agreements were recently renewed, comparing the Highland Fund’s contractual annual advisory fee and overall expenses with those of funds in the peer group and universe of funds selected by the Data Provider. The Trustees noted that the Highland Fund’s contractual advisory fee rate was the same as the Data Provider peer group median contractual advisory fee rate.

 

Total Expense Ratios: The Trustees further reviewed and considered the total expense ratio (after waivers) of 0.48% for the Highland Fund. The Trustees noted that the total expense ratio (after waivers) for the Highland Fund was below the Data Provider peer group median total expense ratio (after waivers).

 

Comparable Accounts: The Trustees noted certain information provided by each of the Highland Fund Advisers regarding fees charged to their other clients utilizing a strategy similar to that employed by the portion of the Highland Fund for which such entity was responsible.

 

Profitability: The Trustees received and considered actual and estimated profitability analyses provided by the Highland Fund Advisers when the current investment advisory and sub-advisory agreements were recently renewed, as well as additional information regarding each of the Highland Fund Adviser’s profitability since the last renewal. The Trustees considered the profits, if any, realized and anticipated to be realized by each of the Highland Fund Advisers relating to the operation of the Highland Fund. The Trustees then considered the financial condition of each of the Highland Fund Advisers. They concluded that any profits were projected to remain reasonable in the short term after the Transaction.

 

Semi-Annual Report | October 31, 2019 37

 

 

Highland Resolute Fund Disclosure Regarding Approval of
Fund Advisory Agreements

 

  October 31, 2019 (Unaudited)

 

Economies of Scale: The Trustees considered whether economies of scale in the provision of services to the Highland Fund would be passed along to the shareholders under the New Agreements.

 

Other Benefits to the Adviser: The Trustees reviewed and considered any other incidental benefits derived or to be derived by Highland from its relationship with the Highland Fund, including whether soft dollar arrangements were used.

 

The Board summarized its deliberations with respect to the New Agreements with Highland. In evaluating the Highland Fund Advisers and the fees to be charged under each of the New Agreements, the Trustees concluded that no single factor reviewed by the Trustees was identified by the Trustees to be determinative as the principal factor in whether to approve the New Agreements. Further, the Independent Trustees were advised by independent legal counsel throughout the process.

 

The Trustees, including all the Independent Trustees, concluded that:

 

the nature, extent, and quality of services to be rendered by Highland, Chatham, Incline, and Parametric under the New Agreements with respect to the Highland Fund were adequate;
the performance of the Fund was above its Data Provider universe median for the 1-year, 3-year, 5-year, and since inception periods;
 the contractual advisory fee rate was the same as the Data Provider peer group median contractual advisory fee rate;
Chatham’s, Incline’s, Parametric’s, and Solus’ fees under their respective new sub-advisory agreements are paid directly by Highland;
the total expense ratio (after waivers) for the Highland Fund was below the Data Provider peer group median total expense ratio (after waivers);
bearing in mind the limitations of comparing different types of managed accounts and the different levels of service typically associated with such accounts, the fee structures applicable to Highland’s, Chatham’s, Incline’s, Parametric’s and Solus’ other clients employing a comparable strategy to the Highland Fund, if applicable, were not indicative of any unreasonableness with respect to the advisory and sub-advisory fees to be paid by the Highland Fund;
the profit, if any, realized by each of the Highland Fund Advisers in connection with the operation of the Highland Fund is not unreasonable to the Fund; and
there were no material economies of scale or other incidental benefits accruing to any of the Highland Fund Advisers in connection with its relationship with the Highland Fund.

 

Based on its evaluation of the considerations, the Board unanimously voted to approve the New Agreements, and to recommend to the shareholders of the Highland Fund that they approve the New Highland Agreement.

 

In approving the Interim Highland Agreement, the Trustees, including the Independent Trustees, considered the following factors with respect to the Highland Fund:

 

Compensation: The compensation to be received under the Interim Highland Agreement is the same compensation as is being received under the Highland Fund’s current investment advisory agreement; and

 

Scope and Quality of the Services: The scope and quality of services under the Interim Highland Agreement are the same as those under the current investment advisory agreement.

 

After further discussion, and based upon all of the above-mentioned factors and their related conclusions, with no single factor or conclusion being determinative and with each Trustee not necessarily attributing the same weight to each factor, the Board unanimously determined that entering into the Interim Highland Agreement was in the best interests of the Highland Fund and its shareholders.

 

38

 

 

Highland Resolute Fund Additional Information

 

  October 31, 2019 (Unaudited)

 

1. FUND HOLDINGS

 

The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information included in the Fund’s N-PORT will also be available upon request by calling 1-866-759-5679.

 

2. FUND PROXY VOTING POLICIES, PROCEDURES AND SUMMARIES

 

Fund policies and procedures used in determining how to vote proxies and information regarding how each of the Fund voted proxies relating to portfolio securities during the most recent prior 12-month period ending June 30 are available without charge, (1) upon request, by calling (toll-free) (866) 759-5679 and (2) on the SEC’s website at http://www.sec.gov.

 

Semi-Annual Report | October 31, 2019 39

 

 

Highland Resolute Fund Shareholder Proxy Voting

 

  October 31, 2019 (Unaudited)

 

A Special Meeting of Shareholders of the Highland Resolute Fund was held on September 16, 2019. Shareholders of record as of the close of business on July 25, 2019 voted to approve the following proposal:

 

Proposal: To approve a new Advisory Agreement among Financial Investors Trust, on behalf of the Highland Resolute Fund, and Highland Associates, Inc..

 

Shares Voted in Favor Shares Voted Against or Abstentions
21,745,598 7,689,690

 

40

 

 

Highland Resolute Fund Privacy Policy

 

  October 31, 2019 (Unaudited)

 

Who We Are  
Who is providing this notice? Highland Resolute Fund
What We Do  
How does the Fund protect my personal information? To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings.
How does the Fund collect my personal information? We collect your personal information, for example, when you
  open an account
  provide account information or give us your contact information
  make a wire transfer or deposit money
Why can't I limit all sharing? Federal law gives you the right to limit only
  sharing for affiliates’ everyday business purposes-information about your creditworthiness
  affiliates from using your information to market to you
  sharing for non-affiliates to market to you
  State laws and individual companies may give you additional rights to limit sharing.
Definitions  
Affiliates Companies related by common ownership or control. They can be financial and nonfinancial companies.
Non-affiliates Companies not related by common ownership or control. They can be financial and nonfinancial companies.
  The Fund does not share with non-affiliates so they can market to you.
Joint marketing A formal agreement between non-affiliated financial companies that together market financial products or services to you.
  The Fund does not jointly market.
Other Important Information  
California Residents If your account has a California home address, your personal information will not be disclosed to nonaffiliated third parties except as permitted by applicable California law, and we will limit sharing such personal information with our affiliates to comply with California privacy laws that apply to us.
Vermont Residents The State of Vermont requires financial institutions to obtain your consent prior to sharing personal information that they collect about you with affiliated companies and nonaffiliated third parties other than in certain limited circumstances. Except as permitted by law, we will not share personal information we collect about you with nonaffiliated third parties or other affiliated companies unless you provide us with your written consent to share such information.

 

Semi-Annual Report | October 31, 2019 41

 

 

Highland Resolute Fund Privacy Policy

 

  October 31, 2019 (Unaudited)

 

FACTS WHAT DOES THE FUND DO WITH YOUR PERSONAL INFORMATION?
Why? Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.
What? The types of personal information we collect and share depend on the product or service you have with us. This information can include:
  Social Security number and account transactions
  Account balances and transaction history
  Wire transfer instructions
How? All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons the Fund chooses to share; and whether you can limit this sharing.

 

Reasons we can share your personal information Does the Fund share: Can you limit this sharing?
For our everyday business purposes — such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus Yes No
For our marketing purposes — to offer our products and services to you No We do not share.
For joint marketing with other financial companies No We do not share.
For our affiliates’ everyday business purposes — information about your transactions and experiences Yes No
For our affiliates’ everyday business purposes — information about your creditworthiness No We do not share.
For nonaffiliates to market to you No We do not share.

 

42

 

 

 

Page intentionally left blank

 

 

 

 

 

 

  TABLE OF CONTENTS

 

Shareholder Letter 1
Performance Update 6
Disclosure of Fund Expenses 12
Portfolio of Investments  
Rondure New World Fund 13
Rondure Overseas Fund 16
Statements of Assets and Liabilities 18
Statements of Operations 19
Statement of Changes in Net Assets  
Rondure New World Fund 20
Rondure Overseas Fund 21
Financial Highlights  
Rondure New World Fund 22
Rondure Overseas Fund 24
Notes to Financial Statements 26
Disclosure Regarding Approval of Fund Advisory Agreement 32
Additional Information 34
Privacy Policy 35

 

Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, paper copies of the Fund’s annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Funds’ website at www.rondureglobal.com and you will be notified by mail each time a report is posted and provided with a website link to access the report.

 

You may, notwithstanding the availability of shareholder reports online, elect to receive all future shareholder reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the Funds, you can call 1.855.775.3337 to let the Funds know you wish to continue receiving paper copies of your shareholder reports.

 

If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Funds electronically anytime by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by enrolling at www.rondureglobal.com.

 

 

Rondure Funds Shareholder Letter

 

  October 31, 2019 (Unaudited)

 

All I Really Need to Know I Learned in Kindergarten

 

As many of you know, I don’t have children. I have a much younger sibling and my husband has two younger siblings. We both feel like we were parents to them, in a sense. We both love kids. My husband, who worked at a daycare center in college, is phenomenal with kids. I get to share in the joy of children through my nieces and nephews, who are incredible, as well as my work with the Utah Youth Village and the kids of my Rondure colleagues. Without fail, their parenting stories make me laugh or smile. But they often make me think, too.

 

A few weeks ago, my officemate Blake came in on a Monday morning and told me how his 9-year-old daughter had asked him what he does for work. He explained his job to her as best he could. She got it (my mom and dad still don’t get it, so I’ve given up there). Then he asked her, “If you had to pick one company to invest your money in, which would it be?” Pausing for a few seconds to think, she replied with confidence, “I’d invest in McDonald’s.” To which I told Blake: “She’s hired!”

 

The dialogue reminded me of the great book by Robert Fulghum, All I Really Need to Know I Learned in Kindergarten. Fulghum’s book of short essays sits prominently on my shelf. Published in 1986, its title comes from the first chapter of the book. It reflects on the timeless lessons we all learned in kindergarten and ruminates on how much better a place the world would be if adults adhered to the same basic rules that children do.

 

The power of simplicity resonates with me strongly. Lately I’ve been thinking about its relevance to investing as well as to corporate sustainability or what some people refer to as “responsible investing.” Whatever nomenclature you prefer, the concepts all relate.

 

When it comes to global value investing, the rules are simple. Many of them were said best by a Coke-drinking, McDonald’s-eating Warren Buffett. Here are a few that I cherish:

 

“Buy what you know.”
“Pay a discount to intrinsic value.”
“Intrinsic value is easier to assess if the business has a moat.” (At Rondure, we call this CGP investing. CGP is an acronym for Club, Glue, and Platform businesses.)
“Find management teams whose interests and values align with yours.”
“Don’t lose money.”
“Let compound returns work their magic.” Leave your portfolio alone and learn to sit still.

 

That’s about it. Quite simple when you think about it. International investing requires tons of travel and some odd working hours, but the fundamental rules aren’t any different.

 

I recently discussed these rules with a group of MBA students as a guest speaker at NYU’s course on value investing, taught by James Rosenwald of Dalton Investments. One of the questions I was asked was, “If value investing is so simple, why doesn’t everyone do it?”

 

Here were my reasons:

 

Too much noise in the market (ease of information flow), so it’s hard for people to sit still.
Humans love to solve for complexity—it shows others how smart they are.
Our industry loves complexity because it creates jobs.
Corporate bureaucracies can push passive replication to protect the business model (we won’t do this!).
Human emotion makes markets inefficient. The greed and fear pendulum swings widely.

 

Those were a few of my reasons. It becomes more and more obvious to me over time just how true these basic premises are. Their utter simplicity amplifies their utility; it doesn’t undermine it. We at Rondure are fortunate to have great clients—partners—who I know believe these things as well.

 

Here’s a second story. It’s another Monday, this one a few months back. Blake told me how he and his wife Amy had been running errands that weekend with their young children. Driving past a strip mall, his daughter in the back seat spotted a man on the sidewalk dressed in a bright yellow chicken costume, dancing as he spun one of those arrow-shaped signs to advertise for payday loans or fast food or some other store nearby. She asked her parents what on earth the man in the chicken costume was doing. They told her this was the man’s job. She paused for a long time, trying to make sense of it. “Wow,” she said, “he looks so silly. They must be paying him a lot of money!”

 

I’ve been thinking hard lately about Rondure’s approach to responsible investing. The team and I have spent a considerable amount of time studying the topic. We’re codifying something we’re hoping to share with you all soon. We’re excited about it.

 

 

Semi-Annual Report | October 31, 2019 1

 

 

Rondure Funds Shareholder Letter

 

  October 31, 2019 (Unaudited)

 

The concept of social and environmental responsibility in investing is timely but hardly simple. It involves complex, interconnected systems of thought, belief, data and action: the opposite of the notion of keeping it simple in investing. Returns come first, but I deeply believe, especially after investing in emerging markets and frontier markets for years, that something isn’t right globally. I want to do something.

 

What fascinates me is to think about fairness through the eyes of a child. As I was chewing on this (and again this is not our philosophy – that will be forthcoming, I returned to Fulghum’s basic rules. Imagine if we applied them to the world of politics and business.

 

So here is what we learned in kindergarten, according to Fulghum:

 

Share everything. (Social inclusion)
Play fair. (Social inclusion)
Don’t hit people. (Governance)
Put things back where you found them. (Governance, Environment)
Clean up your own mess. (Environment)
Don’t take things that aren’t yours. (Governance, Environment, Social Inclusion)
Warm cookies and cold milk are good for you. (Social)
Live a balanced life—learn some and think some and draw and paint and sing and dance and play and work every day some. (Social, Governance. I’ve learned so much about happiness and simplicity from the children in Bhutan, a country that embraces Gross National Happiness.)
Take a nap every afternoon. (Social. Science is continually recognizing the value of sleep.)
When you go out into the world, watch out for traffic, hold hands, and stick together. (Environment. An important lesson for India, Pakistan, Indonesia, Bangladesh, and increasingly the United States as it embraces bikes and scooters and walking and a focus on the environment. The extreme poor have strikingly low carbon footprints per capita.)
Be aware of wonder. Remember the little seed in the Styrofoam cup: The roots go down and the plant goes up and nobody really knows how or why, but we are all like that. (Environment)
Goldfish and hamsters and white mice and even the little seed in the Styrofoam cup—they all die. So do we. (Governance)
And then remember the Dick-and-Jane books and the first word you learned—the biggest word of all—LOOK. (Governance, Environment, Social. This piece of wisdom touches on all three.)

 

Fulghum concludes his lessons by saying that “everything you need to know is in there somewhere. The Golden Rule and love and basic sanitation. Ecology and politics and equality and sane living.”

 

I’d add that none of these observations detract from our focus on returns for our clients, which are paramount—our fiduciary duty.

 

There is so much noise, so much cacophony in the market right now. This is a market that almost seems to be thriving on the noise, getting a sort of high off the continual to-and-fro of political headlines and made-for-TV moments.

 

Yet noise will only distract you from the kind of long-term investment success that invariably requires discipline, farsightedness, and above all, patience. Our focus is on detecting the signals within the noise. We’re striving to heed the simple lessons that have served us well in the past. That is not easy to do when analytical people meet complex systems. It’s not how we’re wired, but it is essential.

 

A noisy world, yet it’s almost as simple as our earliest lessons as kids. Investing and global responsibility—it’s everything we learned in kindergarten but how easy it can be to forget.

 

Rondure Overseas Fund

While near-term movements in interest rates could continue to prop up equity markets across much of the developed world, we remain defensively positioned. Few central banks have room to stimulate without driving rates even deeper into negative territory. Recent reports from the Wall Street Journal and others estimate that there is around $15 trillion in government debt globally with negative yields.i High levels of corporate debt suggest a private sector that has taken full advantage of low rates to potentially boost their growth rates (and buy back stock). Sovereign balance sheets are little better. While trade frictions may be the proximate cause of today’s slowing manufacturing data in major markets like the United States and Germany, the ultimate endgame—and the pace of this bull market’s finale—is beyond our ability to predict.

 

 

iIosebashvili, Ira. “Investors Scramble for Yield as Growth Outlook Darkens.” The Wall Street Journal, Dow Jones & Company, 30 Sept. 2019, www.wsj.com/articles/investors-scramble-for-yield-as-growth-outlook-darkens-11569848400?mod=hp_lead_pos6.

 

 

2 1.855.775.3337 | www.rondureglobal.com

 

 

Rondure Funds Shareholder Letter

 

  October 31, 2019 (Unaudited)

 

What we do know is that in these sorts of environments, quality counts. We’re looking to hold companies in our portfolio with the ability to sustain their dividends in an extended period of economic malaise and soften any downdraft in equity markets. We have many companies in our portfolios with enough cash on the balance sheet, in theory, to sustain their dividend payout for a number of years even if their free cash flow were to temporarily disappear.

 

We have recently been tilting our portfolios even further towards companies with dividend yields that have been 1) well-funded, 2) backed by stable cash flows, and 3) higher than what their home-region sovereign bonds offer. The theme here is dividend yield compression—in other words, as goes the bond market, so could go equity markets over time. Sustainable yield is a precious commodity in today’s capital markets. We believe that companies that offer such have the ability to thrive in the current environment. As a result, we have increased our weights in our high-conviction names that fit that description.

 

Japan has been one of the weaker markets globally this year, which has weighed on our performance. In addition to various macroeconomic pressures on the country, we suffered from stock specific issues with one of our large weights. Yamato Holdings, Co. Ltd. (9064 JP), a parcel delivery company, was hit by wage inflation issues, which ultimately led us to exit our position during the quarter. Over the past 12 months, we have also seen many of our consumer names impacted by severe weather in addition to soft tourist traffic. We believe they will be well positioned as we move into the latter part of 2019 and comparisons begin to ease.

 

We began to see improving prospects for our value-oriented holdings in Japan in recent months. At the portfolio level, Consumer Staples was our best performing sector and within this sector 7 of the top 10 contributing names being Japanese consumer staples companies. Many of these were retailers like the drugstores who were impacted in 2018 from the aforementioned weather and tourism issues. We are beginning to see them lap these headwinds and post better operational results. Also interesting are some early signs of consolidation in the drugstore landscape, something we have long felt is overdue. While we remain in the early innings, we are seeing some activity with one of our holdings, Matsumotokiyoshi Holdings Co. Ltd. (3088 JP) looking to acquire peer Cocokara Fine Holdings Inc. (3098 JP). We still see meaningful value in the Japanese stock market and remain heavily invested in the country, where yields and valuation metrics look relatively attractive to us.

 

On the negative side, we have struggled recently in the United Kingdom. Brexit has cast a shadow over the country with no easy resolution in sight. While we are underweight the benchmark, our stocks have been weak. In some instances this was due to strong performers taking a breather, as with Diageo PLC (DGE LN), a multinational beverage company. In other cases there was a more direct Brexit impact as with Whitbread PLC (WTB LN), a largely domestic hotel operator for which markets fret the implications of the looming political rupture on local business and tourism activity. Thematically, athleisure companies continue to benefit from the trend towards more casual workplace attire. This evolution has driven strong performance for companies who play into this theme both in the developed and emerging world. Across both of our funds our athleisure and sportswear holdings were many of our best performing lately. Our top performing name in the 3rd quarter, and the largest portfolio weight going into the quarter, was Puma SE (PUM GR), which specifically targets this trend.

 

Fundamentally, we continue to like what we see in the portfolio. The Fund’s quality metrics remain well ahead of the benchmark, which gives us comfort that we are conservatively positioned in a bull market that we believe continues to edge closer to the end of its run.

 

Rondure New World Fund

 

The Rondure New World Fund has benefited lately from good stock picking and exposure to sectors and countries with notable thematic tailwinds. We will comment on all of these but wanted to begin with a couple of thoughts on the Indian market.

 

In my Q2 letter, I discussed some of the headwinds in India. Consumers there have been under pressure, beset by demonetization, a new goods and services tax (GST) scheme, and a devastating 2018 monsoon season. Our consumer tilt has meant our holdings were not immune to these misfortunes, despite basic nature of the products they provide. In Q3 we saw an almost across-the-board improvement in our Indian holdings, particularly in the month of September, buoyed primarily by government stimulus. On recent trips to India, we have sensed palpable enthusiasm that the Modi administration, just beginning its 2nd term, will be capable of sparking an acceleration in Gross Domestic Product (GDP) growth. While we are always cautious in reading political tea leaves, we continue to like the long-term opportunity for our companies and think we have some real gems in the portfolio. It has been nice to see several of our holdings begin to bounce off multi-year lows.

 

While our weighting for China is light relative to the benchmark, we have had some nice results. Nowhere is the global embrace of athleisure more apparent than in China, where athletic and sportswear companies are enjoying strong growth, driven partially by a broad push for fitness by the Chinese government. The companies have also benefitted from superb margin profiles thanks to the close proximity of their retail and manufacturing bases. We have direct exposure to this trend via our ownership of Li Ning Company Ltd. (2331 HK) and Anta Sports Products, Ltd. (2020 HK), two strong domestic brands. While Western brands like Nike, Adidas and Puma still have enormous clout in the local market, Chinese consumers are increasingly showing a preference for local brands.

 

 

Semi-Annual Report | October 31, 2019 3

 

 

Rondure Funds Shareholder Letter

 

  October 31, 2019 (Unaudited)

 

Li Ning typifies this trend. Founded in 1990, the company was named after its founder, a champion gymnast and national icon. In addition to sponsoring popular Chinese athletes like Yao Ming, Li Ning includes among its influencers international athletes like the NBA’s Dwayne Wade. The company is pushing the envelope on the premium, fashion-forward end of the market. All this has driven improving margins and growing prevalence with the Chinese consumer. On a recent trip to China we had the opportunity to visit several of the company’s retail locations (as well as those of competitors). We came away impressed by Li Ning’s foot traffic and product offering. The stock has performed well for us.

 

On the negative side, the Philippines has been a challenge for us recently, where we are meaningfully overweight the benchmark. The country has been caught in the cross-currents of China’s deteriorating economy. From a position perspective, we saw San Miguel Food & Beverage, Inc. (FB PM) take a pause in the third quarter after strong year-to-date performance. Jollibee Foods Corp. (JFC PM) stock was hurt by an unfavorable market reception to an acquisition announcement.

 

We remain confident in the long-term outlook for both companies. Jollibee is one of Asia’s most promising fast food success stories, expanding both regionally and globally, including by acquiring international brands. The company’s approach to international acquisitions has been to look for underperforming franchises where it can enhance operations and expand via its platform. Its recently announced acquisition of Coffee Bean & Tea Leaf gives it an interesting foothold from which to cater to the Pacific Rim’s growing taste for coffee concepts. The company’s ambition is impressive: it aims to be a top five quick service food retailer globally.

 

We remain underweight Information Technology. In the grand scheme of things, we are comfortable with that. We are bottom-up portfolio managers, and haven’t found the right Quality companies trading at good valuations, which is central to our process. We aren’t afraid to look different from the benchmark. What does cause us to lose sleep is when we miss opportunities to increase weights in some of our highest conviction holdings.

 

As with the Rondure Overseas Fund, we like how we are positioned in the New World Fund. We are conservatively positioned in companies where we believe there is real potential for long-term compounding of your capital, which is what we seek to do over time. As the now-historic U.S. bull market continues to run, we want to be able to sleep when the wind blows.

 

Laura Geritz, CFA

CEO and Portfolio Manager

 

Intrinsic Value is the value of a company based on fundamental analysis.

 

Moat is a type of sustainable competitive advantage that may pose barriers to entry for competitors.

 

Club, Glue Platform (CGP) is a proprietary research framework developed by Rondure Global Advisors designed to evaluate Quality on a qualitative basis. It is based on the time-tested research process of portfolio manager Laura Geritz, CFA.

 

Gross National Happiness is a phrase coined by the 4th King of Bhutan. The idea implies that non-economic aspects of well-being are just as important to the sustainable development of a nation as economic aspects.

 

Interest rates are generally tied to The Fed Funds Rate, which is the interest rate that U.S. banks charge other banks to lend for lending them money from their reserve balances on an overnight basis. Banks must retain reserves, equal to a certain percentage of their deposits, in an account at the Federal Reserve Bank.

 

A Central Bank is an entity responsible for overseeing the monetary system and policy of a nation(s), regulating its money supply and interest rates.

 

The Federal Reserve System (Fed) Funds Rate is the interest rate that U.S. banks charge other banks to lend for lending them money from their reserve balances on an overnight basis. Banks must retain reserves, equal to a certain percentage of their deposits, in an account at the Federal Reserve Bank.

 

Inflation is the general increase in prices of commonly used goods and services in an economy. It is a decrease in the purchasing power of money.

 

Yield is the percent return a company can give back to its shareholders for investing in the security.

 

Dividend yield is a company’s annual dividend payments to shareholders, as a percentage of the company’s current stock price.

 

Wage inflation is the general increase in wages over time.

 

 

4 1.855.775.3337 | www.rondureglobal.com

 

 

Rondure Funds Shareholder Letter

 

  October 31, 2019 (Unaudited)

 

Brexit is the process of withdrawal of the UK from the European Union.

 

Demonetization is a change in national currency that results in the removal of a currency unit as legal tender. There is often a replacement of the legal tender with new notes or coins.

 

Goods and Services Tax (GST) is an indirect tax on goods and services in India.

 

GDP Growth is a measure of the output of an economy, telling how fast a country is growing.

 

Bull Market is a condition in the financial markets where prices are rising, encouraging buying.

 

Free cash flow is the amount of cash a company generates after cash outflows used to maintain the business.

 

The CFA designation is owned by the CFA institute.

 

The objective of all Rondure Funds is long-term growth of capital.

 

RISKS: Mutual fund investing involves risks and loss of principal is possible. Investing in small and micro-cap funds will be more volatile and loss of principal could be greater than investing in large cap or more diversified funds. Investing in foreign securities entails special risks, such as currency fluctuations and political uncertainties, which are described in more detail in the prospectus. Investments in emerging markets are subject to the same risks as other foreign securities and may be subject to greater risks than investments in foreign countries with more established economies and securities markets.

 

Must be preceded or accompanied by a prospectus.

 

The views and information discussed in this commentary are as of the date of publication, are subject to change, and may not reflect the writer's current views. The views expressed represent an assessment of market conditions at a specific point in time, are opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. Such information does not constitute a recommendation to buy or sell specific securities or investment vehicles. It should not be assumed that any investment will be profitable or will equal the performance of the Funds or any securities or any sectors mentioned herein. The subject matter contained herein has been derived from several sources believed to be reliable and accurate at the time of compilation. The Funds do not accept any liability for losses either direct or consequential caused by the use of this information.

 

Past performance does not guarantee future results.

 

The Rondure Funds are distributed by ALPS Distributors Inc. (ADI). ADI is not affiliated with Rondure Global Advisors.

 

 

Semi-Annual Report | October 31, 2019 5

 

 

 

Rondure New World Fund Performance Update

 

  October 31, 2019 (Unaudited)

 

Annualized Total Return Performance for the periods ended October 31, 2019

 

      Expense Ratio(b)
  6 Months 1 Year Since Inception(a) Gross Net(c)
Rondure New World Fund – Institutional (RNWIX) 5.65% 21.89% 5.92% 1.46% 1.10%
Rondure New World Fund – Investor (RNWOX) 5.57% 21.72% 5.67% 1.76% 1.35%
MSCI Emerging Markets USD Index(d) -1.41% 12.29% 5.59%    

 

Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. The Fund imposes a 2.00% redemption fee on shares held for less than 60 days. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data, please call 1-855-775-3337.

 

The table does not reflect the deduction of taxes a shareholder would pay on Fund distributions or redemption of Fund shares.

 

Subject to investment risks, including possible loss of the principal amount invested.

 

Returns for periods less than 1 year are cumulative.

 

(a)Fund inception date of May 1, 2017.
(b)Ratios as of the Prospectus dated August 31, 2019 and may differ from the ratios presented in the Financial Highlights.
(c)Rondure Global Advisors, LLC (the “Advisor”), has agreed to waive and/or reimburse fees or expenses in order to limit Total Annual Fund Operating Expenses After Fee Waiver/ Expense Reimbursement (excluding acquired fund fees and expenses, brokerage expenses, interest expenses, taxes and extraordinary expenses) to 1.35% and 1.10% of the Fund’s average daily net assets for the Fund’s Investor Class Shares and Institutional Class Shares, respectively. This agreement (the “Expense Agreement”) is in effect through August 31, 2020. The Advisor will be permitted to recover, on a class-by-class basis, expenses it has borne through the Expense Agreement to the extent that a Fund’s expenses in later periods fall below the expense cap in effect at the time of waiver or reimbursement. However, such recapture payments may not cause the Fund’s expense ratio (after recapture) to exceed the lesser of (i) the expense cap in effect at the time of the waiver and (ii) the expense cap in effect at the time of the recapture. Notwithstanding the foregoing, the Fund will not be obligated to pay any such deferred fees and expenses more than three years after the date of the waiver or reimbursement. The Expense Agreement may not be terminated or modified by the Advisor prior to August 31, 2020, except with the approval of the Fund’s Board of Trustees.

(d)The MSCI Emerging Markets USD Index is an unmanaged total return index, reported in U.S. Dollars, based on share prices and reinvested dividends of approximately 800 companies from 24 emerging market countries. The Index is not actively managed and does not reflect any deductions for fees, expense, or taxes. An investor may not invest directly in the Index.

 

 

6 1.855.775.3337 | www.rondureglobal.com

 

 

Rondure New World Fund Performance Update

 

  October 31, 2019 (Unaudited)

 

Growth of $10,000 for the period ended October 31, 2019

 

 

 

The chart shown above represent a hypothetical investment of $ 10,000 in the Fund’s Investor Class shares for the period from inception to October 31, 2019. All returns reflect reinvested dividends, but do not reflect the deduction of taxes that an investor would pay on distributions or redemptions.

 

Investing in the Fund is subject to investment risks, including possible loss of the principal amount invested.

 

The Fund also offers Institutional Class shares, performance for which is not reflected in the graphs above. The performance of Institutional Class shares may be higher or lower than the performance of the Investor Class shares shown in the graphs above based upon differences in fees paid by shareholders investing in the Investor Class shares and Institutional Class shares.

 

 

Semi-Annual Report | October 31, 2019 7

 

 

Rondure New World Fund Performance Update

 

  October 31, 2019 (Unaudited)

 

Regional Allocation (as a % of Net Assets)*  
Asia ex Japan 63.3%
North America 9.0%
Africa/Middle East 7.4%
Latin America 7.0%
Europe 3.0%
Australia/New Zealand 1.8%
Cash, Cash Equivalents, & Other Net Assets 8.5%
Total 100.0%

 

Industry Sector Allocation (as a % of Net Assets)*  
Consumer 64.9%
Technology 7.5%
Financials 6.2%
Industrials 5.1%
Health Care 4.0%
Energy & Materials 3.8%
Cash, Cash Equivalents, & Other Net Assets 8.5%
Total 100.0%

 

Top 10 Holdings (as a % of Net Assets)*  
Li Ning Co., Ltd. 3.7%
Philippine Seven Corp. 3.4%
Taiwan Semiconductor Manufacturing Co., Ltd. 3.2%
TOA Paint Thailand PCL 2.6%
Carlsberg Brewery Malaysia Bhd 2.6%
Heineken Malaysia Bhd 2.5%
Aramex PJSC 2.4%
Wal-Mart de Mexico SAB de CV 2.3%
Vincom Retail JSC 2.2%
Vietnam Dairy Products JSC 2.2%
Total 27.1%

 

*Holdings are subject to change, and may not reflect the current or future position of the portfolio.

 

 

8 1.855.775.3337 | www.rondureglobal.com

 

 

Rondure Overseas Fund Performance Update

 

  October 31, 2019 (Unaudited)

 

Annualized Total Return Performance for the periods ended October 31, 2019

 

      Expense Ratio(b)
  6 Months 1 Year Since Inception(a) Gross Net(c)
Rondure Overseas Fund – Institutional (ROSIX) 4.68% 10.04% 7.26% 1.72% 0.85%
Rondure Overseas Fund – Investor (ROSOX) 4.68%(d) 9.88% 7.03% 2.04% 1.10%
MSCI EAFE Index(e) 3.62% 11.63% 5.99%    

 

Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. The Fund imposes a 2.00% redemption fee on shares held for less than 60 days. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data, please call 1-855-775-3337.

 

The table does not reflect the deduction of taxes a shareholder would pay on Fund distributions or redemption of Fund shares.

 

Subject to investment risks, including possible loss of the principal amount invested.

 

Returns for periods less than 1 year are cumulative.

 

(a)Fund inception date of May 1, 2017.
(b)Ratios as of the Prospectus dated August 31, 2019 and may differ from the ratios presented in the Financial Highlights.
(c)Rondure Global Advisors, LLC (the “Advisor”), has agreed to waive and/or reimburse fees or expenses in order to limit Total Annual Fund Operating Expenses After Fee Waiver/ Expense Reimbursement (excluding acquired fund fees and expenses, brokerage expenses, interest expenses, taxes and extraordinary expenses) to 1.10% and 0.85% of the Fund’s average daily net assets for the Fund’s Investor Class Shares and Institutional Class Shares, respectively. This agreement (the “Expense Agreement”) is in effect through August 31, 2020. The Advisor will be permitted to recover, on a class-by-class basis, expenses it has borne through the Expense Agreement to the extent that a Fund’s expenses in later periods fall below the expense cap in effect at the time of waiver or reimbursement. However, such recapture payments may not cause the Fund’s expense ratio (after recapture) to exceed the lesser of (i) the expense cap in effect at the time of the waiver and (ii) the expense cap in effect at the time of the recapture. Notwithstanding the foregoing, the Fund will not be obligated to pay any such deferred fees and expenses more than three years after the date of the waiver or reimbursement. The Expense Agreement may not be terminated or modified by the Advisor prior to August 31, 2020, except with the approval of the Fund’s Board of Trustees.
(d)Excludes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value and total return for shareholder transactions reported to the market may differ from the net asset value for financial reporting purposes.
(e)The MSCI EAFE Index is an unmanaged total return index, reported in U.S. dollars, based on share prices and reinvested net dividends of approximately 1,100 companies from 22 developed market countries excluding the US and Canada. The Index is not actively managed and does not reflect any deductions for fees, expense, or taxes. An investor may not invest directly in the Index.

 

 

Semi-Annual Report | October 31, 2019 9

 

 

Rondure Overseas Fund Performance Update

 

  October 31, 2019 (Unaudited)

 

Growth of $10,000 for the period ended October 31, 2019

 

 

 

The chart shown above represent a hypothetical investment of $ 10,000 in the Fund’s Investor Class shares for the period from inception to October 31, 2019. All returns reflect reinvested dividends, but do not reflect the deduction of taxes that an investor would pay on distributions or redemptions.

 

Investing in the Fund is subject to investment risks, including possible loss of the principal amount invested.

 

The Fund also offers Institutional Class shares, performance for which is not reflected in the graphs above. The performance of Institutional Class shares may be higher or lower than the performance of the Investor Class shares shown in the graphs above based upon differences in fees paid by shareholders investing in the Investor Class shares and Institutional Class shares.

 

 

10 1.855.775.3337 | www.rondureglobal.com

 

 

Rondure Overseas Fund Performance Update

 

  October 31, 2019 (Unaudited)

 

 

Regional Allocation (as a % of Net Assets)*  
Europe 48.7%
Japan 28.9%
Australia/New Zealand 11.7%
North America 2.9%
Asia ex Japan 1.6%
Cash, Cash Equivalents, & Other Net Assets 6.2%
Total 100.0%

 

Industry Sector Allocation (as a % of Net Assets)*  
Consumer 69.3%
Industrials 13.2%
Technology 4.1%
Financials 3.5%
Energy & Materials 2.3%
Health Care 1.4%
Cash, Cash Equivalents, & Other Net Assets 6.2%
Total 100.0%

 

Top 10 Holdings (as a % of Net Assets)*  
Unilever NV 4.2%
Nestle SA 4.2%
Danone SA 4.1%
Puma SE 2.9%
Coca-Cola Amatil, Ltd. 2.6%
Alimentation Couche-Tard, Inc. 2.6%
Chocoladefabriken Lindt & Spruengli AG 2.3%
Pernod Ricard SA 2.1%
Asics Corp. 2.0%
Diageo PLC 2.0%
Total 29.0%

 

*Holdings are subject to change, and may not reflect the current or future position of the portfolio.

 

 

Semi-Annual Report | October 31, 2019 11

 

 

Rondure Funds Disclosure of Fund Expenses

 

  October 31, 2019 (Unaudited)

 

As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

 

This example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period of May 1, 2019 through October 31, 2019.

 

Actual Expenses The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

 

Hypothetical Example for Comparison Purposes The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 

  Beginning Account
Value
May 1, 2019
Ending Account
Value
October 31, 2019
Expense Ratio(a) Expenses Paid
During Period
May 1, 2019 - October
31, 2019
(b)
Rondure New World Fund        
Institutional Class        
Actual $ 1,000.00 $ 1,056.50 1.10% $ 5.69
Hypothetical (5% return before expenses) $ 1,000.00 $ 1,019.61 1.10% $ 5.58
Investor Class        
Actual $ 1,000.00 $ 1,055.70 1.35% $ 6.98
Hypothetical (5% return before expenses) $ 1,000.00 $ 1,018.35 1.35% $ 6.85
Rondure Overseas Fund        
Institutional Class        
Actual $ 1,000.00 $ 1,046.80 0.85% $ 4.37
Hypothetical (5% return before expenses) $ 1,000.00 $ 1,020.86 0.85% $ 4.32
Investor Class        
Actual $ 1,000.00 $ 1,045.90 1.10% $ 5.66
Hypothetical (5% return before expenses) $ 1,000.00 $ 1,019.61 1.10% $ 5.58

 

(a)The Fund's expense ratios have been annualized based on the Fund's most recent fiscal half-year expenses.
(b)Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184)/366 (to reflect the half-year period).

 

 

12 1.855.775.3337 | www.rondureglobal.com

 

 

Rondure New World Fund Portfolio of Investments

 

  October 31, 2019 (Unaudited)

 

 

       Value 
   Shares   (Note 2) 
COMMON STOCKS (91.52%)          
Australia (1.77%)          
Coca-Cola Amatil, Ltd.   360,500   $2,522,387 
           
Bangladesh (0.76%)          
Square Pharmaceuticals, Ltd.   391,432    1,085,592 
           
Brazil (5.61%)          
Ambev SA   402,200    1,740,978 
B3 SA - Brasil Bolsa Balcao   229,600    2,771,459 
Hypera SA   171,400    1,471,036 
M Dias Branco SA   114,700    1,081,363 
Raia Drogasil SA   33,300    913,020 
         7,977,856 
           
Canada (1.15%)          
Lululemon Athletica, Inc.(a)   8,025    1,639,267 
           
China (13.00%)          
ANTA Sports Products, Ltd.   223,000    2,185,619 
China Resources Beer Holdings Co., Ltd.   140,000    720,908 
Chongqing Brewery Co., Ltd.   111,100    683,775 
Haier Electronics Group Co., Ltd.   233,000    666,058 
Hengan International Group Co., Ltd.   79,000    552,479 
Kweichow Moutai Co., Ltd., Class A   4,400    737,989 
Li Ning Co., Ltd.   1,552,000    5,278,339 
Sichuan Swellfun Co., Ltd.   153,900    1,163,317 
TravelSky Technology, Ltd., Class H   409,000    934,296 
Tsingtao Brewery Co., Ltd., Class H   381,000    2,214,735 
Want Want China Holdings, Ltd.   590,000    498,446 
Yum China Holdings, Inc.   67,175    2,854,938 
         18,490,899 
           
Greece (1.68%)          
JUMBO SA   122,456    2,390,065 
           
Hong Kong (3.82%)          
Cafe de Coral Holdings, Ltd.   214,000    584,435 

 

 

       Value 
   Shares   (Note 2) 
Hong Kong (continued)          
Hong Kong Exchanges & Clearing, Ltd.   69,000   $2,157,364 
Vitasoy International Holdings, Ltd.   660,000    2,686,847 
         5,428,646 
           
India (8.32%)          
Asian Paints, Ltd.   62,744    1,600,783 
Britannia Industries, Ltd.   14,622    673,411 
Colgate-Palmolive India, Ltd.   39,204    856,279 
Dabur India, Ltd.   159,000    1,035,547 
HDFC Bank, Ltd.   43,000    745,890 
Hero MotoCorp, Ltd.   31,500    1,200,956 
Hindustan Unilever, Ltd.   25,135    770,878 
Jubilant Foodworks, Ltd.   93,500    2,110,345 
Marico, Ltd.   14,900    76,854 
Maruti Suzuki India, Ltd.   6,070    646,925 
Nestle India, Ltd.   3,718    783,504 
Pidilite Industries, Ltd.   6,385    126,172 
Tata Consultancy Services, Ltd.   22,500    719,978 
United Breweries, Ltd.   27,500    494,780 
         11,842,302 
           
Indonesia (2.82%)          
Ace Hardware Indonesia Tbk PT   5,526,000    665,309 
Indofood CBP Sukses  Makmur Tbk PT   2,571,000    2,129,221 
Multi Bintang Indonesia Tbk PT   515,000    620,040 
Unilever Indonesia Tbk PT   193,000    601,191 
         4,015,761 
           
Kenya (2.10%)          
Safaricom PLC   10,368,600    2,986,117 
           
Malaysia (6.14%)          
Carlsberg Brewery Malaysia Bhd   558,000    3,704,420 
Hartalega Holdings Bhd   776,000    976,848 
Heineken Malaysia Bhd   588,000    3,596,812 
Top Glove Corp. Bhd   432,000    449,731 
         8,727,811 

 

See Notes to Financial Statements.

 

Semi-Annual Report | October 31, 2019 13

 

 

Rondure New World Fund Portfolio of Investments

 

  October 31, 2019 (Unaudited)

 

 

       Value 
   Shares   (Note 2) 
Mexico (4.42%)          
Becle SAB de CV   1,769,600   $3,047,688 
Wal-Mart de Mexico SAB de CV   1,082,400    3,243,852 
         6,291,540 
           
Pakistan (0.13%)          
Nestle Pakistan, Ltd.   4,578    188,359 
           
Peru (0.95%)          
Alicorp SAA   236,846    649,349 
InRetail Peru Corp.(b)(c)   20,196    706,860 
         1,356,209 
           
Philippines (7.11%)          
International Container          
Terminal Services, Inc.   272,000    636,248 
Jollibee Foods Corp.   247,000    1,129,254 
Philippine Seven Corp.   1,631,447    4,790,336 
Puregold Price Club, Inc.   1,288,000    1,036,847 
San Miguel Food and Beverage, Inc.   1,393,000    2,525,490 
         10,118,175 
           
Poland (1.35%)          
AmRest Holdings SE(a)   94,000    1,163,729 
Dino Polska SA(a)(b)(c)   19,400    756,573 
         1,920,302 
           
South Africa (2.62%)          
Clicks Group, Ltd.   115,400    1,877,040 
Distell Group Holdings, Ltd.   69,900    620,614 
Shoprite Holdings, Ltd.   137,200    1,229,493 
         3,727,147 
           
South Korea (1.28%)          
LG Household & Health Care, Ltd.   650    704,500 
S-1 Corp.   13,800    1,111,401 
         1,815,901 
           
Sri Lanka (1.12%)          
Lion Brewery Ceylon PLC   472,256    1,586,322 
           
Taiwan (7.47%)          
President Chain Store Corp.   284,000    2,836,222 

 

 

       Value 
   Shares   (Note 2) 
Taiwan (continued)          
Taiwan FamilyMart Co., Ltd.   274,000   $1,971,255 
Taiwan Semiconductor          
Manufacturing Co., Ltd.   471,000    4,618,633 
Uni-President Enterprises Corp.   487,000    1,203,081 
         10,629,191 
           
Tanzania (0.11%)          
Tanzania Breweries, Ltd.   34,234    161,958 
           
Thailand (6.00%)          
Airports of Thailand PCL   263,000    681,561 
Bangkok Dusit Medical Services PCL   1,574,000    1,251,068 
Bumrungrad Hospital PCL   103,000    411,045 
CP ALL PCL   129,000    333,234 
Home Product Center PCL   1,238,000    705,203 
MK Restaurants Group PCL   559,000    1,439,386 
TOA Paint Thailand PCL   2,494,000    3,716,840 
         8,538,337 
           
Turkey (0.63%)          
BIM Birlesik Magazalar AS   107,600    890,574 
           
United Arab Emirates (2.44%)          
Aramex PJSC   3,253,000    3,471,992 
           
United States (3.42%)          
Kansas City Southern   9,125    1,284,617 
Microsoft Corp.   9,750    1,397,858 
Starbucks Corp.   25,800    2,181,648 
         4,864,123 
           
Uruguay (0.41%)          
Arcos Dorados Holdings, Inc., Class A   77,600    579,672 
           
Vietnam (4.89%)          
Saigon Beer Alcohol          
Beverage Corp.   64,520    724,366 
Vietnam Dairy Products JSC   555,582    3,112,773 

 

 

See Notes to Financial Statements.

 

14 1.855.775.3337 | www.rondureglobal.com

 

 

Rondure New World Fund Portfolio of Investments

 

  October 31, 2019 (Unaudited)

 

       Value 
   Shares   (Note 2) 
Vietnam (continued)          
Vincom Retail JSC   2,181,185   $3,120,947 
         6,958,086 
           
TOTAL COMMON STOCKS          
(Cost $112,667,646)        130,204,591 
           
TOTAL INVESTMENTS (91.52%)          
(Cost $112,667,646)       $130,204,591 
           
Other Assets In Excess Of Liabilities (8.48%)        12,058,982 
           
NET ASSETS (100.00%)       $142,263,573 

 

 

(a)Non-Income Producing Security.
(b)Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. As of October 31, 2019, these securities had a total aggregate market value of $1,463,433 representing 1.03% of net assets.
(c)Security was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts securities offered and sold outside of the United States from registration. Such security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. The security has been deemed liquid under guidelines approved by the Fund's Board of Trustees. As of October 31, 2019, the aggregate market value of those securities was $1,463,433, representing 1.03% of net assets.

 

See Notes to Financial Statements.

 

Semi-Annual Report | October 31, 2019 15

 

 

 

Rondure Overseas Fund Portfolio of Investments

 

  October 31, 2019 (Unaudited)

 

       Value 
   Shares   (Note 2) 
COMMON STOCKS (93.84%)          
Australia (7.54%)          
ASX, Ltd.   4,000   $226,989 
Coca-Cola Amatil, Ltd.   86,600    605,933 
REA Group, Ltd.   5,946    445,097 
SEEK, Ltd.   10,000    156,345 
Sydney Airport   50,600    306,257 
         1,740,621 
           
Austria (0.98%)          
Mayr Melnhof Karton AG   1,850    227,376 
           
Belgium (0.27%)          
Lotus Bakeries NV   22    62,078 
           
Britain (11.15%)          
Compass Group PLC   4,696    125,066 
Diageo PLC   11,200    459,104 
Intertek Group PLC   1,700    117,857 
J D Wetherspoon PLC   13,488    255,611 
Rightmove PLC   19,800    153,529 
Unilever NV   16,400    968,504 
WH Smith PLC   9,287    263,215 
Whitbread PLC   4,400    231,459 
         2,574,345 
           
Canada (2.90%)          
Alimentation Couche-Tard, Inc., Class B   20,000    599,803 
Dollarama, Inc.   2,100    70,648 
         670,451 
           
Denmark (2.25%)          
Carlsberg A/S(a)   2,272    319,629 
Royal Unibrew A/S   2,440    200,043 
         519,672 
           
Finland (2.62%)          
Kone Oyj, Class B   2,300    146,318 
Olvi Oyj, Class A   10,805    458,534 
         604,852 
           
France (10.56%)          
Danone SA   11,480    952,079 
EssilorLuxottica SA   900    137,316 
Laurent-Perrier   550    54,594 

 

       Value 
   Shares   (Note 2) 
France (continued)          
L'Oreal SA   1,300   $379,581 
LVMH Moet Hennessy Louis          
Vuitton SE   590    251,695 
Pernod Ricard SA   2,582    476,591 
Remy Cointreau SA   912    121,957 
Sodexo SA   600    65,981 
         2,439,794 
           
Germany (6.49%)          
adidas AG   1,130    348,911 
CTS Eventim AG & Co., KGaA   3,745    226,591 
Deutsche Post AG   3,505    124,115 
Puma SE   8,860    666,511 
SAP SE   1,000    132,497 
         1,498,625 
           
Hong Kong (1.62%)          
Hong Kong Exchanges & Clearing, Ltd.   3,800    118,811 
Vitasoy International Holdings, Ltd.   63,000    256,472 
         375,283 
           
Italy (1.66%)          
Davide Campari-Milano SpA   10,509    96,286 
DiaSorin SpA   383    43,143 
Ferrari NV   1,525    243,984 
         383,413 
           
Japan (28.91%)          
ABC-Mart, Inc.   3,600    247,356 
Asics Corp.   26,600    460,124 
Calbee, Inc.   6,800    227,947 
Cosmos Pharmaceutical Corp.   1,200    248,134 
Create SD Holdings Co., Ltd.   10,100    251,869 
Ezaki Glico Co., Ltd.   5,400    251,523 
Kewpie Corp.   9,900    225,521 
Kobayashi Pharmaceutical Co., Ltd.   1,800    144,847 
Kusuri no Aoki Holdings Co., Ltd.   2,500    187,286 
Matsumotokiyoshi Holdings Co., Ltd.   7,500    265,650 
McDonald's Holdings Co. Japan, Ltd.   1,800    90,508 

 

See Notes to Financial Statements.

 

16 1.855.775.3337 | www.rondureglobal.com

 

 

Rondure Overseas Fund Portfolio of Investments

 

  October 31, 2019 (Unaudited)

 

       Value 
   Shares   (Note 2) 
Japan (continued)          
MEIJI Holdings Co., Ltd.   800   $57,931 
MISUMI Group, Inc.   5,100    129,590 
MonotaRO Co., Ltd.   10,500    321,349 
Morinaga & Co., Ltd.   3,900    193,212 
Nihon M&A Center, Inc.   7,800    239,078 
Nippon Paint Holdings Co., Ltd.   2,500    137,744 
Oriental Land Co., Ltd.   2,500    367,742 
Pigeon Corp.   5,200    256,172 
Secom Co., Ltd.   4,500    419,414 
Seria Co., Ltd.   4,700    118,642 
Seven & i Holdings Co., Ltd.   11,200    425,225 
Shimano, Inc.   700    117,326 
Ship Healthcare Holdings, Inc.   6,400    274,396 
SK Kaken Co., Ltd.   174    75,246 
Sundrug Co., Ltd.   7,200    239,689 
Suntory Beverage & Food, Ltd.   2,600    111,232 
Tsuruha Holdings, Inc.   1,300    147,227 
Unicharm Corp.   13,000    444,087 
         6,676,067 
           
Netherlands (3.31%)          
Akzo Nobel NV   1,100    101,275 
Euronext NV(b)(c)   5,690    458,502 
Heineken NV   2,000    204,011 
         763,788 
           
New Zealand (4.12%)          
Air New Zealand, Ltd.   156,402    283,283 
Auckland International          
Airport, Ltd.   51,800    308,867 
Mainfreight, Ltd.   13,931    359,060 
         951,210 
           
Sweden (2.47%)          
Axfood AB   19,844    427,062 
Loomis AB, Class B   3,682    142,236 
         569,298 
           
Switzerland (6.99%)          
Chocoladefabriken Lindt & Spruengli AG   73    542,413 
Cie Financiere Richemont SA   1,425    112,093 

 

       Value 
   Shares   (Note 2) 
Switzerland (continued)          
Nestle SA   8,980   $958,716 
         1,613,222 
           
TOTAL COMMON STOCKS          
(Cost $19,157,611)        21,670,095 
           
TOTAL INVESTMENTS (93.84%)          
(Cost $19,157,611)       $21,670,095 
           
Other Assets In Excess Of Liabilities (6.16%)        1,422,965 
           
NET ASSETS (100.00%)       $23,093,060 

 

(a)Non-Income Producing Security.
(b)Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. As of October 31, 2019, these securities had a total aggregate market value of $458,502 representing 1.99% of net assets.
(c)Security was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts securities offered and sold outside of the United States from registration. Such security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. The security has been deemed liquid under guidelines approved by the Fund's Board of Trustees. As of October 31, 2019, the aggregate market value of those securities was $458,502, representing 1.99% of net assets.

 

See Notes to Financial Statements.

 

Semi-Annual Report | October 31, 2019 17

 

 

Rondure Funds Statements of Assets and Liabilities

 

  October 31, 2019 (Unaudited)

 

   Rondure New World   Rondure Overseas 
   Fund   Fund 
ASSETS          
Investments, at value (Cost - see below)  $130,204,591   $21,670,095 
Foreign cash, at value (Cost $1,603,485 and $1, respectively)   1,603,493    1 
Cash   10,451,555    1,326,305 
Dividends and interest receivable   39,188    36,427 
Receivable for investments sold   674,673    3,803 
Receivable for fund shares subscribed   39,826    394,939 
Receivable due from advisor   38,303    18,584 
Prepaid and other assets   19,881    13,102 
Total assets   143,071,510    23,463,256 
           
LIABILITIES          
Payable for investments purchased       287,977 
Foreign capital gains tax   344,598     
Payable for fund shares redeemed   184,632     
Advisory fees payable   99,564    13,205 
Administration fees payable   49,585    25,992 
Custodian fees payable   47,877    5,216 
Payable for professional fees   25,643    19,446 
Payable for trustee fees and expenses   2,399    430 
Payable for chief compliance officer fee   4,199    806 
Payable for principal financial officer fees   1,485    281 
Distribution and service fees payable - Investor Class   4,207    779 
Payable for transfer agency fees   30,227    12,575 
Accrued expenses and other liabilities   13,521    3,489 
Total liabilities   807,937    370,196 
NET ASSETS  $142,263,573   $23,093,060 
           
NET ASSETS CONSISTS OF          
Paid-in capital (Note 5)  $131,948,702   $21,502,849 
Total distributable earnings   10,314,871    1,590,211 
NET ASSETS  $142,263,573   $23,093,060 
           
INVESTMENTS, AT COST  $112,667,646   $19,157,611 
           
PRICING OF SHARES          
Institutional Class          
Net Assets  $121,424,775   $19,358,433 
Net Asset Value, offering and redemption price per share  $11.41   $11.63 
Shares of beneficial interest outstanding   10,640,548    1,664,336 
Investor Class          
Net Assets  $20,838,798   $3,734,627 
Net Asset Value, offering and redemption price per share  $11.38   $11.63 
Shares of beneficial interest outstanding   1,831,405    321,126 

 

See Notes to Financial Statements.

 

18 1.855.775.3337 | www.rondureglobal.com

 

 

Rondure Funds Statements of Operations

 

  For the Six Months Ended October 31, 2019 (Unaudited)

 

   Rondure New World
Fund
   Rondure Overseas
Fund
 
INVESTMENT INCOME          
Dividends  $1,876,718   $234,202 
Interest   65     
Foreign taxes withheld   (143,152)   (29,100)
Other Income   28,819    3,215 
Total investment income   1,762,450    208,317 
EXPENSES          
Investment advisor fees (Note 6)   570,363    78,885 
Administrative fees   123,476    35,780 
Distribution and service fees - Investor Class   24,647    4,744 
Transfer agent fees   89,501    31,417 
Professional fees   16,340    12,795 
Printing fees   9,481    1,437 
Registration fees   20,286    15,982 
Custodian fees   102,332    15,604 
Trustee fees and expenses   2,349    409 
Chief compliance officer fees   14,846    2,611 
Principal financial officer fees   4,337    763 
Other expenses   7,208    4,423 
Total expenses   985,166    204,850 
Less fees waived/reimbursed by investment advisor (Note 6)   (222,066)   (104,321)
Total net expenses   763,100    100,529 
NET INVESTMENT INCOME   999,350    107,788 
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS          
Net realized gain/(loss) on investments   104,545    (355,579)
Net realized gain/(loss) on foreign currency transactions   (11,291)   8,119 
Net realized gain/(loss)   93,254    (347,460)
Net change in unrealized appreciation on investments (net of change in foreign capital gains tax of $308,148 and $0, respectively)   6,554,819    1,277,041 
Net change in unrealized appreciation/(depreciation) on translation of assets and liabilities in foreign currencies   2,154    (207)
Net change in unrealized appreciation   6,556,973    1,276,834 
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCY          
TRANSACTIONS   6,650,227    929,374 
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS  $7,649,577   $1,037,162 

 

 

See Notes to Financial Statements.

 

Semi-Annual Report | October 31, 2019 19

 

 

Rondure New World Fund Statement of Changes in Net Assets

 

 

  

For the
Six Months Ended

October 31, 2019
(Unaudited)

   For the
Year Ended
April 30, 2019
 
OPERATIONS          
Net investment income  $999,350   $1,008,257 
Net realized gain/(loss)   93,254    (7,966,966)
Net change in unrealized appreciation   6,556,973    2,660,191 
Net increase/(decrease) in net assets resulting from operations   7,649,577    (4,298,518)
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)          
From distributable earnings          
Institutional Class       (805,429)
Investor Class       (134,438)
Net decrease in net assets from distributions       (939,867)
CAPITAL SHARE TRANSACTIONS (NOTE 5)          
Institutional Class          
Proceeds from sales of shares   10,554,452    45,561,068 
Distributions reinvested       775,462 
Cost of shares redeemed   (6,465,344)   (32,437,400)
Redemption fees   6,941    2,181 
Net increase from capital shares transactions   4,096,049    13,901,311 
Investor Class          
Proceeds from sales of shares   3,137,161    10,226,719 
Distributions reinvested       133,941 
Cost of shares redeemed   (4,014,540)   (12,623,048)
Redemption fees   585    1,142 
Net decrease from capital shares transactions   (876,794)   (2,261,246)
Net increase in net assets   10,868,832    6,401,680 
           
NET ASSETS          
Beginning of period   131,394,741    124,993,061 
End of period  $142,263,573   $131,394,741 
           
OTHER INFORMATION          
Shares Transactions          
Institutional Class          
Issued   973,672    4,483,691 
Issued to shareholders in reinvestment of distributions       81,115 
Redeemed   (594,282)   (3,256,312)
Net increase in share transactions   379,390    1,308,494 
Investor Class          
Issued   287,872    1,005,992 
Issued to shareholders in reinvestment of distributions       14,025 
Redeemed   (366,826)   (1,265,236)
Net decrease in share transactions   (78,954)   (245,219)

 

See Notes to Financial Statements.

 

20 1.855.775.3337 | www.rondureglobal.com

 

 

Rondure Overseas Fund Statement of Changes in Net Assets

 

 

   For the
Six Months Ended
October 31, 2019
(Unaudited)
   For the
Year Ended
April 30, 2019
 
OPERATIONS          
Net investment income  $107,788   $214,145 
Net realized loss   (347,460)   (711,512)
Net change in unrealized appreciation/(depreciation)   1,276,834    (30,254)
Net increase/(decrease) in net assets resulting from operations   1,037,162    (527,621)
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)(a)          
From distributable earnings          
Institutional Class       (239,395)
Investor Class       (49,787)
Net decrease in net assets from distributions       (289,182)
CAPITAL SHARE TRANSACTIONS (NOTE 5)          
Institutional Class          
Proceeds from sales of shares   943,727    8,892,000 
Distributions reinvested       229,107 
Cost of shares redeemed   (1,295,874)   (3,918,374)
Redemption fees   4    1,619 
Net increase/(decrease) from capital shares transactions   (352,143)   5,204,352 
Investor Class          
Proceeds from sales of shares   248,353    1,539,008 
Distributions reinvested       49,575 
Cost of shares redeemed   (608,761)   (2,683,077)
Redemption fees   1,345    1,670 
Net decrease from capital shares transactions   (359,063)   (1,092,824)
Net increase in net assets   325,956    3,294,725 
NET ASSETS          
Beginning of period   22,767,104    19,472,379 
End of period  $23,093,060   $22,767,104 
OTHER INFORMATION          
Shares Transactions          
Institutional Class          
Issued   82,594    787,230 
Issued to shareholders in reinvestment of distributions       22,528 
Redeemed   (114,980)   (359,383)
Net increase/(decrease) in share transactions   (32,386)   450,375 
Investor Class          
Issued   22,183    139,570 
Issued to shareholders in reinvestment of distributions       4,865 
Redeemed   (53,955)   (243,574)
Net decrease in share transactions   (31,772)   (99,139)

 

See Notes to Financial Statements.

 

Semi-Annual Report | October 31, 2019 21

 

 

Rondure New World Fund – Institutional Class Financial Highlights

 

  For a Share Outstanding Throughout the Period Presented

 

Institutional Class  For the Six Months Ended October 31, 2019 (Unaudited)    Year Ended April 30, 2019    For the Period May 2, 2017 (Commencement of Operations) to April 30, 2018  
NET ASSET VALUE, BEGINNING OF PERIOD  $10.80   $11.25   $10.00 
                
INCOME FROM INVESTMENT OPERATIONS               
Net investment income(a)   0.08    0.09    0.05 
Net realized and unrealized gain/(loss) on investments   0.53    (0.45)   1.23 
Total income/(loss) from investment operations   0.61    (0.36)   1.28 
                
DISTRIBUTIONS               
From net investment income       (0.09)   (0.03)
From net realized gain on investments           (0.00)(b)
Total distributions       (0.09)   (0.03)
                
REDEMPTION FEES ADDED TO PAID-IN CAPITAL   0.00(b)    0.00(b)   0.00(b) 
                
INCREASE/DECREASE IN NET ASSET VALUE   0.61    (0.45)   1.25 
NET ASSET VALUE, END OF PERIOD  $11.41   $10.80   $11.25 
                
TOTAL RETURN   5.65%(c)   (3.09)%   12.78%(c)
                
RATIOS AND SUPPLEMENTAL DATA               
Net assets, end of period (in 000s)  $121,425   $110,800   $100,760 
                
RATIOS TO AVERAGE NET ASSETS           
Expenses (excluding fees waived/ reimbursed by investment advisor)   1.42%(d)   1.46%   1.62%(d)
Expenses (including fees waived/ reimbursed by investment advisor)   1.10%(d)   1.10%   1.10%(d)
Net investment income   1.53%(d)   0.87%   0.43%(d)
                
PORTFOLIO TURNOVER RATE   11%(c)   37%   13%(c)

 

(a)Per share numbers have been calculated using the average shares method.
(b)Less than $0.005 or ($0.005) per share.
(c)Not Annualized.
(d)Annualized.

 

See Notes to Financial Statements.

 

22 1.855.775.3337 | www.rondureglobal.com

 

 

Rondure New World Fund – Investor Class Financial Highlights

 

  For a Share Outstanding Throughout the Period Presented

 

Investor Class  For the Six Months Ended October 31, 2019 (Unaudited)    Year Ended April 30, 2019    For the Period May 2, 2017 (Commencement of Operations) to April 30, 2018  
NET ASSET VALUE, BEGINNING OF PERIOD  $10.78   $11.24   $10.00 
                
INCOME FROM INVESTMENT OPERATIONS               
Net investment income(a)   0.07    0.07    0.03 
Net realized and unrealized gain/(loss) on investments   0.53    (0.46)   1.22 
Total income/(loss) from investment operations   0.60    (0.39)   1.25 
                
DISTRIBUTIONS               
From net investment income       (0.07)   (0.01)
From net realized gain on investments           (0.00)(b)
Total distributions       (0.07)   (0.01)
                
REDEMPTION FEES ADDED TO PAID-IN CAPITAL   0.00(b)    0.00(b)   0.00(b) 
                
INCREASE/DECREASE IN NET ASSET VALUE   0.60    (0.46)   1.24 
NET ASSET VALUE, END OF PERIOD  $11.38   $10.78   $11.24 
                
TOTAL RETURN   5.57%(c)   (3.37)%   12.53%(c)
                
RATIOS AND SUPPLEMENTAL DATA               
Net assets, end of period (in 000s)  $20,839   $20,595   $24,233 
                
RATIOS TO AVERAGE NET ASSETS               
Expenses (excluding fees waived/ reimbursed by investment advisor)   1.73%(d)   1.76%   1.91%(d)
Expenses (including fees waived/ reimbursed by investment advisor)   1.35%(d)   1.35%   1.35%(d)
Net investment income   1.27%(d)   0.66%   0.24%(d)
                
PORTFOLIO TURNOVER RATE   11%(c)   37%   13%(c)

 

(a)Per share numbers have been calculated using the average shares method.
(b)Less than $0.005 or ($0.005) per share.
(c)Not Annualized.
(d)Annualized.

 

See Notes to Financial Statements.

 

Semi-Annual Report | October 31, 2019 23

 

 

 

Rondure Overseas Fund – Institutional Class Financial Highlights

 

  For a Share Outstanding Throughout the Period Presented

 

Institutional Class  For the Six Months Ended October 31, 2019 (Unaudited)    Year Ended April 30, 2019    For the Period May 2, 2017 (Commencement of Operations) to April 30, 2018  
NET ASSET VALUE, BEGINNING OF PERIOD  $11.11   $11.46   $10.00 
                
INCOME FROM INVESTMENT OPERATIONS               
Net investment income(a)   0.06    0.10    0.10 
Net realized and unrealized gain/(loss) on investments   0.46    (0.31)   1.48 
Total income/(loss) from investment operations   0.52    (0.21)   1.58 
                
DISTRIBUTIONS               
From net investment income       (0.11)   (0.04)
From net realized gain on investments       (0.03)   (0.08)
Total distributions       (0.14)   (0.12)
                
REDEMPTION FEES ADDED TO PAID-IN CAPITAL   0.00(b)    0.00(b)   0.00(b) 
                
INCREASE/DECREASE IN NET ASSET VALUE   0.52    (0.35)   1.46 
NET ASSET VALUE, END OF PERIOD  $11.63   $11.11   $11.46 
                
TOTAL RETURN   4.68%(c)   (1.76)%   15.88%(c)
                
RATIOS AND SUPPLEMENTAL DATA               
Net assets, end of period (in 000s)  $19,358   $18,845   $14,283 
                
RATIOS TO AVERAGE NET ASSETS               
Expenses (excluding fees waived/ reimbursed by investment advisor)   1.76%(d)   1.72%   2.57%(d)
Expenses (including fees waived/ reimbursed by investment advisor)   0.85%(d)   0.85%   0.85%(d)
Net investment income   1.00%(d)   0.95%   0.92%(d)
                
PORTFOLIO TURNOVER RATE   24%(c)   40%   14%(c)

 

(a)Per share numbers have been calculated using the average shares method.
(b)Less than $0.005 or ($0.005) per share.
(c)Not Annualized.
(d)Annualized.

 

See Notes to Financial Statements.

 

24 1.855.775.3337 | www.rondureglobal.com

 

 

 

Rondure Overseas Fund – Investor Class Financial Highlights

 

  For a Share Outstanding Throughout the Period Presented

 

Investor Class  For the Six Months Ended October 31, 2019 (Unaudited)    Year Ended April 30, 2019    For the Period May 2, 2017 (Commencement of Operations) to April 30, 2018  
NET ASSET VALUE, BEGINNING OF PERIOD  $11.12   $11.48   $10.00 
                
INCOME FROM INVESTMENT OPERATIONS               
Net investment income(a)   0.04    0.08    0.09 
Net realized and unrealized gain/(loss) on investments   0.47    (0.32)   1.46 
Total income/(loss) from investment operations   0.51    (0.24)   1.55 
                
DISTRIBUTIONS               
From net investment income       (0.09)    
From net realized gain on investments       (0.03)   (0.08)
Total distributions       (0.12)   (0.08)
                
REDEMPTION FEES ADDED TO PAID-IN CAPITAL   0.00(b)    0.00(b)    0.01 
                
INCREASE/DECREASE IN NET ASSET VALUE   0.51    (0.36)   1.48 
NET ASSET VALUE, END OF PERIOD  $11.63   $11.12   $11.48 
                
TOTAL RETURN   4.59%(c)   (1.98)%   15.63%(c)
                
RATIOS AND SUPPLEMENTAL DATA               
Net assets, end of period (in 000s)  $3,735   $3,922   $5,189 
                
RATIOS TO AVERAGE NET ASSETS               
Expenses (excluding fees waived/ reimbursed by investment advisor)   2.09%(d)   2.04%   2.45%(d)
Expenses (including fees waived/ reimbursed by investment advisor)   1.10%(d)   1.10%   1.10%(d)
Net investment income   0.76%(d)   0.74%   0.82%(d)
                
PORTFOLIO TURNOVER RATE   24%(c)   40%   14%(c)

 

(a)Per share numbers have been calculated using the average shares method.
(b)Less than $0.005 or ($0.005) per share.
(c)Not Annualized.
(d)Annualized.

 

See Notes to Financial Statements.

 

Semi-Annual Report | October 31, 2019 25

 

 

Rondure Funds Notes to Financial Statements

 

  October 31, 2019 (Unaudited)

 

1. ORGANIZATION

 

Financial Investors Trust (the “Trust”), a Delaware statutory trust, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (“1940 Act”). As of October 31, 2019, the Trust consists of multiple separate Portfolios or series. This semi-annual report describes the Rondure New World Fund and the Rondure Overseas Fund (individually a “Fund” and collectively, the “Funds”). The Funds seek long-term growth of capital. The Funds offer Investor Class and Institutional Class shares.

 

2. SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. The Funds are considered an investment company for financial reporting purposes under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946. The following is a summary of significant accounting policies consistently followed by the Funds in preparation of its financial statements.

 

Investment Valuation: The Funds generally value their securities based on market prices determined at the close of regular trading on the New York Stock Exchange (“NYSE”), normally 4:00 p.m. Eastern Time, on each day the NYSE is open for trading.

 

For equity securities and mutual funds that are traded on an exchange, the market price is usually the closing sale or official closing price on that exchange. In the case of equity securities not traded on an exchange, or if such closing prices are not otherwise available, the securities are valued at the mean of the most recent bid and ask prices on such day. Redeemable securities issued by open-end registered investment companies are valued at the investment company’s applicable net asset value, with the exception of exchange-traded open-end investment companies, which are priced as equity securities.

 

Equity securities that are primarily traded on foreign securities exchanges are valued at the closing values of such securities on their respective foreign exchanges, except when an event occurs subsequent to the close of the foreign exchange and the close of the NYSE that was likely to have changed such value. In such an event, the fair value of those securities are determined in good faith through consideration of other factors in accordance with procedures established by and under the general supervision of the Board of Trustees of the Trust (the “Board” or the “Trustees”). The Funds will use a fair valuation model provided by an independent pricing service, which is intended to reflect fair value when a security’s value or a meaningful portion of each Fund’s portfolio is believed to have been materially affected by a valuation event that has occurred between the close of the exchange or market on which the security is traded and the close of the regular trading day on the NYSE. The Funds’ valuation procedures set forth certain triggers which instruct when to use the fair valuation model.

 

Forward currency exchange contracts have a fair value determined by the prevailing foreign currency exchange daily rates and current foreign currency exchange forward rates. The foreign currency exchange forward rates are calculated using an automated system that estimates rates on the basis of the current day foreign currency exchange rates and forward foreign currency exchange rates supplied by a pricing service.

 

When such prices or quotations are not available, or when Rondure Global Advisors, LLC (the “Advisor” or “Rondure”) believes that they are unreliable, securities may be priced using fair value procedures approved by the Board.

 

Fair Value Measurements: The Funds disclose the classification of their fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.

 

Various inputs are used in determining the value of the Funds’ investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments. These inputs are categorized in the following hierarchy under applicable financial accounting standards:

 

 

26 1.855.775.3337 | www.rondureglobal.com

 

 

 

Rondure Funds Notes to Financial Statements

 

  October 31, 2019 (Unaudited)

 

Level 1 – Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that the Funds have the ability to access at the measurement date;

 

Level 2 – Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and

 

Level 3 – Significant unobservable prices or inputs (including the Funds’ own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date.

 

The following is a summary of each Fund’s investments in the fair value hierarchy as of October 31, 2019:

 

Investments in Securities at Value  Level 1 - Quoted and Unadjusted Prices   Level 2 - Other Significant Observable Inputs   Level 3 - Significant Unobservable Inputs   Total 
Rondure New World Fund                    
Common Stocks                    
Tanzania  $   $161,958   $   $161,958 
Other*   130,042,633            130,042,633 
Total  $130,042,633   $161,958   $   $130,204,591 
                 
Investments in Securities at Value  Level 1 - Quoted and Unadjusted Prices   Level 2 - Other Significant Observable Inputs   Level 3 - Significant Unobservable Inputs   Total 
Rondure Overseas Fund                    
Common Stocks*  $21,670,095   $   $   $21,670,095 
Total  $21,670,095   $   $   $21,670,095 

 

*For a detailed country breakdown, see the accompanying Portfolio of Investments.

 

For liabilities arising from overdrafts in the custody account, the carrying amount reported as payable to custodian in the Statement of Assets and Liabilities approximates fair value due to the relatively short-term maturity of these financial instruments. As of October 31, 2019, the liability related to custody overdrafts in the Rondure Overseas Fund are based on Level 2 inputs.

 

For the six months ended October 31, 2019, the Funds did not have any securities that used significant unobservable inputs (Level 3) in determining fair value.

 

Investment Transactions and Investment Income: Investment transactions are accounted for on the date the investments are purchased or sold (trade date). Realized gains and losses from investment transactions are reported on an identified cost which is the same basis the Fund uses for federal income tax purposes. Interest income, which includes accretion of discounts and amortization of premiums, is accrued and recorded as earned. Dividend income is recognized on the ex-dividend date or for certain foreign securities, as soon as information is available to the Funds. All of the realized and unrealized gains and losses and net investment income, are allocated daily to each class in proportion to its average daily net assets.

 

 

Semi-Annual Report | October 31, 2019 27

 

 

 

Rondure Funds Notes to Financial Statements

 

  October 31, 2019 (Unaudited)

 

Cash Management Transactions: The Funds subscribe to the Brown Brothers Harriman & Co. (“BBH”) Cash Management Service (“CMS”), whereby cash balances are automatically swept into overnight offshore demand deposits with either the BBH Grand Cayman branch or a branch of a pre-approved commercial bank. This fully automated program allows the Funds to earn interest on cash balances. Excess cash with deposit institutions domiciled outside of the U.S. are subject to sovereign actions in the jurisdiction of the deposit institution including, but not limited to, freeze, seizure or diminution. Cash balances in the BBH CMS are included on the Statements of Assets and Liabilities under Cash and Foreign Cash, at Value. As of October 31, 2019, the Funds had the following cash balances participating in the BBH CMS:

 

Fund    
Rondure New World Fund  $10,451,555 
Rondure Overseas Fund   1,326,305 

 

As of October 31, 2019, the Funds had the following foreign cash balances participating in the BBH CMS (cost and value of foreign cash balances are equal):

 

Fund    
Rondure New World Fund  $6 
Rondure Overseas Fund   1 

 

Foreign Securities: The Funds may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible reevaluation of currencies, the inability to repatriate foreign currency, less complete financial information about companies and possible future adverse political and economic developments. Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. issuers.

 

Foreign Currency Translation: The books and records of the Funds are maintained in U.S. dollars. Investment valuations and other assets and liabilities initially expressed in foreign currencies are converted each business day into U.S. dollars based upon current exchange rates. Prevailing foreign exchange rates may generally be obtained at the close of the NYSE (normally, 4:00 p.m. Eastern Time). The portion of realized and unrealized gains or losses on investments due to fluctuations in foreign currency exchange rates are separately disclosed.

 

Foreign Currency Spot Contracts: The Funds may enter into foreign currency spot contracts to facilitate transactions in foreign securities or to convert foreign currency receipts into U.S. dollars. A foreign currency spot contract is an agreement between two parties to buy and sell currencies at the current market rate, for settlement generally within two business days. The U.S. dollar value of the contracts is determined using current currency exchange rates supplied by a pricing service.

 

The contract is marked-to-market daily for settlements beyond one day and any change in market value is recorded as an unrealized gain or loss. When the contract is closed, a realized gain or loss is recorded equal to the difference between the value on the open and close date. Losses may arise from changes in the value of the foreign currency, or if the counterparties do not perform under the contract’s terms. The maximum potential loss from such contracts is the aggregate face value in U.S. dollars at the time the contract was opened.

 

Trust Expenses: Some expenses of the Trust can be directly attributed to the Funds. Expenses which cannot be directly attributed to the Funds are apportioned among all funds in the Trust based on average net assets of each fund.

 

Fund and Class Expenses: Expenses that are specific to a Fund or class of shares of a Fund, including distribution fees (Rule 12b-1 fees), are charged directly to that Fund or share class. Expenses that are common to all Funds generally are allocated among the Funds in proportion to their average daily net assets.

 

Federal Income Taxes: The Funds comply with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies and intend to distribute substantially all of their net taxable income and net capital gains, if any, each year so that it will not be subject to excise tax on undistributed income and gains. The Funds are not subject to income taxes to the extent such distributions are made.

 

Distributions to Shareholders: Each Fund normally pays dividends and distributes capital gains, if any, on an annual basis. Income dividend distributions are derived from dividends and other income each Fund receives from their investments, including short term capital gains. Long term capital gain distributions are derived from gains realized when each Fund sells a security it has owned for more than a year. Each Fund may make

 

 

28 1.855.775.3337 | www.rondureglobal.com

 

 

 

Rondure Funds Notes to Financial Statements

 

  October 31, 2019 (Unaudited)

 

additional distributions and dividends at other times if the portfolio manager believes doing so may be necessary for each Fund to avoid or reduce taxes. The Funds intend to pass through foreign tax credits to shareholders.

 

3. TAX BASIS INFORMATION

 

Tax Basis of Investments: As of October 31, 2019, the aggregate cost of investments, gross unrealized appreciation/(depreciation) and net unrealized appreciation for Federal tax purposes was as follows:

 

Fund  Gross Appreciation (excess of value over tax cost)   Gross Depreciation (excess of tax cost over value)   Net Unrealized Appreciation   Cost of Investments for Income Tax Purposes 
Rondure New World Fund  $23,244,032   $(5,721,383)  $17,522,649   $112,681,942 
Rondure Overseas Fund   2,960,993    (451,105)   2,509,888    19,160,207 

 

Tax Basis of Distributions to Shareholders: The character of distributions made during the year from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or realized gain were recorded by the Funds.

 

The tax characters of distributions paid by the Funds for the year ended April 30, 2019 were as follows:

 

Fund  Ordinary Income   Long-Term Capital Gain 
Rondure New World Fund  $939,867   $ 
Rondure Overseas Fund   289,182     

 

The amounts and characteristics of tax basis distributions and composition of distributable earnings/(accumulated losses) are finalized at fiscal year-end. Accordingly, tax basis balances have not been determined as of October 31, 2019.

 

4. SECURITIES TRANSACTIONS

 

The cost of purchases and proceeds from sales of securities (excluding short term securities) during the six months ended October 31, 2019 were as follows:

 

Fund  Purchases of Securities   Proceeds From Sales of Securities 
Rondure New World Fund  $14,810,470   $19,831,949 
Rondure Overseas Fund   5,154,825    7,165,549 

 

5. SHARES OF BENEFICIAL INTEREST

 

The capitalization of the Trust consists of an unlimited number of shares of beneficial interest with no par value per share. Holders of the shares of the Funds of the Trust have one vote for each share held and a proportionate fraction of a vote for each fractional share. All shares issued and outstanding are fully paid and are transferable and redeemable at the option of the shareholder. Purchasers of the share do not have any obligation to make payments to the Trust or its creditors solely by reason of the purchasers’ ownership of the shares. Shares have no pre-emptive rights.

 

Shares redeemed within 60 days of purchase may incur a 2% short-term redemption fee deducted from the redemption amount. For the six months ended October 31, 2019, the redemption fees charged by the Funds are presented in the Statement of Changes in Net Assets.

 

 

Semi-Annual Report | October 31, 2019 29

 

 

 

Rondure Funds Notes to Financial Statements

 

  October 31, 2019 (Unaudited)

 

6. MANAGEMENT AND RELATED-PARTY TRANSACTIONS

 

The Advisor, subject to the authority of the Board, is responsible for the overall management and administration of the Funds’ business affairs. The Advisor manages the investments of the Funds in accordance with the Funds’ investment objective, policies and limitations and investment guidelines established jointly by the Advisor and the Trustees. Pursuant to the Advisory Agreement, (the “Advisory Agreement”), each Fund pays the Advisor an annual management fee based on each Fund’s average daily net assets. The management fee is paid on a monthly basis. The following table reflects the Funds’ advisory fee rates.

 

Fund Advisory Fee
Rondure New World Fund 0.85%
Rondure Overseas Fund 0.70%

 

The Advisor has contractually agreed to limit certain of each Fund’s expenses (excluding acquired fund fees and expenses, brokerage expenses, interest expense, taxes and extraordinary expenses). The following table reflects the Funds’ expense cap.

 

Fund  Expense Cap   Term of Expense Limit Agreements
Rondure New World Fund        
Institutional Class   1.10%   September 1, 2019 – August 31, 2020/
Investor Class   1.35%   September 1, 2018 – August 31, 2019
Rondure Overseas Fund        
Institutional Class   0.85%   September 1, 2019 – August 31, 2020/
Investor Class   1.10%   September 1, 2018 – August 31, 2019

 

Pursuant to these agreements, the Advisor may seek reimbursement from a Fund for any previous fee waivers and expense reimbursements made by the Advisor, provided that any such reimbursements made by the Funds to the Advisor will not cause the Funds’ expense limitation to exceed expense limitations in existence at the time the expense was incurred, or at the time of the reimbursement, whichever is lower, and the reimbursement is made within three years after the expenses were incurred. Fees waived/reimbursed by Advisor for the year ended April 30, 2019 are disclosed in the Statements of Operations.

 

For the six months ended October 31, 2019, the fee waivers/reimbursements and/or recoupments were as follows:

 

Fund  Fees Waived/Reimbursed By Adviser 
Rondure New World Fund Fund    
Institutional Class  $184,186 
Investor Class   37,880 
Rondure Overseas Fund Fund     
Institutional Class  $85,596 
Investor Class   18,725 

 

Fund  Expires 2021   Expires 2022   Expires 2023   Total 
Rondure New World Fund                
Institutional Class  $366,501   $357,945   $184,186   $908,632 
Investor Class   90,647    90,396    37,880    218,923 
Rondure Overseas Fund                    
Institutional Class  $186,581   $165,269   $85,596   $437,446 
Investor Class   33,311    42,849    18,725    94,886 

 

 

30 1.855.775.3337 | www.rondureglobal.com

 

 

 

Rondure Funds Notes to Financial Statements

 

  October 31, 2019 (Unaudited)

 

Administrator Fees and Expenses

ALPS Fund Services, Inc. (“ALPS”) serves as administrator to the Funds and the Funds have agreed to pay expenses incurred in connection with their administrative activities. Pursuant to an Administration Agreement, ALPS provides operational services to the Funds including, but not limited to, fund accounting and fund administration and generally assists in the Funds’ operations. Officers of the Trust are employees of ALPS. The Funds’ administration fee is accrued on a daily basis and paid monthly. Administration fees paid by the Funds for the six months ended October 31, 2019 are disclosed in the Statements of Operations.

 

ALPS is reimbursed by the Funds for certain out-of-pocket expenses.

 

Transfer Agent

ALPS serves as transfer, dividend paying and shareholder servicing agent for the Funds. ALPS receives an annual minimum fee, a fee based upon the number of shareholder accounts, and is also reimbursed by the Funds for certain out-of-pocket expenses. Transfer agent fees paid by the Funds for the six months ended October 31, 2019 are disclosed in the Statements of Operations.

 

Compliance Services

ALPS provides services that assist the Trust’s chief compliance officer in monitoring and testing the policies and procedures of the Trust in conjunction with requirements under Rule 38a-1 under the 1940 Act and receives an annual base fee. ALPS is reimbursed for certain out-of-pocket expenses by the Funds. Compliance service fees paid by the Funds for the year ended April 30, 2019 are disclosed in the Statements of Operations.

 

Principal Financial Officer

ALPS receives an annual fee for providing principal financial officer services to the Funds. Principal financial officer fees paid by the Fund for the six months ended October 31, 2019 are disclosed in the Statements of Operations.

 

Distributor

ALPS Distributors, Inc. (“ADI” or the “Distributor”) (an affiliate of ALPS) acts as the distributor of the Funds’ shares pursuant to a Distribution Agreement with the Trust. Shares are sold on a continuous basis by ADI as agent for the Funds, and ADI has agreed to use its best efforts to solicit orders for the sale of each Fund’s shares, although it is not obliged to sell any particular amount of shares. ADI is not entitled to any compensation for its services as Distributor. ADI is registered as a broker-dealer with the U.S. Securities and Exchange Commission.

 

Each Fund has adopted a Distribution and Services (Rule 12b-1) Plan pursuant to Rule 12b-1 of the 1940 Act (the “Plan”) for its Investor Class shares. The Plan allows the Funds to use Investor Class assets to pay fees in connection with the distribution and marketing of Investor Class shares and/or the provision of shareholder services to Investor Class shareholders. The Plan permits payment for services in connection with the administration of plans or programs that use Investor Class shares of each Fund as their funding medium and for related expenses. The recipients of such payments may include the Distributor, other affiliates of the Advisor, broker-dealers, financial institutions, plan sponsors and administrators and other financial intermediaries through which investors may purchase shares of the Fund. The Plan permits the Funds to make total payments at an annual rate of up to 0.25% of each Fund’s average daily net assets attributable to its Investor Class shares. The expenses of the Plan are reflected as distribution and service fees in the Statements of Operations.

 

Trustees

The fees and expenses of the independent Trustees of the Board are presented in the Statements of Operations.

 

7. INDEMNIFICATIONS

 

Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that may contain general indemnification clauses, which may permit indemnification to the extent permissible under applicable law. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred.

 

8. SUBSEQUENT EVENT

 

Subsequent events after the date of the Statements of Assets and Liabilities have been evaluated through the date the financial statements were issued.

 

 

Semi-Annual Report | October 31, 2019 31

 

 

 

Rondure Funds Disclosure Regarding Approval of Fund Advisory Agreement

 

October 31, 2019 (Unaudited)

 

Rondure Funds

 

On September 10, 2019, the Trustees met in person to discuss, among other things, the approval of the Investment Advisory Agreement between the Trust, with respect to the Rondure New World Fund and the Rondure Overseas Fund (collectively, the “Rondure Funds”) and Rondure, in accordance with Section 15(c) of the 1940 Act. In renewing and approving the Investment Advisory Agreement with Rondure, on behalf of the Rondure Funds, the Trustees, including the independent Trustees, considered the following factors with respect to the Rondure Funds:

 

Investment Advisory Fee Rate: The Trustees reviewed and considered the contractual annual advisory fees paid by the Trust, on behalf of the Rondure Funds, to Rondure, of 0.85% of the Rondure New World Fund’s daily net assets and 0.70% of the Rondure Overseas Fund’s daily net assets, in light of the extent and quality of the advisory services provided by Rondure to each of the Rondure Funds.

 

The Board received and considered information including a comparison of the Investor Class and Institutional Class of each Rondure Fund’s contractual advisory fee rate with those of funds in the peer group and universe of funds provided by an independent provider of investment company data (the “Data Provider”). The Trustees noted that the contractual advisory fee rate of both classes of each of the Rondure Funds was below the Data Provider peer group and universe medians.

 

Total Net Expense Ratios: The Trustees further reviewed and considered that the total net expense ratios of both classes of each of the Rondure Funds was generally below the Data Provider peer group and universe medians.

 

Nature, Extent, and Quality of the Services under the Investment Advisory Agreement: The Trustees received and considered information regarding the nature, extent, and quality of services provided to the Rondure Funds under the Investment Advisory Agreement. The Trustees reviewed certain background materials supplied by Rondure in its presentation, including its Form ADV.

 

The Trustees reviewed and considered Rondure’s investment advisory personnel, its history as an asset manager, and its performance and the amount of assets currently under management by Rondure and its affiliated entities. The Trustees also reviewed the research and decision-making processes utilized by Rondure, including the methods adopted to seek to achieve compliance with the investment objectives, policies, and restrictions of the Rondure Funds.

 

The Trustees considered the background and experience of Rondure’s management in connection with the Rondure Funds, including reviewing the qualifications, backgrounds, and responsibilities of the management team primarily responsible for the day-to-day portfolio management of each Rondure Fund and the extent of the resources devoted to research and analysis of actual and potential investments.

 

The Trustees also reviewed, among other things, Rondure’s insider trading policies and procedures and its Code of Ethics.

 

Performance: The Trustees reviewed performance information for the Investor Class and Institutional Class shares of the Rondure Funds for the 3-month and 1-year periods ended June 30, 2019. That review included a comparison of each Rondure Fund’s performance to the performance of a group of comparable funds selected by the Data Provider. The Trustees noted that the performance of both classes of the Rondure New World Fund was above the Data Provider universe median for the 3-month and 1-year periods and that the performance of both classes of the Rondure Overseas Fund was below the Data Provider universe median for the 3-month and 1-year periods. The Trustees also considered Rondure’s discussion of its reputation generally and its investment techniques, risk management controls, and decision-making processes.

 

Comparable Accounts: The Trustees noted certain information provided by Rondure regarding fees charged to its other clients utilizing a strategy similar to that employed by the Rondure Funds.

 

Profitability: The Trustees received and considered a retrospective and projected profitability analysis prepared by Rondure based on the fees payable under the Investment Advisory Agreement with respect to the Rondure Funds. The Trustees considered the profits, if any, anticipated to be realized by Rondure in connection with the operation of the Rondure Funds. The Board then reviewed Rondure’s income statement and balance sheet for the years ended December 31, 2016 through December 31, 2018 in order to analyze the financial condition, stability, and profitability of Rondure.

 

Economies of Scale: The Trustees considered whether economies of scale in the provision of services to the Rondure Funds will be passed along to the shareholders under the proposed agreements.

 

Other Benefits to the Adviser: The Trustees reviewed and considered any other incidental benefits derived or to be derived by Rondure from its relationship with the Rondure Funds, including whether soft dollar arrangements were used.

 

 

32 1.855.775.3337 | www.rondureglobal.com

 

 

 

Rondure Funds Disclosure Regarding Approval of Fund Advisory Agreement

 

October 31, 2019 (Unaudited)

 

In renewing Rondure as the Rondure Funds’ investment adviser and renewing the Investment Advisory Agreement and the fees charged under the Investment Advisory Agreement, the Trustees concluded that no single factor reviewed by the Trustees was identified by the Trustees to be determinative as the principal factor in whether to renew the Investment Advisory Agreement. Further, the Independent Trustees were advised by separate independent legal counsel throughout the process. The Trustees, including all of the Independent Trustees, concluded that:

 

the contractual advisory fee rate of both classes of each of the Rondure Funds was below the Data Provider peer group and universe medians;

 

the total net expense ratios of both classes of each of the Rondure Funds was below the Data Provider peer group and universe medians;

 

the nature, extent, and quality of services rendered by Rondure under the Investment Advisory Agreement with respect to each Rondure Fund were adequate;

 

for the period ended June 30, 2019, the performance of both classes of the Rondure New World Fund was above the Data Provider universe median for the 3-month and 1-year periods and the performance of both classes of the Rondure Overseas Fund was below the Data Provider universe median for the 3-month and 1-year periods;

 

bearing in mind the limitations of comparing different types of managed accounts and the different levels of service typically associated with such accounts, the fee structures applicable to Rondure’s other clients employing a comparable strategy to any of the Rondure Funds were not indicative of any unreasonableness with respect to the advisory fee payable by the Rondure Funds;

 

the profit, if any, realized by Rondure in connection with the operation of any of the Rondure Funds is not unreasonable; and

 

there were no material economies of scale or other incidental benefits accruing to Rondure in connection with its relationship with any of the Rondure Funds.

 

Based on the Trustees’ deliberations and their evaluation of the information described above, the Trustees, including all of the Independent Trustees, concluded that Rondure’s compensation for investment advisory services is consistent with the best interests of each of the Rondure Funds and their shareholders.

 

 

Semi-Annual Report | October 31, 2019 33

 

 

 

Rondure Funds Additional Information

 

  October 31, 2019 (Unaudited)

 

1. FUND HOLDINGS

 

 

The Funds’ portfolio holdings are made available semi-annually in shareholder reports within 60 days after the close of the period for which the report is being made, as required by federal securities laws. The Funds also file monthly portfolio holdings on Form N-PORT on a quarterly basis, with the schedule of portfolio holdings filed on Form N-PORT for the third month of each Fund’s fiscal quarter made publicly available 60 days after the end of the Funds’ fiscal quarter.

 

2. FUND PROXY VOTING POLICIES, PROCEDURES AND SUMMARIES

 

 

The Funds’ policies and procedures used in determining how to vote proxies and information regarding how the Funds voted proxies relating to portfolio securities during the most recent prior 12-month period ending June 30 are available without charge, (1) upon request, by calling (toll-free) 1-855-775-3337 and (2) on the SEC’s website at http://www.sec.gov.

 

 

34 1.855.775.3337 | www.rondureglobal.com

 

 

 

Rondure Funds Privacy Policy

 

  October 31, 2019 (Unaudited)

 

Who We Are  
Who is providing this notice? Rondure New World Fund and Rondure Overseas Fund.
What We Do  
How do the Funds protect my personal information? To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings.

How do the Funds collect my

personal information?

We collect your personal information, for example, when you

 

•     open an account

     provide account information or give us your contact information

     make a wire transfer or deposit money

Why can't I limit all sharing?

Federal law gives you the right to limit only

 

     sharing for affiliates’ everyday business purposes-information about your creditworthiness

     affiliates from using your information to market to you

     sharing for non-affiliates to market to you

 

State laws and individual companies may give you additional rights to limit sharing.

Definitions  
Affiliates Companies related by common ownership or control. They can be financial and nonfinancial companies.
Non-affiliates

Companies not related by common ownership or control. They can be financial and nonfinancial companies.

 

     The Funds does not share with non-affiliates so they can market to you.

Joint marketing

A formal agreement between non-affiliated financial companies that together market

financial products or services to you.

 

     The Funds does not jointly market.

Other Important Information  
California Residents If your account has a California home address, your personal information will not be disclosed to nonaffiliated third parties except as permitted by applicable California law, and we will limit sharing such personal information with our affiliates to comply with California privacy laws that apply to us.
Vermont Residents The State of Vermont requires financial institutions to obtain your consent prior to sharing personal information that they collect about you with affiliated companies and nonaffiliated third parties other than in certain limited circumstances. Except as permitted by law, we will not share personal information we collect about you with nonaffiliated third parties or other affiliated companies unless you provide us with your written consent to share such information.

 

 

Semi-Annual Report | October 31, 2019 35

 

 

 

Rondure Funds Privacy Policy

 

  October 31, 2019 (Unaudited)

 

FACTS WHAT DO THE FUNDS DO WITH YOUR PERSONAL INFORMATION?
Why? Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.
What?

The types of personal information we collect and share depend on the product or service you have with us. This information can include:

    Social Security number and account transactions

    Account balances and transaction history

    Wire transfer instructions

How? All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons the Funds choose to share; and whether you can limit this sharing.

 

Reasons we can share your personal information Do the Funds share: Can you limit this sharing?
For our everyday business purposes — such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus Yes No
For our marketing purposes — to offer our products and services to you No We do not share.
For joint marketing with other financial companies No We do not share.
For our affiliates’ everyday business purposes — information about your transactions and experiences Yes No
For our affiliates’ everyday business purposes — information about your creditworthiness No We do not share.
For nonaffiliates to market to you No We do not share.

 

 

36 1.855.775.3337 | www.rondureglobal.com

 

 

 

 

 

Contact Us

 

Mail: Rondure Funds, P.O. Box 13664, Denver, CO 80201 E-Mail: rondureglobal@alpsinc.com
Phone: 1.855.775.3337 Web: www.rondureglobal.com

 

 

 

 

  

 

 

TABLE OF CONTENTS

 

Letter to Shareholders 1
Performance Review  
Seafarer Overseas Growth and Income Fund 4
Seafarer Overseas Value Fund 10
Disclosure of Fund Expenses 16
Portfolio of Investments 18
Statements of Assets and Liabilities 26
Statements of Operations 27
Statements of Changes in Net Assets 28
Financial Highlights 30
Notes to Financial Statements 38
Additional Information 47
Privacy Policy 48

 

Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, paper copies of the Funds’ annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Funds’ website at seafarerfunds.com, and you will be notified by mail each time a report is posted and provided with a website link to access the report.

 

If you already elected to receive shareholder reports electronically, you will not be affected by this change, and you need not take any action. You may elect to receive shareholder reports and other communications from the Funds electronically by contacting your financial intermediary or, if you invest directly with the Funds, by logging into your Seafarer Funds account at seafarerfunds.com and enrolling in electronic delivery.

 

You may elect to receive future shareholder reports in paper format free of charge by contacting your financial intermediary or, if you invest directly with the Funds, by calling (855) 732-9220. 

 

 

 

Seafarer Funds Letter to Shareholders

October 31, 2019

 

LETTER TO SHAREHOLDERS

 

November 15, 2019

 

Dear Fellow Shareholders,

 

I appreciate the opportunity to address you on behalf of the Seafarer Funds. This semi-annual report covers the first half of the Funds’ 2019-2020 fiscal year (May 1, 2019 to October 31, 2019).

 

Team Update

 

The common practice at Seafarer Capital Partners, LLC (“Seafarer”), the adviser to the Funds, and my own personal preference, is to address issues head on. Thus, on October 11, 2019, Seafarer announced the departure of one of the Seafarer Overseas Growth and Income Fund’s portfolio managers, Inbok Song.1 An esteemed colleague and human being, Inbok and her work during her 13-month tenure as a Lead Manager of the Fund will be missed. The Fund continues to pursue its objective following Seafarer’s distinctive investment approach, which remains in the custody of the Seafarer team and does not go out the door with one person. As such, Andrew Foster and I continue our roles as Lead Managers of the Fund, working with the rest of the Seafarer investment team.

 

As an organization, Seafarer remains true to its founders’ vision: a small, employee-owned investment management firm, with employees that self-select to remain at the firm, attracted by the rare opportunity to create a distinctive investment approach to better serve the needs of savers, and to build an asset management firm with an equally unique ethos.

 

Navigating Challenges to Investors and to Seafarer – Common Cause, Common Solution

 

Seafarer’s investment approach and culture differentiate themselves not for the sake of doing so, but out of necessity, as these characteristics address the challenges faced by investors in the Funds and by Seafarer as an organization. The primary challenge to an investor’s objective of increasing the long-term purchasing power of savings is the ever-decreasing rate of return on capital promulgated by central banks around the globe, as this policy transfers value from savers to debtholders. At the same time, the primary long-term challenge to Seafarer as an active asset manager is the as-yet-unabated migration of savings from active investment strategies to passively managed ones. In my opinion, the primary cause of said migration shares the same root as the transfer of value from savers to debtholders: progressively lower rates of return on capital. Indeed, the result of ever-rising debt associated with its progressively lower cost is the apparent suspension of the business cycle, as demonstrated by the unprecedented longevity of the expansionary phases of gross domestic product (GDP) growth in recent economic cycles. The reason this effect is relevant to Seafarer is that active managers thrive on the changes in company business prospects associated with the natural business cycle. Now that central banks appear to have successfully suppressed the natural economic cycle, non-discriminating benchmark-oriented investment strategies have outperformed at the expense of active managers – for the same root cause that has transferred value from savers to debtholders.

 

Alas, shareholders and Seafarer find themselves on the same boat. Seafarer chooses to navigate the winds of change sticking to the sailboat it knows how to command best (a small and nimble asset management organization), with a crew that shares the same ethos (a small group of investment professionals committed to this type of vessel and who know what they are looking for on the investment horizon). While Seafarer has clarity of mind regarding the type of vessel and crew it employs, what deserves a more extended discussion is the waters it chooses to navigate. The Funds’ shareholders have good reason to question the captain’s choice of route. The MSCI Emerging Markets Index has underperformed the S&P 500 Index since the 2008 financial crisis, with its valuation on traditional multiples perennially cheaper than that of the S&P 500 with little prospect of revaluation.

 

My purpose in this letter is not to argue in favor of emerging markets or delve into an intricate explanation of the underperformance of the investment universe over the past decade. My objective is far more complex, thus requiring a simpler explanation: to explain how Seafarer thinks about the companies it invests in and why the Funds’ investors should care, given the foregoing headwinds to increasing the future purchasing power of present savings.

 

Semi-annual Report – October 31, 2019 1

 

 

 

Seafarer Funds Letter to Shareholders

October 31, 2019

 

The first hint as to why investors should care is in the name of the two strategies Seafarer manages at present: the Overseas Growth and Income strategy and the Overseas Value strategy. “Growth and Income” and “Value” point to the fact that in selecting securities, Seafarer’s crew prioritizes financial attributes over countries, sectors, or benchmarks. Furthermore, the use of the term “overseas” hints at the idea of diversifying U.S. dollar savings into securities denominated in other currencies. Thus, Seafarer’s frame of mind extends beyond the traditional approach of investing in the emerging markets because the countries that comprise said universe grow faster than the U.S. Seafarer approaches non-U.S. dollar overseas markets by searching for companies (not countries) that issue securities bearing “growth and income” and “value” characteristics.

 

It is difficult to overstate the importance of this difference in approach. It means that the Funds’ shareholders free themselves from the false premise that they must predict the relative performance of the S&P 500 Index versus the emerging markets over the next ten years before making an allocation. That quixotic prediction is something with which only investors in passive, benchmark-oriented strategies need to preoccupy themselves. Indexes do not add value to the world; individual companies do. The same way that Argentina and Turkey do not define the entire emerging markets, the fact that the latter has underperformed the S&P 500 Index over the past decade does not mean that all individual emerging market companies have also underperformed their U.S. counterparts. Therein lies the beauty of an active, bottom-up strategy that seeks to identify and invest in individual companies, thus obviating futile questions without answer, such as predicting stock indexes’ relative performance or the future path of benchmark interest rates.

 

From this perspective, the more meaningful allocation decision centers on savers’ allocation to U.S. dollar vs non-U.S. dollar investments. As explained in Seafarer’s Emerging Markets Briefing, one approach is as follows: investors measure the portion of their assets that are principally denominated in U.S. dollars versus those assets that are not.2 After matching U.S. dollar assets against U.S. dollar liabilities, a portion of the surplus capital could be allocated to the emerging markets.

 

In summary, both the Funds’ investors and Seafarer find themselves at the same crossroads. In Seafarer’s opinion, the answer to the challenge posed by the transfer of value from savers to debtholders, and to the shift from active management to passive strategies, is the same: to derive investment returns from individual companies (not indexes) that display specific Growth and Income or Value characteristics (as opposed to characteristics that relate to geography or sector). I find it important to convey to the Funds’ shareholders that Seafarer has the crew to stay the course because we have self-selected to man this type of vessel and know what we are pursuing on the investment horizon.

 

Thank you for entrusting us with your capital. We are honored to serve as your investment adviser in the emerging markets.

 

Sincerely,

 

Paul Espinosa

Portfolio Manager

Seafarer Capital Partners, LLC

 

2 (855) 732-9220  seafarerfunds.com

 

 

 

Seafarer Funds Letter to Shareholders

October 31, 2019

 

The Funds are subject to investment risks, including possible loss of the principal amount invested and therefore are not suitable for all investors. The Funds may not achieve their objectives. Diversification does not ensure a profit or guarantee against loss.

 

Information on the Seafarer website is provided for textual reference only, and is not incorporated by reference into this report.

 

The MSCI Emerging Markets Total Return Index, Standard (Large+Mid Cap) Core, Gross (dividends reinvested), USD is a free float-adjusted market capitalization index designed to measure equity market performance of emerging markets. Index code: GDUEEGF.

 

The S&P 500 Total Return Index is a stock market index based on the market capitalizations of 500 large companies with common stock listed on the NYSE or NASDAQ.

 

It is not possible to invest directly in an index.

 

The views and information discussed in this commentary are as of the date of publication, are subject to change, and may not reflect Seafarer’s current views. The views expressed represent an assessment of market conditions at a specific point in time, are opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. Such information does not constitute a recommendation to buy or sell specific securities or investment vehicles. It should not be assumed that any investment will be profitable or will equal the performance of the portfolios or any securities or any sectors mentioned herein. The subject matter contained herein has been derived from several sources believed to be reliable and accurate at the time of compilation. Seafarer does not accept any liability for losses either direct or consequential caused by the use of this information.

 

1www.seafarerfunds.com/message-to-shareholders/2019/10/11
2www.seafarerfunds.com/commentary/emerging-markets-briefing/2019/10

 

Semi-annual Report – October 31, 2019 3

 

 

 

Seafarer Overseas Growth and Income Fund Performance Review

October 31, 2019

 

SEAFARER OVERSEAS GROWTH AND INCOME FUND 

PERFORMANCE REVIEW

 

November 15, 2019

 

This report addresses the first half of the Seafarer Overseas Growth and Income Fund’s 2019-2020 fiscal year (May 1, 2019 to October 31, 2019).

 

During the semi-annual period, the Fund returned 4.23%, while the Fund’s benchmark, the MSCI Emerging Markets Total Return Index, declined -1.41%.1 By way of broader comparison, the S&P 500 Index gained 4.16%.

 

The Fund began the fiscal year with a net asset value (NAV) of $11.61 per share. In June, the Fund paid a semi-annual distribution of $0.181 per share. That payment brought the cumulative distribution per share, as measured from the Fund’s inception, to $2.860.2 The Fund finished the semi-annual period with a NAV of $11.91 per share.3

 

* * * * *

 

The small decline of the benchmark index in the semi-annual period belies what was a volatile period for emerging market equities. During the six month period, the benchmark fell by more than -8% in May, before recovering most of its losses by early July; next, it plummeted again, such that by late August, it had declined by more than 8%, but it recovered by the end of October to finish the period with a decline of -1.41%. The cause of such volatility is difficult to identify with certainty. However, we attribute the wild swings to two primary factors: first, confusion and rapidly shifting sentiments regarding the progress (or lack thereof) towards resolution of the trade disputes between the U.S. and China; and second, the sharp deterioration in earnings results for companies in the developing world.

 

The evidence suggest that the deterioration in projections for earnings growth was driven by Chinese companies, which have seen their prospects for 2019 fall sharply as growth in Mainland China decelerates regardless of the “trade war” (see the Outlook section of the Fund’s second quarter 2019 portfolio review for further discussion).4 Market participants appear to have been caught off guard by the sudden and sharp decline in corporate performance in China; the resulting “gap” between misplaced expectations and a more difficult reality likely induced the market gyrations mentioned above. The benchmark’s partial recovery at the end of the semi-annual period may indicate that stocks generally overreacted to the shock of anemic corporate performance of many companies.

 

The Fund’s substantial outperformance of the benchmark for the semi-annual period does not lend itself to any obvious explanation. The only common characteristic of the Fund’s holdings that might explain their resilience is that most companies presented very stable financial results – and some even modestly surpassed expectations. Normally, such “at par” performance would not lead to exuberance among stock prices; but when the broader market is undergoing a sharp deterioration in the quality of its underlying earnings, the favorable comparison can lend support to share prices. Essentially, the fundamental performance and earnings of the Fund’s holdings proved steadier than most other companies, and this led the holdings’ shares to be stable in a sinking market.

 

The largest contributor to the Fund’s total return during the semi-annual period was Qualicorp, a Brazil-based life insurance broker. Qualicorp’s stock appreciated over 100% during the period, recovering all the ground lost in the preceding quarters, and more. The company’s stock was propelled higher by: persistent and substantial free cash flow generation in spite of difficult operating conditions in Brazil; return of capital to shareholders; and business development potential following the acquisition of a ten percent stake in the company by a strategic shareholder. Qualicorp’s share price rose despite factors impinging on the performance of its home market equity index.

 

Another top contributor to the Fund’s NAV appreciation was China International Travel Service (CITS). CITS is listed in China’s domestic A-share market; it manages travel agencies, markets travel packages, and manages a range of duty-free stores in China.5 The company has produced strong results in 2019, allaying fears that surfaced in late 2018 that Chinese consumers’ demand to travel might soon plateau

 

4 (855) 732-9220  seafarerfunds.com

 

 

 

Seafarer Overseas Growth and Income Fund Performance Review

October 31, 2019

 

amid a weak economy. Instead, the Chinese continue to travel with gusto – tourism is one of the leading reasons that China’s current account has swung from surplus to deficit. In addition, the company announced that it would open a duty-free shop in Beijing, boosting confidence in the company’s leadership within the tourism sector.

 

Other contributors to Fund performance include: Naver, a leading internet media company in Korea with a substantial holding in a Japanese internet subsidiary; and Aspeed, a Taiwan-based maker of specialized chips in computer servers.

 

Sun Pharma Advanced Research Company (SPARC), a long-held position, continued to weigh on performance; as a result, the Fund exited the position during the semi-annual period. SPARC is an India-based company that specializes in the development of new pharmaceutical therapies and medical devices. During the past five years, SPARC has realized some success with the introduction of new generic therapies, particularly several that target glaucoma and various forms of ocular hypertension. However, the company’s financial performance has been lackluster due to poor licensing and operational decisions taken by its management. This placed severe strain on the company’s financial stability and necessitated repeated capital raising exercises. While SPARC arguably persists as an innovative leader, the Fund exited the position to reduce its exposure to such financial instability.

 

Thank you for entrusting us with your capital. We are honored to serve as your investment adviser in the emerging markets.

 

Andrew Foster and Paul Espinosa 

Portfolio Managers, Seafarer Overseas Growth and Income Fund 

Seafarer Capital Partners, LLC

 

The MSCI Emerging Markets Total Return Index, Standard (Large+Mid Cap) Core, Gross (dividends reinvested), USD is a free float-adjusted market capitalization index designed to measure equity market performance of emerging markets. Index code: GDUEEGF.

 

The S&P 500 Total Return Index is a stock market index based on the market capitalizations of 500 large companies with common stock listed on the NYSE or NASDAQ.

 

It is not possible to invest directly in an index.

 

The Fund is subject to investment risks, including possible loss of the principal amount invested and therefore is not suitable for all investors. The Fund may not achieve its objectives. Diversification does not ensure a profit or guarantee against loss.

 

Information on the Seafarer website is provided for textual reference only, and is not incorporated by reference into this report.

 

The views and information discussed in this commentary are as of the date of publication, are subject to change, and may not reflect Seafarer’s current views. The views expressed represent an assessment of market conditions at a specific point in time, are opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. Such information does not constitute a recommendation to buy or sell specific securities or investment vehicles. It should not be assumed that any investment will be profitable or will equal the performance of the portfolios or any securities or any sectors mentioned herein. The subject matter contained herein has been derived from several sources believed to be reliable and accurate at the time of compilation. Seafarer does not accept any liability for losses either direct or consequential caused by the use of this information.

 

1References to the “Fund” pertain to the Fund’s Institutional share class (ticker: SIGIX). The Investor share class (ticker: SFGIX) returned 4.14% during the semi-annual period.
2The Fund’s inception date is February 15, 2012.
3The Fund’s Investor share class began the fiscal year with a net asset value of $11.56 per share; it paid a semi-annual distribution of $0.179 per share in June; and it finished the semi-annual period with a value of $11.85 per share.

 

Semi-annual Report – October 31, 2019 5

 

 

 

Seafarer Overseas Growth and Income Fund Performance Review

October 31, 2019

 

4The Outlook section of the Fund’s second quarter 2019 portfolio review is available at: www.seafarerfunds.com/funds/ogi/portfolio-review/2019/06/Q2/#outlook
5Chinese A-Shares are a class of securitized common stock in Chinese companies, traded exclusively on Chinese stock exchanges (i.e., Shanghai and Shenzhen), and denominated in renminbi, China’s currency. If a Seafarer Fund is invested in Chinese A-Shares, please note the following: 1) any reduction or elimination of access to A-Shares could have a material adverse effect on the ability of the Fund to achieve its investment objective; and 2) uncertainties regarding China’s laws governing taxation of income and gains from investments in A-Shares could result in unexpected tax liabilities for the Fund, which could adversely impact Fund returns.

 

6 (855) 732-9220  seafarerfunds.com

 

 

Seafarer Overseas Growth and Income Fund Performance Review

October 31, 2019

 

Total Returns

 

As of October 31, 2019 6 Month 1 Year 3 Year 5 Year Since Inception Annualized(1) Gross Expense Ratio(2)
Investor Class (SFGIX) 4.14% 17.52% 4.49% 3.83% 5.53% 0.99%
Institutional Class (SIGIX) 4.23% 17.67% 4.62% 3.95% 5.66% 0.89%
MSCI Emerging Markets Total Return Index(3) (1.41%) 12.29% 7.76% 3.32% 2.68%  

 

All performance is in U.S. dollars with gross (pre-tax) dividends and/or distributions reinvested. The performance data quoted represents past performance and does not guarantee future results. Future returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Prior to August 31, 2016, shares of the Fund redeemed or exchanged within 90 days of purchase were subject to a 2% redemption fee. Performance does not reflect this fee, which if deducted would reduce an individual's return. To obtain the Fund’s most recent month-end performance, visit seafarerfunds.com or call (855) 732-9220.

 

1Inception Date: February 15, 2012.
2Ratios as of Prospectus dated August 31, 2019. Seafarer Capital Partners, LLC has agreed contractually to waive and/or reimburse fees or expenses in order to limit Total Annual Fund Operating Expenses After Fee Waiver/Expense Reimbursements (inclusive of acquired fund fees and expenses, and exclusive of brokerage expenses, interest expenses, taxes and extraordinary expenses) to 1.15% and 1.05% of the Fund’s average daily net assets for the Investor and Institutional share classes, respectively. This agreement is in effect through August 31, 2020.
3The MSCI Emerging Markets Total Return Index, Standard (Large+Mid Cap) Core, Gross (dividends reinvested), USD is a free float-adjusted market capitalization index designed to measure equity market performance of emerging markets. Index code: GDUEEGF. The index is not actively managed and does not reflect any deductions for fees, expense or taxes. An investor may not invest directly in an index.

 

Semi-annual Report – October 31, 2019 7

 

 

 

Seafarer Overseas Growth and Income Fund Performance Review

October 31, 2019

 

Performance of a $10,000 Investment Since Inception

 

 

*Inception Date: February 15, 2012.

 

The chart shown above represents historical performance of a hypothetical investment of $10,000 in the Fund’s Investor Class shares for the period from inception to October 31, 2019. All returns reflect reinvested dividends and/or distributions, but do not reflect the deduction of taxes that an investor would pay on distributions

or redemptions.

 

The Fund also offers Institutional Class shares, performance for which is not reflected in the chart above. The performance of Institutional Class shares may be higher or lower than the performance of the Investor Class shares shown above based upon differences in fees paid by shareholders investing in the Investor Class shares and Institutional Class shares.

 

Investment Objective

 

The Fund seeks to provide long-term capital appreciation along with some current income. The Fund seeks to mitigate adverse volatility in returns as a secondary objective.

 

Strategy

 

The Fund invests primarily in the securities of companies located in developing countries. The Fund invests in several asset classes including dividend-paying common stocks, preferred stocks, and fixed-income securities.

 

The Fund seeks to offer investors a relatively stable means of participating in developing countries’ growth prospects, while attempting to mitigate adverse volatility in returns.

 

8 (855) 732-9220  seafarerfunds.com

 

 

Seafarer Overseas Growth and Income Fund Performance Review

October 31, 2019

 

Portfolio Composition by Region % Net Assets
East & South Asia 76.3%
Emerging Europe 4.5%
Latin America 8.2%
Middle East & Africa 5.3%
Cash & Other Assets, Less Liabilities 3.9%
Government Bond, Short-term - USD and Foreign Currency 1.8%
Total 100.0%

 

Portfolio Composition by Sector % Net Assets
Communication Services 4.5%
Consumer Discretionary 17.2%
Consumer Staples 10.9%
Energy 1.6%
Financials 11.6%
Health Care 12.0%
Industrials 9.3%
Information Technology 20.6%
Materials 1.4%
Real Estate 1.4%
Utilities 3.8%
Cash & Other Assets, Less Liabilities 3.9%
Government Bond, Short-term - USD and Foreign Currency 1.8%
Total 100.0%

 

Top 10 Holdings % Net Assets
Samsung Electronics Co., Ltd. 4.7%
Venture Corp., Ltd. 4.4%
Hyundai Mobis Co., Ltd. 3.9%
Alibaba Group Holding, Ltd., Sponsored ADR 3.4%
Orion Corp. 3.4%
NAVER Corp. 3.3%
China Yangtze Power Co., Ltd., Class A 3.1%
Richter Gedeon Nyrt 3.0%
Qualicorp Consultoria e Corretora de Seguros SA 2.9%
Sanlam, Ltd. 2.4%
Total 34.5%
   
Total Number of Holdings 571

 

Holdings are subject to change, and may not reflect the current or future position of the portfolio. Source: ALPS Fund Services, Inc.

 

1Excludes short-term government bonds; includes medium- and long-term government bonds.

 

Semi-annual Report – October 31, 2019 9

 

 

 

Seafarer Overseas Value Fund Performance Review

October 31, 2019

 

SEAFARER OVERSEAS VALUE FUND

PERFORMANCE REVIEW

 

November 14, 2019

 

This report addresses the first half of the Seafarer Overseas Value Fund’s 2019-2020 fiscal year (May 1, 2019 to October 31, 2019).

 

During the semi-annual period, the Fund gained 5.42%, while the Fund’s benchmark, the MSCI Emerging Markets Total Return Index, returned -1.41%.1 By way of broader comparison, the S&P 500 Index gained 4.16%.

 

The Fund began the fiscal year with a net asset value (NAV) of $11.43 per share. The Fund paid no distributions during the first half of the fiscal year, and it finished the period with a value of $12.05 per share.2

 

* * * * *

 

During this semi-annual period, the primary driver of the Value Fund’s performance was the resilience of portfolio holding valuations in the face of the Hong Kong protests and U.S.-China trade dispute. Importantly, the Fund offset the negative contributions to total return from its holdings in Hong Kong and China with positive contributions derived primarily from stocks that realized their value potential for company-specific reasons, and to a lesser extent through geographic diversification. More specifically, the Value strategy’s objective of seeking diversification across the seven categories of value identified in the white paper On Value in the Emerging Markets proved not only effective, but in my opinion, was more beneficial than the traditional approach of diversification across geographies.3

 

The largest contributor to the Fund’s total return during the semi-annual period is Asia Satellite Telecommunications Holdings (Deleveraging source of value; Seafarer’s seven sources of value,3 hereafter referenced using parenthesized italics, are defined in Figure 1). Ironically in the context of the recent Hong Kong protests, Asia Satellite is a Hong Kong-based company that owns and operates satellites. Contradicting the widespread belief that markets are efficient, the company’s share price languished since the Value Fund purchased the stock at the Fund’s inception. Market participants seemed to ignore the company’s cash flow from operations, which management used to reduce debt and restart a dividend. Attuned to this market oversight, the controlling shareholders tendered for the publicly traded shares of the company, which delisted in September of 2019, thus permanently locking in the Fund’s capital gain in the stock.

 

10 (855) 732-9220  seafarerfunds.com

 

 

 

Seafarer Overseas Value Fund Performance Review

October 31, 2019

 

Figure 1. A Working Definition of Value

 

Seafarer has identified seven distinct sources of value in emerging markets that may give rise to viable opportunities for long-term, value-oriented investments.

 

 

 

Source: Seafarer

 

A second top contributor to the Fund’s NAV appreciation in the semi-annual period is Qualicorp (Structural Shift), a Brazilian life insurance broker. The company’s stock was propelled higher by persistent and substantial free cash flow generation in spite of difficult operating conditions in Brazil; return of capital to shareholders; and business development potential following the acquisition of a ten percent stake in the company by a strategic shareholder. Qualicorp’s share price rose despite factors impinging on the performance of its home market equity index.

 

Another positive contributor to the Value Fund is Qatar Gas Transport (Deleveraging), an owner and operator of liquefied natural gas (LNG) vessels. The company’s stock appreciated against the headwind of a mediocre performance of its home country stock market index. In the absence of significant company developments during the semi-annual period, I attribute the stock price appreciation to the divergence between a share price that had declined following the Gulf Cooperation Council (GCC) feud that begun in June of 2017, and the likely expansion of the company’s fleet as it seeks to accommodate an expected ramp up in Qatar’s gas output, the country’s primary national asset.

 

As I noted in the Fund’s third quarter 2019 portfolio review, it is unlikely that geographic diversification alone would have delivered a performance matching that of the foregoing cases of value realization.4 This observation is important when considering the meaningful impact on performance of the Fund’s exposure to Hong Kong-listed stocks, whose valuations suffered during the semi-annual period as a result of the prolongation and intensification of the Hong Kong protests and U.S.-China trade dispute.

 

In particular, the performance of portfolio holdings Shangri-La (Breakup Value), a hotel owner and operator, and Giordano (Structural Shift), an apparel manufacturer and retailer, declined meaningfully due to substantial profit derivation from Hong Kong. Similarly, the share price of WH Group (Management Change), a Chinese meat processor and owner of U.S.-based Smithfield Foods, fluctuated with the sentiment around a potential resolution of the U.S.-China trade dispute. Neither geography nor speculation about the trade dispute motivate the Fund’s investment in these three companies. As their respective source of value designations indicate, each holding contributes different drivers and risks to the overall Value strategy, even if at present, each company’s stock price is besieged by the same geopolitical force.

 

Semi-annual Report – October 31, 2019 11

 

 

 

Seafarer Overseas Value Fund Performance Review

October 31, 2019

 

Thank you for entrusting us with your capital. We are honored to serve as your investment adviser in the emerging markets.

 

Paul Espinosa 

Portfolio Manager, Seafarer Overseas Value Fund 

Seafarer Capital Partners, LLC

 

The MSCI Emerging Markets Total Return Index, Standard (Large+Mid Cap) Core, Gross (dividends reinvested), USD is a free float-adjusted market capitalization index designed to measure equity market performance of emerging markets. Index code: GDUEEGF.

 

The S&P 500 Total Return Index is a stock market index based on the market capitalizations of 500 large companies with common stock listed on the NYSE or NASDAQ.

 

It is not possible to invest directly in an index.

 

The Fund is subject to investment risks, including possible loss of the principal amount invested and therefore is not suitable for all investors. The Fund may not achieve its objectives. Diversification does not ensure a profit or guarantee against loss.

 

Information on the Seafarer website is provided for textual reference only, and is not incorporated by reference into this report.

 

The views and information discussed in this commentary are as of the date of publication, are subject to change, and may not reflect Seafarer’s current views. The views expressed represent an assessment of market conditions at a specific point in time, are opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. Such information does not constitute a recommendation to buy or sell specific securities or investment vehicles. It should not be assumed that any investment will be profitable or will equal the performance of the portfolios or any securities or any sectors mentioned herein. The subject matter contained herein has been derived from several sources believed to be reliable and accurate at the time of compilation. Seafarer does not accept any liability for losses either direct or consequential caused by the use of this information.

 

As of October 31, 2019, the Fund did not own shares in Smithfield Foods, Inc.

 

1References to the “Fund” pertain to the Fund’s Institutional share class (ticker: SIVLX). The Investor share class (ticker: SFVLX) returned 5.43% during the semi-annual period.
2The Fund’s Investor share class began the fiscal year with a net asset value of $11.41 per share. It finished the period with a value of $12.03 per share.
3Additional information on Seafarer’s seven sources of value is available in the white paper On Value in the Emerging Markets (www.seafarerfunds.com/value-in-em).
4The Fund’s third quarter 2019 portfolio review is available at: www.seafarerfunds.com/funds/ovl/portfolio-review/2019/09/Q3

 

12 (855) 732-9220  seafarerfunds.com

 

 

Seafarer Overseas Value Fund Performance Review

October 31, 2019

 

Total Returns

 

        Since Inception Net Expense
As of October 31, 2019 6 Month 1 Year 3 Year Annualized(1) Ratio(2)
Investor Class (SFVLX) 5.43% 16.20% 8.17% 7.94% 1.15%
Institutional Class (SIVLX) 5.42% 16.36% 8.26% 8.05% 1.05%
MSCI Emerging Markets Total Return Index(3) (1.41%) 12.29% 7.76% 10.92%  

 

Gross expense ratio: 1.60% for Investor Class; 1.50% for Institutional Class.2

 

All performance is in U.S. dollars with gross (pre-tax) dividends and/or distributions reinvested. The performance data quoted represents past performance and does not guarantee future results. Future returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Prior to August 31, 2016, shares of the Fund redeemed or exchanged within 90 days of purchase were subject to a 2% redemption fee. Performance does not reflect this fee, which if deducted would reduce an individual's return. To obtain the Fund’s most recent month-end performance, visit seafarerfunds.com or call (855) 732-9220.

 

1Inception Date: May 31, 2016.
2Ratios as of Prospectus dated August 31, 2019. Seafarer Capital Partners, LLC has agreed contractually to waive and/or reimburse fees or expenses in order to limit Total Annual Fund Operating Expenses After Fee Waiver/Expense Reimbursements (inclusive of acquired fund fees and expenses, and exclusive of brokerage expenses, interest expenses, taxes and extraordinary expenses) to 1.15% and 1.05% of the Fund’s average daily net assets for the Investor and Institutional share classes, respectively. This agreement is in effect through August 31, 2020.
3The MSCI Emerging Markets Total Return Index, Standard (Large+Mid Cap) Core, Gross (dividends reinvested), USD is a free float-adjusted market capitalization index designed to measure equity market performance of emerging markets. Index code: GDUEEGF. The index is not actively managed and does not reflect any deductions for fees, expense or taxes. An investor may not invest directly in an index.

 

Semi-annual Report – October 31, 2019 13

 

 

 

Seafarer Overseas Value Fund Performance Review

October 31, 2019

 

Performance of a $10,000 Investment Since Inception

 

 

*Inception Date: May 31, 2016.

 

The chart shown above represents historical performance of a hypothetical investment of $10,000 in the Fund’s Investor Class shares for the period from inception to October 31, 2019. All returns reflect reinvested dividends and/or distributions, but do not reflect the deduction of taxes that an investor would pay on distributions

or redemptions.

 

The Fund also offers Institutional Class shares, performance for which is not reflected in the chart above. The performance of Institutional Class shares may be higher or lower than the performance of the Investor Class shares shown above based upon differences in fees paid by shareholders investing in the Investor Class shares and Institutional Class shares.

 

Investment Objective

 

The Fund seeks to provide long-term capital appreciation.

 

Strategy

 

The Fund invests primarily in the securities of companies located in developing countries. The Fund invests in several asset classes including common stocks, preferred stocks, and fixed-income securities.

 

The Fund’s portfolio is comprised of securities identified through a bottom-up security selection process based on fundamental research. The Fund seeks to produce a minimum long-term rate of return by investing in securities priced at a discount to their intrinsic value.

 

14 (855) 732-9220  seafarerfunds.com

 

 

Seafarer Overseas Value Fund Performance Review

October 31, 2019

 

Portfolio Composition by Region % Net Assets
East & South Asia 57.2%
Emerging Europe 13.2%
Latin America 7.4%
Middle East & Africa 7.6%
Cash & Other Assets, Less Liabilities 14.6%
Total 100.0%

 

Portfolio Composition by Sector % Net Assets
Communication Services 0.4%
Consumer Discretionary 16.0%
Consumer Staples 21.1%
Energy 6.1%
Financials 13.1%
Health Care 5.0%
Industrials 10.7%
Information Technology 3.9%
Materials 5.9%
Real Estate 1.3%
Utilities 1.9%
Cash & Other Assets, Less Liabilities 14.6%
Total 100.0%

 

Top 10 Holdings % Net Assets
Qualicorp Consultoria e Corretora de Seguros SA 4.9%
WH Group, Ltd. 4.7%
First Pacific Co., Ltd. 4.3%
Shangri-La Asia, Ltd. 4.0%
Qatar Gas Transport Co., Ltd. 4.0%
Samsung SDI Co., Ltd. 3.9%
Wilmar International, Ltd. 3.8%
National Central Cooling Co. PJSC 3.6%
HRnetgroup, Ltd. 3.4%
Philip Morris CR AS 3.4%
Total 40.0%
   
Total Number of Holdings 31

 

Holdings are subject to change, and may not reflect the current or future position of the portfolio. Source: ALPS Fund Services, Inc.

 

Semi-annual Report – October 31, 2019 15

 

 

 

Seafarer Funds Disclosure of Fund Expenses

October 31, 2019 (Unaudited)

 

DISCLOSURE OF FUND EXPENSES

 

As a shareholder of a Fund you will incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees and other Fund expenses. The following examples are intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested on May 1, 2019 and held until October 31, 2019.

 

Actual Expenses. For each Fund and share class, the first line of the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

 

Hypothetical Example for Comparison Purposes. For each Fund and share class, the second line of the following table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.

 

Please note the expenses shown in the following table are meant to highlight your ongoing costs only and do not reflect transaction costs. Therefore, for each Fund and share class, the second line of the following table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 

16 (855) 732-9220  seafarerfunds.com

 

 

 

Seafarer Funds Disclosure of Fund Expenses

October 31, 2019 (Unaudited)

 

  Beginning Account Value 05/01/19 Ending Account Value 10/31/19   Expense Ratio(a) Expenses Paid During Period 05/01/19 - 10/31/19(b)
SEAFARER OVERSEAS GROWTH AND INCOME FUND  
Investor Class        
Actual $ 1,000.00 $ 1,041.40 1.01% $ 5.20
Hypothetical (5% return before expenses) $ 1,000.00 $ 1,020.11 1.01% $ 5.14
Institutional Class        
Actual $ 1,000.00 $ 1,042.30 0.92% $ 4.74
Hypothetical (5% return before expenses) $ 1,000.00 $ 1,020.57 0.92% $ 4.69
         
SEAFARER OVERSEAS VALUE FUND  
Investor Class        
Actual $ 1,000.00 $ 1,054.30 1.15% $ 5.95
Hypothetical (5% return before expenses) $ 1,000.00 $ 1,019.41 1.15% $ 5.85
Institutional Class        
Actual $ 1,000.00 $ 1,054.20 1.05% $ 5.44
Hypothetical (5% return before expenses) $ 1,000.00 $ 1,019.91 1.05% $ 5.35

  

(a)Annualized, based on the Fund's most recent fiscal half year expenses.
(b)Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184)/366 (to reflect the half-year period).

 

Semi-annual Report – October 31, 2019 17

 

 

Seafarer Overseas Growth and Income Fund Portfolio of Investments

October 31, 2019 (Unaudited)

 

   Currency  Shares  Value
COMMON STOCKS (89.6%)               
Brazil (5.0%)               
Odontoprev SA   BRL    8,900,000   $33,087,894 
Qualicorp Consultoria e Corretora de Seguros SA   BRL    5,600,000    44,724,598 
                
Total Brazil             77,812,492 
                
China / Hong Kong (31.3%)               
Alibaba Group Holding, Ltd., Sponsored ADR(a)   USD    300,000    53,001,000 
China Foods, Ltd.   HKD    74,184,000    30,488,938 
China International Travel Service Corp., Ltd., Class A   CNY    860,000    11,034,229 
China Resources Beer Holdings Co., Ltd.   HKD    3,900,000    19,995,401 
China Yangtze Power Co., Ltd., Class A   CNY    18,650,000    47,318,441 
First Pacific Co., Ltd.   HKD    83,000,000    31,752,734 
Foshan Haitian Flavouring & Food Co., Ltd., Class A   CNY    210,000    3,332,459 
Greatview Aseptic Packaging Co., Ltd.   HKD    42,357,000    21,345,945 
Hang Lung Properties, Ltd.   HKD    9,610,000    21,124,735 
Jiangsu Hengrui Medicine Co., Ltd., Class A   CNY    1,750,000    22,577,104 
Pacific Basin Shipping, Ltd.   HKD    110,000,000    25,469,121 
Pico Far East Holdings, Ltd.   HKD    52,296,000    17,819,195 
Shangri-La Asia, Ltd.   HKD    30,000,000    30,792,371 
Shenzhou International Group Holdings, Ltd.   HKD    2,250,000    31,091,971 
Techtronic Industries Co., Ltd.   HKD    4,500,000    35,167,566 
Texwinca Holdings, Ltd.   HKD    54,398,000    12,342,337 
WH Group, Ltd.   HKD    29,600,000    31,244,084 
Xinhua Winshare Publishing and Media Co., Ltd., Class H   HKD    27,000,000    19,173,468 
Xtep International Holdings, Ltd.   HKD    29,936,500    17,381,424 
                
Total China / Hong Kong             482,452,523 
                
Czech Republic (1.6%)               
Moneta Money Bank AS   CZK    7,300,000    24,236,899 
                
Total Czech Republic             24,236,899 
                
Hungary (3.0%)               
Richter Gedeon Nyrt   HUF    2,470,000    45,776,940 
                
Total Hungary             45,776,940 
                
India (2.6%)               
Container Corp. Of India, Ltd.   INR    950,000    7,880,197 

 

18 (855) 732-9220  seafarerfunds.com

 

 

Seafarer Overseas Growth and Income Fund Portfolio of Investments

October 31, 2019 (Unaudited)

 

   Currency  Shares  Value
India (continued)               
Infosys, Ltd., Sponsored ADR   USD    3,375,000   $32,366,250 
                
Total India             40,246,447 
                
Indonesia (1.6%)               
Bank Rakyat Indonesia Persero Tbk PT   IDR    80,000,000    23,970,822 
                
Total Indonesia             23,970,822 
                
Malaysia (1.2%)               
Inari Amertron Bhd   MYR    40,000,000    18,803,015 
                
Total Malaysia             18,803,015 
                
Mexico (3.1%)               
Bolsa Mexicana de Valores SAB de CV   MXN    14,500,000    31,741,481 
Credito Real SAB de CV SOFOM ER   MXN    13,290,238    16,456,916 
                
Total Mexico             48,198,397 
                
Philippines (1.5%)               
Ayala Corp.   PHP    1,400,000    23,703,750 
                
Total Philippines             23,703,750 
                
Qatar (1.7%)               
Qatar Gas Transport Co., Ltd.   QAR    37,613,950    25,516,742 
                
Total Qatar             25,516,742 
                
Singapore (6.4%)               
Venture Corp., Ltd.   SGD    5,825,000    67,567,838 
Wilmar International, Ltd.   SGD    11,500,000    31,619,028 
                
Total Singapore             99,186,866 
                
South Africa (2.4%)               
Sanlam, Ltd.   ZAR    7,000,000    36,839,895 
                
Total South Africa             36,839,895 
                
South Korea (19.1%)               
Dentium Co., Ltd.   KRW    355,292    18,166,514 
Hyundai Mobis Co., Ltd.   KRW    292,500    59,650,616 
Koh Young Technology, Inc.   KRW    386,667    31,269,588 

 

Semi-annual Report – October 31, 2019 19

 

 

Seafarer Overseas Growth and Income Fund Portfolio of Investments

October 31, 2019 (Unaudited)

 

   Currency  Shares  Value
South Korea (continued)               
LEENO Industrial, Inc.   KRW    69,200   $3,155,708 
NAVER Corp.   KRW    365,000    51,463,712 
Orion Corp.   KRW    575,000    52,241,298 
Samsung SDI Co., Ltd.   KRW    175,000    34,150,508 
Sindoh Co., Ltd.   KRW    390,000    12,832,544 
Woongjin Coway Co., Ltd.   KRW    400,000    31,561,305 
                
Total South Korea             294,491,793 
                
Taiwan (5.1%)               
ASPEED Technology, Inc.   TWD    400,000    10,452,887 
Taiwan Semiconductor Manufacturing Co., Ltd.   TWD    3,525,000    34,544,308 
Voltronic Power Technology Corp.   TWD    1,500,000    33,203,870 
                
Total Taiwan             78,201,065 
                
Thailand (1.3%)               
Bangkok Dusit Medical Services PCL, Class F   THB    25,000,000    19,873,943 
                
Total Thailand             19,873,943 
                
United Arab Emirates (1.2%)               
National Central Cooling Co. PJSC   AED    38,200,000    18,753,098 
                
Total United Arab Emirates             18,753,098 
                
Vietnam (1.5%)               
Bao Viet Holdings(a)   VND    4,206,880    13,065,884 
PetroVietnam Gas JSC   VND    2,283,720    10,160,007 
                
Total Vietnam             23,225,891 
                
TOTAL COMMON STOCKS               
(Cost $1,341,038,518)             1,381,290,578 
                
PREFERRED STOCKS (4.7%)               
South Korea (4.7%)               
Samsung Electronics Co., Ltd.   KRW    2,050,000    72,161,689 
                
Total South Korea             72,161,689 
                
TOTAL PREFERRED STOCKS               
(Cost $47,297,213)             72,161,689 

 

20 (855) 732-9220  seafarerfunds.com

 

 

Seafarer Overseas Growth and Income Fund Portfolio of Investments

October 31, 2019 (Unaudited)

 

   Currency  Rate  Maturity Date  Principal Amount  Value
GOVERNMENT BOND, SHORT-TERM - USD AND FOREIGN CURRENCY (1.8%) 
Colombia (0.3%)                       
Colombia Government International Bond   USD    11.75%  02/25/20   5,000,000   $5,150,050 
                        
Total Colombia                     5,150,050 
                        
India (0.3%)                       
Export-Import Bank of India   USD    2.75%  08/12/20   5,000,000    5,014,225 
                        
Total India                     5,014,225 
                        
Latvia (0.3%)                       
Republic of Latvia Government International Bond, Series REGS   USD    2.75%  01/12/20   4,000,000    4,003,888 
                        
Total Latvia                     4,003,888 
                        
Lithuania (0.3%)                       
Lithuania Government International Bond, Series REGS   USD    7.38%  02/11/20   5,000,000    5,075,710 
                        
Total Lithuania                     5,075,710 
                        
South Korea (0.6%)                       
Korea Development Bank   USD    2.25%  05/18/20   5,000,000    5,003,817 
         3M US L              
Korea Development Bank(b)   USD    +0.675%  09/19/20   4,000,000    4,013,725 
                        
Total South Korea                     9,017,542 
                        
TOTAL GOVERNMENT BOND, SHORT-TERM - USD AND FOREIGN CURRENCY 
(Cost $28,212,825)                     28,261,415 
                        
TOTAL INVESTMENTS                       
(Cost $1,416,548,556) (96.1%)                    $1,481,713,682 
                        
Cash and Other Assets, Less Liabilities (3.9%)     60,606,814 
NET ASSETS (100.0%)                    $1,542,320,496 

 

Semi-annual Report – October 31, 2019 21

 

 

Seafarer Overseas Growth and Income Fund Portfolio of Investments

October 31, 2019 (Unaudited)

 

Principal Amount is stated in local currency unless otherwise noted.

 

(a)Non-income producing security.
(b)Floating or variable rate security. The reference rate is the London Interbank Offered Rate (LIBOR). The rate in effect is based on the reference rate plus the displayed spread as of the security's last reset date. The 3 Month LIBOR (3M US L) as of October 31, 2019 was 1.90%.

 

Currency Abbreviations 

AED - United Arab Emirates Dirham
BRL - Brazil Real
CNY - China Yuan
CZK - Czech Koruna
HKD - Hong Kong Dollar
HUF - Hungary Forint
IDR - Indonesia Rupiah
INR - India Rupee
KRW - South Korea Won
MXN - Mexico Peso
MYR - Malaysia Ringgit
PHP - Philippine Peso
QAR - Qatar Riyal
SGD - Singapore Dollar
THB - Thailand Baht
TWD - Taiwan New Dollar
USD - United States Dollar
VND - Vietnam Dong
ZAR - South Africa Rand

 

For Fund compliance purposes, the Fund's geographical classifications refer to any one or more of the sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine sub-classifications for reporting ease. Geographical regions are shown as a percentage of net assets.

 

See accompanying Notes to Financial Statements.

 

22 (855) 732-9220  seafarerfunds.com

 

 

Seafarer Overseas Value Fund Portfolio of Investments

October 31, 2019 (Unaudited)

 

  Currency  Shares  Value
COMMON STOCKS (85.4%)         
Brazil (5.0%)         
Qualicorp Consultoria e Corretora de Seguros SA   BRL    251,000   $2,004,620 
                
Total Brazil             2,004,620 
                
China / Hong Kong (38.0%)               
AMVIG Holdings, Ltd.   HKD    3,754,000    967,729 
China Foods, Ltd.   HKD    2,880,000    1,183,653 
China Resources Beer Holdings Co., Ltd.   HKD    224,000    1,148,454 
China Yangtze Power Co., Ltd., Class A   CNY    301,990    766,204 
First Pacific Co., Ltd.   HKD    4,590,000    1,755,964 
Giordano International, Ltd.   HKD    3,300,000    1,047,556 
Greatview Aseptic Packaging Co., Ltd.   HKD    1,120,000    564,428 
Hang Lung Properties, Ltd.   HKD    247,000    542,956 
Melco International Development, Ltd.   HKD    499,000    1,322,522 
Pacific Basin Shipping, Ltd.   HKD    4,099,000    949,072 
Pico Far East Holdings, Ltd.   HKD    538,000    183,317 
Shangri-La Asia, Ltd.   HKD    1,580,000    1,621,732 
Texwinca Holdings, Ltd.   HKD    1,470,000    333,528 
WH Group, Ltd.   HKD    1,798,000    1,897,867 
Xtep International Holdings, Ltd.   HKD    1,913,500    1,110,996 
                
Total China / Hong Kong             15,395,978 
                
Czech Republic (6.3%)               
Moneta Money Bank AS   CZK    368,000    1,221,805 
Philip Morris CR AS   CZK    2,300    1,372,982 
                
Total Czech Republic             2,594,787 
                
Georgia (3.4%)               
Georgia Capital PLC(a)   GBP    108,000    1,361,209 
                
Total Georgia             1,361,209 
                
Mexico (2.4%)               
Credito Real SAB de CV SOFOM ER   MXN    789,609    977,750 
                
Total Mexico             977,750 
                
Philippines (1.4%)               
Del Monte Pacific, Ltd.   SGD    5,700,000    546,768 
                
Total Philippines             546,768 

 

Semi-annual Report – October 31, 2019 23

 

 

Seafarer Overseas Value Fund Portfolio of Investments

October 31, 2019 (Unaudited)

 

  Currency  Shares  Value
Qatar (4.0%)         
Qatar Gas Transport Co., Ltd.   QAR    2,370,000   $1,607,773 
                
Total Qatar             1,607,773 
                
Russia (3.5%)               
Cherkizovo Group PJSC   RUB    30,000    841,436 
Global Ports Investments PLC, GDR(a)   USD    197,000    563,420 
                
Total Russia             1,404,856 
                
Singapore (9.7%)               
Genting Singapore, Ltd.   SGD    1,500,000    1,034,872 
HRnetgroup, Ltd.   SGD    3,200,000    1,387,242 
Wilmar International, Ltd.   SGD    560,000    1,539,709 
                
Total Singapore             3,961,823 
                
South Korea (3.9%)               
Samsung SDI Co., Ltd.   KRW    8,000    1,561,166 
                
Total South Korea             1,561,166 
                
United Arab Emirates (3.6%)               
National Central Cooling Co. PJSC   AED    2,952,000    1,449,192 
                
Total United Arab Emirates             1,449,192 
                
Vietnam (4.2%)               
Petrovietnam Fertilizer & Chemicals JSC   VND    1,432,000    841,523 
PetroVietnam Technical Services Corp.   VND    1,063,780    846,827 
                
Total Vietnam             1,688,350 
                
TOTAL COMMON STOCKS               
(Cost $33,640,802)             34,554,272 
                
TOTAL INVESTMENTS               
(Cost $33,640,802) (85.4%)            $34,554,272 
                
Cash and Other Assets, Less Liabilities (14.6%)             5,897,913 
NET ASSETS (100.0%)            $40,452,185 

 

(a)Non-income producing security.

 

24 (855) 732-9220  seafarerfunds.com

 

 

Seafarer Overseas Value Fund Portfolio of Investments

October 31, 2019 (Unaudited)

Currency Abbreviations 

AED - United Arab Emirates Dirham
BRL - Brazil Real
CNY - China Yuan
CZK - Czech Koruna
GBP - Great British Pound
HKD - Hong Kong Dollar
KRW - South Korea Won
MXN - Mexico Peso
QAR - Qatar Riyal
RUB - Russia Ruble
SGD - Singapore Dollar
USD - United States Dollar
VND - Vietnam Dong
       

 

For Fund compliance purposes, the Fund's geographical classifications refer to any one or more of the sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine sub-classifications for reporting ease. Geographical regions are shown as a percentage of net assets.

 

See accompanying Notes to Financial Statements.

 

Semi-annual Report – October 31, 2019 25

 

 

Seafarer Funds Statements of Assets and Liabilities  
    October 31, 2019 (Unaudited)  

 

  Seafarer Overseas Growth and Income Fund  Seafarer Overseas Value Fund
ASSETS:      
Investments, at value  $1,481,713,682   $34,554,272 
Cash   43,672,161    5,771,625 
Foreign currency, at value (Cost $6,084,252 and $36,313)   6,090,283    36,311 
Receivable for investments sold   12,701,522    3,334 
Receivable for shares sold   553,441    5,496 
Interest and dividends receivable   5,855,659    222,213 
Prepaid expenses and other assets   30,980    14,717 
Total Assets   1,550,617,728    40,607,968 
LIABILITIES:          
Payable for investments purchased   5,740,250    91,221 
Foreign capital gains tax   205,739     
Administrative fees payable   86,726    8,996 
Shareholder service plan fees payable   173,794    3,083 
Payable for shares redeemed   752,039     
Investment advisory fees payable   952,915    16,876 
Payable for chief compliance officer fees   3,774    3,774 
Trustee fees and expenses payable   27,177    514 
Payable for principal financial officer fees   847    847 
Audit and tax fees payable   18,321    15,148 
Accrued expenses and other liabilities   335,650    15,324 
Total Liabilities   8,297,232    155,783 
NET ASSETS  $1,542,320,496   $40,452,185 
NET ASSETS CONSIST OF:          
Paid-in capital (Note 5)  $1,520,469,914   $38,796,190 
Total distributable earnings   21,850,582    1,655,995 
NET ASSETS  $1,542,320,496   $40,452,185 
INVESTMENTS, AT COST  $1,416,548,556   $33,640,802 
PRICING OF SHARES          
Investor Class:          
Net Asset Value, offering and redemption price per share  $11.85   $12.03 
Net Assets  $201,057,200   $324,586 
Shares of beneficial interest outstanding   16,962,384    26,982 
Institutional Class:          
Net Asset Value, offering and redemption price per share  $11.91   $12.05 
Net Assets  $1,341,263,296   $40,127,599 
Shares of beneficial interest outstanding   112,644,719    3,330,868 

 

See accompanying Notes to Financial Statements.

 

26 (855) 732-9220  seafarerfunds.com

 

 

Seafarer Funds Statements of Operations

Six Months Ended October 31, 2019 (Unaudited)

 

  Seafarer Overseas Growth and Income Fund   Seafarer Overseas Value Fund
INVESTMENT INCOME:        
Dividends   $ 31,171,955     $ 915,055  
Foreign taxes withheld     (1,618,849 )     (7,541 )
Interest and other income     514,189       24,326  
Total investment income     30,067,295       931,840  
                 
EXPENSES:                
Investment advisory fees (Note 6)     5,624,422       126,078  
Administrative and transfer agency fees     282,928       29,436  
Trustee fees and expenses     27,595       533  
Registration/filing fees     19,355       15,718  
Shareholder service plan fees                
Investor Class     146,357        
Institutional Class     280,894       5,229  
Recoupment of previously waived fees                
Investor Class           37  
Institutional Class            
Legal fees     8,221       159  
Audit fees     17,281       10,666  
Reports to shareholders and printing fees     43,769       757  
Custody fees     514,059       25,113  
Chief compliance officer fees     12,150       12,150  
Principal financial officer fees     2,513       2,513  
Miscellaneous     14,571       2,449  
Total expenses     6,994,115       230,838  
Less fees waived/reimbursed by investment adviser (Note 6)                
Investor Class           (361 )
Institutional Class           (53,244 )
Total net expenses     6,994,115       177,233  
NET INVESTMENT INCOME:     23,073,180       754,607  
Net realized gain on investments     14,444,019       200,409  
Net realized loss on foreign currency transactions     (162,018 )     (2,654 )
Net realized gain     14,282,001       197,755  
Net change in unrealized appreciation on investments     27,082,932       841,504  
Net change in unrealized appreciation on translation of                
assets and liabilities in foreign currency transactions     158,575       6,773  
Net Change in unrealized foreign capital gains tax     (205,739 )      
Net unrealized appreciation     27,035,768       848,277  
                 
NET REALIZED AND UNREALIZED GAIN ON                
INVESTMENTS AND FOREIGN CURRENCY                
TRANSLATIONS     41,317,769       1,046,032  
NET INCREASE IN NET ASSETS RESULTING FROM                
OPERATIONS   $ 64,390,949     $ 1,800,639  

 

See accompanying Notes to Financial Statements.

 

Semi-annual Report – October 31, 2019 27

 

 

 

Seafarer Overseas Growth and Income Fund Statements of Changes in Net Assets

 

   Six Months Ended October 31, 2019 (Unaudited)    Year Ended April 30, 2019
OPERATIONS:      
Net investment income  $23,073,180   $50,058,210 
Net realized gain/(loss)   14,282,001    (78,375,229)
Net change in unrealized appreciation/(depreciation)   27,035,768    (157,770,194)
Net increase/(decrease) in net assets resulting from operations   64,390,949    (186,087,213)
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3):        
Total amount of distribution          
Investor Class   (3,298,885)   (24,164,869)
Institutional Class   (21,066,969)   (109,435,374)
Net decrease in net assets from distributions   (24,365,854)   (133,600,243)
BENEFICIAL INTEREST TRANSACTIONS (NOTE 5):          
Shares sold          
Investor Class   8,527,551    44,452,361 
Institutional Class   180,264,849    774,931,703 
Dividends reinvested          
Investor Class   3,242,695    23,834,890 
Institutional Class   16,023,988    94,069,305 
Shares Redeemed          
Investor Class   (47,122,032)   (652,824,161)
Institutional Class   (196,204,665)   (1,455,504,946)
Net decrease in net assets derived from beneficial interest transactions   (35,267,614)   (1,171,040,848)
Net increase/(decrease) in net assets   4,757,481    (1,490,728,304)
NET ASSETS:          
Beginning of period   1,537,563,015    3,028,291,319 
End of period  $1,542,320,496   $1,537,563,015 
Other Information:          
SHARE TRANSACTIONS:          
Investor Class          
Sold   756,945    3,794,490 
Distributions reinvested   286,964    2,179,970 
Redeemed   (4,244,615)   (54,038,510)
Net decrease in shares outstanding   (3,200,706)   (48,064,050)
Institutional Class          
Sold   16,292,351    65,086,770 
Distributions reinvested   1,413,050    8,768,097 
Redeemed   (17,435,329)   (123,834,889)
Net increase/(decrease) in shares outstanding   270,072    (49,980,022)

 

See accompanying Notes to Financial Statements.

 

28 (855) 732-9220  seafarerfunds.com

 

 

Seafarer Overseas Value Fund Statements of Changes in Net Assets

 

   Six Months Ended October 31, 2019 (Unaudited)  Year Ended April 30, 2019
OPERATIONS:          
Net investment income  $754,607   $722,172 
Net realized gain/(loss)   197,755    (44,789)
Net change in unrealized appreciation/(depreciation)   848,277    (1,126,907)
Net increase/(decrease) in net assets resulting from operations   1,800,639    (449,524)
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3):        
Total amount of distribution          
Investor Class       (8,420)
Institutional Class       (806,121)
Net decrease in net assets from distributions       (814,541)
BENEFICIAL INTEREST TRANSACTIONS (NOTE 5):          
Shares sold          
Investor Class   8,300    36,125 
Institutional Class   11,481,468    11,105,956 
Dividends reinvested          
Investor Class       8,124 
Institutional Class       777,710 
Shares Redeemed          
Investor Class   (27,398)   (17,747)
Institutional Class   (1,986,908)   (7,072,100)
Net increase in net assets derived from beneficial interest transactions   9,475,462    4,838,068 
Net increase in net assets   11,276,101    3,574,003 
NET ASSETS:          
Beginning of period   29,176,084    25,602,081 
End of period  $40,452,185   $29,176,084 
Other Information:          
SHARE TRANSACTIONS:          
Investor Class          
Sold   716    3,312 
Distributions reinvested       789 
Redeemed   (2,360)   (1,530)
Net increase/(decrease) in shares outstanding   (1,644)   2,571 
Institutional Class          
Sold   978,930    1,003,072 
Distributions reinvested       75,506 
Redeemed   (172,810)   (668,216)
Net increase in shares outstanding   806,120    410,362 

 

See accompanying Notes to Financial Statements

 

Semi-annual Report – October 31, 2019 29

 

 

Seafarer Overseas Growth and Income Fund

 

Investor Class
NET ASSET VALUE, BEGINNING OF PERIOD INCOME FROM OPERATIONS:
Net investment income(a)
Net realized and unrealized gain/(loss) on investments
Total from investment operations
 
LESS DISTRIBUTIONS:
From net investment income
From net realized gains on investments
Total distributions
REDEMPTION FEES ADDED TO PAID IN CAPITAL
NET INCREASE/(DECREASE) IN NET ASSET VALUE
NET ASSET VALUE, END OF PERIOD
 
TOTAL RETURN(d)
SUPPLEMENTAL DATA:
Net assets, end of period (in 000s)
RATIOS TO AVERAGE NET ASSETS:
Operating expenses excluding reimbursement/waiver
Operating expenses including reimbursement/waiver
Net investment income including reimbursement/waiver
PORTFOLIO TURNOVER RATE(i)

 

(a)Calculated using the average shares method.
(b)Less than $0.005 per share.
(c)In preparing the financial statements in accordance with U.S. GAAP, management made certain adjustments as required by U.S. GAAP which caused the net asset value for purposes of these financial statements to differ from the net asset value used to process shareholder transactions as of the date of these financial statements. As a result, the net asset value increased from $12.50 to $12.51.
(d)Total returns are for the periods indicated and have not been annualized. In some periods, total returns would have been lower had certain expenses not been waived during the periods. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
(e)Includes adjustments in accordance with U.S. GAAP and as such, the total return for shareholder transactions reported to the market may differ from the total return for financial reporting purposes. As a result, the total return decreased from 8.12% to 8.03%.
(f)Includes adjustments in accordance with U.S. GAAP and as such, the total return for shareholder transactions reported to the market may differ from the total return for financial reporting purposes. As a result, the total return increased from 11.13% to 11.22%. (g) Annualized.
(h)Effective September 1, 2015, the Adviser agreed to limit expenses to 1.15%. The Adviser agreed to limit expenses to 1.25% for the period September 1, 2014 through August 31, 2015. Prior to September 1, 2014, the Adviser agreed to limit expenses to 1.40%. (See Note 6.)
(i)Portfolio turnover rate for periods less than one full year have not been annualized.

 

30 (855) 732-9220  seafarerfunds.com

 

 

 

Financial Highlights

 

For a share outstanding through the periods presented

 

Six Months Ended October 31, 2019 (Unaudited)   Year Ended April 30, 2019   Year Ended April 30, 2018   Year Ended April 30, 2017   Year Ended April 30, 2016   Year Ended April 30, 2015 
$11.56   $13.11   $12.51   $11.44   $12.64   $11.58 
                            
 0.17    0.36    0.28    0.22    0.16    0.14 
 0.30    (1.02)   0.72    1.04    (1.23)   1.26 
 0.47    (0.66)   1.00    1.26    (1.07)   1.40 
                            
 (0.18)   (0.01)   (0.37)   (0.19)   (0.11)   (0.19)
     (0.88)   (0.03)       (0.02)   (0.15)
 (0.18)   (0.89)   (0.40)   (0.19)   (0.13)   (0.34)
             0.00(b)    0.00(b)    0.00(b) 
 0.29    (1.55)   0.60    1.07    (1.20)   1.06 
$11.85   $11.56   $13.11   $12.51(c)  $11.44   $12.64 
 4.14%   (4.36%)   8.03%(e)   11.22%(f)   (8.39%)   12.55%
                            
$201,057   $233,072   $894,241   $877,384   $613,795   $53,543 
                            
 1.02%(g)   0.99%   0.97%   1.02%   1.14%   1.30%
 1.02%(g)   0.99%   0.97%   1.02%   1.14%(h)   1.30%(h)
 3.03%(g)   3.02%   2.12%   1.88%   1.50%   1.19%
 13%   52%   23%   14%   7%   28%

 

See accompanying Notes to Financial Statements.

 

Semi-annual Report – October 31, 2019 31

 

 

 

Seafarer Overseas Growth and Income Fund

 

 

Institutional Class
NET ASSET VALUE, BEGINNING OF PERIOD
INCOME FROM OPERATIONS:
Net investment income(a)
Net realized and unrealized gain/(loss) on investments
Total from investment operations
 
LESS DISTRIBUTIONS:
From net investment income
From net realized gains on investments
Total distributions
REDEMPTION FEES ADDED TO PAID IN CAPITAL
NET INCREASE/(DECREASE) IN NET ASSET VALUE
NET ASSET VALUE, END OF PERIOD
 
TOTAL RETURN(c)
SUPPLEMENTAL DATA:
Net assets, end of period (in 000s)
RATIOS TO AVERAGE NET ASSETS:
Operating expenses excluding reimbursement/waiver
Operating expenses including reimbursement/waiver
Net investment income including reimbursement/waiver
PORTFOLIO TURNOVER RATE(f)

 

(a)Calculated using the average shares method.
(b)Less than $0.005 per share.
(c)Total returns are for the periods indicated and have not been annualized. In some periods, total returns would have been lower had certain expenses not been waived during the periods. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
(d)Annualized.
(e)Effective September 1, 2014, the Adviser agreed to limit expenses to 1.05%. Prior to September 1, 2014, the Adviser agreed to limit expenses to 1.25%. (See Note 6.)
(f)Portfolio turnover rate for periods less than one full year have not been annualized.

 

32 (855) 732-9220  seafarerfunds.com

 

 

 

Financial Highlights

 

For a share outstanding through the periods presented

  

Six Months Ended October 31, 2019 (Unaudited)     Year Ended April 30, 2019     Year Ended April 30, 2018     Year Ended April 30, 2017     Year Ended April 30, 2016     Year Ended April 30, 2015 
$11.61   $13.14   $12.54   $11.46   $12.66   $11.59 
                            
 0.17    0.29    0.28    0.21    0.19    0.15 
 0.31    (0.93)   0.73    1.07    (1.26)   1.28 
 0.48    (0.64)   1.01    1.28    (1.07)   1.43 
                            
 (0.18)   (0.01)   (0.38)   (0.20)   (0.12)   (0.21)
     (0.88)   (0.03)       (0.02)   (0.15)
 (0.18)   (0.89)   (0.41)   (0.20)   (0.14)   (0.36)
             0.00(b)    0.01    0.00(b) 
 0.30    (1.53)   0.60    1.08    (1.20)   1.07 
$11.91   $11.61   $13.14   $12.54   $11.46   $12.66 
 4.23%   (4.17%)   8.08%   11.37%   (8.32%)   12.76%
                            
$1,341,263   $1,304,491   $2,134,051   $1,500,310   $605,178   $129,714 
                            
 0.92%(d)   0.90%   0.87%   0.92%   1.03%   1.18%
 0.92%(d)   0.90%   0.87%   0.92%   1.03%   1.10%(e)
 3.08%(d)   2.45%   2.09%   1.82%   1.72%   1.30%
 13%   52%   23%   14%   7%   28%

 

See accompanying Notes to Financial Statements.

 

Semi-annual Report – October 31, 2019 33

 

 

Seafarer Overseas Value Fund

 

 

Investor Class
NET ASSET VALUE, BEGINNING OF PERIOD
INCOME FROM OPERATIONS:
Net investment income(a)
Net realized and unrealized gain/(loss) on investments
Total from investment operations
 
LESS DISTRIBUTIONS:
From net investment income
From net realized gains on investments
Total distributions
NET INCREASE/(DECREASE) IN NET ASSET VALUE
NET ASSET VALUE, END OF PERIOD
 
TOTAL RETURN(b)
SUPPLEMENTAL DATA:
Net assets, end of period (in 000s)
RATIOS TO AVERAGE NET ASSETS:
Operating expenses excluding reimbursement/waiver
Operating expenses including reimbursement/waiver
Net investment income including reimbursement/waiver
PORTFOLIO TURNOVER RATE(d)

 

(a)Calculated using the average shares method.
(b)Total returns are for the periods indicated and have not been annualized. In some periods, total returns would have been lower had certain expenses not been waived during the periods. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
(c)Annualized.
(d)Portfolio turnover rate for a period less than one full year has not been annualized.

 

 

34 (855) 732-9220  seafarerfunds.com

 

 

 

Financial Highlights

 

For a share outstanding through the periods presented

 

Six Months Ended October 31, 2019 (Unaudited)    Year Ended April 30, 2019    Year Ended April 30, 2018    May 31, 2016 (Inception) to April 30, 2017 
$11.41   $11.95   $11.30   $10.00 
                  
 0.25    0.29    0.35    0.12 
 0.37    (0.51)   0.72    1.28 
 0.62    (0.22)   1.07    1.40 
                  
     (0.29)   (0.42)   (0.10)
     (0.03)        
     (0.32)   (0.42)   (0.10)
 0.62    (0.54)   0.65    1.30 
$12.03   $11.41   $11.95   $11.30 
                  
 5.43%   (1.50%)   9.55%   14.15%
                  
$325   $327   $311   $280 
                  
 1.38%(c)   1.45%   1.80%   3.71%(c)
 1.15%(c)   1.15%   1.15%   1.15%(c)
 4.35%(c)   2.59%   2.91%   1.24%(c)
 12%   3%   3%   0%

 

See accompanying Notes to Financial Statements.

 

Semi-annual Report – October 31, 2019 35

 

 

 

Seafarer Overseas Value Fund

 

 

Institutional Class
NET ASSET VALUE, BEGINNING OF PERIOD
INCOME FROM OPERATIONS:
Net investment income(a)
Net realized and unrealized gain/(loss) on investments
Total from investment operations
 
LESS DISTRIBUTIONS:
From net investment income
From net realized gains on investments
Total distributions
NET INCREASE/(DECREASE) IN NET ASSET VALUE
NET ASSET VALUE, END OF PERIOD
 
TOTAL RETURN(c)
SUPPLEMENTAL DATA:
Net assets, end of period (in 000s)
RATIOS TO AVERAGE NET ASSETS:
Operating expenses excluding reimbursement/waiver
Operating expenses including reimbursement/waiver
Net investment income including reimbursement/waiver
PORTFOLIO TURNOVER RATE(g)

 

(a)Calculated using the average shares method.
(b)In preparing the financial statements in accordance with U.S. GAAP, management made certain adjustments as required by U.S. GAAP which caused the net asset value for purposes of these financial statements to differ from the net asset value used to process shareholder transactions as of the date of these financial statements. As a result, the net asset value decreased from $11.29 to $11.28.
(c)Total returns are for the periods indicated and have not been annualized. In some periods, total returns would have been lower had certain expenses not been waived during the periods. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
(d)Includes adjustments in accordance with U.S. GAAP and as such, the total return for shareholder transactions reported to the market may differ from the total return for financial reporting purposes. As a result, the total return increased from 9.64% to 9.74%.
(e)Includes adjustments in accordance with U.S. GAAP and as such, the total return for shareholder transactions reported to the market may differ from the total return for financial reporting purposes. As a result, the total return decreased from 14.29% to 14.18%.
(f)Annualized.
(g)Portfolio turnover rate for a period less than one full year has not been annualized.

 

36 (855) 732-9220  seafarerfunds.com

 

 

 

Financial Highlights

 

For a share outstanding through the periods presented

 

Six Months Ended October 31, 2019 (Unaudited)    Year Ended April 30, 2019    Year Ended April 30, 2018    May 31, 2016 (Inception) to April 30, 2017 
$11.43   $11.96   $11.28   $10.00 
                  
 0.26    0.30    0.35    0.13 
 0.36    (0.50)   0.74    1.28 
 0.62    (0.20)   1.09    1.41 
                  
     (0.30)   (0.41)   (0.13)
     (0.03)        
     (0.33)   (0.41)   (0.13)
 0.62    (0.53)   0.68    1.28 
$12.05   $11.43   $11.96   $11.28(b) 
                  
 5.42%   (1.34%)   9.74%(d)   14.18%(e)
                  
$40,128   $28,849   $25,291   $9,846 
                  
 1.37%(f)   1.48%   1.76%   3.63%(f)
 1.05%(f)   1.05%   1.05%   1.05%(f)
 4.48%(f)   2.65%   2.90%   1.36%(f)
 12%   3%   3%   0%

 

See accompanying Notes to Financial Statements.

 

Semi-annual Report – October 31, 2019 37

 

 

 

Seafarer Funds Notes to Financial Statements

October 31, 2019 (Unaudited)

 

NOTES TO FINANCIAL STATEMENTS

 

1. Organization

 

Financial Investors Trust (the “Trust”), a Delaware statutory trust, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (“1940 Act”). The Trust consists of multiple separate portfolios or series. This semi-annual report describes the Seafarer Overseas Growth and Income Fund and the Seafarer Overseas Value Fund (individually a “Fund” and collectively, the “Funds”). The Seafarer Overseas Growth and Income Fund seeks to provide long-term capital appreciation along with some current income; it also seeks to mitigate adverse volatility in returns as a secondary objective. The Seafarer Overseas Value Fund seeks to provide long-term capital appreciation. The Funds each offer Investor Class and Institutional Class shares.

 

2. Significant Accounting Policies

 

The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. The Funds are considered an investment company for financial reporting purposes under U.S. GAAP and follow the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946.The following is a summary of significant accounting policies consistently followed by the Funds in preparation of their financial statements.

 

Investment Valuation

 

Each Fund generally values its securities based on market prices determined at the close of regular trading on the New York Stock Exchange (“NYSE”), normally 4:00 p.m. Eastern Time, on each day the NYSE is open for trading.

 

For equity securities and exchange traded funds, the market price is usually the closing sale or official closing price on that exchange. In the case of equity securities not traded on an exchange, or if such closing prices are not otherwise available, the securities are valued at the mean of the most recent bid and ask prices on such day. Redeemable securities issued by open-end registered investment companies are valued at the investment company’s applicable net asset value, with the exception of exchange-traded open-end investment companies, which are priced as equity securities.

 

Equity securities that are primarily traded on foreign securities exchanges are valued at the closing values of such securities on their respective foreign exchanges, except when an event occurs subsequent to the close of the foreign exchange but before the close of the NYSE, such that the securities’ value would likely change. In such an event, the fair values of those securities are determined in good faith through consideration of other factors in accordance with procedures established by and under the general supervision of the Board of Trustees of the Trust (the “Board” or the “Trustees”). Each Fund uses a fair valuation model provided by an independent pricing service, which is intended to reflect fair value when a security’s value or a meaningful portion of the Fund’s portfolio is believed to have been materially affected by a valuation event that has occurred between the close of the exchange or market on which the security is traded and the close of the regular trading day on the NYSE.

 

The market price for debt obligations is generally the price supplied by an independent third-party pricing service approved by the Board, which may use a matrix, formula or other objective method that takes into consideration quotations from dealers, market transactions in comparable investments, market indices and yield curves. If vendors are unable to supply a price, or if the price supplied is deemed to be unreliable, the market price may be determined using quotations received from one or more broker-dealers that make a market in the security. Corporate bonds and convertible bonds are valued using market models that consider trade data, quotations from dealers and active market makers, relevant yield curve and spread

 

38 (855) 732-9220  seafarerfunds.com

 

 

Seafarer Funds Notes to Financial Statements

October 31, 2019 (Unaudited)

 

data, creditworthiness, trade data or market information on comparable securities, and other relevant security specific information. Publicly traded foreign government debt securities and foreign corporate bonds are typically traded internationally in the over -the-counter market and are valued at the mean between the bid and asked prices as of the close of business of that market.

 

Forward currency exchange contracts have a market value determined by the prevailing foreign currency exchange daily rates and current foreign currency exchange forward rates. The foreign currency exchange forward rates are calculated using an automated system that estimates rates on the basis of the current day foreign currency exchange rates and forward foreign currency exchange rates supplied by a pricing service.

 

When such prices or quotations are not available, or when the Trust’s Valuation Committee believes that they are unreliable, securities may be priced using fair value procedures approved by the Board.

 

Certain foreign countries impose a tax on capital gains which is accrued by each Fund based on unrealized appreciation, if any, on affected securities. The tax is paid when the gain is realized.

 

Fair Value Measurements

 

Each Fund discloses the classification of its fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability. Such inputs are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability, which are developed based on the information available and the reporting entity’s best efforts to interpret such information.

 

Various inputs are used in determining the value of the Funds’ investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments. These inputs are categorized in the following hierarchy under applicable financial accounting standards:

 

Level 1 – Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that the Funds have the ability to access at the measurement date;

 

Level 2 – Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and

 

Level 3 – Significant unobservable prices or inputs (including the Funds’ own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date.

 

Semi-annual Report – October 31, 2019 39

 

 

 

Seafarer Funds Notes to Financial Statements

October 31, 2019 (Unaudited)

 

The following is a summary of the inputs used to value each Fund as of October 31, 2019:

  

Investments in Securities at Value(a)  Level 1 - Quoted Prices   Level 2 - Other Significant Observable Inputs   Level 3 - Significant Unobservable Inputs   Total 
Seafarer Overseas Growth and Income Fund    
Common Stocks                    
Brazil  $77,812,492   $   $   $77,812,492 
China / Hong Kong   70,820,195    411,632,328        482,452,523 
Czech Republic       24,236,899        24,236,899 
Hungary   45,776,940            45,776,940 
India   40,246,447            40,246,447 
Indonesia       23,970,822        23,970,822 
Malaysia       18,803,015        18,803,015 
Mexico   48,198,397            48,198,397 
Philippines       23,703,750        23,703,750 
Qatar   25,516,742            25,516,742 
Singapore       99,186,866        99,186,866 
South Africa       36,839,895        36,839,895 
South Korea   31,561,305    262,930,488        294,491,793 
Taiwan       78,201,065        78,201,065 
Thailand       19,873,943        19,873,943 
United Arab Emirates       18,753,098        18,753,098 
Vietnam       23,225,891        23,225,891 
Preferred Stocks       72,161,689        72,161,689 
Government Bond, Short-term - USD and Foreign Currency       28,261,415        28,261,415 
Total  $339,932,518   $1,141,781,164   $   $1,481,713,682 

 

40 (855) 732-9220  seafarerfunds.com

 

 

Seafarer Funds Notes to Financial Statements

October 31, 2019 (Unaudited)

  

Investments in Securities at Value(a)  Level 1 - Quoted Prices   Level 2 - Other Significant Observable Inputs   Level 3 - Significant Unobservable Inputs   Total 
Seafarer Overseas Value Fund                
Common Stocks                    
Brazil  $2,004,620   $   $   $2,004,620 
China / Hong Kong   1,151,046    14,244,932        15,395,978 
Czech Republic   1,372,982    1,221,805        2,594,787 
Georgia   1,361,209            1,361,209 
Mexico   977,750            977,750 
Philippines   546,768            546,768 
Qatar   1,607,773            1,607,773 
Russia   1,404,856            1,404,856 
Singapore       3,961,823        3,961,823 
South Korea       1,561,166        1,561,166 
United Arab Emirates       1,449,192        1,449,192 
Vietnam       1,688,350        1,688,350 
Total  $10,427,004   $24,127,268   $   $34,554,272 

  

(a)For detailed descriptions of securities by country, see the accompanying Portfolio of Investments.

 

For the six months ended October 31, 2019, the Funds did not have any securities that used significant unobservable inputs (Level 3) in determining fair value.

 

Investment Transactions and Investment Income

 

Investment transactions are accounted for on the date the investments are purchased or sold (trade date). Realized gains and losses from investment transactions are reported on an identified cost basis. Interest income, which includes accretion of discounts and amortization of premiums, is accrued and recorded as earned. Dividend income is recognized on the ex-dividend date or for certain foreign securities, as soon as information is available to the Funds. All of the realized and unrealized gains and losses and net investment income are allocated daily to each share class in proportion to its average daily net assets.

 

Cash Management Transactions

 

Each of the Funds subscribes to the Brown Brothers Harriman & Co. (“BBH”) Cash Management Service (“CMS”), whereby cash balances are automatically swept into overnight offshore demand deposits with either the BBH Grand Cayman branch or a branch of a pre-approved commercial bank. This fully automated program allows the Funds to earn interest on cash balances. Excess cash with deposit institutions domiciled outside of the U.S. are subject to sovereign actions in the jurisdiction of the deposit institution including, but not limited to, freeze, seizure or diminution. Cash balances in the BBH CMS are included on the Statements of Assets and Liabilities under Cash and Foreign currency, at value. As of October 31, 2019, the Funds had the following cash balances participating in the BBH CMS:

 

Fund    
Seafarer Overseas Growth and Income Fund  $43,672,161 
Seafarer Overseas Value Fund   5,771,625 

 

Semi-annual Report – October 31, 2019 41

 

 

Seafarer Funds Notes to Financial Statements

October 31, 2019 (Unaudited)

 

As of October 31, 2019, the Funds had the following foreign cash balances participating in the BBH CMS (cost and value of foreign cash balances are equal):

 

Fund     
Seafarer Overseas Growth and Income Fund  $ 
Seafarer Overseas Value Fund    

 

Foreign Securities

 

The Funds may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible revaluation of currencies, the inability to repatriate foreign currency, less complete financial information about companies, and possible future adverse political and economic developments. Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. issuers.

 

Foreign Currency Translation

 

The books and records of the Funds are maintained in U.S. dollars. Investment valuations and other assets and liabilities initially expressed in foreign currencies are converted each business day into U.S. dollars based upon current exchange rates. Prevailing foreign exchange rates may generally be obtained at the close of the NYSE (normally, 4:00 p.m. Eastern Time). The portion of realized and unrealized gains or losses on investments due to fluctuations in foreign currency exchange rates is not separately disclosed and is included in realized and unrealized gains or losses on investments, when applicable.

 

Foreign Currency Spot Contracts

 

Each Fund may enter into foreign currency spot contracts to facilitate transactions in foreign securities or to convert foreign currency receipts into U.S. dollars. A foreign currency spot contract is an agreement between two parties to buy and sell currencies at the current market rate, for settlement generally within two business days. The U.S. dollar value of a contract is determined using current currency exchange rates supplied by a pricing service. The contract is marked-to-market daily for settlements beyond one day and any change in market value is recorded as an unrealized gain or loss. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value on the open and close date. Losses may arise from changes in the value of the foreign currency, or if the counterparties do not perform under the contract’s terms. The maximum potential loss from such contracts is the aggregate face value in U.S. dollars at the time the contract was opened.

 

Trust Expenses

 

Some expenses of the Trust can be directly attributed to the Funds. Expenses that cannot be directly attributed to the Funds are apportioned among all funds in the Trust based on the average daily net assets of each fund.

 

Fund and Class Expenses

 

Expenses that are specific to a Fund or class of shares of a Fund, including shareholder servicing fees, are charged directly to that Fund or share class. Expenses that are common to all Funds are generally allocated among the Funds in proportion to their average daily net assets.

 

Federal Income Taxes

 

Each Fund complies with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies and intends to distribute substantially all of its net taxable income and net capital gains, if any, each year so that it will not be subject to excise tax on undistributed income and gains. The Funds are not subject to income taxes to the extent such distributions are made.

 

As of and during the six months ended October 31, 2019, the Funds did not have a liability for any unrecognized tax benefits. The Funds file U.S. federal, state, and local tax returns as required. The

 

42 (855) 732-9220  seafarerfunds.com

 

 

 

Seafarer Funds Notes to Financial Statements

October 31, 2019 (Unaudited)

 

Funds’ tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return for federal purposes and four years for most state returns. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.

 

Distributions to Shareholders

 

In general, the Seafarer Overseas Growth and Income Fund’s policy is to distribute to its shareholders substantially all net investment income, paid out via two semi-annual dividends, in June and December. The Seafarer Overseas Value Fund’s policy is to distribute to its shareholders substantially all net investment income via one annual dividend in December. It is also each Fund’s policy to distribute annually all net realized short-term and long-term capital gains, if any, after offsetting any capital loss carryovers. Income dividend distributions are derived from dividends and other income each Fund receives from its investments, including short-term capital gains. Long-term capital gain distributions are derived from gains realized when a Fund sells a security it has owned for more than one year. Each Fund may make additional distributions if Seafarer Capital Partners, LLC (the “Adviser”) believes doing so may be necessary for the Fund to share tax obligations more ratably and more equitably across shareholders over time.

 

3. Tax Basis Information

 

Tax Basis of Investments

 

As of October 31, 2019, the aggregate cost of investments, gross unrealized appreciation/(depreciation), and net unrealized appreciation for Federal tax purposes were as follows:

 

   Cost of Investments   Gross Unrealized Appreciation   Gross Unrealized Depreciation   Net Unrealized Appreciation 
Seafarer Overseas Growth and Income Fund  $1,423,285,779   $178,057,351   $(119,629,448)  $58,427,903 
Seafarer Overseas Value Fund   33,640,802    5,041,253    (4,127,783)   913,470 

  

Tax Basis of Distributions to Shareholders

 

The character of distributions made during the fiscal year from net investment income or net realized gains may differ from the ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or realized gain is recorded by a Fund.

 

The tax character of distributions paid by the Funds for the fiscal year ended April 30, 2019 was as follows:

 

   Ordinary Income   Long-Term Capital Gain 
Seafarer Overseas Growth and Income Fund  $2,805,129   $130,795,114 
Seafarer Overseas Value Fund   751,764    62,777 

 

The amounts and characteristics of tax basis distributions and composition of distributable earnings/(accumulated losses) are finalized at fiscal year-end. Accordingly, tax basis balances have not been determined as of October 31, 2019.

 

Semi-annual Report – October 31, 2019 43

 

 

 

Seafarer Funds Notes to Financial Statements

October 31, 2019 (Unaudited)

 

4. Securities Transactions

 

The cost of purchases and proceeds from sales of securities excluding short-term securities during the six months ended October 31, 2019 were as follows:

 

   Purchases of Securities   Proceeds from Sales of Securities 
Seafarer Overseas Growth and Income Fund  $187,070,276   $262,601,536 
Seafarer Overseas Value Fund   9,685,408    3,641,646 

 

5. Shares of Beneficial Interest

 

The capitalization of the Trust consists of an unlimited number of shares of beneficial interest with no par value per share. Holders of shares of the Funds of the Trust have one vote for each share held and a proportionate fraction of a vote for each fractional share. All shares issued and outstanding are fully paid and are transferable and redeemable at the option of the shareholder. Purchasers of the shares do not have any obligation to make payments to the Trust or its creditors solely by reason of the purchasers’ ownership of the shares. Shares have no pre-emptive rights.

 

6. Management and Related Party Transactions

 

The Adviser, subject to the authority of the Board, is responsible for the overall management and administration of the Funds’ business affairs. The Adviser manages the investments of the Funds in accordance with the Funds’ investment objectives, policies, limitations and investment guidelines established jointly by the Adviser and the Trustees. Pursuant to the investment advisory agreement, the Funds, in the aggregate, pay the Adviser an annual management fee of 0.75% of the aggregate average daily net assets of the Funds up to $1.5 billion and 0.70% of the aggregate average daily net assets of the Funds over $1.5 billion. Each Fund pays the Adviser a monthly fee at the annual rate using the applicable management fee calculated based on the Fund’s pro rata share of the Funds’ combined average daily net assets. Prior to August 31, 2016, the Funds paid the Adviser an annual management fee of 0.75% of the aggregate average daily net assets of the Funds.

 

Effective September 1, 2014, the Adviser contractually agreed to limit certain Fund expenses (excluding brokerage expenses, interest expenses, taxes and extraordinary expenses) to 1.25% and 1.05% of the Funds’ average daily net assets in the Investor and Institutional share classes, respectively, through August 31, 2015. Effective September 1, 2015, the Adviser contractually, through successive one-year agreements, agreed to waive and/or reimburse fees or expenses in order to limit Total Annual Fund Operating Expenses After Fee Waiver / Expense Reimbursements (excluding brokerage expenses, interest expenses, taxes and extraordinary expenses) to 1.15% and 1.05% of the Funds’ average daily net assets for the Investor and Institutional share classes, respectively. The current agreement (the “Expense Agreement”) is in effect through August 31, 2020. The Adviser will be permitted to recover, on a class-by-class basis, expenses it has borne through the Expense Agreement to the extent that the Funds’ expenses in later periods fall below the expense cap in effect at the time of waiver or reimbursement. The Funds will not be obligated to pay any such deferred fees and expenses more than three years after the date of the waiver. This agreement may not be terminated or modified prior to August 31, 2020, except with the approval of the Funds’ Board. During the six months ended October 31, 2019, the Adviser agreed that it will only seek to recoup waived management fees and will not recoup any reimbursed expenses. As of October 31, 2019, the Adviser has recouped all available waived management fees from the Seafarer Overseas Growth and Income Fund.

 

44 (855) 732-9220  seafarerfunds.com

 

 

 

Seafarer Funds Notes to Financial Statements

October 31, 2019 (Unaudited)

 

For the six months ended October 31, 2019, the fee waivers and/or reimbursements were as follows for the Seafarer Overseas Value Fund:

 

Fund  Fees Waived/ Reimbursed By Adviser   Recoupment of Past Waived Fees By Adviser 
Seafarer Overseas Value Fund        
Investor Class  $361   $37 
Institutional Class   53,244     

 

As of October 31, 2019, the balances of recoupable expenses for each class were as follows for the Funds:

 

Fund  Expires 2020   Expires 2021   Expires 2022   Expires 2023    Total 
Seafarer Overseas Growth and Income Fund                 
Investor Class  $   $   $   $   $ 
Institutional Class                    
Seafarer Overseas Value Fund                         
Investor Class  $777   $1,723   $897   $361   $3,758 
Institutional Class   22,162    108,082    115,259    53,244    298,747 

 

Fund Administrator

 

ALPS Fund Services, Inc. (“ALPS” and the “Administrator”) provides administrative, fund accounting and other services to the Funds under the Administration, Bookkeeping and Pricing Services Agreement with the Trust.

 

The Funds’ administrative fee is accrued on a daily basis and paid monthly. The Administrator is also reimbursed by the Funds for certain out-of-pocket expenses. Administration fees paid by the Funds for the six months ended October 31, 2019 are disclosed in the Statements of Operations.

 

Transfer Agent

 

ALPS serves as transfer, dividend paying and shareholder servicing agent for the Funds (“Transfer Agent”). ALPS is paid an annual base fee per Fund and a fee based on the number of shareholder accounts. The Transfer Agent is also reimbursed by the Funds for certain out-of-pocket expenses. Transfer agent fees paid by the Funds for the six months ended October 31, 2019 are disclosed in the Statements of Operations.

 

Compliance Services

 

ALPS provides compliance services to the Funds under the Chief Compliance Officer Services Agreement with the Trust. ALPS provides services that assist the Trust’s chief compliance officer in monitoring and testing the policies and procedures of the Trust in accordance with the requirements of Rule 38a-1 under the 1940 Act. ALPS is paid an annual base fee and is reimbursed for certain out-of-pocket expenses. Compliance service fees paid by the Funds for the six months ended October 31, 2019 are disclosed in the Statements of Operations.

 

Principal Financial Officer

 

ALPS provides principal financial officer services to the Funds under the Principal Financial Officer Services Agreement with the Trust. Under this Agreement, ALPS is paid an annual base fee and is reimbursed for certain out-of-pocket expenses. Principal financial officer fees paid by the Funds for the six months ended October 31, 2019 are disclosed in the Statements of Operations.

 

Semi-annual Report – October 31, 2019 45

 

 

 

Seafarer Funds Notes to Financial Statements

October 31, 2019 (Unaudited)

 

Distributor

 

ALPS Distributors, Inc. (“ADI” or the “Distributor”) (an affiliate of ALPS) acts as the distributor of the Funds’ shares pursuant to the Distribution Agreement with the Trust. Under a side letter agreement, the Adviser pays ADI an annual base fee of $12,420 per Fund for the distribution services. The Adviser also reimburses ADI for certain out-of-pocket expenses. Shares are sold on a continuous basis by ADI as agent for the Funds, and ADI has agreed to use its best efforts to solicit orders for the sale of the Funds’ shares, although it is not obliged to sell any particular amount of shares. ADI is registered as a broker-dealer with the U.S. Securities and Exchange Commission.

 

Shareholder Service Plan for Investor Class and Institutional Class Shares

 

Each Fund has adopted a Shareholder Services Plan (a “Services Plan”) for each of its share classes. Under the Services Plan, each Fund is authorized to enter into shareholder service agreements with investment advisers, financial institutions and other service providers (“Participating Organizations”) to maintain and provide certain administrative and servicing functions in relation to the accounts of shareholders. Shareholder service arrangements typically include processing orders for shares, generating account and confirmation statements, sub-accounting, account maintenance, tax reporting, and disbursing cash dividends as well as other investment or administrative services required for a particular Participating Organizations’ products, programs, platform and accounts. The Services Plan will cause each Fund to pay an aggregate fee, not to exceed on an annual basis 0.15% and 0.05% of the average daily net asset value of the Investor and Institutional share classes, respectively. Such payments will be made on assets attributable to or held in the name of a Participating Organization, on behalf of its clients as compensation for providing service activities pursuant to an agreement with the Participating Organization. Any amount of such payment not paid to a Participating Organization for such service activities shall be reimbursed to the Fund as soon as practicable. Shareholder Services Plan fees paid by the Funds for the six months ended October 31, 2019 are disclosed in the Statements of Operations.

 

Trustees

 

The fees and expenses of the independent Trustees of the Board are presented in the Statements of Operations.

 

7. Indemnifications

 

Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that may contain general indemnification clauses, which may permit indemnification to the extent permissible under the applicable law. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred.

 

46 (855) 732-9220  seafarerfunds.com

 

 

 

Seafarer Funds Additional Information

October 31, 2019 (Unaudited)

 

ADDITIONAL INFORMATION

 

1. Fund Holdings

 

The Funds’ portfolio holdings are made available semi-annually in shareholder reports within 60 days after the close of the period for which the report is being made, as required by federal securities laws. The Funds also file monthly portfolio holdings on Form N-PORT on a quarterly basis, with the schedule of portfolio holdings filed on Form N-PORT for the third month of each Fund’s fiscal quarter made publicly available 60 days after the end of the Funds’ fiscal quarter.

 

2. Fund Proxy Voting Policies, Procedures and Summaries

 

The Funds’ policies and procedures used in determining how to vote proxies and information regarding how the Funds voted proxies relating to portfolio securities during the most recent prior 12-month period ending June 30 are available without charge, (1) upon request, by calling toll-free (855) 732-9220 and (2) on the SEC’s website at http://www.sec.gov.

 

Semi-annual Report – October 31, 2019 47

 

 

 

Seafarer Funds Privacy Policy

October 31, 2019 (Unaudited)

 

FACTS WHAT DO THE FUNDS DO WITH YOUR PERSONAL INFORMATION?
Why? Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.
What?

The types of personal information we collect and share depend on the product or service you have with us. This information can include:

 

   Social Security number and account transactions

   Account balances and transaction history

   Wire transfer instructions

How? All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons the Funds choose to share; and whether you can limit this sharing.

 

Reasons we can share your personal information Do we share: Can you limit this sharing?
For our everyday business purposes — such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus Yes No
For our marketing purposes — to offer our products and services to you No We do not share.
For joint marketing with other financial companies No We do not share.
For our affiliates’ everyday business purposes — information about your transactions and experiences Yes No
For our affiliates’ everyday business purposes — information about your creditworthiness No We do not share.
For nonaffiliates to market to you No We do not share.

 

48 (855) 732-9220  seafarerfunds.com

 

 

 

Seafarer Funds Privacy Policy

October 31, 2019 (Unaudited)

  

Who We Are  
Who is providing this notice? Seafarer Overseas Growth and Income Fund and Seafarer Overseas Value Fund.
What We Do  
How do the Funds protect my personal information? To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings.
How do the Funds collect my personal information?

We collect your personal information, for example, when you

 

     open an account

     provide account information or give us your contact information

     make a wire transfer or deposit money

Why can’t I limit all sharing?

Federal law gives you the right to limit only

 

     sharing for affiliates’ everyday business purposes-information about your creditworthiness

   affiliates from using your information to market to you

   sharing for non-affiliates to market to you

 

State laws and individual companies may give you additional rights to limit sharing.

Definitions  
Affiliates Companies related by common ownership or control. They can be financial and nonfinancial companies.
Non-affiliates

Companies not related by common ownership or control. They can be financial and nonfinancial companies.

 

     The Funds do not share with non-affiliates so they can market to you.

Joint marketing

A formal agreement between non-affiliated financial companies that together market financial products or services to you.

 

     The Funds do not jointly market.

Other Important Information  
California Residents If your account has a California home address, your personal information will not be disclosed to nonaffiliated third parties except as permitted by applicable California law, and we will limit sharing such personal information with our affiliates to comply with California privacy laws that apply to us.
Vermont Residents The State of Vermont requires financial institutions to obtain your consent prior to sharing personal information that they collect about you with affiliated companies and nonaffiliated third parties other than in certain limited circumstances. Except as permitted by law, we will not share personal information we collect about you with nonaffiliated third parties or other affiliated companies unless you provide us with your written consent to share such information.

 

Semi-annual Report – October 31, 2019 49

 

 

 

 

 

 

 

 

Table of Contents

 

 

CONTENTS PAGE
Shareholder Letter 1
Fund Overview  
Vulcan Value Partners Fund 4
Vulcan Value Partners Small Cap Fund 8
Disclosure of Fund Expenses  
Vulcan Value Partners Fund 6
Vulcan Value Partners Small Cap Fund 10
Statements of Investments  
Vulcan Value Partners Fund 12
Vulcan Value Partners Small Cap Fund 15
Statements of Assets and Liabilities 18
Statements of Operations 20
Statements of Changes in Net Assets  
Vulcan Value Partners Fund 21
Vulcan Value Partners Small Cap Fund 22
Financial Highlights  
Vulcan Value Partners Fund 24
Vulcan Value Partners Small Cap Fund 28
Notes to Financial Statements 31
Additional Information 40
Privacy Policy 41

 

Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, paper copies of the Funds’ annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Funds’ website at www.vulcanvaluepartners.com and you will be notified by mail each time a report is posted and provided with a website link to access the report.

 

You may, notwithstanding the availability of shareholder reports online, elect to receive all future shareholder reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the Funds, you can call 1.877.421.5078 to let the Funds know you wish to continue receiving paper copies of your shareholder reports.

 

If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Funds electronically anytime by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by enrolling at www.vulcanvaluepartners.com.

 

 

www.vulcanvaluepartners.com

 

 

 

Shareholder Letter

 

October 31, 2019 (Unaudited)

 

Portfolio Review

 

General

For the six months ended October 31, 2019, Vulcan Value Partners Fund returned 7.84% and the Vulcan Value Partners Small Cap Fund returned 0.58%. As you know, we place no weight on short-term results, good or bad, and neither should you. In fact, we have and will continue to willingly make decisions that negatively impact short-term performance when we think we can lower risk and improve our long-term returns. We encourage you to place more weight on our longer term historical results and a great deal of weight on our long-term prospects.

 

Vulcan Value Partners Fund Review

In the discussion that follows, we highlight a few holdings in the Vulcan Value Partners Fund. There was one material contributor, CVS Health Corp. There were no material detractors.

 

CVS is a leader in the retail pharmacy, health insurance, and pharmacy benefits management services industries. It enjoys unmatched scale, a growing network effect, a large physical footprint, a strong brand, and is the only fully vertically integrated company in its industry. Its merger with Aetna is progressing, and we are optimistic about the long-term outlook for the combined entity. We believe that their combination has the potential to bend the healthcare cost curve in the future, which should allow us to experience further value compounding. Its recent stock price decline has allowed us to establish a position in this high quality business at a compelling discount to our estimate of its intrinsic worth.

 

National Oilwell Varco was the largest detractor from performance during the period. Despite the recent decline in stock price, the underlying value of the business remains stable. Its stock price can be affected by movements in oil prices, but the company’s long-term value is not. The products it provides to the oil industry are needed regardless of commodity price movements. We acknowledge that, in the near term, wide fluctuations in oil prices can impact demand at the margin. However, these short-term fluctuations in demand do not have bearing on the company’s value. We look forward to stock price volatility in stable value businesses because it allows us the opportunity to execute our discipline.

 

We purchased shares of Brookfield Asset Management during the period. Brookfield Asset Management is a Canadian alternative asset manager focusing on its own private equity funds, investing in listed partnerships, and managing public securities. Unlike other asset managers, Brookfield has two sources of capital: its limited partnership structure and its publicly traded vehicles. Brookfield earns recurring long-term base management fees and generates performance fees for managing investors’ capital. Its scale, robust free cash flow, and excellent capital allocation are just a few of the reasons we like this business. Brookfield’s management team intelligently utilizes its robust free cash flow to maximize its intrinsic value per share. Brookfield’s value is compounding faster than its stock price, which gave us a margin of safety and the opportunity to add it to our portfolio.

 

BlackRock is the world’s largest money manager with a vast array of offerings, which we like for its numerous competitive advantages. However, we had the opportunity to reallocate capital in other high quality companies at deeper discounts. We followed our discipline and sold BlackRock in order to lower the weighted average price to value ratio of the portfolio.

 

 

Semi-Annual Report | October 31, 2019 1

 

 

 

Shareholder Letter

 

October 31, 2019 (Unaudited)

 

Vulcan Value Partners Small Cap Fund Review

In the discussion that follows, we highlight a few holdings in the Vulcan Value Partners Small Cap Fund. There were five material contributors including Sotheby’s, Sleep Number Corp., Avast plc, Sleep Country Canada Holdings, and Frontdoor Inc. Material detractors include Despegar.com Corp., Ituran Location and Control, and Resideo Technologies Inc.

 

Another name we exited during the period, Sotheby's, was also a material contributor and added over 3% to performance. Sotheby’s is an auctioneer of art, jewelry, wine and other expensive luxury collectables. Having been in operation since 1744, the Sotheby’s brand is irreplaceable and its heritage is impossible to duplicate. On June 17, the company announced an agreement to be acquired and taken private by billionaire Patrick Drahi. The stock price appreciated close to the deal price, and we exited our position for a considerable gain. We are grateful to Ted Smith and the management team for their excellent stewardship of capital. We are sad to see Sotheby’s leave the portfolio.

 

Sleep Number, the second largest contributor during the period, is a premium bedding company in a stable industry. Its value has compounded at a strong double-digit rate over the three years we have owned it. The management team has excelled at capital allocation and has used the company’s free cash flow to repurchase its stock at extremely discounted prices. To paraphrase Benjamin Graham, in the short run, the stock market is a voting machine but, in the long run, it's a weighing machine. Price can increase or decrease drastically based on popular sentiment, as demonstrated by Sleep Number’s stock price volatility over the years we have owned it. Following our discipline, we have raised and lowered Sleep Number’s weight in the portfolio according to its price to value ratio.

 

Resideo was a material detractor for the period. As this letter is being written, Resideo has lowered its guidance for the year. We are evaluating the company thoughtfully and will follow our investment discipline, as always.

 

We exited Despegar.com during the period. Despegar.com is a dominant Latin American online travel agent. There are many nice tailwinds for the business long term, including a transition from offline to online travel; however, Despegar.com faces volatile macro economies. We thought that the company’s business model was strong enough to withstand those macroeconomic headwinds. We were wrong. Following our investment discipline, Despegar.com no longer qualified, and we sold it.

 

Closing

We appreciate the confidence you have placed in us. Your capital, invested alongside our own capital provides a foundation that allows us to make sound, long-term investment decisions that can lower risk and provide the opportunity to achieve superior long-term results. You, our client-partners, are one of our most important competitive advantages.

 

C.T. Fitzpatrick

Chief Executive Officer

Vulcan Value Partners, LLC

 

 

2 www.vulcanvaluepartners.com

 

 

 

Shareholder Letter

 

October 31, 2019 (Unaudited)

 

Past performance does not guarantee future results. The Funds’ prices fluctuate as the underlying assets have exposure to market fluctuations and other risks, as described in the Funds’ prospectus. Please call 877.421.5078 to obtain current performance information and for the current prospectus and statement of additional information. This material must be preceded or accompanied by a prospectus. Please read the prospectus carefully before investing.

 

The views of the Vulcan Value Partners, LLC and information discussed in this commentary are as of the date of publication, are subject to change, and may not reflect the writer's current views. The views expressed represent an assessment of market conditions at a specific point in time, are opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. Such information does not constitute a recommendation to buy or sell specific securities or investment vehicles. It should not be assumed that any investment will be profitable or will equal the performance of the Funds or any securities or any sectors mentioned in this letter. The subject matter contained in this letter has been derived from several sources believed to be reliable and accurate at the time of compilation. Neither Vulcan Value Partners, LLC nor the Funds accept any liability for losses either direct or consequential caused by the use of this information.

 

The Funds are distributed by ALPS Distributors, Inc.

 

The Funds are subject to investment risks, including possible loss of the principal amount invested and therefore is not suitable for all investors. The Funds may not achieve their objectives.

 

Diversification does not eliminate the risk of experiencing investment losses.

 

Price to value ratio compares a firm's market to book value by dividing price per share by book value per share. It is also known as the price-equity ratio.

 

Margin of safety is a principle of investing in which an investor only purchases securities when their market price is significantly below their intrinsic value. In other words, when the market price of a security is significantly below your estimation of its intrinsic value, the difference is the margin of safety. Because investors may set a margin of safety in accordance with their own risk preferences, buying securities when this difference is present allows an investment to be made with minimal downside risk.

 

Intrinsic worth is a value or attribute that a person has that is internal which is a part of their makeup or being which is something that can be taken away.

 

Free cash flow is the cash a company produces through its operations, less the cost of expenditures on assets. In other words, free cash flow (FCF) is the cash left over after a company pays for its operating expenses and capital expenditures, also known as CAPEX.

 

Volume-weighted average price (VWAP) is the ratio of the value traded to total volume traded over a particular time horizon (usually one day). It is a measure of the average price at which a stock is traded over the trading horizon.

 

 

Semi-Annual Report | October 31, 2019 3

 

 

 

Fund Overview

 

October 31, 2019 (Unaudited)

 

VULCAN VALUE PARTNERS FUND

 

Annualized Total Returns (as of 10/31/19)

          Expense Ratios(1)
  6 Month 1 Year 3 Year 5 Year Since Inception* Total Net(2)
Vulcan Value Partners Fund - Investor Class(3) 7.84% 18.15% 14.42% 8.08% 12.26% 1.08% 1.08%
Vulcan Value Partners Fund - Institutional Class 8.09% 1.08% 0.85%
S&P 500® Total Return Index(4) 4.16% 14.33% 14.91% 10.78% 12.93%    
Russell 1000® Value Index(5) 3.07% 11.21% 10.51% 7.61% 11.25%    

 

Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. The Fund imposes a 2.00% redemption fee on shares held for less than 90 days. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data, please call 1-877-421-5078.

 

The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

 

Subject to investment risks, including possible loss of the principal amount invested. Returns for periods less than 1 year are cumulative.

 

*Inception Dates – Investor Class: 12/30/09, Institutional Class: 5/01/19
  
(1)Ratios as of the Prospectus dated August 31, 2019 and may differ from the ratios presented in the Financial Highlights.
(2)Vulcan Value Partners, LLC (“Vulcan” or the “Adviser”) has contractually agreed to limit the Fund’s total annual fund operating expenses (exclusive of Acquired Fund Fees and Expenses, brokerage expenses, interest expense, taxes and extraordinary expenses) to 1.25% and 0.85% of the Fund’s average daily net assets with respect to Investor Class shares and Institutional Class shares, respectively. This agreement (the “Expense Agreement”) is in effect through August 31, 2020. The Adviser will be permitted to recover, on a class-by-class basis, expenses it has borne through the Expense Agreement to the extent that the Fund’s expenses in later periods fall below the expense cap in effect at the time of waiver or reimbursement. Notwithstanding the foregoing, the Fund will not be obligated to pay any such fees and expenses more than three years after the end of the fiscal year in which the fees or expenses were foregone or reimbursed. The Adviser may not discontinue or modify this waiver prior to August 31, 2020 without the approval by the Fund’s Board of Trustees.
(3)The initial share class of the Fund was redesignated as Investor Class shares effective April 23, 2019.
(4)The S&P 500® Total Return Index is an unmanaged index of 500 common stocks chosen for market size, liquidity and industry group representation. It is a market-value weighted index. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly in the Index.
(5)The Russell 1000® Value Index is presented here as an additional index, and measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000® companies with lower price-to-book ratios and lower expected growth values. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly in the Index.

 

 

4 www.vulcanvaluepartners.com

 

 

 

Fund Overview

 

October 31, 2019 (Unaudited)

 

Growth of $10,000 Initial Investment (for the period ended October 31, 2019)

 

 

 

The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund since inception. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

 

Investing in the Fund is subject to investment risks, including possible loss of the principal amount invested.

 

Industry Allocation (as a % of Net Assets)*

 

 

 

Top Ten Holdings (as a % of Net Assets)*

 

Qorvo, Inc. 6.61%
Skyworks Solutions, Inc. 6.44%
National Oilwell Varco, Inc. 5.79%
KKR & Co., Inc. 5.45%
Anthem, Inc. 4.63%
Alphabet, Inc. 4.52%
NVIDIA Corp. 4.16%
Mastercard, Inc. 4.06%
CVS Health Corp. 4.05%
Amazon.com, Inc. 4.02%
Top Ten Holdings 49.73%

 

*Holdings are subject to change, and may not reflect the current or future position of the portfolio.

 

 

Semi-Annual Report | October 31, 2019 5

 

 

 

Disclosure of Fund Expenses

 

October 31, 2019 (Unaudited)

 

As a shareholder of the Vulcan Value Partners Fund (the “Fund”), you will incur two types of costs: (1) transaction costs, including applicable redemption fees; and (2) ongoing costs, including management fees and other fund operating expenses. The following examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested on May 1, 2019 and held until October 31, 2019.

 

Actual Expenses. The first line of each table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

 

Hypothetical Example for Comparison Purposes. The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.

 

Please note the expenses shown in the table are meant to highlight ongoing Fund costs only and do not reflect transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table below is useful in comparing your ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 

Vulcan Value Partners Fund

 

  Beginning Account Value 5/1/19 Ending Account Value 10/31/19 Expense Ratio(a) Expenses Paid During period 5/1/19 - 10/31/19(b)
VULCAN VALUE PARTNERS FUND        
Investor Class        
Actual $1,000.00 $1,078.40 0.95% $ 4.96
Hypothetical (5% return before expenses) $1,000.00 $1,020.36 0.95% $ 4.82
Institutional Class        
Actual $1,000.00 $1,080.90 0.85 $ 4.45
Hypothetical (5% return before expenses) $1,000.00 $1,020.86 0.85 $ 4.32

 

 

6 www.vulcanvaluepartners.com

 

 

 

Disclosure of Fund Expenses

 

October 31, 2019 (Unaudited)

 

(a)The Fund's expense ratios have been annualized based on the Fund's most recent fiscal half-year expenses.
(b)Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184)/366 (to reflect the half-year period).

 

 

Semi-Annual Report | October 31, 2019 7

 

 

 

Fund Overview

 

October 31, 2019 (Unaudited)

 

VULCAN VALUE PARTNERS SMALL CAP FUND

 

Annualized Total Returns (as of 10/31/19)

 

          Expense Ratios(1)
  6 Month 1 Year 3 Year 5 Year Since Inception* Total Net(2)
Vulcan Value Partners Small Cap Fund – Investor Class(3) 0.58% 14.39% 8.62% 5.94% 11.94% 1.28% 1.26%
Vulcan Value Partners Small Cap Fund – Institutional Class 1.46% 1.27% 1.01%
Russell 2000® Value Index(4) -0.53% 3.22% 8.60% 6.24% 9.94%    
Russell 2000® Index(5) -1.09% 4.91% 10.96% 7.37% 11.11%    

 

Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. The Fund imposes a 2.00% redemption fee on shares held for less than 90 days. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data, please call 1-877-421-5078.

 

The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

 

Subject to investment risks, including possible loss of the principal amount invested. Returns for periods less than 1 year are cumulative.

 

* Inception Dates – Investor Class: 12/30/09, Institutional Class: 5/01/19
   
(1) Ratios as of the Prospectus dated August 31, 2019 and may differ from the ratios presented in the Financial Highlights.
(2) Vulcan Value Partners, LLC (“Vulcan” or the “Adviser”) has contractually agreed to limit the Fund’s total annual fund operating expenses (exclusive of Acquired Fund Fees and Expenses, brokerage expenses, interest expense, taxes and extraordinary expenses) to 1.25% and 1.00% of the Fund’s average daily net assets with respect to Investor Class shares and Institutional Class shares, respectively. This agreement (the “Expense Agreement”) is in effect through August 31, 2020. The Adviser will be permitted to recover, on a class-by-class basis, expenses it has borne through the Expense Agreement to the extent that the Fund’s expenses in later periods fall below the expense cap in effect at the time of waiver or reimbursement. Notwithstanding the foregoing, the Fund will not be obligated to pay any such fees and expenses more than three years after the end of the fiscal year in which the fees or expenses were foregone or reimbursed. The Adviser may not discontinue or modify this waiver prior to August 31, 2020 without the approval by the Fund’s Board of Trustees.
(3) The initial share class of the Fund was redesignated as Investor Class shares effective April 23, 2019.
(4) The Russell 2000® Value Index is presented here as an additional index, and measures the performance of small-cap value segment of the U.S.equity universe. It includes those Russell 2000® companies with lower price-to-book ratios and lower forecasted growth values. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly in the Index.
(5) The Russell 2000® Index is presented here as an additional index, and measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000® Index is a subset of the Russell 3000® Index representing approximately 8% of the total market capitalization of that index. It includes approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership. The Index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly in the Index.

 

 

8 www.vulcanvaluepartners.com

 

 

 

Fund Overview

 

October 31, 2019 (Unaudited)

 

Growth of $10,000 Initial Investment (for the period ended October 31, 2019)

 

 

 

The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund since inception. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

 

Investing in the Fund is subject to investment risks, including possible loss of the principal amount invested.

 

Industry Allocation (as a % of Net Assets)*

 

 

 

Top Ten Holdings (as a % of Net Assets)*

 

Cushman & Wakefield PLC 5.92%
Ibstock PLC 5.47%
Coherent, Inc. 5.24%
Jones Lang LaSalle, Inc. 5.15%
Avast PLC 4.57%
Savills PLC 4.36%
EnerSys 4.35%
WESCO International, Inc. 4.24%
Sleep Country Canada Holdings, Inc. 3.89%
CDK Global, Inc. 3.71%
Top Ten Holdings 46.90%

 

*Holdings are subject to change, and may not reflect the current or future position of the portfolio.

 

 

Semi-Annual Report | October 31, 2019 9

 

 

 

Disclosure of Fund Expenses

 

October 31, 2019 (Unaudited)

 

As a shareholder of the Vulcan Value Partners Small Cap Fund (the “Fund”), you will incur two types of costs: (1) transaction costs, including applicable redemption fees; and (2) ongoing costs, including management fees and other fund operating expenses. The following examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested on May 1, 2019 and held until October 31, 2019.

 

Actual Expenses. The first line of each table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

 

Hypothetical Example for Comparison Purposes. The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.

 

Please note the expenses shown in the table are meant to highlight ongoing Fund costs only and do not reflect transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table below is useful in comparing your ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 

Vulcan Value Partners Small Cap Fund

 

  Beginning Account Value 5/1/19 Ending Account Value 10/31/19 Expense Ratio(a) Expenses Paid During period 5/1/19 - 10/31/19(b)
VULCAN VALUE PARTNERS SMALL CAP FUND        
Investor Class        
Actual $1,000.00 $1,005.80 1.02% $ 5.14
Hypothetical (5% return before expenses) $1,000.00 $1,020.01 1.02% $ 5.18
Institutional Class        
Actual $1,000.00 $1,014.60 0.99 $ 5.01
Hypothetical (5% return before expenses) $1,000.00 $1,020.16 0.99 $ 5.03

 

 

10 www.vulcanvaluepartners.com

 

 

 

Disclosure of Fund Expenses

 

October 31, 2019 (Unaudited)

 

(a)The Fund's expense ratios have been annualized based on the Fund's most recent fiscal half-year expenses.
(b)Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184)/366 (to reflect the half-year period).

 

 

Semi-Annual Report | October 31, 2019 11

 

 

 

Statement of Investments Vulcan Value Partners Fund

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
COMMON STOCKS (96.35%)          
Communications (13.95%)          
Internet (13.95%)          
Alphabet, Inc., Class C(a)   49,456   $62,320,000 
Amazon.com, Inc.(a)   31,213    55,454,889 
Booking Holdings, Inc.(a)   16,296    33,386,756 
Facebook, Inc., Class A(a)   215,888    41,374,935 
         192,536,580 
           
TOTAL COMMUNICATIONS        192,536,580 
           
Consumer, Cyclical (5.12%)          
Lodging (5.12%)          
Hilton Worldwide Holdings, Inc.   470,343    45,604,457 
Marriott International, Inc., Class A   197,898    25,043,992 
         70,648,449 
           
TOTAL CONSUMER, CYCLICAL        70,648,449 
           
Consumer, Non-cyclical (18.18%)          
Commercial Services (2.86%)          
S&P Global, Inc.   153,154    39,512,200 
           
Healthcare-Services (5.61%)          
Anthem, Inc.   237,471    63,898,697 
UnitedHealth Group, Inc.   53,487    13,516,165 
         77,414,862 
           
Pharmaceuticals (9.71%)          
AmerisourceBergen Corp.   437,473    37,351,445 
CVS Health Corp.   841,780    55,885,774 
McKesson Corp.   305,846    40,677,518 
         133,914,737 
           
TOTAL CONSUMER, NON-CYCLICAL        250,841,799 
           
Energy (5.79%)          
Oil & Gas Services (5.79%)          
National Oilwell Varco, Inc.   3,529,379    79,834,553 
           
TOTAL ENERGY        79,834,553 
           
Financial (21.74%)          
Diversified Financial Services (7.45%)          
Mastercard, Inc., Class A   202,541    56,065,374 

 

 

12 www.vulcanvaluepartners.com

 

 

 

Vulcan Value Partners Fund Statement of Investments

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
Financial (continued)        
Diversified Financial Services (continued)        
Visa, Inc., Class A   260,812   $46,648,835 
         102,714,209 
           
Insurance (6.91%)          
Axis Capital Holdings, Ltd.   159,192    9,460,780 
Everest Re Group, Ltd.   123,364    31,715,651 
Swiss Re AG   517,394    54,178,206 
         95,354,637 
           
Private Equity (7.38%)          
Brookfield Asset Management, Inc., Class A   484,008    26,741,442 
KKR & Co., Inc., Class A   2,605,598    75,119,390 
         101,860,832 
           
TOTAL FINANCIAL        299,929,678 
           
Industrial (8.08%)          
Aerospace/Defense (3.43%)          
Airbus SE   330,340    47,313,536 
           
Miscellaneous Manufacturing (1.90%)          
Parker-Hannifin Corp.   143,013    26,241,456 
           
Transportation (2.75%)          
United Parcel Service, Inc., Class B   329,317    37,927,439 
           
TOTAL INDUSTRIAL        111,482,431 
           
Technology (23.49%)          
Semiconductors (17.21%)          
NVIDIA Corp.   285,751    57,441,666 
Qorvo, Inc.(a)   1,127,541    91,172,966 
Skyworks Solutions, Inc.   975,471    88,826,389 
         237,441,021 
           
Software (6.28%)          
Microsoft Corp.   322,872    46,290,158 
Oracle Corp.   739,418    40,290,887 
         86,581,045 
           
TOTAL TECHNOLOGY        324,022,066 
           
TOTAL COMMON STOCKS          
(Cost $1,048,914,786)        1,329,295,556 

 

 

Semi-Annual Report | October 31, 2019 13

 

 

 

Statement of Investments Vulcan Value Partners Fund

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
LIMITED PARTNERSHIPS (0.16%)        
Financial (0.16%)        
Private Equity (0.16%)        
Carlyle Group LP   80,333   $2,191,484 
           
TOTAL FINANCIAL        2,191,484 
           
TOTAL LIMITED PARTNERSHIPS          
(Cost $2,068,728)        2,191,484 

 

   7-Day Yield   Shares   Value (Note 2) 
SHORT TERM INVESTMENTS (4.10%)            
Money Market Fund (4.10%)            
Invesco Government & Agency Portfolio, Institutional Class   1.721%   56,571,077    56,571,077 
                
TOTAL SHORT TERM INVESTMENTS               
(Cost $56,571,077)             56,571,077 
                
TOTAL INVESTMENTS (100.61%)               
(Cost $1,107,554,591)            $1,388,058,117 
                
Liabilities In Excess Of Other Assets (-0.61%)             (8,471,007)
                
NET ASSETS (100.00%)            $1,379,587,110 

 

(a)Non-Income Producing Security.

 

For Fund compliance purposes, the Fund's industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine industry sub-classifications for reporting ease. Industries are shown as a percentage of net assets.

 

See Accompanying Notes to Financial Statements.

 

14 www.vulcanvaluepartners.com

 

 

 

Vulcan Value Partners Small Cap Fund Statement of Investments

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
COMMON STOCKS (96.38%)        
Consumer, Cyclical (21.33%)        
Distribution/Wholesale (6.77%)        
Resideo Technologies, Inc.(a)   1,274,755   $12,148,415 
WESCO International, Inc.(a)   407,213    20,421,732 
         32,570,147 
           
Home Furnishings (6.05%)          
Howden Joinery Group PLC   1,745,738    13,057,023 
Sleep Number Corp.(a)   333,411    16,043,738 
         29,100,761 
           
Lodging (2.02%)          
Wyndham Hotels & Resorts, Inc.   180,296    9,730,575 
           
Retail (6.49%)          
MSC Industrial Direct Co., Inc., Class A   170,953    12,515,469 
Sleep Country Canada Holdings, Inc.   1,123,378    18,721,545 
         31,237,014 
           
TOTAL CONSUMER, CYCLICAL        102,638,497 
           
Consumer, Non-cyclical (7.72%)          
Commercial Services (7.72%)          
Sabre Corp.   688,013    16,154,545 
Savills PLC   1,765,441    20,982,035 
         37,136,580 
           
TOTAL CONSUMER, NON-CYCLICAL        37,136,580 
           
Financial (23.42%)          
Diversified Financial Services (3.50%)          
Virtus Investment Partners, Inc.   155,498    16,868,423 
           
Insurance (6.33%)          
Axis Capital Holdings, Ltd.   283,421    16,843,710 
Everest Re Group, Ltd.   52,941    13,610,601 
         30,454,311 
           
Real Estate (13.59%)          
Cushman & Wakefield PLC(a)   1,528,668    28,509,658 
Jones Lang LaSalle, Inc.   169,025    24,765,543 
Marcus & Millichap, Inc.(a)   338,848    12,103,651 
         65,378,852 
           
TOTAL FINANCIAL        112,701,586 

 

 

 

Semi-Annual Report | October 31, 2019 15

 

 

 

Statement of Investments Vulcan Value Partners Small Cap Fund

 

October 31, 2019 (Unaudited)

 

   Shares   Value (Note 2) 
Industrial (29.37%)          
Building Materials (5.47%)          
Ibstock PLC   8,410,431   $26,342,857 
           
Electrical Components & Equipment (7.68%)          
Acuity Brands, Inc.   128,412    16,024,533 
EnerSys   312,817    20,914,945 
         36,939,478 
           
Electronics (8.54%)          
Coherent, Inc.(a)   169,428    25,231,218 
Ituran Location and Control, Ltd.   646,636    15,861,981 
         41,093,199 
           
Machinery-Diversified (2.29%)          
Concentric AB   826,651    11,044,044 
           
Miscellaneous Manufacturing (5.39%)          
Carlisle Cos., Inc.   79,721    12,139,117 
Crane Co.   180,089    13,780,410 
         25,919,527 
           
TOTAL INDUSTRIAL        141,339,105 
           
Technology (14.54%)          
Computers (4.57%)          
Avast PLC   4,096,957    22,013,469 
           
Software (9.97%)          
ACI Worldwide, Inc.(a)   512,659    16,092,366 
CDK Global, Inc.   353,490    17,865,385 
Lectra   599,911    14,017,237 
         47,974,988 
           
TOTAL TECHNOLOGY        69,988,457 
           
TOTAL COMMON STOCKS          
(Cost $400,716,343)        463,804,225 

 

 

16 www.vulcanvaluepartners.com

 

 

 

Vulcan Value Partners Small Cap Fund Statement of Investments

 

October 31, 2019 (Unaudited)

 

   7-Day Yield   Shares   Value (Note 2) 
SHORT TERM INVESTMENTS (3.56%)            
Money Market Fund (3.56%)               
Invesco Government & Agency Portfolio, Institutional Class   1.721%   17,125,812   $17,125,812 
                
TOTAL SHORT TERM INVESTMENTS               
(Cost $17,125,812)             17,125,812 
                
TOTAL INVESTMENTS (99.94%)               
(Cost $417,842,155)            $480,930,037 
                
Other Assets In Excess Of Liabilities (0.06%)             272,596 
                
NET ASSETS (100.00%)            $481,202,633 

 

(a)Non-Income Producing Security.

 

For Fund compliance purposes, the Fund's industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine industry sub-classifications for reporting ease. Industries are shown as a percentage of net assets.

 

See Accompanying Notes to Financial Statements.

 

Semi-Annual Report | October 31, 2019 17

 

 

 

Statements of Assets and Liabilities

 

October 31, 2019 (Unaudited)

 

   Vulcan Value Partners Fund   Vulcan Value Partners Small Cap Fund 
ASSETS:          
Investments, at value  $1,388,058,117   $480,930,037 
Receivable for investments sold   8,761,706    3,795,984 
Receivable for shares sold   6,329,480    210,158 
Dividends receivable   2,890,266    370,411 
Other assets   37,526    21,359 
Total assets   1,406,077,095    485,327,949 
           
LIABILITIES:          
Payable for investments purchased   18,864,656    3,594,363 
Payable for shares redeemed   6,394,715    13,638 
Payable to adviser   1,001,427    402,412 
Payable for administration fees   72,202    27,080 
Payable for transfer agency fees   18,933    18,492 
Payable for delegated transfer agent equivalent services fees   7,426    6,359 
Payable for professional fees   11,217    11,513 
Payable for trustee fees and expenses   23,239    9,158 
Payable for principal financial officer fees   1,182    512 
Accrued expenses and other liabilities   94,988    41,789 
Total liabilities   26,489,985    4,125,316 
NET ASSETS  $1,379,587,110   $481,202,633 
           
NET ASSETS CONSIST OF:          
           
Paid-in capital (Note 5)  $1,040,334,133   $401,171,796 
Total distributable earnings   339,252,977    80,030,837 
NET ASSETS  $1,379,587,110   $481,202,633 
           
INVESTMENTS, AT COST  $1,107,554,591   $417,842,155 

 

See Accompanying Notes to Financial Statements.

 

18 www.vulcanvaluepartners.com

 

 

 

Statements of Assets and Liabilities

 

October 31, 2019 (Unaudited)

 

   Vulcan Value Partners Fund   Vulcan Value Partners Small Cap Fund 
PRICING OF SHARES:        
Investor Class:        
Net Asset Value, offering and redemption price per share  $22.70   $17.41 
Net Assets  $803,909,827   $264,691,203 
Shares of beneficial interest outstanding (unlimited number of shares, no par value common stock authorized)   35,420,500    15,203,176 
Institutional Class:          
Net Asset Value, offering and redemption price per share   22.72    17.43 
Net Assets   575,677,283    216,511,430 
Shares of beneficial interest outstanding (unlimited number of shares, no par value common stock authorized)   25,340,660    12,419,260 

 

See Accompanying Notes to Financial Statements.

 

Semi-Annual Report | October 31, 2019 19

 

 

 

Statements of Operations

 

For the Six Months Ended October 31, 2019 (Unaudited)

 

   Vulcan Value Partners Fund   Vulcan Value Partners Small Cap Fund 
INVESTMENT INCOME:        
Dividends  $7,478,382   $5,165,062 
Foreign taxes withheld   (12,549)   (180,270)
Total investment income   7,465,833    4,984,792 
           
EXPENSES:          
Investment advisory fees (Note 6)   6,599,767    2,810,025 
Administrative fees   209,092    80,453 
Transfer agency fees   48,402    49,146 
Delegated transfer agent equivalent services fees          
Investor Class   54,680    23,314 
Institutional Class(a)   26,171    10,652 
Professional fees   21,761    15,081 
Custodian fees   93,827    43,811 
Principal financial officer fees   3,594    1,434 
Trustee fees and expenses   23,157    9,151 
ReFlow Fees (Note 2)   32,023    10,537 
Other   57,256    40,420 
Total expenses before waiver   7,169,730    3,094,024 
Less fees waived/reimbursed by investment adviser (Note 6) Investor Class       (30,587)
Institutional Class   (402,955)   (135,657)
Total net expenses   6,766,775    2,927,780 
NET INVESTMENT INCOME   699,058    2,057,012 
           
Net realized gain on investments(b)   48,786,776    8,215,851 
Net realized gain/(loss) on foreign currency transactions   (89,478)   11,045 
Net realized gain   48,697,298    8,226,896 
Net change in unrealized appreciation/(depreciation) of investments   53,500,551    (9,892,453)
Net change in unrealized appreciation on translation of assets and liabilities denominated in foreign currencies   77,347    4,567 
Net change in unrealized appreciation/(depreciation)   53,577,898    (9,887,886)
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS   102,275,196    (1,660,990)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS  $102,974,254   $396,022 

 

(a)Institutional Class inception date was May 1, 2019.
(b)See Note 2 for gain/(loss) on In-Kind transactions.

 

See Accompanying Notes to Financial Statements.

 

20 www.vulcanvaluepartners.com

 

 

 

Vulcan Value Partners Fund Statements of Changes in Net Assets

 

 

   For the Six Months Ended October 31, 2019 (Unaudited)   For the Year Ended April 30, 2019 
OPERATIONS:        
Net investment income  $699,058   $5,078,555 
Net realized gain   48,697,298    72,617,855 
Net change in unrealized appreciation/(depreciation)   53,577,898    (3,680,794)
Net increase in net assets resulting from operations   102,974,254    74,015,616 
           
DISTRIBUTIONS TO SHAREHOLDERS (Note 3):          
Total amount of distribution          
Investor Class(a)       (98,666,500)
Institutional Class(b)        
Net decrease in net assets from distributions       (98,666,500)
           
SHARE TRANSACTIONS (Note 5):          
Investor Class(a)          
Proceeds from sales of shares   49,917,086    257,281,793 
Issued to shareholders in reinvestment of distributions       85,760,192 
Cost of shares redeemed, net of redemption fees   (591,059,153)   (348,353,451)
Institutional Class(b)          
Proceeds from sales of shares   562,052,772     
Cost of shares redeemed, net of redemption fees   (28,854,087)    
Net decrease from share transactions   (7,943,382)   (5,311,466)
           
Net increase/(decrease) in net assets   95,030,872    (29,962,350)
           
NET ASSETS:          
Beginning of year   1,284,556,238    1,314,518,588 
End of period  $1,379,587,110   $1,284,556,238 

 

(a)Prior to April 23, 2019, the Investor class was the initial share class.
(b)Institutional Class inception date was May 1, 2019.

 

See Accompanying Notes to Financial Statements.

 

Semi-Annual Report | October 31, 2019 21

 

 

 

Statements of Changes in Net Assets Vulcan Value Partners Small Cap Fund

 

 

   For the Six Months Ended October 31, 2019 (Unaudited)   For the Year Ended April 30, 2019 
OPERATIONS:        
Net investment income  $2,057,012   $4,412,446 
Net realized gain   8,226,896    97,428,463 
Net change in unrealized depreciation   (9,887,886)   (99,582,592)
Net increase in net assets resulting from operations   396,022    2,258,317 
           
DISTRIBUTIONS TO SHAREHOLDERS (Note 3):          
Total amount of distribution          
Investor Class(a)       (91,839,425)
Institutional Class(b)        
Net decrease in net assets from distributions       (91,839,425)
           
SHARE TRANSACTIONS (Note 5):          
Investor Class(a)          
Proceeds from sales of shares   19,968,669    162,197,866 
Issued to shareholders in reinvestment of distributions       79,373,996 
Cost of shares redeemed, net of redemption fees   (289,837,361)   (805,375,212)
Institutional Class(b)          
Proceeds from sales of shares   219,170,547     
Cost of shares redeemed, net of redemption fees   (11,669,030)    
Net decrease from share transactions   (62,367,175)   (563,803,350)
           
Net decrease in net assets   (61,971,153)   (653,384,458)
           
NET ASSETS:          
Beginning of year   543,173,786    1,196,558,244 
End of period  $481,202,633   $543,173,786 

 

(a)Prior to April 23, 2019, the Investor class was the initial share class.
(b)Institutional Class inception date was May 1, 2019.

 

See Accompanying Notes to Financial Statements.

 

22 www.vulcanvaluepartners.com

 

 

 

Intentionally Left Blank

 

 

 

Financial Highlights

 

For a share outstanding throughout the years presented.

 

Investor Class
NET ASSET VALUE, BEGINNING OF PERIOD
INCOME/(LOSS) FROM OPERATIONS:
Net investment income(a)
Net realized and unrealized gain/(loss) on investments
Total from investment operations
 
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
From net realized gains on investments
Total distributions
 
Redemption fees added to paid-in capital
Increase/(decrease) in net asset value
NET ASSET VALUE, END OF PERIOD
 
Total return
 
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's)
 
Ratio of expenses to average net assets without fee waivers/reimbursements
Ratio of expenses to average net assets including fee waivers/reimbursements
 
Net investment income to average net assets including fee waivers/reimbursements
 
Portfolio turnover rate

 

(a)Per share numbers have been calculated using the average shares method.
(b)Less than $0.005 per share.
(c)Not Annualized.
(d)Annualized.

 

See Accompanying Notes to Financial Statements.

 

24 www.vulcanvaluepartners.com

 

 

 

Vulcan Value Partners Fund

 

 

For the Six Months Ended October 31, 2019 (Unaudited)   For the Year Ended April 30, 2019   For the Year Ended April 30, 2018   For the Year Ended April 30, 2017   For the Year Ended April 30, 2016   For the Year Ended April 30, 2015 
$21.05   $21.39   $19.30   $17.17   $19.97   $18.20 
 0.01    0.08    0.09    0.18    0.20    0.22 
 1.64    1.13    2.35    2.18    (1.51)   2.77 
 1.65    1.21    2.44    2.36    (1.31)   2.99 
     (0.13)   (0.12)   (0.23)   (0.13)   (0.17)
     (1.42)   (0.23)       (1.36)   (1.05)
     (1.55)   (0.35)   (0.23)   (1.49)   (1.22)
 0.00(b)    0.00(b)    0.00(b)    0.00(b)    0.00(b)    0.00(b)
 1.65    (0.34)   2.09    2.13    (2.80)   1.77 
$22.70   $21.05   $21.39   $19.30   $17.17   $19.97 
 7.84%(c)   6.80%   12.72%   13.85%   (6.49%)   16.61%
$803,910   $1,284,556   $1,314,519   $1,284,669   $1,528,080   $1,770,104 
 0.95%(d)   1.08%   1.08%   1.07%   1.08%   1.08%
 0.95%(d)   1.08%   1.08%   1.07%   1.08%   1.08%
 0.07%(d)   0.38%   0.46%   1.01%   1.10%   1.12%
 22%(c)   73%   50%   49%   85%   64%

 

 

Semi-Annual Report | October 31, 2019 25

 

 

 

Financial Highlights Vulcan Value Partners Fund

 

For a share outstanding throughout the years presented.

 

Institutional Class  For the Period May 1, 2019 (Inception) to October 31, 2019 
NET ASSET VALUE, BEGINNING OF PERIOD  $21.02 
INCOME/(LOSS) FROM OPERATIONS:     
Net investment income(a)   0.02 
Net realized and unrealized gain on investments   1.68 
Total from investment operations   1.70 
      
Redemption fees added to paid-in capital   0.00(b) 
Increase in net asset value   1.70 
NET ASSET VALUE, END OF PERIOD  $22.72 
      
Total return   8.09%(c)
      
RATIOS AND SUPPLEMENTAL DATA:     
Net assets, end of period (000's)  $575,677 
      
Ratio of expenses to average net assets without fee waivers/reimbursements   1.09%(d)
Ratio of expenses to average net assets including fee waivers/reimbursements   0.85%(d)
Net investment income to average net assets including fee waivers/reimbursements   0.19%(d)
      
Portfolio turnover rate   22%(c)

 

(a)Per share numbers have been calculated using the average shares method.
(b)Less than $0.005 per share.
(c)Not Annualized.
(d)Annualized.

 

See Accompanying Notes to Financial Statements.

 

26 www.vulcanvaluepartners.com

 

 

 

Intentionally Left Blank

 

 

 

Financial Highlights

 

For a share outstanding throughout the years presented.

 

Investor Class 
NET ASSET VALUE, BEGINNING OF PERIOD   
INCOME/(LOSS) FROM OPERATIONS:   
Net investment income(a)   
Net realized and unrealized gain/(loss) on investments   
Total from investment operations   
    
LESS DISTRIBUTIONS TO SHAREHOLDERS:   
From net investment income   
From net realized gains on investments   
Total distributions   
    
Redemption fees added to paid-in capital   
Increase/(decrease) in net asset value   
NET ASSET VALUE, END OF PERIOD   
    
Total return   
    
RATIOS AND SUPPLEMENTAL DATA:   
Net assets, end of period (000's)   
    
Ratio of expenses to average net assets without fee waivers/reimbursements   
Ratio of expenses to average net assets including fee waivers/reimbursements   
    
Net investment income to average net assets including fee waivers/reimbursements   
    
Portfolio turnover rate   

 

(a)Per share numbers have been calculated using the average shares method.
(b)Less than $0.005 per share.
(c)Not Annualized.
(d)Annualized.

 

See Accompanying Notes to Financial Statements.

 

28 www.vulcanvaluepartners.com

 

 

 

Vulcan Value Partners Small Cap Fund

 

 

For the Six Months Ended October 31, 2019 (Unaudited)   For the Year Ended April 30, 2019   For the Year Ended April 30, 2018   For the Year Ended April 30, 2017   For the Year Ended April 30, 2016   For the Year Ended April 30, 2015 
$17.31   $19.52   $20.16   $16.58   $18.61   $18.74 
                            
 0.08    0.10    0.02    0.03    0.10    0.10 
 0.02    0.38    0.59    3.61    (1.05)   1.77 
 0.10    0.48    0.61    3.64    (0.95)   1.87 
                            
     (0.12)   (0.03)   (0.06)   (0.06)   (0.11)
     (2.57)   (1.22)       (1.02)   (1.89)
     (2.69)   (1.25)   (0.06)   (1.08)   (2.00)
                            
 0.00(b)    0.00(b)    0.00(b)    0.00(b)    0.00(b)    0.00(b) 
 0.10    (2.21)   (0.64)   3.58    (2.03)   (0.13)
$17.41   $17.31   $19.52   $20.16   $16.58   $18.61 
                            
 0.58%(c)   4.76%   3.08%   21.97%   (5.04%)   10.74%
                            
$264,691   $543,174   $1,196,558   $1,255,606   $1,147,007   $1,133,122 
                            
 1.03%(d)   1.27%   1.24%   1.25%   1.25%   1.26%
 1.02%(d)   1.25%   1.24%   1.25%   1.25%   1.25%
                            
 0.74%(d)   0.54%   0.08%   0.18%   0.61%   0.56%
                            
 34%(c)   68%   68%   52%   80%   73%

 

 

Semi-Annual Report | October 31, 2019 29

 

 

 

Financial Highlights Vulcan Value Partners Small Cap Fund

 

For a share outstanding throughout the years presented.

 

Institutional Class  For the Period May 1, 2019 (Inception) to October 31, 2019 
NET ASSET VALUE, BEGINNING OF PERIOD  $17.18 
INCOME/(LOSS) FROM OPERATIONS:     
Net investment income(a)   0.05 
Net realized and unrealized gain on investments   0.20 
Total from investment operations   0.25 
      
Redemption fees added to paid-in capital   0.00(b) 
Increase in net asset value   0.25 
NET ASSET VALUE, END OF PERIOD  $17.43 
      
Total return   1.46%(c)
      
RATIOS AND SUPPLEMENTAL DATA:     
Net assets, end of period (000's)  $216,511 
      
Ratio of expenses to average net assets without fee waivers/reimbursements   1.27%(d)
Ratio of expenses to average net assets including fee waivers/reimbursements   0.99%(d)
Net investment income to average net assets including fee waivers/reimbursements   0.57%(d)
      
Portfolio turnover rate   34%(c)

 

(a)Per share numbers have been calculated using the average shares method.
(b)Less than $0.005 per share.
(c)Not Annualized.
(d)Annualized.

 

See Accompanying Notes to Financial Statements.

 

30 www.vulcanvaluepartners.com

 

 

 

Notes to Financial Statements

 

October 31, 2019 (Unaudited)

 

1. ORGANIZATION

 

 

Financial Investors Trust (the “Trust”) is organized as a Delaware statutory trust and is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (“1940 Act”). The Trust consists of multiple separate portfolios or series. This semi-annual report describes the Vulcan Value Partners Fund and Vulcan Value Partners Small Cap Fund (each a “Fund” and collectively, the “Funds”). The Funds seek to achieve long-term capital appreciation. The Funds offer Investor Class and Institutional Class shares.

 

2. SIGNIFICANT ACCOUNTING POLICIES

 

 

The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), including policies specific to investment companies. The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. The Funds are considered an investment company for financial reporting purposes under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946. The following is a summary of significant accounting policies consistently followed by the Funds in preparation of their financial statements.

 

Investment Valuation: The Funds generally value their securities based on market prices determined at the close of regular trading on the New York Stock Exchange (“NYSE”), normally 4:00 p.m. Eastern Time, on each day the NYSE is open for trading.

 

For equity securities and mutual funds that are traded on an exchange, the market price is usually the closing sale or official closing price on that exchange. In the case of equity securities not traded on an exchange, or if such closing prices are not otherwise available, the securities are valued at the mean of the most recent bid and ask prices on such day. Redeemable securities issued by open-end registered investment companies are valued at the investment company’s applicable net asset value, with the exception of exchange-traded open-end investment companies, which are priced as equity securities.

 

The market price for debt obligations is generally the quote supplied by an independent third-party pricing service approved by the Board of Trustees of the Trust (the “Board” or the “Trustees”), which may use a matrix, formula or other objective method that takes into consideration quotations from dealers, market transactions in comparable investments, market indices and yield curves. If vendors are unable to supply a quote, or if the quote supplied is deemed to be unreliable, the market price may be determined using quotations received from one or more broker–dealers that make a market in the security.

 

Equity securities that are primarily traded on foreign securities exchanges are valued at the preceding closing values of such securities on their respective exchanges, except when an occurrence subsequent to the time a value was so established is likely to have changed such value. In such an event, the fair values of those securities are determined in good faith through consideration of other factors in accordance with procedures established by and under the general supervision of the Board.

 

 

Semi-Annual Report | October 31, 2019 31

 

 

 

Notes to Financial Statements

 

October 31, 2019 (Unaudited)

 

When such prices or quotations are not available, or when Vulcan Value Partners, LLC (the “Adviser”) believes that they are unreliable, securities may be priced using fair value procedures approved by the Board.

 

Fair Value Measurements: A three-tier hierarchy has been established to classify fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available. Various inputs are used in determining the value of each Fund’s investments as of the reporting period end. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments. These inputs are categorized in the following hierarchy under applicable financial accounting standards:

 

Level 1 – Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that the Funds have the ability to access at the measurement date;

 

Level 2 – Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and

 

Level 3 – Significant unobservable prices or inputs (including the Funds’ own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date.

 

The following is a summary of each input used to value each Fund’s investments as of October 31, 2019:

 

Vulcan Value Partners Fund:

 

Investments in Securities at Value  Level 1 - Unadjusted Quoted Prices   Level 2 - Other Significant Observable Inputs   Level 3 - Significant Unobservable Inputs   Total 
Common Stocks(a)  $1,329,295,556   $   $   $1,329,295,556 
Limited Partnerships(a)   2,191,484            2,191,484 
Short Term Investments   56,571,077            56,571,077 
TOTAL  $1,388,058,117   $   $   $1,388,058,117 

 

Vulcan Value Partners Small Cap Fund:

 

Investments in Securities at Value  Level 1 - Unadjusted Quoted Prices   Level 2 - Other Significant Observable Inputs   Level 3 - Significant Unobservable Inputs   Total 
Common Stocks(a)  $463,804,225   $   $   $463,804,225 
Short Term Investments   17,125,812            17,125,812 
TOTAL  $480,930,037   $   $   $480,930,037 

 

(a)For detailed descriptions, see the accompanying Statements of Investments.

 

 

32 www.vulcanvaluepartners.com

 

 

 

Notes to Financial Statements

 

October 31, 2019 (Unaudited)

 

For the six months ended October 31, 2019, the Funds did not have any securities that used significant unobservable inputs (Level 3) in determining fair value.

 

Investment Transactions and Investment Income: Investment transactions are accounted for on the date the investments are purchased or sold (trade date). Realized gains and losses from investment transactions are reported on an identified cost basis, which is the same basis the Funds use for federal income tax purposes. Interest income, which includes accretion of discounts and amortization of premiums, is accrued and recorded as earned. Dividend income is recognized on the ex-dividend date or, for certain foreign securities, as soon as information is available to the Funds. All of the realized and unrealized gains and losses and net investment income, are allocated daily to each class in proportion to its average daily net assets.

 

ReFlow Liquidity Program: Each Fund may participate in the ReFlow liquidity program, which is designed to provide an alternative liquidity source for mutual funds experiencing net redemptions of their shares. Pursuant to the program, ReFlow Fund, LLC (“ReFlow”) provides participating mutual funds with a source of cash to meet net shareholder redemptions by standing ready each business day to purchase fund shares up to the value of the net shares redeemed by other shareholders that are to settle the next business day. ReFlow will purchase shares of the Fund at net asset value and will not be subject to any investment minimums. Following purchases of Fund shares, ReFlow then generally redeems those shares when the Fund experiences net subscriptions, at the end of a maximum holding period determined by ReFlow (currently 28 days), or at other times as the Fund may request. ReFlow may choose to redeem its position in the Fund with an in-kind transfer of securities, instead of cash, enabling the Fund to avoid a realization of capital gains on the securities it transfers. ReFlow will not be subject to any short-term redemption fees. While ReFlow holds Fund shares, it will have the same rights and privileges with respect to those shares as any other shareholder. For use of the ReFlow service, a Fund pays a fee to ReFlow each time it purchases Fund shares, calculated by applying to the purchase amount a fee rate determined through an automated daily auction among participating mutual funds. The current minimum fee rate is 0.20% of the value of the Fund shares purchased by ReFlow although the Fund may submit a bid at a higher fee rate if it determines that doing so is in the best interest of Fund shareholders. In accordance with federal securities laws, ReFlow is prohibited from acquiring more than 3% of the outstanding voting securities of a Fund. There is no assurance that ReFlow will have sufficient funds available to meet the Funds’ liquidity needs on a particular day. During the six months ended October 31, 2019, the Funds participated in ReFlow. Fees associated with ReFlow are disclosed in the Statements of Operations.

 

Real Estate Investment Trusts (“REITs”): The Funds may invest a portion of their assets in REITs and are subject to certain risks associated with direct investment in REITs. REITs may be affected by changes in the value of their underlying properties and by defaults by borrowers or tenants. REITs depend generally on their ability to generate cash flow to make distributions to shareowners, and certain REITs have self-liquidation provisions by which mortgages held may be paid in full and distributions of capital returns may be made at any time. In addition, the performance of a REIT may be affected by its failure to qualify for tax-free pass-through of income under the Internal Revenue Code of 1986, as amended (the “Code”), or its failure to maintain exemption from registration under the 1940 Act. A Fund’s investments in REITs may result in such Fund’s receipt of cash in excess of the REITs’ earnings. If the Fund receives such distributions all or a portion of these distributions will constitute a return of capital to such Fund. Receiving a return of capital distribution from REITs will reduce the amount of income available to be distributed to

 

 

Semi-Annual Report | October 31, 2019 33

 

 

 

Notes to Financial Statements

 

October 31, 2019 (Unaudited)

 

Fund shareholders. Income from REITs generally will not be eligible for treatment as qualified dividend income. As the final character of the distributions is not known until reported by the REITs on their 1099s, the Funds utilize an average of the prior year’s reallocation information as an estimate for the current year character of distributions. 

 

Foreign Securities: The Funds may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible reevaluation of currencies, the inability to repatriate foreign currency, less complete financial information about companies and possible future adverse political and economic developments. Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. issuers.

 

Foreign Currency Translation: The books and records of the Funds are maintained in U.S. dollars. Investment valuations and other assets and liabilities initially expressed in foreign currencies are converted each business day into U.S. dollars based upon current exchange rates. Prevailing foreign exchange rates may generally be obtained at the close of the NYSE (normally, 4:00 p.m. Eastern Time). The portion of realized and unrealized gains or losses on investments due to fluctuations in foreign currency exchange rates is not separately disclosed and is included in realized and unrealized gains or losses on investments, when applicable.

 

In-Kind Redemptions: During the six months ended October 31, 2019, the Vulcan Value Partners Fund and the Vulcan Value Partners Small Cap Fund distributed portfolio securities rather than cash as payment for certain redemptions of fund shares (in-kind redemptions) in the amount of $15,338,560 and $3,134,900, respectively. For financial reporting purposes, the Vulcan Value Partners Fund and the Vulcan Value Partners Small Cap Fund recognized gains on the in-kind redemptions in the amount of $1,421,373 and $3,283,370, respectively. For tax purposes, the gains are not recognized.

 

Trust Expenses: Some expenses of the Trust can be directly attributed to the Funds. Expenses which cannot be directly attributed are apportioned among all funds in the Trust based on average net assets of each fund.

 

Fund Expenses: Expenses that are specific to a Fund are charged directly to that Fund.

 

Federal Income Taxes: Each Fund complies with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies and intends to distribute substantially all of its net taxable income and net capital gains, if any, each year so that it will not be subject to excise tax on undistributed income and gains. The Funds are not subject to income taxes to the extent such distributions are made.

 

As of and during the six months ended October 31, 2019, the Funds did not have a liability for any unrecognized tax benefits. The Funds file U.S. federal, state, and local tax returns as required. The Fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return for federal purposes and four years for most state returns. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.

 

 

34 www.vulcanvaluepartners.com

 

 

 

Notes to Financial Statements

 

October 31, 2019 (Unaudited)

 

Distributions to Shareholders: Each Fund normally pays dividends and distributes capital gains, if any, on an annual basis. Income dividend distributions are derived from dividends and other income each Fund receives from its investments, including short-term capital gains. Long term capital gain distributions are derived from gains realized when each Fund sells a security it has owned for more than a year. Each Fund may make additional distributions and dividends at other times if the portfolio manager believes doing so may be necessary for each Fund to avoid or reduce taxes.

 

3. TAX BASIS INFORMATION

 

 

Tax Basis of Investments: As of October 31, 2019, the aggregate cost of investments, gross unrealized appreciation/(depreciation) and net unrealized appreciation for federal tax purposes was as follows:

 

   Vulcan Value Partners Fund   Vulcan Value Partners Small Cap Fund 
Gross appreciation (excess of value over tax cost)  $286,591,244   $68,529,016 
Gross depreciation (excess of tax cost over value)   (16,663,108)   (13,364,199)
Net unrealized appreciation  $269,928,136   $55,164,817 
Cost of investments for income tax purposes  $1,118,129,980   $425,765,220 

 

Tax Basis of Distributions to Shareholders: The character of distributions made during the year from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or realized gain were recorded by each Fund.

 

The tax character of distributions paid by the Funds for the fiscal year ended April 30, 2019 were as follows:

 

   Ordinary Income   Long-Term Capital Gain 
2019          
Vulcan Value Partners Fund  $56,597,050   $42,069,450 
Vulcan Value Partners Small Cap Fund   10,950,971    80,888,454 

 

The amounts and characteristics of tax basis distributions and composition of distributable earnings/(accumulated losses) are finalized at fiscal year-end. Accordingly, tax basis balances have not been determined as of October 31, 2019.

 

 

Semi-Annual Report | October 31, 2019 35

 

 

 

Notes to Financial Statements

 

October 31, 2019 (Unaudited)

 

4. SECURITIES TRANSACTIONS

 

 

The cost of purchases and proceeds from sales of securities (excluding short-term securities and in-kind redemptions) during the six months ended October 31, 2019 were as follows:

 

Fund  Purchases of Securities   Proceeds From Sales of Securities 
Vulcan Value Partners Fund  $283,297,966   $322,817,786 
Vulcan Value Partners Small Cap Fund   157,410,936    225,256,568 

 

5. SHARES OF BENEFICIAL INTEREST

 

 

The capitalization of the Trust consists of an unlimited number of shares of beneficial interest with no par value per share. Holders of the shares of the Funds of the Trust have one vote for each share held and a proportionate fraction of a vote for each fractional share. All shares issued and outstanding are fully paid and are transferable and redeemable at the option of the shareholder. Purchasers of the shares do not have any obligation to make payments to the Trust or its creditors solely by reason of the purchasers’ ownership of the shares. Shares have no pre-emptive rights.

 

Shares redeemed within 90 days of purchase may incur a 2% short-term redemption fee deducted from the redemption amount. The Vulcan Value Partners Fund and the Vulcan Value Partners Small Cap Fund retained $9,694 and $33,890, respectively, for the six months ended October 31, 2019, and $16,120 and $22,728, respectively, for the year ended April 30, 2019, which is reflected in the “Cost of shares redeemed, net of redemption fees” in the Statements of Changes in Net Assets.

 

Transactions in shares of capital stock for the dates listed below were as follows:

 

Vulcan Value Partners Fund

 

   For the Six Months Ended October 31, 2019 (Unaudited)   For the Year Ended April 30, 2019 
Shares Sold        
Investor Class   2,448,483    12,191,768 
Institutional Class   26,655,935     
Shares Issued in Reinvestment of Dividends          
Investor Class       4,689,102 
Less Shares Redeemed          
Investor Class   (28,050,753)   (17,310,102)
Institutional Class   (1,315,275)    
Net Decrease   (261,610)   (429,232)

 

 

36 www.vulcanvaluepartners.com

 

 

 

Notes to Financial Statements

 

October 31, 2019 (Unaudited)

 

Vulcan Value Partners Small Cap Fund

 

   For the Six Months Ended October 31, 2019 (Unaudited)   For the Year Ended April 30, 2019 
Shares Sold        
Investor Class   1,196,172    9,339,047 
Institutional Class   13,119,259     
Shares Issued in Reinvestment of Dividends          
Investor Class       5,297,515 
Less Shares Redeemed          
Investor Class   (17,373,506)   (44,554,915)
Institutional Class   (699,999)    
Net Decrease   (3,758,074)   (29,918,353)

 

6. MANAGEMENT AND RELATED-PARTY TRANSACTIONS

 

 

The Adviser, subject to the authority of the Board, is responsible for the overall management and administration of the Funds’ business affairs. The Adviser manages the investments of the Funds in accordance with each Fund’s investment objective, policies and limitations and investment guidelines established jointly by the Adviser and the Board. Pursuant to the Investment Advisory Agreement (the “Advisory Agreement”), the Funds pay the Adviser an annual management fee of 1.00% and 1.15% for Vulcan Value Partners Fund and Vulcan Value Partners Small Cap Fund, respectively, based on each Fund’s average daily net assets. The management fee is paid on a monthly basis.

 

The Adviser has contractually agreed to limit the Vulcan Value Partners Fund’s total annual fund operating expenses (exclusive of Acquired Fund Fees and Expenses, brokerage expenses, interest expense, taxes and extraordinary expenses) to 1.25% and 0.85% of the Fund’s average daily net assets with respect to Investor Class shares and Institutional Class shares, respectively.

 

The Adviser has contractually agreed to limit the Vulcan Value Partners Small Cap Fund’s total annual fund operating expenses (exclusive of Acquired Fund Fees and Expenses, brokerage expenses, interest expense, taxes and extraordinary expenses) to 1.25% and 1.00% of the Fund’s average daily net assets with respect to Investor Class shares and Institutional Class shares, respectively.

 

These agreements (the “Expense Agreements”) are in effect from September 1, 2019 through August 31, 2020. The prior Expense Agreements were in effect from September 1, 2018 through August 31, 2019. The Adviser will be permitted to recover, on a class-by-class basis, expenses it has borne through the Expense Agreements to the extent that a Fund’s expenses in later periods fall below the expense cap in effect at the time of waiver or reimbursement. Notwithstanding the foregoing, the Funds will not be obligated to pay any such fees and expenses more than three years after the date of the waiver or reimbursement. The Adviser may not discontinue or modify this waiver prior to August 31, 2020 without the approval by the Funds’ Board.

 

 

Semi-Annual Report | October 31, 2019 37

 

 

 

Notes to Financial Statements

 

October 31, 2019 (Unaudited)

 

Fund Administrator Fees and Expenses: ALPS Fund Services, Inc. (“ALPS”) serves as administrator to the Funds and the Funds have agreed to pay expenses incurred in connection with their administrative activities. Pursuant to an Administration Agreement, ALPS provides operational services to the Funds including, but not limited to fund accounting and fund administration and generally assist in each Fund’s operations. Officers of the Trust are employees of ALPS. The Funds’ administration fee is accrued on a daily basis and paid monthly. Administration fees paid by the Funds for the six months ended October 31, 2019 are disclosed in the Statements of Operations.

 

ALPS is reimbursed by the Funds for certain out-of-pocket expenses.

 

Transfer Agent: ALPS serves as transfer, dividend paying and shareholder servicing agent for the Funds. ALPS receives an annual minimum fee, a fee based upon the number of shareholder accounts, and is also reimbursed by the Funds for certain out-of-pocket expenses. Transfer agent fees paid by the Funds for the six months ended October 31, 2019 are disclosed in the Statements of Operations.

 

Compliance Services: ALPS provides services that assist the Trust’s chief compliance officer in monitoring and testing the policies and procedures of the Trust in conjunction with requirements under Rule 38a-1 under the 1940 Act and receives an annual base fee. ALPS is reimbursed for certain out-of-pocket expenses by the Funds. Vulcan pays this fee on behalf of the Funds.

 

Principal Financial Officer: ALPS receives an annual fee for providing principal financial officer services to the Funds. Principal financial officer fees paid by the Fund for the six months ended October 31, 2019 are disclosed in the Statements of Operations.

 

Distributor: ALPS Distributors, Inc. (“ADI” or the “Distributor”) (an affiliate of ALPS) acts as the distributor of each Fund’s shares pursuant to a Distribution Agreement with the Trust. Shares are sold on a continuous basis by ADI as agent for the Funds, and ADI has agreed to use its best efforts to solicit orders for the sale of each Fund’s shares, although it is not obliged to sell any particular amount of shares. ADI is not entitled to any compensation for its services as Distributor. ADI is registered as a broker-dealer with the U.S. Securities and Exchange Commission. Certain intermediaries may charge networking, omnibus account or other administrative fees with respect to transactions in shares of the Funds. Transactions may be processed through the National Securities Clearing Corporation (“NSCC”) or similar systems or processed on a manual basis. These fees are paid by the Funds to the Distributor, which uses such fees to reimburse intermediaries. In the event an intermediary receiving payments from the Distributor on behalf of the Funds converts from a networking structure to an omnibus account structure or otherwise experiences increased costs, fees borne by the Funds may increase. Fees are disclosed on the Statements of Operations as “Delegated transfer agent equivalent services fees”.

 

Trustees: The fees and expenses of the independent Trustees of the Board are presented in the Statement of Operations.

 

 

38 www.vulcanvaluepartners.com

 

 

 

Notes to Financial Statements

 

October 31, 2019 (Unaudited)

 

7. INDEMNIFICATIONS

 

 

Under the Trust’s organizational documents, its Officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that may contain general indemnification clauses which may permit indemnification to the extent permissible under applicable law. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred.

 

8. SUBSEQUENT EVENT

 

 

Subsequent events after the date of the Statements of Assets and Liabilities have been evaluated through the date the financial statements were issued.

 

 

Semi-Annual Report | October 31, 2019 39

 

 

 

Additional Information

 

October 31, 2019 (Unaudited)

 

1. FUND HOLDINGS

 

 

The Funds’ portfolio holdings are made available semi-annually in shareholder reports within 60 days after the close of the period for which the report is being made, as required by federal securities laws. The Funds also file monthly portfolio holdings on Form N-PORT on a quarterly basis, with the schedule of portfolio holdings filed on Form N-PORT for the third month of each Fund’s fiscal quarter made publicly available 60 days after the end of the Funds’ fiscal quarter.

 

2. FUND PROXY VOTING POLICIES, PROCEDURES AND SUMMARIES

 

 

The Funds’ policies and procedures used in determining how to vote proxies and information regarding how the Fund voted proxies relating to portfolio securities during the most recent prior 12-month period ending June 30 are available without charge, (1) upon request, by calling (toll-free) (866)-759-5679 and (2) on the SEC’s website at http://www.sec.gov.

 

 

40 www.vulcanvaluepartners.com

 

 

 

Privacy Policy

 

October 31, 2019 (Unaudited)

 

WHO WE ARE  
Who is providing this notice? Vulcan Value Partners Fund and Vulcan Value Partners Small Cap Fund.
WHAT WE DO  
How do the Funds protect my personal information? To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings.
How do the Funds collect my personal information?

We collect your personal information, for example, when you

 

• open an account

• provide account information or give us your contact information

• make a wire transfer or deposit money

Why can’t I limit all sharing?

Federal law gives you the right to limit only

 

• sharing for affiliates’ everyday business purposes-information about your creditworthiness

• affiliates from using your information to market to you

• sharing for non-affiliates to market to you

 

State laws and individual companies may give you additional rights to limit sharing.

 

 

Semi-Annual Report | October 31, 2019 41

 

 

 

Privacy Policy

 

October 31, 2019 (Unaudited)

 

FACTS WHAT DO THE FUNDS DO WITH YOUR PERSONAL INFORMATION?
WHY? Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.
WHAT?

The types of personal information we collect and share depend on the product or service you have with us. This information can include:

• Social Security number and account transactions

• Account balances and transaction history

• Wire transfer instructions

HOW? All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons the Funds choose to share; and whether you can limit this sharing.

 

REASONS WE CAN SHARE YOUR PERSONAL INFORMATION DO THE FUNDS SHARE: CAN YOU LIMIT THIS SHARING?

For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus

Yes No

For our marketing purposes – to offer our products and services to you

No We do not share.
For joint marketing with other financial companies No We do not share.

For our affiliates’ everyday business purposes – information about your transactions and experiences

Yes No

For our affiliates’ everyday business purposes – information about your creditworthiness

No We do not share.
For non-affiliates to market to you No We do not share.

 

 

42 www.vulcanvaluepartners.com

 

 

 

Intentionally Left Blank

 

 

 

 

 

 

Item 2.Code of Ethics.

 

Not applicable to this Report.

 

Item 3.Audit Committee Financial Expert.

 

Not applicable to this Report.

 

Item 4.Principal Accountant Fees and Services.

 

Not applicable to this Report.

 

Item 5.Audit Committee of Listed Registrants.

 

Not applicable to the Registrant.

 

Item 6.Investments.

 

(a)Schedule of Investments is included as part of the Reports to Stockholders filed under Item 1 of this Form N-CSR.

 

(b)Not applicable.

 

Item 7.Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

 

Not applicable to the Registrant.

 

Item 8.Portfolio Managers of Closed-End Management Investment Companies.

 

Not applicable to the Registrant.

 

 

 

Item 9.Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

 

Not applicable to the Registrant.

 

Item 10.Submission of Matters to a Vote of Security Holders.

 

There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees, where those changes were implemented after the Registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K, or this Item.

 

Item 11.Controls and Procedures.

 

(a)The Registrant’s principal executive officer and principal financial officer have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report.

 

(b)There was no change in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940, as amended) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

 

Item 12.Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.

 

Not applicable to the Registrant.

 

Item 13.Exhibits.

 

(a)(1)Not applicable to this Report.

 

(a)(2)The certifications required by Rule 30a-2(a) of the Investment Company Act of 1940, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto as Exhibit 99.Cert.

 

(a)(3)Not applicable to the Registrant.

 

(a)(4)The information regarding the change in the registrant’s independent public accountant pursuant to Item 4 of Form 8-K and Item 304 of Regulation S-K is filed herewith.

 

(b)The certifications by the Registrant’s principal executive officer and principal financial officer, as required by Rule 30a-2(b) of the Investment Company Act of 1940, as amended, and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto as Exhibit 99.906Cert.

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

FINANCIAL INVESTORS TRUST

 

By: /s/ Bradley J. Swenson  
  Bradley J. Swenson (Principal Executive Officer)  
  President  
     
Date: January 6, 2020  

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

FINANCIAL INVESTORS TRUST

 

By: /s/ Bradley J. Swenson  
  Bradley J. Swenson (Principal Executive Officer)  
  President  
     
Date: January 6, 2020  
     
By: /s/ Kimberly R. Storms  
  Kimberly R. Storms (Principal Financial Officer)  
  Treasurer  
     
Date: January 6, 2020  


EXHIBIT 13(a)(4)

 

Change in Independent Registered Public Accounting Firm

 

At a meeting held on December 10, 2019, based on the recommendation of the Audit Committee of the Highland Resolute Fund, a series of Financial Investors Trust (hereinafter referred to as the "Fund") and the approval of the Board of Trustees, Deloitte & Touche LLP (“Deloitte”) was dismissed as the independent registered public accounting firm for the Fund. At the same meeting, based on the recommendation and approval of the Audit Committee, the full Board of Trustees of the Fund approved the appointment of Cohen & Company, Ltd. as the Fund’s registered public accounting firm for the fiscal year ending April 30, 2020.

 

The report of Deloitte on the Fund’s financial statements for the fiscal year ended April 30, 2019 contained no adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles.

 

During the Fund’s most recent fiscal year, and through December 10, 2019, there were no disagreements with Deloitte on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Deloitte, would have caused them to make reference to the subject matter of the disagreements in connection with their report on the Fund’s financial statements for such year. During the most recent fiscal year, and through December 10, 2019, there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K promulgated by the SEC.

 

The Fund has requested that Deloitte furnish them with a letter addressed to the SEC stating whether or not it agrees with the above statements.

 

A copy of such letter is filed herewith.


Exhibit 99.Cert

 

I, Bradley J. Swenson, President and Principal Executive Officer of the Financial Investors Trust (the “Registrant”), certify that:

 

1.I have reviewed this report on Form N-CSR of the Registrant;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Registrant as of, and for, the periods presented in this report;

 

4.The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the Registrant and have:

 

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c.Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

d.Disclosed in the report any change in the Registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

 

5.The Registrant’s other certifying officer and I have disclosed to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

 

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize, and report financial information; and

 

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

 

By: /s/ Bradley J. Swenson  
Bradley J. Swenson (Principal Executive Officer)  
President  
     
Date: January 6, 2020  

 

 

 

 

I, Kimberly R. Storms, Treasurer and Principal Financial Officer of the Financial Investors Trust (the “Registrant”), certify that:

 

1.I have reviewed this report on Form N-CSR of the Registrant;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Registrant as of, and for, the periods presented in this report;

 

4.The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the Registrant and have:

 

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c.Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

d.Disclosed in the report any change in the Registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

 

5.The Registrant’s other certifying officer and I have disclosed to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

 

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize, and report financial information; and

 

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

 

By: /s/ Kimberly R. Storms  
Kimberly R. Storms (Principal Financial Officer)  
Treasurer  
     
Date: January 6, 2020  


Exhibit 99.906Cert

 

This certification is furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1350, and accompanies the report on Form N-CSR (the “Report”) for the period ended October 31, 2019 of the Financial Investors Trust (the “Company”).

 

I, Bradley J. Swenson, the President and Principal Executive Officer of the Company, certify that:

 

(i)the Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

 

(ii)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated: January 6, 2020

 

By: /s/ Bradley J. Swenson  
  Bradley J. Swenson (Principal Executive Officer)  
  President  

 

 

 

This certification is furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1350, and accompanies the report on Form N-CSR (the “Report”) for the period ended October 31, 2019 of the Financial Investors Trust (the “Company”).

 

I, Kimberly R. Storms, the Treasurer and Principal Financial Officer of the Company, certify that:

 

(i)the Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

 

(ii)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated: January 6, 2020

 

By: /s/ Kimberly R. Storms  
  Kimberly R. Storms (Principal Financial Officer)  
  Treasurer